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

Today, Ohio EPA released its response to the federal court ruling which struck down the exemption from BAT for sources that emit less than 10 tons per year.  The memo makes clear that it supplants the February 2nd e-mail instructing staff to not issue air permits until the ruling was evaluated. 

There are few surprises in the memo.  It basically states sources will have to go back to case-by-case BAT evaluations.  This was what Senate Bill 265 was designed to eliminate.  Therefore, three years after passage of the bill the status quo remains. 

The memo also says Ohio EPA has supplied some information to U.S. EPA to support the rule exempting sources less than 10 tons per year.  However, U.S. EPA requested additional information which it could not supply due to staffing shortages.  The memo contains no discussion of what has been supplied or what additional information is going to be collected. 

The memo also points out that there may be instances when sources less than 10 tons per year have more stringent regulations than sources greater than 10 tons per year.  I don't anyone anticipated that outcome three years after passage of Senate Bill 265.

Also, notably absent is any discussion of the status of air permits that were issued over the last three years without BAT in accordance with the exemption. The memo only states that Ohio EPA has yet to make a decision as whether to go back and re-issue these permits.  Businesses holding these permits received no word as to whether they are still considered valid or subject to potential federal enforcement. 

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

EPA Responds

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

Major uncertainty surrounds Ohio's air permtting program.   I use the term "certainty" because that was the buzz word utilized when business groups fought hard for major reforms that eventually were passed in Senate Bill 265 in 2006. 

Back in 2006, business groups were concerned that  Ohio's system for issuing air permits was far more onerous and unpredictable than other states.  The focus of attention was the requirement to install Best Available Technology (BAT) on smaller sources of air pollution.  

Business groups complained BAT was imposed on an "ad-hoc" case-by-case basis.  Individual permit reviewers could develop inconsistent determinations as what constituted BAT on same or similar sources.  The goal was to get away from this uncertain application of BAT.

The two major reforms secured in Senate Bill 265:

1. All sources less than 10 tons per year (tpy) were no longer required to install BAT
2. For all sources larger than 10 tpy, Ohio EPA could only require BAT through rulemaking that defined BAT consistent with elements set forth in S.B. 265.  It was contemplated the rules would spell out the requirements for various source categories.  Thus, providing certainty by avoiding case-by-case determinations of BAT.

What is the status of air permitting in Ohio three years after passage of these reforms? 

• Business have far less certainty regarding Ohio's permitting process than they did three years ago (prior to S.B. 265)
• Businesses are caught in a stalemate between U.S. EPA and Ohio EPA that could subject them to federal enforcement and make their permits invalid
• Ohio businesses are no closer to avoiding case-by-case BAT decisions as they were three years ago
• In some cases, businesses will take longer to get their permits and still have the same level of required controls
• The two major reforms (the less than 10 tpy exemption and BAT through rulemaking for larger sources) will never be implemented unless hard choices are made.

To preserve the two major reforms, means facing the reality that federal law requires Ohio demonstrate the changes are valid. How does Ohio demonstrate validity?

1. Ohio EPA would have to quantify the lost reductions from "weakening" the BAT requirement (something Ohio EPA hasn't done in three years).
2. The business community will have to help direct the Agency in identifying new air pollution control programs that can be used to offset the lost reductions attributable to BAT.

Less Than 10 TPY Exemption

My last post discussed the recent federal court ruling which determined the exemption from installing BAT for sources smaller than 10 tpy was inconsistent with federal law.  The Court found Ohio EPA failed to properly revise its State Implementation Plan (SIP- the State plan for how it will meet federal air quality standards).

At issue, was a prohibition contained in the Clean Air Act called "anti-backsliding."  In essence, if a state is going to reduce air pollution requirements on one set of sources it must make up for lost reductions by imposing more stringent controls someplace else.

The response to the Court decision by some business groups is to urge Ohio EPA to appeal the Magistrate's decision.  This from the Ohio Manufacturer Association (OMA) Web page regarding the decision:

The OMA is urging the Ohio EPA to mount a vigorous defense of this common sense regulatory reform through all available legal channels.

However, even if the Agency successfully challenged the Magistrate's decision on appeal, I don't see how this fixes things for the business community. At issue in the Magistrate's decision was a Citizen Group's rights to challenge a State's implementation of its SIP- Ohio's air pollution control plan.  

Regardless of the Citizen's suit, U.S. EPA has already put Ohio EPA on notice that it believes the less than 10 tpy BAT exemption is inconsistent with federal law.  U.S. EPA sent a letter back on June 5, 2008 that it could not approve Ohio's attempt to provide the 10 TPY exemption. 

Without U.S. EPA approval, all permits issued without BAT due to the state exemption could be deemed to violate federal law.  All those businesses holding those permits could be subject to federal enforcement action or their permits determined invalid. 

A win on appeal barring the Citizen Group from challenging Ohio EPA isn't truly a fix.  The harsh reality is the only way to fix things for the business community is for Ohio to make an approvable submittal to U.S. EPA.  To be approvable, Ohio will have to demonstrate their reforms don't violate "anti-backsliding."

To make such a demonstration, Ohio EPA must quantify the lost reductions attributable to the 10 TPY exemption- something I don't believe Ohio EPA has done in the three years since passage of S.B. 265.  After Ohio EPA quantifies the difference, it will have to work with the business community to come up with replacement controls to make up for the lost reductions. 

Anything short of developing a "true" fix, leaves the business community with greater uncertainty than it had prior to S.B. 265.

BAT Through Rule Making On Sources Greater Than 10 TPY

Things may even be more complicated for sources that emit more than 10 tpy.  S.B. 265 mandates that Ohio EPA specify BAT on these larger sources through rulemaking.  S.B. 265 provided a three year window to give Ohio EPA time to develop rules specifying BAT for different air pollution source categories. 

In the three years since, Ohio EPA has yet to finalize a single rule defining BAT.  Since the three year deadline has passed, State law now prohibits Ohio EPA from requiring BAT on sources larger than 10 tpy because it has not adopted rules consistent with S.B. 265.  This State law requirement is in conflict with the federal law which requires approval from U.S. EPA before it can be deemed effective. 

On December 10, 2009, Ohio EPA proposed a policy titled "BAT requirement for Permit Applications Filed on or After August 3, 2009."  [August 3rd was the deadline imposed by S.B. 265 after which Ohio EPA could only require BAT through rulemaking].  The Policy was put out for public comment which closed January 31, 2010.  The policy describes the current status as follows:

Ohio is currently working to develop short-term and long-term set of rules that would implement S.B. 265.  A short-term rule would define BAT on a case-by-case basis consistent with the S.B. 265 provisions.  Long-term rules would attempt to define BAT by category when possible.  However, neither short-term nor long-term rules have been developed. 

U.S. EPA has told Ohio EPA that issuing permits on or after August 3, 2009 without BAT would be considered by U.S. EPA as "backsliding" under the statutory provisions of the Clean Air Act and would not be acceptable. 

The policy goes on to say, because Ohio EPA has not adopted any BAT rules it will require BAT on a case-by-case basis to avoid "backsliding" claims. 

First of all...It's been three years since passage of S.B. 265 and the business community is no closer to its goal of avoiding case-by-case BAT decisions.  Even what Ohio EPA describes as its "short-term rule" would require case-by-case BAT. 

Worse yet, the policy makes clear that businesses may even be worse off then prior to S.B. 265.  In the "Common Questions and Answers" Section of the Policy, at least two critical Ohio EPA comments appear:

Question 1:  If a company indicates they do not want Ohio EPA to establish a BAT limit because a BAT rule has not been developed, what should the permit writers do?

The Policy goes on to answer- try and get the company to voluntarily accept a BAT limit or Ohio EPA will have to process the permit without a BAT limit.  However, if there is no BAT limit in the permit, Ohio EPA states:

We will inform them [the business] that U.S. EPA would likely not approve the permit and that U.S. EPA may take some sort of action against either the company or the Ohio EPA because they don't approve the approach.  We will also inform them that we are obligated to provide U.S. EPA with a copy of any issued permit that does not contain BAT.

In essence, unless a business voluntarily accepts a case-by-case BAT limit, they will be subject to enforcement by U.S. EPA. 

The Second major issue appears in Question 5 of the Ohio EPA policy.  It relates to when sources can avoid New Source Review (NSR) which is the complex federal air permitting program.  Due to the complexities of the program there are strong incentives for businesses to avoid NSR.

Prior to August 3, 2009, Ohio EPA used BAT limits to avoid triggering NSR.  However, the policy makes clear they can no longer utilize BAT to avoid NSR because of the stalemate with U.S. EPA. 

The implication is more sources will have to go through a longer permitting process in order to avoid NSR.  Therefore, no only will sources end up with the same controls as prior to S.B. 265, it will take longer to get their permit.

Conclusion

The status quo should be unacceptable to the business community.  It must decide:

1. Whether the reforms in S.B. 265 are worth holding onto. If not, new state legislation is needed to undo the mess.  
2. If the reforms are still critical, then the business community must engage Ohio EPA to fix its issues with U.S. EPA.  It is very important that the business community involve itself in the details of developing a fix.  Otherwise, it risks Ohio EPA spending valuable time developing proposals businesses believe are unworkable.

• Email This
• Print
• Comments
• Trackbacks

On February 3rd Magistrate Judge Mark Able of the U.S. District Court in Columbus ruled that Ohio EPA (and really the Ohio General Assembly) violated that federal Clean Air Act by exempting small air pollution sources from stringent air pollution requirements.  At issue was one major overhaul of Ohio's air regulation included in state legislation (Senate Bill 265)  back in 2006.  The law was designed to reduce the regulatory burden on small businesses. 

The provision exempted small air pollution sources, those that emit less than 10 tons per year, from the requirement to install Best Available Control Technology (BAT).  These sources would still be required to install air pollution control equipment.  However, these small sources could avoid the more time consuming BAT permitting process.

I was Director of Ohio EPA when Senate Bill 265 was passed.  The complaint regarding BAT was that it resulted in uncertain regulatory requirements for business.  Upon receipt of an air permit for a small air pollution source, Ohio EPA would have to decide on a individual case-by-case basis which pollution controls were the most stringent for that particular source. 

Businesses complained that the determinations as to what constituted BAT were inconsistent among Ohio EPA's five district offices.  They also complained that businesses would not be able to plan ahead of time for the types of controls to install.  Rather, business would be forced to wait until Ohio EPA concluded its evaluation.

To reduce the regulatory burden, Ohio businesses sought two major reforms regarding BAT in Senate Bill 265.  The General Assembly passed the bill which included the following.

1. Exempt all sources smaller than 10 tons from having to install BAT.
2. After August 2009, Ohio EPA could only require BAT on larger sources (greater than 10 tons) through specific rulemaking for those types of sources.

The goal of reducing the regulatory burden was understandable.  However, there is a long standing tenant in the federal Clean Air Act that restricts the ability of State's to change pollution control strategies to achieve federal clean air standards.  This is referred to as "anti-backsliding."

• "Anti-Backsliding"- If you drop an air pollution requirement, you must make up for those lost reductions through alternative control strategies. 

The best example of this perhaps is E-check, the automobile tail pipe test that used to be required in Cleveland, Dayton and Cincinnati.  E-check was dropped in Dayton and Cincinnati after the 10 year contract expired.  In order to drop the program, Ohio EPA was forced to make up the lost reductions through new air pollution control requirements.  One new requirement used to replace E-check was the requirement to use less polluting gasoline (RVP gas) in the summer months in Dayton and Cincinnati. 

Ohio EPA failed to adopt replacement strategies after the General Assembly dropped BAT on sources less than 10 tons.  It is my understanding, that Ohio EPA never actually even quantified the lost reductions attributable to dropping the BAT requirement.  U.S. EPA put Ohio EPA on notice this past summer that it failed to address the "anti-backsliding" issue.

Ohio EPA's failure to adopt new controls to replace BAT- a violation of the "anti-backsliding" principal- was one of the reasons Magistrate Abel struck down the provision as a violation of the Federal Clean Air Act.  According to a recent newspaper article, Ohio EPA has decided to stop issuing permits for small sources while it figures out how to address the decision. 

The agency said Wednesday it won't authorize any new or expanded emissions from small sources until the ramifications of the decision are understood. Spokeswoman Heidi Griesmer said the agency has temporarily suspended issuing permits.

"These are small sources of pollution," she said. "We will be complying with the judge's orders but we're right now looking through the decision and figuring out how to do that..."

Griesmer said it was impossible to determine immediately on Wednesday how many exemptions the state has granted to small source polluters. The agency estimates it will take two weeks to mine through its permit database and count them all, she said.

What a mess...

• The Agency will be forced to decide what to do with hundreds of permits it issued in the last three years in which BAT was not required.  Does Ohio EPA go back and revoke those permits requiring businesses to install different air pollution controls? 
• Does the Agency still try and comply with Legislative mandate to eliminate BAT for small sources?  If so, what new air pollution control requirements will it adopt to replace BAT for sources less than 10 tons.  
• What about permits already in the system that were about to be issued?  No doubt the Agency will be forced to go back and determine BAT delaying these permits by many months.  

This is just a sample of the issues facing EPA after S.B. 265.  Next up-  The second major reform in S.B. 265 that prevents Ohio EPA from requiring BAT on sources larger than 10 tons per year unless done through rulemaking.   

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

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

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

Is Cap & Trade Dead or Alive?

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

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

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

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

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

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

EPA Rulemaking

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

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

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

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

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

SEC Interpretative Guidance

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

The Board of the Northeast Ohio Regional Sewer District (NEORSD) could vote as soon as the end of this week on whether to create a stormwater utility within its service territory.  Through the imposition of a fee on homeowner's and businesses the District would hope to tackle some of the region's major stormwater issues. 

In my post on Monday I discussed some of the local battles that have emerged over whether the District has the legal authority to move forward with its proposal.  In today's post, I discuss some of the other issues and opportunities that may have gone unnoticed due to the contentious debate that is occurring.

Pro's and Con's of Regional Solution to Stormwater

At its core, the idea of treating stormwater as a regional issue makes sense.  Water does not know any boundaries.  Prioritizing the largest stormwater issues within the area also makes sense.  Some projects would be just too costly to do without aggregating resources.

However, this has to be balanced with making sure certain areas don't receive the lion share of  revenue collected by the Utility.  This is the concern of Summit County who fears revenue will be almost entirely be used to fund projects in Cuyahoga County.

The proposed regulations, especially upon revision, attempt to address this issue by establishing Watershed Advisory Committees.  These Committees would be made up of key local stakeholders in each watershed.  They would provide input into project selection and identification of stormwater issues.

However, even with recent language changes in response to comments, the Committee's are purely advisory.  The District retains the ability to ultimately make all decisions regarding use of the funds it collects.  There must be ways to balance the structure and use of the Committees to provide additional local control over resources.

Impact on Local Stormwater Ordinances Governing Storm Water

In Chapter 6 of the proposed regulations, NEORSD has the authority to establish its own standards for stormwater management.  Those standards must be consistent with Ohio EPA requirements for municipal stormwater systems. However, the District has the authority to impose more stringent requirements than Ohio EPA.  This may set up an interesting battle over ordinances passed by local municipalities within the District's jurisdiction.

The best example of where a potential battle may take place is riparian set back requirements.  Riparian setbacks establish "no build" zones adjacent to streams and wetlands in order to maintain their natural ability to control stormwater and filter run-off. 

Right now riparian setbacks are one option a municipality can choose to implement in meeting Ohio EPA's requirements for municipal stormwater systems.  This option has proved controversial.  Contentious debate has take place, including over the following issues:

• Size of the Setbacks-  Standards range from 25 feet to 300 feet. This is a very wide range and Ohio EPA has not formally endorsed a specific distance. 
• Takings- Issues have raised by property owners that the government imposing no-build areas on their property amounts to a "takings" under the Constitution which would entitle them to compensation
• Variances- What is the process for granting a variance from the set back requirements?  Communities have utilized very different processes in determining whether to grant a variance

Right now municipalities have had the flexibility to determine these and other issues associated with riparian set back on their own.  They can craft their ordinances to deal with local concerns of their constituents. While this has led to variations in standards, some would argue variation may be suitable based upon local conditions.

What if the Sewer District decides riparian set backs are mandatory and imposes certain standards on all communities related to the setbacks?  For example, what if they impose a mandatory 50 to 100 foot setback from all streams and wetlands?  This may lead to significant debate and outcry.

Cost of the Program- Opportunities to Offset CSO Compliance Costs Should Be Explored

One of the other major concerns with the proposal is the imposition of a new fee (tax) during these tough economic times.  Certainly it is a legitimate concern to worry about imposing new costs on businesses after the worst recession in decades. 

However, it is possible the stormwater utility could save money.  The Sewer District is still in a battle with U.S. EPA over its combined sewer overflows (CSOs).  The ultimate fix to those problems runs into the billions of dollars over the next few decades.  This translates into ever escalating sewer rates to pay for those improvements.

It is possible to offset some of the costs through the stormwater utility?  There are opportunities, such as the use of "green infrastructure" to reduce infiltration of stormwater into the Sewer District's system.  Reducing infiltration diminishes the need for costly "grey" infrastructure to hold stormwater to prevent overflows.

The Cincinnati Metropolitan Sewer District faced years of litigation with U.S. EPA over its CSOs.  Ultimately a very costly judicial order was agreed to satisfy the federal agency.  However, built into that Order were unprecedented flexibility to explore the use of  "green infrastructure" instead of constructing deep tunnels to hold stormwater.  Here is an excerpt from a report recently submitted to U.S. EPA regarding viability of green infrastructure to solve CSO issues (Note: while it says for settlement purpose this document is available on the web):

All of the parties clearly desire significant improvement to water quality currently impacted by MSD's CSOs and SSOs. If cost were no object, this could be done by conventional, so-called "grey" methods, such as massive deep storage tunnels. However, as discussed openly among the parties, MSD's service area faces huge economic problems due to its increased urbanization, population and industry losses, and related matters. MSD maintains that the sewer rate increases required through construction of massive "grey" solutions would be economically and socially devastating. This problem has the potential to create a stalemate or gridlock in finalizing the WWIP. It also presents a lose-lose situation where neither side obtains what it wants or needs. As recognized by USEPA, green infrastructure has the potential to provide water quality improvements at a fraction of the cost of "grey" infrastructure projects.--  Cincinnati MSD "Green Infrastructure" Program

Sounds very similar to the issues facing our Region.  Perhaps there is a real opportunity to see if the stormwater utility could be used as a means to reduce the District's compliance costs to solve its CSO problems. 

Has the District even studied or discussed whether a "green infrastructure" program implemented by the proposed utility could be a cost saver versus another tax imposed on businesses and residents?

• Email This
• Print
• Comments
• Trackbacks

A new report regarding fine particulate pollution in the Midwest shows that achieving compliance with federal air quality standards is linked to U.S. EPA's fix for the Clean Air Interstate Rule (CAIR).  The Lake Michigan Air Director's Consortium (LADCO) released its white paper discussing recommendation on addressing fine particulate (p.m. 2.5) pollution in the Midwest.  The white paper includes these major findings:

The air quality studies demonstrated that high daily PM2.5 concentrations occur year-round, but are more likely in the winter and summer months, and are associated with elevated concentrations of particulate sulfate (especially in the summer), particulate nitrate (in the winter), and organic carbon (OC). Effective control programs for these PM species include:

• Regional reductions in sulfur dioxide (SO2) emissions from EGUs and large non-EGUs
• Reductions in ammonia (NH3) emissions from agricultural operations, especially in winter
• Regional reductions in oxides of nitrogen (NOx) emission reductions
• Urban-scale reductions in OC primary emissions from residential wood combustion and mobile sources, and VOC emissions from anthropogenic sources

The report notes that, beside power plant sulfate emissions, PM levels are attributable to agricultural emissions, smoking cars and outdoor wood fireplaces.  However, these types of sources are much more difficult to control. 

• Outdoor wood fireplaces may be responsible for local hot spot type emissions, however regulation of these sources has proved very controversial. 
• Addressing smoking cars and auto emissions in general is always been a difficult task.  Automobile testing, while continuing, is still very controversial. 
• Agricultural operations have fought long and hard to stay out of EPA regulation.  The report acknowledges no federal program for reduction of agricultural ammonia emissions.

In contrast there has been a long track record for regulating power plant emissions.  Starting with the acid rain program, then the NOx SIP call and finally CAIR- there have been three different cap and trade programs set up for reducing emissions.  CAIR is critical because power plants are the largest source of SO2 emissions. (See post, CAIR Impact on Air Quality)  The table below was taken from the report (EGU = Electric Generating Units). 

Table 1. Annual SO2 Emissions in LADCO Region (1000 TPY)

CAIR, under a cap and trade program, would dramatically reduce SO2 power plant emission in two phases- 2010 requires 50% reduction and 2015 requires 65% reduction.  States are counting on the continued existence of CAIR to meet PM air quality standards.  However, the D.C. Circuit Court tossed out CAIR as "fatally flawed."  U.S. EPA is currently working on a "CAIR fix" to address the issues raised in the Court's decision. 

LADCO's white paper makes it clear little thought is being given to what will happen if CAIR cannot be fixed.  A review of the legal issues with CAIR shows the State's better start considering that possibility.

The fact State's have incorporated CAIR into the air quality planning is the main reason the Court allowed CAIR to remain while U.S. EPA worked on its CAIR fix.  But there is no guarantee U.S. EPA is going to find a legally valid way to preserve CAIR.  The Court found many "fatal flaws" but two of those flaws go to the heart of the cap and trade program:

• One of the central problems the Court noted with CAIR was its method for reducing the cap on SO2 emissions.  The Clean Air Act establishes a value for acid rain allowances- one allowance is the right to emit one ton of SO2.  CAIR attempted to reduce the cap by cutting the value of an acid rain allowance in half in 2010. The Court found this to be problematic because the value of acid rain allowances is set forth the Clean Air Act.  The Court said:

Lest EPA forget, it is “a creature of statute,”
and has “only those authorities conferred upon it by Congress”;
“if there is no statute conferring authority, a federal agency has
none.”

CAIR, as program created by rule, cannot trump a statute.  How U.S. EPA can possibly get around the Clean Air Act establishment of acid rain allowance to preserve CAIR reductions is perplexing.

• The Court also questioned the fundamental basis of EPA's cap and trade program that it was not required to eliminate one state's contribution to another state's non-attainment problem.  The Court said:

"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." 

How U.S. EPA can legally show CAIR will address contribution from one state to another while at the same time preserving the cap and trade concept is also perplexing.

While States are counting on preservation of CAIR reductions to meet air quality standards, their faith in U.S. EPA to develop a legally defensible CAIR fix may be misplaced.  Senator Carper has pushed hard to incorporate a new, stronger CAIR-like program in the Senate climate change legislation.  However, this move has not been all that popular as it is seen to slow down progress on climate change.

What will be left if CAIR cannot be repaired is a mess in terms of air quality planning.  It will also make the mountain that much higher to climb for areas recently designated nonattainment by U.S. EPA.

• Email This
• Print
• Comments
• Trackbacks

Two federal appeal courts (Fifth and Second Circuits) have issued decisions that will allow lawsuits to proceed that assert common law tort claims based on business contribution to climate change.  Comer v. Murphy Oil USA Inc. is the second decision in the last two months to allow claims to proceed.  Earlier in October, the Second Circuit allows a federal common law tort claim to proceed in Connecticut v. American Electric Power.

In Comer, Mississippi coastal residents, following hurricane Katrina, sued a number of energy, oil refining and chemical manufacturing companies claiming their greenhouse gas emissions contributed to climate change.  The residents argue, that climate change increased the intensity of hurricane Katrina which led to massive damages along the cost.

A key distinguishing factor between the Comer and Connecticut is that the plaintiffs rely upon different legal theories to present their cases.  In Connecticut it was based purely on federal common law tort claims.  In Comer, the Mississippi residents grounded their claims in state common law theories of nuisance, trespass and negligence.  After these decisions, it appears either federal or state law claims can proceed.

It is important to note that another federal district court (Northern District of California) in the case of Native Village of Kivalina v Exxon Mobil Corp.  dismissed a common law tort claim because the Court determined Plaintiffs failed to establish standing.  However, district courts had dismissed similar claims that were later overturned by the appellate court decisions cited above.  Certainly this decision will be appealed to the Ninth Circuit which means we will have three federal district courts weigh in on this question. 

What are the implications of these decisions?

We are a long way from plaintiffs successfully collecting millions or even billions in damages from businesses for their greenhouse gas contribution to climate change.  The two federal appeal courts have only determined that there is enough of an argument for plaintiffs to be allowed to proceed to trial or in other words, the plaintiffs have standing. 

The legal standards for standing are much lower than what is required to be successful in winning a judgment.  For example, tort claims must meet more stringent causation standards than are required to demonstrate standing.  The Comer court found that plaintiffs had demonstrated sufficient causation.  The Court said plaintiffs did not have to show that the defendants greenhouse gas emissions alone caused the damages suffered by plaintiffs.  Rather, it is sufficient for standing that defendant's emissions contributes to the injuries suffered. 

While plaintiffs can now proceed to trial, there is certainly no guarantee of success.  However, these two appellate decisions will certainly embolden many more to file suits against utilities, chemical manufacturers, refiners, etc.  A flood of litigation is certainly on its way.

All this litigation creates significant uncertainty for the business community.  If just one plaintiff is successful in securing damages, the risk of liability will be massive for businesses.  All of this should be considered as the Senate continues to debate Climate Change legislation. 

• Email This
• Print
• Comments
• Trackbacks

The past two days I have been in Houston at the Environmental Markets Association (EMA) fall conference.  If you are not familiar with the EMA, it is an organization that supports the use of market-based solutions to environmental issues.  The members are largely made up of consultants, traders of environmental credits and project developers. 

Many of the members were on the ground floor when the first cap and trade programs were implemented in the 90's regarding acid rain.  The also participated in the two cap and trade programs on utilities that followed acid rain- NOx SIP call and CAIR. 

Finally, there is also expertise in the burgeoning carbon markets.  Whether that involves the "voluntary markets" in the U.S., state mandatory programs like RGGI in the east, or the international cap and trade program in the European Union.

Bottom line, these folks have the expertise in trading various environmental credits under a wide range of programs.  They have seen what has worked (acid rain) and what hasn't worked (collapse of the CAIR program). 

The big topic of course is the Waxman-Markey and Kerry-Boxer bills pending in Congress.  There was a lot of discussion regarding the various elements of these bills.  From the various perspectives offered over the last few days I draw the following perspectives regarding the drive for a federal CO2 cap and trade program in the U.S.:

• Complexity- Many expressed concern that the Waxman-Markey Bill is overly complex.  That instead of focusing on setting up a core program- namely putting a price on carbon-the bill tries to dictate the minutia around the program.  The more complex the program the more difficult it is to operate.
• Offsets- Many concentrated on the debate over the domestic and international offset programs.  There appeared to be consensus that an offset program was absolutely key to bringing down the cost of compliance.  The concern expressed was that both Waxman-Markey and Boxer-Kerry put too many conditions on the offset program.  These include limiting how many offsets each company can use for compliance.  What types of offsets will qualify.  How quickly EPA can certify the verification procedures for creating offsets. 
• Stabenow-Baucus Offsets Bill- This bill is seen as a mechanism to clean up what is wrong with the offset programs established in the other bills.  A lot of hope was being placed on this being the vehicle to correct the problems.
• EPA Preclusion-  While not receiving a lot of attention, a huge difference between the House and Senate bills is whether EPA is precluded from regulating greenhouse gases under the Clean Air Act.  House says EPA is precluded, Senate does not.  As I have discussed on in prior posts, this is a huge issue.  In fact, one of the main reasons to set up a cap and trade program is to pre-empt EPA from establishing an unworkable command and control program under the Clean Air Act.
• Stability Reserve-  This is the concept of trying to address carbon prices getting to high after the program is established.  Rather than simply placing a cap on prices, both bills create the concept of a reserve of allowances that could be released if prices get to high.  This is not a cap, if the trigger is met it allows future allowances to be auctioned off.   EPA is supposed to take the proceeds from the auctions and purchase offsets to make the impact of releasing more allowance neutral.  The concern on the stability reserves were: 1) the triggers to tap into the reserve and whether it really can control prices from getting too high; and 2)  what happens if not enough offsets are available for EPA to purchase because all the limitations placed on which types of offset qualify.
• Verification Procedures for Offsets-  The Senate would require notice and comment on every offset project which was seen as overly cumbersome.  The House allows pre-compliance offset credits to qualify for only 2009-2012. Also, projects must meet either a state verification procedure or one deemed by EPA as stringent as a state verification procedure.  The short duration of pre-compliance offset projects was concerning because it may severely limit available offset credits after 2012.  The limitations on verification procedures could disqualify many projects that went through non-state certified verification procedures. 

Many more observations and comments were made.  I certainly learned a lot from the experts who work have been working in environmental markets since the 1990's.  Their expertise certainly should carry a lot of weight with Congress.  Otherwise, we risk have politicians set up a program that is doomed to failure from the start.

• Email This
• Print
• Comments
• Trackbacks

Any business spending money on an environmental investigation or on clean up at property they own examine closely a federal tax incentive which is set to expire December 31, 2009.  The incentive allows environmental clean up costs to be fully deductible in the year they are incurred, rather than having to be capitalized and spread over a period of years. 

Some businesses may not look closely at that tax incentive because they don't think they own a "brownfield" property.  Many conjure images of falling down and abandoned manufacturing buildings when they think of a brownfield.  However, the incentive, known as the Federal Brownfields Tax Incentive, is very broad and inclusive as to what constitutes eligible properties.  Properties in full productive use with contamination can be eligible.

Until 2000, the Federal Brownfield Tax Incentive did include restrictions on which properties could be eligible.  The law included requirements on specific land use, geographic and contamination requirements for determining eligible properties.  However, most of these limitations were removed in 2000. 

Section 198 of the Internal Revenue Code contains the requirements for expensing environmental remediation costs.  Section 198 defines "qualified contaminated site" as the following:

The term "qualified contaminated site" means any area-

(A) which is held by the taxpayer for use in a trade or business or for the production of income, or which is property described in section 1221(a)(1) in the hands of the taxpayer, and

(B)  at or on which there has been a release (or threat of release) or disposal of any hazardous substance.

(Note: sites on the National Priorities List are excluded from eligibility)

The two requirements set forth in Section 198 are not very limiting, potentially allowing any property to be eligible that is held by a business upon which contamination is present.  Any business looking to qualify their property as eligible must obtain a statement from the designated state agency (typically the State EPA where the property is located) that there has been a release, threat of release, or disposal of a a hazardous substance at or on the property. 

Clean ups at former gas stations or  those involving underground storage tanks containing gasoline now also potentially qualify.  In 2006, the tax incentive was further expanded to include contamination from petroleum products (e.g., crude oil, crude oil condensates, and natural gasoline). 

What types of expenses are deductible? Generally speaking, any expenses incurred in connection with abatement or control of hazardous substances, including:

• Site assessment and investigation;
• Site monitoring;
• Clean up costs;
• Operation and maintenance costs;
• State voluntary cleanup program oversight fees; and
• Removal of demolition debris

While the incentive was extended at least three times since 1997, it is set to expire on December 31, 2009.  If the incentive provides advantages to your business it may make sense to consider managing your clean ups in the remaining months to maximize its benefits before it expires.  Also, note that it is possible previously filed tax returns can be amended to include deductions for past clean up expenditures.

U.S. EPA has a very useful fact sheet and answers to frequently asked questions on their website that provide further guidance on the incentive. 

[Disclaimer: You should consult your environmental counsel, CPA and tax counsel to determine whether your specific circumstances would qualify for the Federal Brownfield Tax Incentive]

[Photo: everystockphoto.com/Here in Van Nuys]

• Email This
• Print
• Comments
• Trackbacks

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

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

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

Two major issues:

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

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

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

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

photo: everystockphoto- cjohnson7

• Email This
• Print
• Comments
• Trackbacks

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

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

What does triggering NSR mean for these sources?

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

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

What does coverage under Title V mean for these sources?

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

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

Key Issue: Established Thresholds Triggering NSR or Title V 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

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

Who is required to report? 

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

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

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

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

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

What pollutants are considered GHGs?

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

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

When does reporting start?

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

When do I have to install monitors?

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

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

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

Can I ever get out of the reporting obligation?

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

• Email This
• Print
• Comments
• Trackbacks

In March of this year Canada and the United States submitted a bi-national proposal to reduce emissions from ships at ports.  The proposal marked the culmination of years of study of the costs and benefits of requiring emission reductions from ocean going vessels.  However, the proposal never mentions the Great Lakes and includes no analysis of the costs or benefits of extending the requirements to the region.  

Now, in a separate proposed rule making issued on August 28th,  U.S. EPA has proposed to expand the costly shipping regulations to include the Great Lakes region.  The proposed expansion would in essence amend the bi-national proposal even though no formal application has been submitted to the governing international body.  In addition, EPA has not provided a study of the costs/benefits of extending the regulations to the Great Lakes.

Background on North American Emission Control Area

In March 2006, President Bush and Canadian Prime Minister Harper agreed to prepare a bi-national application to the International Maritime Organization (IMO) to designate nearly all of North America's coastlines as an Emission Control Area (ECA).  Ships that enter the ECA are required to reduce emissions through a combination of cleaner burning fuel and air pollution controls. (see, U.S. EPA's frequently asked questions on ECAs)

On March 30, 2009, U.S. EPA submitted the final ECA application to the IMO.  The U.S.-Canadian ECA application included years of work and study of the ship traffic, anticipated air pollution reductions as well as the projected costs of the proposed controls.  A thorough explanation of the studies can be found in the application.  However, the ECA application does not include any studies or evaluation of the shipping traffic or costs in the Great Lakes region.  In fact, no where in the document is the term Great Lakes even found.

[Below are the charts showing the proposed emission reductions as well as the proposed ECA]

 Figure 1- Proposed ECA included in the March 2009 application to the IMO.  Green line denotes area covered by the ECA.

Figure 2- Chart shows the phase in of sulfur limitations on fuel as well as air pollution controls requirements.  Lower sulfur fuel will reduce fine particle pollution in port cities.

The proposal requirement to move from fuel with a 15,000 parts per million (ppm) sulfur content to a clean fuel with only a 1,000 ppm sulfur content amounts to a 98% reduction.  The overall costs of the regulations to the shipping industry is $3.2 billion, with the largest costs being fuel switching at $1.9 billion.

The proposal assumes that ships will reduce the cost of compliance by carrying two fuel tanks.  One tank would contain the much dirtier high-sulfur fuel which would utilized at sea outside the ECA.  Once the ship enters the ECA, it would switch to the low-sulfur fuel.

EPA Proposed Regulation to Extend ECA to Internal Waters Including the Great Lakes

On August 28, 2009 U.S. EPA issued a proposed rule titled "Control of Emissions From New Marine Compression-Ignition Engines at or Above 30 Liters Per Cylinder."   The preamble to the regulations includes the following statement regarding the proposed ECA:

However, our recent proposal for ECA designation that was submitted to IMO, although intended to protect air quality in U.S. ports and internal areas, does not explicitly state that it applies to internal waters. Therefore, we are proposing regulatory text under the authority of APPS, in order to avoid confusion on whether vessels must meet ECA requirements in internal waters. The text clarifies that the ECA requirements generally apply to internal waters, such as the Mississippi River and the Great Lakes, that can be accessed by ocean-going vessels. Vessel emissions in these waters affect U.S. air quality to an equal, if not greater extent that emissions taking place in coastal waters. Specifically, the proposed rule would require compliance with the fuel sulfur requirements and the NOX emission standards of Regulations 13, 14, and 18 in internal waters. (emphasis added)

While there is no doubt cleaner ships in the Great Lakes would improve air quality.  The issue is that U.S. EPA appears to be amending the bi-national application to the IMO without any supporting information.  The IMO ECA application does not include costs for the Great Lakes shipping fleet which is of a different make up than those traveling to ocean ports on the coasts.  

For example, the IMO ECA application estimates compliance costs will be reduced through fuel switching between high sulfur and low sulfur fuel.  However, that will not be an option for ships traveling in the Great Lakes which will always be within the ECA.  Also, the Great Lakes fleet tend to be smaller in size than some of the large vessels that enter the coastal ports.  No analysis has been performed on the costs and benefits given the different make up of the Great Lakes fleet. 

Smaller marine engines are already required to use lower sulfur fuel under the Nonroad Diesel Rule (finalized June 29, 2004).  It is possible that the proposal to extend the ECA to the Great Lakes would have negligible impacts because ships tend to be smaller.  However, without any analysis of the Great Lakes fleet is it impossible to make this determination.

U.S. EPA proposed rule was issued on August 28, 2009 and the Agency has allowed public comments only until September 28, 2009.

• Email This
• Print
• Comments
• Trackbacks

The Federal Court of Appeals (2nd Circuit) issued a major decision in the ever growing debate regarding action on climate change.  The court is allowing states to proceed with a suit against power companies that calls for a court order to reduce emissions of greenhouse gases which  contribute to global warming.

Eight states (California, Connecticut, Iowa, New Jersey, New York, Rhode Island, Vermont and Wisconsin), New York City and three land trust organization had filed a suit alleging major power plants caused a nuisance by emitting greenhouse gases that contribute to climate change.  The Appeal Court decision follows a lower court which dismissed the case on an interesting rule of law- the "political question doctrine."  In essence the lower court found the nuisance claim to raise a very complicated political question that was best left to the Executive and Legislative branches of government.  That questions was the balance between:

1) Reducing greenhouse gases to eliminate or mitigate societal impacts that flow from climate change

- versus-

2) The negative impact on the economy caused by the regulations and the societal impacts that would result

The Appeals Court ruled that the States did not need to wait for Congress to act by passing legislation.  The Court also ruled that EPA's authority to regulate greenhouse gases under the Clean Air Act does not displace nuisance claims.  The Court noted that the mere issuance of a proposed endangerment finding by EPA was not enough to displace judicial relief under federal common law nuisance theories.

Other significant findings in the Appeals Court decision include:

• The Court found the States are experiencing current "injury in fact" due to impacts from climate change, including melting California snow pack and erosion on the Massachusetts shoreline
• Emitters of greenhouse gases face potential nuisance liability by contributing to climate change.  The Court rejected the notion there must be a direct causation between the sources of emissions and global warming.

The decision will certainly increase pressure on those who have resisted passage of climate change legislation.  Those who stand in the way of legislation must face the prospect of either: a) EPA regulations under the Clean Air Act; or b) Court ordered caps on emissions through multiple nuisance claims.  Either result would be far worse that the legislative option.  Both would result in even more complex regulatory schemes, less certainty and more regulation of smaller sources.

Perhaps there will be a renewed sense of urgency to pass climate change legislation.  American Electric Power, one of the utilities sued, was quoted in the N.Y. Times asserting the need for climate change legislation: 

At American Electric Power, Pat D. Hemlepp, a spokesman, said the company’s lawyers had not decided whether to appeal. But he added: “We don’t feel that litigation is a proper avenue to address climate concerns. In our view, it’s a policy issue.”

“Legislation would be the best approach, and that’s happening now,” Mr. Hemlepp said, referring to a bill that has passed the House and that the Senate may take up this year. 

UPDATE 9/24/09:  Another wrinkle that I did not discuss regarding this decision is that it will open up the floodgates of climate change litgation.   As appropriately acknowledged on Stoel Rives LLP Renewable + Law Blog, private parties now have been recognized to have standing to bring federal nuisance claims:

The court recognized that the Supreme Court had never addressed this question, but concluded that private parties should be able to proceed with federal nuisance claims related to climate change when they invoke an overriding federal interest or federalism concerns. By holding that private parties can bring federal nuisance suits and by recognizing that climate change is of overriding federal interest, the court potentially cleared the way for federal lawsuits against all types of companies that emit material levels of greenhouse gases.

• Email This
• Print
• Comments
• Trackbacks

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.

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

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

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

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

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

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

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

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

(Photo: everystockphoto: cjohnson7)

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

Back in 2006, while I was still at Ohio EPA, a major piece of state legislation worked its way through the General Assembly.  Senate Bill 265 was developed by business groups in Ohio to address concerns with the structure and implementation of Ohio air pollution permitting programs.  The main target to be fixed was the requirement for all non-federally regulated air sources to install Best Available technology (BAT).

Business groups believed that the BAT requirement put Ohio at a disadvantage to neighboring states by requiring a higher (and more costly) level of controls.  Even more importantly, Ohio businesses felt that implementation of BAT at Ohio EPA lacked the certainty that businesses look for in regulatory programs.

Issues with BAT

The lack of certainty stemmed from the fact that BAT was determined on a case-by-case basis with each individual permit that was submitted to the Agency.  Concerns were expressed that permit reviewers reached different conclusions as to what constituted BAT, sometimes for similar sources. 

During the debate over BAT I was at the center of the storm working as Director of Ohio EPA.  I had to testify numerous times before the Legislature.  While I did not agree with every argument against BAT, I did agree that Ohio EPA was placing too much time and energy into regulating small sources of air pollution.

• FACT:  Ohio has some 70,000 regulated air sources in the State whereas Michigan has less than 10,000

The huge difference in regulated sources is not attributable to there being less industry in Michigan, rather it was because Ohio regulated much smaller sources.  For these reasons, Ohio EPA took a neutral position on the legislation.

Senate Bill 265 passed the Legislature and included two major components as an overhaul of the BAT requirement:

1. It exempted all sources less than 10 tons per year from having to install BAT. 
2. For sources larger than 10 tpy, Ohio EPA could only require BAT by adopting rules specifying what exactly BAT would be for particular sources.  The legislation gave Ohio EPA a three year window to adopt rules.  The window is up this month (August 3, 2009)

Region 5 U.S. EPA Questions Ohio's Ability to Modify BAT

In the ensuing three years since passage of S.B. 265 the course of change has been anything but certain.  U.S. EPA has issued two letters to Ohio EPA.  A June 2008 letter rejected Ohio EPA's rule which would exempt sources smaller than 10 TPY because U.S. EPA said Ohio EPA failed to prove Ohio's air pollution control strategy would not be weakened.  On May 22, 2009, U.S. EPA sent a second letter expressing concern over the impending deadline of August 3, 2009 when Ohio would no longer be able to require BAT without source specific rules.

In discussing the letters with staff, Ohio EPA is confident it can work out with U.S. EPA the exemption of sources smaller than 10 TPY.  However, it is much more difficult to envision a resolution of the issue pertaining to sources larger than 10 TPY. 

As an indication of the messy situation that may emerge, U.S. EPA Region 5 could start issuing notices of violation (NOVs) to all sources that receive an air permit without BAT after August 3, 2009.  In an attempt to avoid such a situation, Ohio EPA has discussed passing a rule that would require BAT on all sources larger than 10 tpy.  The rule would specify BAT are those general characteristics set forth in S.B. 265. 

1. Work practices;
2. Source design characteristics or design efficiency of applicable air contaminant control devices;
3. Raw material specifications or throughput limitations averaged over a twelve-month rolling period;
4. Monthly allowable emissions averaged over a twelve-month rolling period.

Sierra Club Sues Ohio for Failing to Enforce the Clean Air Act

It was not just Region 5 of U.S. EPA that was attacking changes to BAT. The Sierra Club filed suit against Ohio EPA over its rule exempting sources smaller than 10 tpy.  The Sierra Club challenged Ohio EPA under the Clean Air Act''s citizen suit provisions. 

In a very surprising decision, Magistrate Judge Abel found the citizen's suit provisions of the Clean Air Act did not allow suits against a State for failing to to enforce the Clean Air Act.  This decision will be appealed given its broader implications on the scope of the citizen suit provisions.  Given the prior precedents it is unclear whether Judge Abel's decision will be upheld.

Lessons Learned

We will have to wait and see how these major issues unfold over the next few months.  However, there is no doubt that the situation that has emerged after three years is not at all what was envisions during passage of S.B. 265.

The complexities involved in trying to change a State's air pollution control strategy on any significant scale are immense.  Ohio's BAT experience is a prime example.  With 70,000 regulated sources the ability to determine the impact of the BAT changes is almost impossible.  Making such a demonstration is the first step toward gaining U.S. EPA's approval.

Unfortunately, after three years businesses may be left with less certainty than they had before the overhaul was attempted. 

• Back to case-by-case BAT
• Region 5 scrutiny of Ohio EPA air permits
• Continuing litigation of changes to Ohio's State Implementation Plan (SIP)

This is hardly the specificity that the business community envisioned during passage of S.B. 265.  Business groups envisions rules that would specifically state that type of controls or work practices that must be utilized for different types of sources.  The stop gap rule proposed by Ohio EPA looks more like case specific BAT.

• Email This
• Print
• Comments
• Trackbacks

On June 18th the Senate Environment and Public Works Committee, on a vote of 12-7, passed the amended version of the Clean Water Restoration Act.  The proposal is seen by some as an attempt to fix a major hole in the Clean Water Act.  Others see it as a major extension of federal regulation.  I see it as a State's rights issue...

The debate over the bill has centered on whether federal jurisdiction should cover essentially all streams and wetlands. (for a discussion of the jurisdiction issue see the extended entry to this post)  The hardcore supporters or detractors appear to break into two camps:

1. Farmers who want the independence and flexibility to address irrigation or flooding without the need of federal permits
2. Without passage the majority of streams and wetlands will be left completely unprotected leading to a complete destruction of water quality even in federally regulated waterways. 

If you think I'm painting the camps too dramatically let me provide some examples.  First from the protection camp (post on Blue Living Ideas).

Without CWRA, we could return to the times of the Cuyahoga River burning and the Great Lakes smelling like cesspools. The Clean Water Act is important legislation that needs restoration. It’s about birds; it’s about clean water; it’s about drinking water. CWA was intended to protect all of America’s waters from pollution, not just those that are navigable.

Now from the farmer's perspective (post on Drovers).

Under current law, the federal government has jurisdiction over "navigable waters of the United States." However, by removing the word "navigable" from the definition, the CWRA would expand federal regulatory control to unprecedented levels - essentially putting stock tanks, drainage ditches, any puddle or water feature found on family farms and ranches—potentially even ground water—under the regulatory strong-arm of the federal government.

There are of course other perspective, such as the U.S. Chamber's.  In a letter to the Senate Committee the U.S. Chamber opposes the Clean Water Restoration Act because it fears the expansive language will be used by citizen groups to stop development projects:

It has been well-documented that deletion of the term “navigable” from the definition of “waters of the United States” could lead to the unnecessary expansion of the CWA to certain intrastate waters. The bill does attempt to address this problem by listing the specific types of waters explicitly covered by the CWA and exempting others. However, the Chamber’s primary concern is that, despite the good intentions of the Committee in negotiating a compromise, S.787 as drafted is still subject to manipulation by activist groups whose only goal is to stop development.

Lost in the debate seems to be Republican notions of federalism.  When it comes to environmental protection, States seem to often loose the argument that they can craft better regulations or even be trusted to adopt any regulation at all.

The lack of trust makes groups push hard for federal regulation, which is unfortunate because State crafted water quality regulatory programs should be a much better alternative. Here are some reasons why an expanded Ohio jurisdiction over waterways and wetlands may be preferable to "putting all waters under federal protection." 

1. Regulations crafted at the local level-  ideally States should be in a better position to address unique water quality issues that may be present in their state.  Rather than one size fits all approach under federal regulations.
2. One permit instead of two-  If the Clean Water Restoration Act passes, anyone with development projects in the State that impacts a stream or wetland will have to get a 401 water quality certification and a 404 permit.  This means all development projects face distinct regulators who may push for different outcomes to mitigate for impacts. 
3. Greater Flexibility-  In navigating federal regulations, companies and developers often must deal with the "national consistency" argument.  In other words, "we can't be flexible in this instance because we have to worry we are setting national precedent."
4. Navigation of only one regulatory structures-  Water quality regulation is a complex business.  It involves biological and chemical criteria.  Navigating two complex regulatory structures (federal and state) bogs down business.  An efficient regulatory structure can still be protective.

A state water permit program is not only a possibility, it was proposed by Ohio EPA in the fall of 2008 in response to shrinking federal regulation.  The State's proposal has met with significant resistance which has slowed the rule development process down to a crawl.  However, for the reasons articulated above perhaps its worth reconsidering positions on the proposal.  

Those groups opposing both the Clean Water Restoration Act and Ohio EPA's proposed Water Quality Permit Program must realize they will not get it both ways.  There is too much support for protecting streams and wetlands to have no regulatory program in place.  Without a strong push for State regulation, the default will be to push for federal regulation.

To fend off federal regulation through adoption of effective state regulation, supporters must address the perception of many that State's engage in a "race to the bottom" when enacting environmental regulation.  Federal legislation like the Clean Water Restoration Act get pushed because fear by many groups that if regulation is left up to the State's they will all compete to have the least amount of protections or requirements. 

(Photo: Colin Gregory Palmer/everystockphoto.com)

• Email This
• Print
• Comments
• Trackbacks

On Monday, the Cleveland Plain Dealer had a picture (above the fold) taken 40 years ago of a man dipping his hand in the Cuyahoga River and having it covered in oil and muck.  In the background is the River that was an oil and waste cesspool, devoid of any life.  Everything was primed for a follow up story in the Plain Dealer today talking about the 40th Anniversary of the famous fire on the Cuyahoga River and show casing Cleveland's massive environmental achievement in cleaning up the River, then in stepped U.S. EPA....

As discussed in detail in the prior postEnding 40 Years of Cleveland Jokes: A River's Recovery, the 40 year clean up of the Cuyahoga River has resulted in an unbelievable achievement.  For most of the forty miles upstream of the navigation channel, the River is teeming with life, including:

• more than 40 species of fish
• ten times the amount of fish per kilometer

To show this amazing progress, Ohio EPA and the Cuyahoga RAP submitted a formal request supported with reams of data to U.S. EPA's Great Lakes National Program Office (GLNPO) asking that huge portions of 40 mile stretch be "delisted" or, in other words, taken off the list of the most polluted rivers in the country.  Yesterday, at the Year of the River celebration, local and state politicians, environmental groups and government representatives gathered to receive the good news- U.S. EPA had granted the request.  Only to find out that GLNPO couldn't see past the bureaucratic red tape and essentially denied the request (GLNPO Letter).  Here was is on the Plain Dealer's web page today regarding the Year of the River event:

Fantastic job, Northeast Ohio, really. But even after an incredible 40-year turnaround from fire to fish-friendly, still not enough has been done to bring the Cuyahoga River into environmental compliance.

That was essentially the message the U.S. EPA delivered Monday to officials and environmentalists gathered for 40th anniversary of the last fire on the industrial waterway.

GLNPO did not deny the request because the disagreed with the data that showed a return of fish and aquatic life to the River.  In fact, they sent a letter saying they agreed with the data.  Instead, GLNPO said they just didn't want to delist portions of the River due to internal difficulties in tracking the data.   So all they could send was a letter saying "nice job" and the data shows recovery, but we can't formally recognize anything.

While this may not seem like a big distinction, the fact is the media was all set to portray the story in an extremely positive light.  I talked with a couple of local reporters and press people covering the event.  Some had glowing coverage written and prepared to be released only to rewrite the stories at the last minute once everyone figured out what U.S. EPA had actually done.  What could have been a event garnering regional if not national attention, ended with local news stories discussing the bureaucratic U.S. EPA. 

Having working on Great Lakes issues for a number of years, I am wise enough to know that progress must be documented when pouring millions into improving the Lakes.  U.S. EPA's Great Lakes National Program Office should be trumpeting these successes to gain momentum, not deflating the balloon. 

Let's hope that a lesson can be learned and U.S. EPA will sit down and realize they need to take a fresh look at establishing milestones and formally recognizing achievements.  Otherwise we will have a difficult time ever convincing the Country spending hundreds of millions on the Great Lakes is a wise investment.

(Photo:tangywolf/everystockphoto.com)

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

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.

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

The American Clean Energy and Security (ACES) Act of 2009 has cleared one hurdle through passage by the House Energy and Commerce Committee.  The bill now makes its way through at least two more House Committees before a floor vote will occur.  The House leadership has set an aggressive time frame for passage, Speaker Pelosi has said the remaining Committees must finish their work by June 19th.  This leads to the possibility of a  floor vote no later than the end of the month or early July. 

(World Resources Institute- Graph on anticipated reductions from ACES- click on chart to enlarge)

While the ACES legislation appears to be moving quickly, major issues remain with the structure of the legislation as well as its timing.  The Senate does not have a companion bill and many speculate the Senate will be unwilling to simply take of the Waxman-Markey Bill.  Therefore, a tremendous amount of uncertainty remains as to the approach the Senate will use to take up climate change legislation.

What are the possible issues that will be debated in House Committee hearings and in the Senate?  Some will include the following:

1. 5 year Phase Out of Allocations-  The mark up version of the ACES legislation saw a significant compromise  on the auction v. allocation debate.  Whereas, the President had proposed a 100% auction, ACES only calls for a 35% auction in the early years.  However, the bill still proposes an aggressive phase out of allocations for the energy sector. (See Pew Chart to Left that show dramatic shift downward in allocations during 2025-2030 - click on chart to enlarge) While it may seem like a long way off, in a five year period stretching from 2025-2030 the legislation phases out allocations moving to 90% auction of allowances.  Industry is concerned that this aggressive phase out period will lead to price spikes in utility costs.
2. 2020 Emission CAP- Emission reductions called for in the initial years was reduced.  The first major milestone of the cap is seen as 2020.  The original bill called for a 20% reduction below 2005 levels.  The mark up reduced that to a 17% reduction by 2020.  However, some forget that President Obama had called for a 14% reduction by 2020.  There are many industry representatives who believe the early reductions still need to be softened to make the bill workable.  There may be a renewed push to bring the 2020 cap down to the 14% reduction.
3. 2012 Start Date-  The Legislation calls for a modest 3% reduction in 2012.  However, some in industry believe 2012 is too early and does not give adequate lead time to prepare for the cap.  During an EMA presentation, Bruce Braine, Vice President of AEP, commented that the 2012 time frame may force switching to natural gas that will result in price spikes in the first year the cap is effective.
4. International Offsets-  In the face of widespread controversy regarding the European Trading Scheme (ETS) use of offsets, the bill includes many limitations on use of international offsets.  Beginning in 2018, there is an automatic 20% discount in the value of international offsets.  The bill limits use of international offsets to those categories of projects that have received approval by U.S. EPA.  In addition, there is a sector limitation on use.  Sectors in various countries will be identified where offsets are deemed appropriate (factors includes GDP and receiving equal treatment in project host country).  Finally, there must a an applicable bi-national or multi-national treaty in effect with the Country. Industry is concerned that these requirements will reduce the availability of international offsets thereby driving up the cost of compliance.
5. Environmentalist Perspective-  The consensus among the environmental community appears to be that the "watering down" of the ACES legislation was necessary to secure passage.  Therefore, even with the dramatic shift away from auction of allowances, most groups still support the Legislation.  The key issue from an environmentalist perspective is the proverbial "line in the sand" to prevent additional changes, including concessions to industry on the issues mentioned above in the Senate.
6. Ideology v. Realism-  Republicans who have uniformly opposed the carbon cap and trade legislation.  Even though industry support for the Legislation has grown, many Republicans have had success describing the Legislation as a large tax increase during a down economy.  This message plays well even with some Democrats from the Midwest and Southern States that face the greatest impacts from climate change legislation.  The "realism" aspect is that regulation of greenhouse gases appears inevitable.  A market based solution is clearly a better alternative to command and control regulation under the Clean Air Act.  However, are some members of Congress in denial that regulation is inevitable?

Obviously, ACES went through a dramatic transformation to gain passage from the House Energy and Commerce Committee.  The overwhelming majority of changes were to address industry concerns with the Legislation.  The most important changes were the shift away from auction of allowances and reduced reduction targets in the early years of the cap. 

Additional battles may be looming in the House over the issues identified above and others.  However, the most important battle ground remains the U.S. Senate where the future is less certain.

• Email This
• Print
• Comments
• Trackbacks

As an indication the New Source Review (NSR) enforcement actions are alive and well, today an Indiana federal court has ordered the shut down of units that triggered NSR and failed to install controls.  In addition, the Court required Cinergy to surrender allowances to compensate for "irreparable harm" caused by the operation of the units in violation of the Clean Air Act

The Federal District Court in Indiana issued its decision in the remedy phase of the New Source Review (NSR) enforcement action against Cinergy Corporation's Beckjord, Ohio plant.  A jury trial was held in May of 2008 to determine whether certain projects triggered NSR.  The jury found that four projects performed at the facility "a reasonable power plant owner or operator would have expected a new increase of 40 tons of SO2 and/or NOx "(NSR major modification trigger levels).  Following the jury's verdict, the Court moved into the remedy stage to determine what relief to grant the plaintiffs for the violations.

The Courts decision is an interesting exercise of looking its crystal ball.  Based on calculations of emissions and modeling, the Court projected environmental harm caused by failure to comply with NSR. 

To determine harm, the Court first determined the type of pollution controls that would have been installed had Cinergy complied with NSR requirements (BACT/LAER).  Those controls established the baseline emissions that should have been emitted since the projects were completed.  All emissions above the baseline were considered  "excess emissions" that resulted in environmental harm and potential health impacts.

It was pretty evident which direction the Court was heading when it included the following statement in its order:

With respect to SO2 emissions, Dr. Fox testified that the annual excess emissions of SO2 is approximately 23,000 tons...Putting this into perspective, this rate is approximately equivalent to the amount of SO2 emitted by 324,000 heavy-duty diesel trucks, which is the total number of trucks registered in Indiana, Ohio and Kentucky.

The analysis of environmental harm and potential health impacts was very similar to the exercise undertaken by the North Carolina Court in the nuisance claims against coal fired power plants (see post, "Nuisance Finding Gives Downwind States New Ammo in Long Cross-Border Pollution War").  Here is what the Court examined to gage harm caused by "excess emissions":

• How did the SO2 and Nox emission impact pm 2.5 and ozone attainment
• What were mercury emission impacts
• Potential health impacts from fine particle pollution
• Damage to the environment from acid rain

After finding irreparable harm from these impacts the Court ordered:

1. Shut down of three units by Sept. 2009
2. Until Sept. 2009, the three units must be run so as not to exceed baseline levels that are based BACT/LAER controls
3. Permanently surrender SO2 allowances in an amount equal to total SO2 emissions from May 22, 2008 until September 30, 2009

For those who though the NSR consent decrees carried with them pretty dramatic remedies, this decision shows you take an equivalent risk by going to trial. 

 (Photo: DanieVDM/everystockphoto.com)

• Email This
• Print
• Comments
• Trackbacks

Representatives Waxman and Markey released their much anticipated re-write of their proposed cap and trade climate legislation earlier this week. Much speculation has been offered in the media that the bill had no chance of passing as it was originally structured, if it had any chance at all. 

Well, there has apparently been a lot of horse trading going on to shore up Democratic support for the bill.  Most notably, President Obama's proposal to have 100% auction of allowances (pollution permits) has been completely tossed out.   The revised legislation allocates that majority of allowances to industry. 

The majority staff provided a summary of the American Clean Energy and Security Act of 2009 (ACES Act) to the Committee.  While the summary is helpful to get an overview of this complex bill, I thought one of the most interesting statements appears in the introduction to the summary appearing on the first page:

In the past two and half years, the Committee has held dozens of hearings on energy and climate change policy and has built a detailed factual record on the need for legislation in this area.  The nation's dependence on foreign oil has significantly increased over the last decade.  Consumers have faced increasing and volatile energy prices.  Other countries have overtaken us in the manufacture of wind and solar energy.  Energy company investments are paralyzed because of uncertainty about what policies the Congress will establish.  Meanwhile, global warming has increased unchecked.

Let's rank the staff's reasons for passing climate change legislation:

1. Reduce dependence on foreign oil
2. Volatile energy prices
3. Increase production of renewable energy
4. Regulatory certainty
5. Global warming

Isn't iit a little odd that global warming is not emphasized as the main reason for the legislation.  There is no discussion at all of the increased threat of climate change and the need to act.  Rather, its about foriegn oil and renewable power.  That seems strange to me, after all it is a multi-billion dollar cap and trade program to reduce greenhouse gases.

It is clear the choice in messaging is in reaction to the headway Republicans and conservative Democrats have made in raising concerns about the timing and cost of the legislation.  In a very difficult economy its hard to gain support for costly new programs, especially programs on the scale called for in this legislation. 

In reaction to this strong criticism we find a re-worked bill that provides the lion share of allowances to industry as well as other hedges against the potential cost of the program.  I am not criticizing the approach, rather I am commenting on the unrealistic nature of the President's 100% auction proposal.  This is a massive new environmental regulatory program, one that is greater in scope than any previous programs.  It makes sense to transition toward a carbon regulated economy.

Here are some of the more notable provisions in the legislation:

1. Reduction Targets- Reductions from covered sources to 97% of 2005 levels by 2012, 83% by 2020, 58% by 17% by 2050.  Here is one of the changes that is meant to ease into a carbon constrained world.  The reductions have been diminished in the early years to ease the transition.  While it helps out in the early years, at some point we face a major spike in needed reductions.  That may be a difficult issue to overcome.
2. Who is covered by the Cap?- By year the cap kicks in--- Group 2012: Electricity generators, liquid fuel refiners, and fluorinated gas manufacturers. Group 2014: Industrial sources that emit more than 25,000 tons of carbon dioxide equivalent per year. Group 2016: Natural gas local distribution companies.
3. Allowance allocation- Coal related: 30% to local electric distribution companies regulated by the states. 5% to merchant coal generators. Natural gas related: 9% of allowances to local distribution companies.  Home heating oil and propane: 1.5% to state programs for users of home heating oil or propane.
4. Auction- approximately 15% of allowances will be auctioned beginning 2011 and proceeds directed to low and moderate income families to address increases in energy prices. This is a far cry from the President's proposal of 100% auction.
5. Offsets- Covered entities are able to offset up to 2 billion tons of emissions by using EPA-approved domestic and international offset credits.  The ability to use the credits is divided according to the legislation's allocation formula.  By 2017, the price to use international offsets is increased.  Covered entities must use five tons of international offset credits for every four tons of emissions being offset.  Offsets are designed to reduce the cost of compliance.  Industries covered by the cap can purchase credits generated by projects outside of the cap.  Offset credits would be cheaper than allowances thereby reducing the cost of compliance.  It also creates a whole new business for companies that specialize in carbon offset credit projects.
6. Offset Integrity Advisory Board-  Board provides recommendations to EPA as to type of offset projects that should be listed by EPA as eligible; appropriate quantification methodologies, etc...  The bill contains multiple safeguards to try and improve the integrity of offsets.  These provisions have been included to address the criticism the European Trading Scheme has received regarding the lack of creditability of offsets used in Europe's Cap and Trade program.
7. National Renewable Portfolio Standard- Includes a requirement that retail electric suppliers provide 6% from renewable energy sources by 2010.  The standard rises to 20% by 2020.  Up to one quarter of the 20% requirement can be met through energy efficiency projects.
8. Clean Air Act Exemptions-  The bill would specifically exempt greenhouse gases from coverage under the Title V program, New Source Review Program, NAAQS, and HAPs. 

Number 8-  is a huge positive factor arguing in favor of the cap and trade approach. As detailed on this blog many times, regulation of greenhouse gases under the Clean Air Act would be a disaster. It would result in over regulation of small sources, inefficient permitting which would slow projects and significant amounts of litigation.

Dspite the recent media coverage, I don't see how EPA backs away from the cliff at this point.  Three are too many things set in motion for EPA to move away from regulation under the Clean Air Act unless legislation is passed. Cap and trade legislation, especially a bill that calls for a smooth transition to a carbon regulated world is just a far better alternative.

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

U.S. EPA's Office of Inspector General released a report regarding the effects of the Supreme Court's decision in Rapanos on enforcement of Section 404 of the Clean Water Act.  The report, titled Comments Related to Effects Jurisdictional Uncertainty On Clean Water Act Implementation, contains some interesting observations and discussion.  Bottomline, the lack of clarity for determining whether wetlands or waterways fall within the jurisdiction of the Clean Water Act has led to U.S. EPA dropping hundred of enforcement cases. 

Overall, CWA enforcement activities (for Sections 311 (oil spills), 402 (National Pollutant Discharge Elimination System), and 404) have decreased since the Rapanos ruling. An estimated total of 489 enforcement cases (Sections 311, 402, and 404 combined) have been affected such that formal enforcement was not pursued as a result of jurisdictional uncertainty, case priority was lowered as a result of jurisdictional uncertainty, or lack of jurisdiction was asserted as an affirmative defense to an enforcement action.

Some interesting observations by the EPA lawyers who are  trying to provide advice to those enforcing the Clean Water Act:  Here are two notable comments about the legal terms that are causing uncertainty:

Traditional navigable waterways evade easy definition; even the Supreme Court has been vague on the precise scope of traditional navigable waterways. Traditional navigable waterways have arisen in multiple legal contexts over the years, not just in CWA discussions. Many stakeholders find the Appendix D definition to be still too broad to adequately serve the jurisdictional issues created by the Rapanos decision. The OGC attorneys noted that there had been considerable discussion about the scope of traditional navigable waterways in Fall 2007. Traditional navigable waterways continue to be an issue in some "isolated (a)(3)" elevations.

"Adjacency" was not addressed by the Supreme Court. Although there are 1-2 sentences on it in the interim June 2007 guidance, it remains an imprecise term. However, OGC staff is working with various program offices to create a follow-up to the June 2007 Rapanos guidance where adjacency, among other things, will be addressed. The real debate involves the interpretation of one aspect of the "adjacency" definition: "neighboring." This "neighboring" term was a cornerstone of the debate in the Carabell case.

The blog Great Lakes Law provides a good summary of the aftermath of the Rapanos Decision as well as discussing the possible legislative fix currently being debated in Congress:

Rapanos / Carabell vs. United States resulted in a divided Court issuing a confusing 4-4-1 divided ruling that cast doubt on whether non-navigable tributaries and their associated wetlands were protected by the Clean Water Act. The Rapanos decision has put at risk safeguards for approximately 60% of the nation’s stream miles (exclusive of Alaska) and their neighboring wetlands.

If nearly 60% of the rivers and wetlands are "unprotected" under federal law, it would seem there would be strong pressure on the States to fill the void.  That pressure is being felt in Ohio where it has proposed a new permit program for impacts to streams.  This proposed rule, if it goes final, would likely be challenged.  This could lead to the State of Ohio's own Rapanos-type decision in the State Supreme Court.  Although that is a long way off.

Outside of new regulations, some states have legal authority that appears broader then federal jurisdiction over waterways.  I wonder whether in any of the 500 cases the U.S. EPA  has dropped they attempted to make a reverse referral to the States for enforcement.   For instance, Ohio Revised Code 6111 has a very broad definition of "Waters of the State" which could form the basis of a State enforcement action:

“Waters of the state” means all streams, lakes, ponds, marshes, watercourses, waterways, wells, springs, irrigation systems, drainage systems, and other bodies or accumulations of water, surface and underground, natural or artificial, regardless of the depth of the strata in which underground water is located, that are situated wholly or partly within, or border upon, this state, or are within its jurisdiction, except those private waters that do not combine or effect a junction with natural surface or underground waters.

Many are pinning their hopes on a Congressional fix that would expand federal jurisdiction beyond navigable waters or those with a "significant nexus" to a navigable water.   Legislation has been proposed- the Clean Water Restoration Act.  It would redefine fedral waterways covered by the Clean Water Act by dropping the term "navigable" as a qualifier to which waters are covered.  It would also add the following language regarding federal

WATERS OF THE UNITED STATES.—The term ‘waters of the United States’ means all waters subject to the ebb and flow of the tide, the territorial seas, and all interstate and intrastate waters and their tributaries, including lakes, rivers, streams (including intermittent streams), mudflats, sandflats, wetlands, sloughs, prairie potholes, wet meadows, playa lakes, natural ponds, and all impoundments of the foregoing, to the fullest extent that these waters, or activities affecting these waters, are subject to the legislative power of Congress under the Constitution."

This language would certainly capture virtually every water way.   However, it is very controversial.  Especially out West.  Perhaps with Democratic control this legislation will begin to move, but it still faces a huge challenge.  As a result, states will be feeling increasing pressure, like Ohio has, to exercise existing authority in an attempt to fill the void left by the Rapanos decision.

(Photo: whiskymac/everystockphoto.com)

• Email This
• Print
• Comments
• Trackbacks

As reported by the AP, "White House Memo Challenges Finding on Warming", an OMB document contains opinions that regulation of the greenhouse gases under the Clean Air Act could have dramatic impacts on the economy.  The release of the OMB memo seems to have put the Obama Administration on the defensive. 

Major news outlets including the N.Y Times, Wall Street Journal and Associated Press reported the uproar regarding the memo. Here is how the Associated Press described the controversy surrounding the memo:

An Environmental Protection Agency proposal that could lead to regulating the gases blamed for global warming will prove costly for factories, small businesses and other institutions, according to a White House document.

The nine-page memo is a compilation of opinions made by a dozen federal agencies and departments during an internal review before the EPA issued a finding in April that greenhouse gases pose dangers to public health and welfare.

That finding could set in motion for the first time the regulation of six heat-trapping gases from cars and trucks, factories and other sources under the Clean Air Act.

On Capital Hill, EPA Administrator Lisa Jackson faced questions from Senators regarding the memo (video of her testimony). The memo was described by some as the "smoking gun" that supported Republican and business claims that regulation of greenhouse gases under the Clean Air Act would have a devastating impact on the economy.

The memo also called into question EPA's claim that the scientific underpinnings for its proposed endangerment finding made an "overwhelming" case for regulation due to the threats presented by climate change. As reported in the Wall Street Journal, the memo criticized EPA's scientific support for the endangerment finding:

“The amount of acknowledged lack of understanding about the basic facts surrounding [greenhouse gases] seem to stretch the precautionary principle to providing regulation in the face of unprecedented uncertainty,” the memo reads.

After the release of the memo and the ensuing uproar, the Wall Street Journal suggested EPA may be wavering in its commitment to regulate greenhouse gases under the Clean Air Act. Such conclusions seem to be supported by statements made by  the Director,of OMB Peter Orszag, on his blog.  

Media reports today are suggesting that OMB has found fault with EPA’s proposed finding that emissions of greenhouse gases from motor vehicles contribute to air pollution that endangers public health and welfare. Any reports suggesting that OMB was opposed to the finding are unfounded...

Perhaps more importantly, OMB concluded review of the preliminary finding several weeks ago, which then allowed EPA to move forward with the proposed finding. As I wrote on this blog on April 17, the "proposed finding is carefully rooted in both law and science." I also noted: "By itself, the EPA’s proposed finding imposes no regulation. (Indeed, by itself, it requires nothing at all.) If and when the endangerment finding is made final, the EPA will turn to the question whether and how to regulate greenhouse gas emissions from new automobiles." 

Orszag seems to be going out of his way to minimize the significance of the endangerment finding.  Such statement belittle the fact that if the endangerment finding is finalized it will set in motion significant regulation of sources under the Clean Air Act.  

After reading the the coverage, I just don't understand all the fuss. Of course regulation under the Clean Air Act would have dramatic impacts on the economy. U.S. EPA's Advanced Notice of Public Rulemaking (ANPR) sets forth numerous examples of the difficulties and issues associated with regulation under the Act.   Even though the ANPR was written during the Bush years, the issues it identifies remain valid.   I have written numerous posts discussing how the structure of the Clean Air Act is ill-suited for regulating greenhouse gases. 

Lets face it, the Obama Administration understands these issues as well.  That is why it has been using the threat of regulation to leverage passage of cap and trade legislation.  EPA Administrator Jackson reiterated support for cap and trade legislation today. 

Thus far the Administration has taken very slow and deliberate steps toward regulation.  Many critical decisions related to climate change are under "EPA review " or in the draft stage. To date, environmental groups have been content to let the Administration move forward at its own pace.  They are convinced regulation is inevitable. 

How long can EPA realistically string out the decisions on whether to address climate change under the Clean Air Act? The longer the string out the decision, the less effective EPA's threats are in leveraging Congress.  At some point, Congress may just be convinced EPA is bluffing. 

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

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

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

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

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

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

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

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

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

(Photo: Flickr Amy Manuel)

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This last statement is very interesting. 

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

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

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

The American Reinvestment and Recovery Act (ARRA) contains the highest federal funding yet for the 5 r's of diesel- retrofits, replacements, repowers, replace and refuel.  The competitive announcements for the ARRA Funding for National Diesel Emissions Reduction Program became available on March 20, 2009. Better get your act together if you still want an application in- the deadline is April 28th to submit a request for funding.  If you can't make the deadline there will be normal funding available ($60 million) in the fall. 

Who can file the application?

1. Regional, state, local, tribal or port agency with jurisdiction over transportation or air quality; and
2. Nonprofit organization or institution which:

a) Represents or provides pollution reduction or educational services to persons or organizations that operate diesel fleets; or

b)Has, as its principle purpose, the promotion of transportation or air quality

What will it pay for?

• 75% for engine repowers
• 25% for all replacements except
• 50% for school buses that meet 2010 standards
• 100% for retrofit technologies
• 100% for idle reduction technologies
• 100% for engine upgrades (kits only)
• 100% for incremental cost of cleaner fuels

Much more information is available on U.S. EPA's Region 5's web page.  Just page down to the section on ARRA. 

Helpful information and tips are available from the Diesel Technology Forum.  For example, here is some very helpful advice on addressing one of the more perplexing components of filing a DERA application- calculating jobs retained or created.

How to Calculate Job Creation - Follow the Flow. Finally, the issue which appears to be causing the most apprehension among applicants is the need to demonstrate how a project will preserve or create new jobs. The sheer range of retrofit options (remember the 5 Rs of retrofit: retrofit, rebuild, repower, replace and refuel?) as well as the varying locations and productivity of individual equipment manufacturing facilities make it very challenging to offer solid figures of new jobs added. But don’t despair. Everyone is in the same situation, so applicants are advised to focus on writing a credible, well-reasoned narrative which highlights the general labor/job impacts along every step of the project flow.

For example: project manager oversees grant award, progress, reporting; device manufacturers produce XXX new devices for the grant (incremental increases in manufacturing, packaging, processing, shipping jobs affected); equipment dealer schedules service to install devices (estimated XXX man-hours for mechanics, helpers and administrative); and so on, specific to your project. If you are not installing equipment yourself, you can ask the equipment manufacturer who has helped assess the fleet to provide an estimate of time necessary to conduct the type of installation you’re seeking. A formula which seeks to quantify jobs through use of a multiplier building on study by Keybridge Research is also available at www.meca.org.
 

UPDATE ON OHIO'S DIESEL EMISSION REDUCTION GRANT PROGRAM (DERG)

At $20 million over two years, Ohio had the largest dedicated diesel fund in the entire Midwest.  Ohio received awards for the DERG program.  Round 2 of funding was just completed and the State will be passing out nearly $11 million in funding.  Seemed like a program well worth continuing...

The Diesel Coalition sought to renew the DERG program for another two years at the same level of funding.  Ultimately. H.B. 2 included only $5 million in funding for DERG over the next two fiscal years.  This is a $15 million dollar reduction from the past two years.  While the Legislature included the full $20 million in funding, the Governor issued a line item veto of the funding (see below).

The Ohio Diesel Coalition still intends to request $20 million in funding for DERG in the regular budget bill.  The Coalition, of which I am a member, will be asking that the $15 million designated for the Public Transportation Green Fleets Program in H.B. 2 to be consolidated with DERG. 

Green Fleets are eligible for funding under DERG.  The Coalition believes it would be better to create a single competitive grant program and allow the best and most effective projects to get funding.  Hopefully we can restore funding for this very successful and worthwhile program.

Governor's Veto message in H.B. 2:

SECTION 512.43.

This provision establishes a diesel emission reduction grant program using federal Congestion Mitigation and Air Quality funds from the Federal Highway Administration.

This provision would have a negative impact on the Department of Transportation’s operations because it diverts a large portion of available flexible funding to specific purposes.

I have directed the Department to dedicate $5 million toward a diesel emissions reduction program for purposes consistent with the intent of the legislation. This funding will provide assistance to small businesses and disadvantaged business enterprises. Therefore, this veto is in the public interest.
 

(Photo: terinea/everystockphoto.com) 

• Email This
• Print
• Comments
• Trackbacks

On April 1st, the U.S. Supreme Court issued its decision in Entergy v. Riverkeepers which examined whether a cost benefit analysis is appropriate under certain provisions of the Clean Water Act, specifically Section 316(b) of the Act. As detailed below, there has been wide ranging debate over the significance of the decision.

At issue are large power plant cooling water intakes.  In the course of operation of these intakes large amounts of fish are pinned against the screens (called "impingement") or sucked into the plant (called "entrainment").  Due to the harmful effect to aquatic ecosystems, the intakes are subject to EPA regulations.  The CWA requires the location, design, construction, and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impact. 

EPA adopted regulations applicable to existing plants.  The regulations included the option for plants to obtain a variance from the requirement to install specified technology.  To obtain a variance the plant would need to demonstrate:

1. costs of compliance are “significantly greater than” the costs considered by the agency in setting the standards, 40 CFR §125.94(a)(5)(i), or
2. costs of compliance “would be significantly greater than the benefits of complying with the applicable performance standards,” §125.94(a)(5)(ii).

Where a variance is warranted, the permit-issuing authority must impose remedial measures that yield results “as close as practicable to the applicable performance standards.” 

Environmental groups challenged the ability to obtain a variance after performing a cost-benefit analysis.  The groups challenging EPA's rule argued that Section 316(b) is silent on the use of cost as a factor in setting forth the "best technology available" standard.  Because the statute is silent, the groups challenging the regulation argued the variance provision was illegal. 

Justice Scalia wrote the opinion for the Court which rejected the argument that 316(b)'s  silence means costs cannot be considered.  However, Justice Scalia did point to other language in the statute that the Court believed indicates costs could be considered.

the statute's use of the less ambitious goal of “minimizing adverse environmental impact” suggests, we think, that the agency retains some discretion to determine the extent of reduction that is warranted under the circumstances. That determination could plausibly involve a consideration of the benefits derived from reductions and the costs of achieving them.

There has been significant debate over the importance of the ruling.  (See New York Time- Groups Debate Supreme Court's Power Plant Ruling.  In the NYT's article, some argue the door is now open to increased use of cost-benefit analysis in environmental regulatory decision-making:

"While the Entergy decision rests on close analysis of the statutory language of a particular Clean Water Act provision, it is likely to be highly influential in granting EPA discretion to use cost-benefit analysis more generally when statutory language does not preclude it," said Tim Bishop, a partner in the Supreme Court and appellate practice at Mayer Brown.

The Wall Street Journal comments that the decision will have significant impact on future regulations:

The ruling addresses a huge question in the energy and environment battle raging right now—namely, how to strike the balance between environmental protections and safeguarding the economy. It also brings the field of cost-benefit analysis squarely back into the environmental debate.

The statements appearing in the Wall Street Journal dramatically overstate the impact of the decision.  The decision was based upon a very close analysis of the language in one specific provision of the Clean Water Act.  The Court avoided wide pronouncements regarding the use of cost benefit analysis in environmental decision making.

Even more importantly, silence alone was not enough.  Justice Scalia found other language in the statute- "minimizing"- as suggesting Congress intended costs to be considered. There are plenty of instances where environmental statutes strictly forbid considerations of costs.  In fact, Justice Scalia in his opinion cites to several other Clean Water Act sections that he deems to prohibit cost considerations. 

For cost-benefit analysis to really become a major factor in environmental policy, Congress will have to insert affirmative language into environmental statutes to allow for costs to be considered.  Something that appears unlikely given the current make up of Congress.

 (Photo: flickr mcgervey)

• Email This
• Print
• Comments
• Trackbacks

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

The bill would:

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

A new complex web of standards for control of vehicle emissions of greenhouse gases (GHGs) is coming at a time of unprecedented challenges to the auto industry.  The timing raises questions as to whether the Bush Administration's denial of California's request to establish separate GHG standards is really worth re-visiting.

On January 26, 2009 President Obama signed a Presidential Memorandum directing U.S. EPA to assess whether denial of California's waiver request to allow it to implement emission standards for GHGs from vehicles was appropriate in light of the Clean Air Act.   The memo forces EPA to reconsider the previous Denial of a Greenhouse Gas Waiver of Preemption for the State of California that was published in the Federal Register on February 12, 2009.

The decision to revisit the denial of California's Waiver request comes at a time of unprecedented challenges for the Big Three Automakers.  Just over the weekend the Obama Administration rejected re-structuring plans and ousted General Motors CEO, Rick Wagoner. With the major auto companies in survival (or near bankruptcy) mode, why is the Obama Administration complicating the regulatory structure for manufacturers?   

There Was A Sound Basis to Deny the Waiver Request

Former Administrator Stephen Johnson denied California Air Resources Board’s (CARB’s) request for a waiver to regulate greenhouse gases deeming it unnecessary in order to "meet compelling and extraordinary conditions." Johnson found C02 to be different than other pollutants regulated by the Clean Air Act, concluding that:

“section 209(b) was intended to allow California to promulgate state standards applicable to emissions from new motor vehicles to address pollution problems that are local or regional. I do not believe section 209(b)(1)(B) was intended to allow California to promulgate state standards for emissions from new motor vehicles designed to address global climate change problems."

While California and the other states that adopted the CARB standards challenged the denial, no Court reached the decision that Administrator Johnson acted unlawfully. 

Many who support the CARB standards cite litigation in other contexts to argue the denial was unlawful.  Supporters cite to decisions that found the CARB standards are not preempted by the CAFE standards. In those cases, the Courts generally recognized there is overlap between CAFE and the California GHG standards, however they rejected the claim this meant the standards were preempted. Green Mountain Chrysler v. Vermont.  Supporters of the CARB standards also point to language in the Supreme Court's decision in Massachusetts v. EPA which rejected EPA's policy reluctance to regulate GHGs. 

Courts finding: a) the CARB standards are not preempted ;and b) GHG need to be regulated as a pollutant under the Clean Air Act- is a far cry from finding California's can establish its own GHG standards for motor vehicles. The Bush Administration properly determined the ability to set separate emission standards is limited to standards necessary to address local pollution problems like ozone or particulates. 

Regardless, it appears the writing is on the wall and EPA will reverse course and grant the waiver. Otherwise, why would the President have issued such a directive.  Also, the Presidential Memorandum notes that "For decades, the EPA has granted the State of California such waivers"- a nod that history should be repeated by granting the waiver.

A Complex Regulatory Structure During Unprecedented Challenges to the Automobile Industry

EPA's decision on the waiver denial comes at the same time it is poised to issue its "endangerment finding" under Section 202 of the Clean Air Act.  The finding will set in motion the development of national standards for controlling GHGs from motor vehicles.  It has been reported that a positive "endangerment finding" was sent to the White House for review. 

Granting the CARB waiver request opens the way for implementation of the state standards in California and thirteen other states which in total represent about 40% of the U.S. auto market. After promulgation of GHG standards under Section 202 ("endangerment finding"), there will be potentially three methods for regulating fuel economy from vehicles and two methods for reducing GHG emissions- CARB, Section 202 and CAFE standards.

Of the three regulatory approaches, the CARB standards are by far the most inconsistent and difficult to implement. Instead of two or three standards, the CARB waiver request will result in a patchwork of regulations across the country.

The National Automobile Dealers Association (NADA) performed an analysis of the effect of the CARB Standards being adopted by other thirteen other states-  “Patchwork Proven: Why a Single National Fuel Economy Standard is Better for America than a Patchwork of State Regulation.” As set forth in the NADA study, the CARB regulations base compliance on what an automaker “delivers for sale” in that state. Therefore, states which adopted the CARB standards will force auto manufacturers to develop and implement more than a dozen separate compliance plans. This unnecessarily complex regulation will raise costs for consumers and will ultimately delay the introduction of advanced technologies to market.

With EPA about to establish national GHG standards for motor vehicles under Section 202 of the Clean Air Act, why revisit the Bush Administration's denial of the California Waiver?  At this critical juncture for the auto industry, a complex regulatory scheme for controlling GHG emissions appears unwise.

• Email This
• Print
• Comments
• Trackbacks

Hurry up and get your site in line by Monday March 30th with the State of Ohio for possible additional federal brownfield money to support your project.  The State is only looking for "shovel ready" sites.  This means the types of brownfield sites that may be able to secure the $200,000 federal brownfield stimulus money are limited. 

Check out the Ohio Department of Development's fact sheet to see if your brownfield site may be eligible.  If it is then you need only fill out a simple form to get your site in line. 

The State has been sending out the following notifications:

Dear Brownfield Stakeholder:

The American Recovery and Reinvestment Act was signed into law by President Obama on February 17, 2009. The Recovery Act purpose and goal is to “to jumpstart our economy, create or save millions of jobs, and put a down payment on addressing long-neglected challenges so our country can thrive in the 21st century.” (www.Recovery.gov)

The American Recovery and Reinvestment Act allocated $100 million in additional funds to the United States Environmental Protection Agency (EPA) for the Brownfields program. This is a nationally competitive program for the assessment and cleanup of brownfield properties. Government entities and non-profit organizations may apply directly to EPA for these funds. It is anticipated the EPA will release a notice into the Federal Register detailing guidelines regarding application submittals this week. The timeline for distribution and administration of these dollars is very short. Additional information is available on EPA’s brownfield website: http://www.epa.gov/brownfields/eparecovery/index.htm

The Ohio Department of Development will be applying to the EPA to support brownfield cleanup and redevelopment statewide. Our Urban Development Division has successfully received grants of this type in the past and is well positioned to request significant cleanup dollars and to work in partnership with the communities to have an impact around the state. In preparation, the Department needs to create a pipeline of potential projects given the criteria listed on the enclosed fact sheet. The Department, if awarded, will administer and target the funds for these particular categories of brownfield projects: asbestos abatement, hazardous substance projects in the Ohio Voluntary Action Program and petroleum projects regulated by the Bureau of Underground Storage Tank Regulations.

If you have a viable project in one of these categories, please read the enclosed fact sheet then fill out the web form available at http://development.ohio.gov/recovery/recoveryform/ so we may include your project in our list of projects by Monday, March 30, 2009 at 12 p.m. EDT.

Important Note: Although you may have already submitted a request on recovery.ohio.gov, it is necessary to provide your project information on the web form for the Department’s funding request to US EPA. Submitting information to either the receovery.ohio.gov site or on the web form does not indicate application submittal or funding approval. If the Department receives funding, projects will be prioritized for their readiness to proceed and creation/retention of jobs.

Thank you,

Urban Development Division

• Email This
• Print
• Comments
• Trackbacks

In accordance with the FY2008 Consolidated Appropriations Act, the U.S. Environmental Protection Agency (EPA) has issued its proposed rule to require annual mandatory reporting of greenhouse gases from over 13,000 businesses.  Businesses covered by the rule must start tracking emissions by 2010 and report in 2011 on an annual basis. While specific sources are named, EPA has decided to use an emission threshold of 25,000 metric tons of CO2 equivalents (mtCO2e) to determine coverage for many businesses under the rule. 

The details of the EPA reporting rule may provide a glimpse into the structure of President Obama's Cap and Trade program.  For example, the 25,000 mtCO2e and specifically named source categories may be used to determine which businesses are covered by the cap.  It is also important to note, the coverage of the reporting rule contrasts with much lower threshold triggers used by other regulatory programs under the Clean Air Act.

Which gases are covered by the rule?

U.S. EPA will require reporting of anthropogenic GHG emissions covered under the United Nations Framework Convention on Climate Change (UNFCCC); carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), perfluorocarbons (PFC), and sulfur hexafluoride (SF6), as well as other fluorinated gases (e.g., nitrogen trifluoride and hydrofluorinated ethers). These gases are often expressed in metric tons of carbon dioxide equivalent (mtCO2e). 

All the other GHGs have higher potential to cause global warming.  Therefore, as with other the European Union Trading System, a conversion ratio is applied to create carbon dioxide equivalents.  For example, 1 ton of methane is equal to 20 tons of CO2.  These conversion ratios are important to understand because they determine which businesses are covered by the reporting rule.

For example, a large agricultural operation will have significant emissions of methane.  The facility will need to convert its methane emissions to CO2 equivalents to determine if it is a facility covered. [Note: most agricultural operations are exempted from coverage under the rule]

How did EPA pick the 25,000 mtCO2e threshold?

EPA considered thresholds of 1,000, 10,000, 25,000, and 100,000 mtCO2e/year when developing the proposal. For each threshold, EPA assessed the number of facilities that would be covered as well as the total amount of emissions that would be covered. These analyses suggested that at a threshold of 25,000 metric tons of mtCO2e/year, 13,000 facilities and 85-90% of total GHG emissions would be covered. At a threshold of 10,000 mtCO2e/year approximately 20,000 facilities and 86-91% of GHG emissions would be covered.  EPA felt reducing the threshold increased costs for smaller businesses and would not result in a significantly larger inventory of emissions.

Are other facilities with lower than 25,000 mtCO2e required to report?

Yes.  EPA also named specific source categories that are covered by mandatory reporting regardless of whether they cross the 25,000 mtCO2e threshold.  These sources include, among others, the following: electric generating plants subject to the Acid Rain program, aluminum, ammonia, cement, electronics, lime, petrochemical, petroleum refining, certain underground coal mines, manufacturers of engines, and municipal landfills.

EPA also included "downstream" sources.  Those facilities that produce fuel that when burned result in GHGs emissions.  This producers include: coal, coal-based liquid fuels; petroleum products, natural gas and natural gas liquids; producers of industrial greenhouse gases as listed in the rule; and importers/exporters of 25,000 mtCO2e. 

How will this affect small and medium sized businesses?

Using this threshold,  EPA estimates this will capture 90% of GHG emissions and require 13,000 businesses to report. In rolling out its proposed rule, EPA tries to deflect criticism leveled by the U.S. Chamber and others that  EPA GHG regulations will have a negative impact on small and medium sized businesses.  EPA provides the following fact relative to the 25,000 threshold:

25,000 mtCO2e are equivalent to emissions from annual energy use of about 2,200 homes. It is also equivalent to just over 58,000 barrels of oil consumed or 131 railcars’ worth of coal.

This statistic does give you some perspective on the magnitude of the sources covered by the reporting rule.  However, just because these larger sources are covered by the reporting rule does not necessarily mean that regulation of GHGs under the Clean Air Act would not capture much smaller sources.  For example, the New Source Review permitting threshold for a major source is 100/250 tons of a pollutant.

What is the method for monitoring emissions?

EPA selected a combination of direct measurement and facility specific calculations as the general monitoring approach.  Direct measurement will require Continuous Emission Monitors (CEMs) on some sources.  Other sources will have to use emission calculations designed for that type of facility. EPA asserts that the emission calculations are similar to those used in other programs such as the Climate Registry or California's AB-32. 

Consistency is an important issues.  EPA estimates the cost to report will be around $13,000 per facility.  This is an average which means it will be much higher for some facilities.  Many companies have voluntarily begun measuring emissions under the Climate Registry or another approach.  Other companies are covered by mandatory state programs like RGGI. 

The ability to agree on a common method for measuring emissions is critical.  It will reduce compliance costs and prevent criticism that there are inconsistencies in the various programs.  For these reasons, the comments on this portion of the rule are critical. 

Has there been an early criticism of the rule?

Yes.  The largest amount of criticism has been focused on the reporting requirement being applied to both upstream and downstream sources of GHGs emission.  As an example, the coal mine and the power plant who later burns the coal are both required to report under the rule.  Some have criticized this approach as "double counting" or a waste of resources.  Others have pointed out that EPA needs to gather a range of data to keep policy options open for controlling GHGs. 

Additional Information:

For more information on the rule, see EPA's web page dedicated to the GHG reporting rule.  Also, EPA has prepared a four page fact sheet that does a good job summarizing the major components of the rule.

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

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

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

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

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

I have been following discussion regarding the green elements of the Presidents Stimulus Package, known as the American Recovery and Reinvestment Act of 2009.  There is certainly a lot directed toward environmentally related projects, especially renewable energy development.  Leading some to call these provisions the "Green New Deal." 

What is the real story behind some of the spending that has been reported?  You certainly can find information all across the web and on government sites that simply lists the amount of money in the bill and which program it has been directed.  However, detail about what the money will really be used for can be hard to find.

Bottom line, some provisions are better than others.  For instance, much of the money directed toward U.S. EPA will pay for existing projects.  This includes prior grant applications, clean ups already under contract or projects previously selected for funding.  So, for many of you expecting great new opportunities for EPA related projects, I don't think the bill offers you that much. (with the exception of diesel engine related grants- see below).

The renewable energy side of the equation is a totally different story.  There are continued and new tax incentives as well as new grant opportunities.  There is a lot in the bill and it will literally pay to stay on top of what is available. 

I.  EPA Side- the American Recovery and Reinvestment Act of 2009 specifically includes $7.22 billion for projects and programs administered by EPA. 

Below is a description of the major areas of funding as well as an analysis of whether this funding presents new opportunities. EPA has established a web site page with helpful links that discuss the opportunities in the Stimulus Bill relative to the money designated for EPA.

Brownfields:  There is over $100 million directed to U.S. EPA's brownfield redevelopment program.  I was intrigued regarding this new slug of money for it could present another great opportunity for clients outside of the Clean Ohio program.  However, after asking for more details from U.S. EPA, I learned that this money is basically already spent.  The U.S. EPA intends to use it for projects that requested funding back in 2008 but were not funded due to an over abundance of proposals.  While its good news more projects are getting funded, I believe U.S. EPA could have even received better project proposals if they would have allowed for new applications. 

Diesel Emission Retrofits Act (DERA):  The Stimulus directed over $300 million in new money to fund the DERA program. DERA is the federal grant program that pays for diesel engine retrofits, repowers and replacements.  Last years allocation was only $50 million for the entire country.  So the Stimulus does provide real, new money for this program.  U.S. EPA intends to spend the money quickly so watch U.S. EPA's website and Recovery.gov to jump in with your project.

Underground Storage Tank (USTs) Cleanups: $200 million was provided to U.S. EPA's Leaking Underground Storage Tanks (LUST) Program, EPA provides resources to states and territories for the oversight, enforcement and cleanup of petroleum releases from underground storage tanks (USTs). EPA estimates that every year 7,570 new releases occur which just adds to the sites that have not yet been completed.  There could be as many as 116,000 sites requiring clean up actions in 2009. However, it appears the funding will be used to help pay for clean ups of abandoned tanks rather than create a new grant program.  Here is additional detail from the from the Convenience Store News regarding the Stimulus package:

Other measures relevant to c-stores include a final approval of $200 million for the Leaking Underground Storage Tank (LUST) Trust Fund, which assists in the cleanup of abandoned gas stations, but will not pay for inspections or to assist state reimbursements programs.

Superfund Cleanups: $600 million was provided to U.S. EPA's superfund program.  However, these funds will be obligated mostly through existing contracts and Interagency Agreements.  In 2009 there could be as many as 20 Superfund sites ready for construction, but not funded due to budget shortfalls. The Recovery funds will begin to address those sites, plus accelerate construction at many of 600 sites where work has been limited in the past by funding constraints.

Clean Water State Revolving Fund and Drinking Water State Revolving Fund: $4 billion for assistance to help communities with water quality and wastewater infrastructure needs and $2 billion for drinking water infrastructure needs. A portion of the funding will be targeted toward green infrastructure, water and energy efficiency and environmentally innovative projects. (guidance on the green infrastructure component)

Ohio EPA has begun soliciting projects for its Drinking Water and Wastewater Revolving Loan Programs.  However, projects must already have been planned and reviewed by Ohio EPA for inclusion on project planning lists.  For instance, drinking water projects must be on the Drinking Water Project Priority List (PPL).

II.  Renewable Energy- the American Recovery and Reinvestment Act of 2009 bill is anticipated to provide around $43 billion for renewable energy in the form of tax breaks and other incentives

The extended entry includes a summary of the renewable energy incentives and investment as assembled by the American Council on Renewable Energy (ACORE). (the link provides you a hard copy of the ACORE document- which does a great job of assembling the relevant information for renewable energy incentives- or see the extended entry for a summary).

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

May you live in interesting times....Yesterday EPA Administrator Jackson issued a letter granting the Sierra Club's petition for reconsideration of a Deseret Power memo issued by former EPA Administrator Johnson.  The Petition seeks reconsideration of the Johnson memo which interpreted EPA regulations defining the pollutants covered by federal permitting under the Clean Air Act.  The Johnson memo said that CO2 was not a regulated pollutant under the Clean Air Act (CAA) for purposes of permitting. 

The memo was issued following the decision by the EPA's Environmental Board of Review in the Deseret Power case concluding the CAA was ambiguous and that EPA had discretion to determine whether CO2 was a pollutant subject to regulation.  Johnson, in one of his last acts before leaving office, tried to fill the void by issuing an interpretive memo determining CO2 was not a regulated pollutant.

There was tremendous pressure on new EPA Administrator Jackson to revoke, stay or invalidate the memo.  Such action would have effectively put on hold about a 100 pending permits for coal fired power plants.  In a prior post, I predicted that despite the pressure Jackson would take a more deliberate approach.  She has done exactly that by not issuing a stay and announcing EPA will embark on a formal rulemaking process.  (even I get one right now and then)

While Jackson has chosen to address the issue slowly, she did include language in her letter that cast a great deal of uncertainty regarding pending permits:

In the meantime, the Agency emphasizes a point noted in the memorandum itself: the memorandum does not bind States issuing permits under their own State Implementation Plans.  In addition, given the Agency's decision to grant reconsideration of the memorandum, other PSD permitting authorities should not assume that the memorandum is the final word on the appropriate interpretation of Clean Air Act requirements.

While this statement casts some uncertainty, the Johnson memo is still legally effective.  Unlike others in the blogosphere predicting stoppage of all permitting for new coal plants,  I believe permits will still move forward in State's willing to issue them. 

Yesterday, EPA Administrator Jackson also issued a statement regarding her decision to grant reconsideration:

“I am granting this petition because we must learn more about how this memo affects all relevant stakeholders impacted by its provisions,” said EPA Administrator Lisa P. Jackson “This will be a fair, impartial and open process that will allow the American public and key stakeholders to review this memorandum and to comment on its potential effects on communities across the country. EPA’s fundamental mission is to protect human health and the environment and we intend to do just that.”

My take on the statement is: a) EPA intends to move through a slow rulemaking process; and b) once EPA completes the rulemaking process you can pretty much count on the fact CO2 emissions will be regulated. 

• Email This
• Print
• Comments
• Trackbacks

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.

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

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

 Here is a review:

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

 (Photo: CJJohnson7/everystockphoto.com)

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

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

My observations from the first day have been as follows:

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

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.

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This eliminates many of the control technologies suggested by pundits:

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

Some other technologies are more likely to be considered BACT:

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

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

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.

• Email This
• Print
• Comments
• Trackbacks

[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.

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

Ohio EPA wants to make it easier for economic development to occur in areas like Cleveland, which are designated "non-attainment" with the federal air quality standards (NAAQS) such as ozone or PM 2.5.   Federal regulations require companies looking to build or expand in these areas to offset their emissions.  Offset is achieved by securing the requisite emission reducition credits from existing companies in the non-attainment area. 

In the past a company had no idea whether sufficient eligible emission reductions had occurred that would allow them to fully offset their emission increases.  Available emission reduction credits was not public information.  This lack of information may have dissuaded companies from considering non-attainment areas for expansion.  This hurts areas like Cleveland which is non-attainment for both ozone and P.M. 2.5.

Ohio EPA will now be establishing a state-wide emission trading bank to help facilitate communication between companies that hold emission trading credits and those that need to purchase the credits to build or expand.  The emission trading bank is in reality a web site that will list the available credits by non-attainment area and pollutant.  It's kind of like a giant advertising billboard for companies holding credits they want to sell.  As further explained below, credits will be listed in the bank as either "verified" or "unverified." 

Ohio EPA has finalized the rules that will govern the emission trading bank, known as the emission reduction credits (ERC) rules.  See,OAC Chapter 3745-111. The rules will become effective on January 8, 2009.  

Basic Overview of Offset Requirement: Under U.S. EPA's New Source Review (NSR) program a company looking to build or expand a facility in a non-attainment area may be required to offset its air emissions before receiving a permit (Permit to Install and Operate- PTIO) to construct the facility from Ohio EPA.  Only new or expanded facilities that are "major" sources need offset their emission.  Generally, a "major" source is a source that will emit over 100 tons of the non-attainment related pollutant or 40 tons if it is an expansion of an existing source.  However, these thresholds vary depending upon the pollutant and how the severity of the non-attainment designation.

Ohio EPA's ERC Program is Voluntary:  There is no requirement to participate in Ohio EPA's emission trading bank.  The ERC rules only apply to those who elect to list their emission credits on Ohio EPA's website.  Private transactions between companies outside of the Ohio EPA's emission trading bank is still permissible.

ERC Program Will List Verified and Unverified Credits:  A company who holds ERC's may elect to have them reviewed and certified by Ohio EPA before listing them.  If Ohio EPA validates the credits they will be considered "verified" and will be listed as such on the web site.  The company will be issued a ERC certificate with a unique number for tracking purposes.

Verified credits have advantages- 1) a buyer should not have to worry as to whether the credits are valid once they turn them in to get their NSR permit; and 2) the permitting process for a new source offsetting its emissions will be faster if it uses verified credits.  For sellers of credits, the disadvantage to verified credits its the administrative costs associated with completing the process. 

Unverified credits can be included in the bank.  However, Ohio EPA's rules will not allow for the transfer of unverified credits.  A company would either have to withdraw the credits and transfer them outside the bank or go through the verification process.

What Types of Activities Generate Credits?  Other states (Pennsylvania, Michigan and New Jersey) have operated banks for a long time with a mixed degree of success.  Studies have shown that 80% of all ERC credits in other states were generated as a result of facility shut downs.  However, ERCs can be generated by installing new pollution control equipment, a change in process or reduced hours if they meet the regulatory requirements (quantifiable, reliable, enforceable and replicable).  Stationary and mobile source reductions can both result in ERCs.

What Should You Consider if You Are a Buyer or Seller of Credits? 

1. Verified credits should be worth more- Verified credits should command a higher price.  They have already been certified by Ohio EPA and therefore carry far less risk than unverified credits.
2. Transfer contracts should allocate risk-  All transfers of credits should be governed by well developed contracts that address the issues associated with the particular transaction.  For instance, are the credits sold "as is" or does the contract contain guarantees as to their validity.  When will payment be made?  What happens if the credits are invalidated?
3. Assess the market-  Whether you are a buyer or seller you should assess the market before making decisions.  What types of credits are available?  How many credits are available?  If you are a buyer, make preliminary inquiries as to price to determine the viability of completing the project.

Are There ERCs in Ohio Right Now?  Ohio EPA has not established the website.  Now that the ERC rules are finalized, Ohio EPA can start to promote the bank.  Hopefully, this will lead to an expansion in the number of credits available.  Based upon limited information from Ohio EPA companies have submitted potential credits for consideration.  Submissions so far include the following types of credits in the locations specified:

Generated in Scioto County
17.75 tons of PM 2.5 ERCs
26.62 tons of SO2 ERCs
14.51 tons of NOx ERCs

Generated in Portage County
57.91 tons of VOC ERCs

Generated in Hamilton County
45.60 tons of VOC ERCs
 

• Email This
• Print
• Comments
• Trackbacks

The D.C. Circuit Court of Appeals issued its much anticipated decision in response to U.S. EPA's request for reconsideration of the decision vacating the CAIR program.  The decision marks an important victory for U.S. EPA, the State and provides some level of certainty for utilities.

The Court decided to remand the rule to U.S. EPA so it can fix the rules "fatal flaws" identified in its earlier decision.  This decision has the effect of preserving the CAIR rule in the interim while EPA overhauls the rule.  The Court also rejected the request by some to establish a firm deadline by which EPA must re-issue the rule. 

Here is how the Court explained the rationale for its decision:

Here, we are convinced that, notwithstanding the relative
flaws of CAIR, allowing CAIR to remain in effect until it is
replaced by a rule consistent with our opinion would at least
temporarily preserve the environmental values covered by
CAIR. Accordingly, a remand without vacatur is appropriate in
this case...

We explained that vacatur was appropriate
because of the depth of CAIR’s flaws, the integral nature of the
rule, and because other statutory and regulatory measures would
mitigate the disruption caused by vacating the rule. Id.
However, on rehearing, EPA, petitioners, and amici states point
to serious implications that our previous remedy analysis,
including our consideration of mitigation measures, did not
adequately take into account. The parties’ persuasive
demonstration, extending beyond short-term health benefits to
impacts on planning by states and industry with respect to
interference with the states’ ability to meet deadlines for
attaining national ambient air quality standards for PM2.5 and
8-hour ozone, shows that the rule has become so intertwined
with the regulatory scheme that its vacatur would sacrifice clear
benefits to public health and the environment while EPA fixes
the rule.

While not addressing the issue, the Court rejected its request for reconsideration of what EPA identified as key issues.  One such issue was whether EPA has the authority to adjust the value of Acid Rain allowances under CAIR. 

While this decision is very good news for EPA and the States who are trying to plan for meeting air quality standards, it still leave a tremendous amount of uncertainty.  The Court is not reconsidering any of the "fatal flaws" it identified with CAIR, which were numerous.  The rule that will emerge after being fixed by EPA will look vastly different than before.

Now utilities will be left with making key decisions about the use of allowances and construction of new controls without the benefit of knowing what the new CAIR rule will look like.  While the picture got a little clearer today, there is still a whole bunch of uncertainty.

• Email This
• Print
• Comments
• Trackbacks

All the recent climate change related litigation has overshadowed major activity around control of hazardous air pollutants (HAPs) from coal plants.  Mercury is one such HAP.  Back in February 8, 2008  in New Jersey v. EPA, the D.C. Circuit Court of Appeals threw out U.S. EPA's cap and trade program for mercury, known as the Clean Air Mercury Rule (CAMR).  

EPA's decision to create a cap and trade program for mercury was very controversial.  Those opposed said cap and trade was not meant to control toxic pollutants like mercury.  In response, a number of states rejected the CAMR rule and adopted state programs that established control requirements for every coal plant within their borders.

While the federal court declared CAMR illegal, it also made an important determination as it relates to control of HAPs from coal plants.  In order to create the cap and trade program, the Bush Administration had to undue the efforts of the Clinton Administration to establish facility specific control standards for coal plants under Section 112 of the Clean Air Act. 

In December 2000, the Clinton EPA decided to list electric generating units (EGUs) under section 112.  By listing this source category under Section 112, all existing and new plants must meet Maximum Available Control Technology Standards (MACT) for controlling emissions of HAPs.  MACT is emission controls equal to the "average emission limitation achieved by the best performing 12 percent of the existing sources."

In order to create its cap and trade program, the Bush Administration tried to de-list EGUs as a source category regulated under Section 112.  The federal court in New Jersey v. EPA found this action to be illegal.  This means that EPA must move forward with rules establishing a MACT standard for EGUs.  To date, EPA has failed to take such action.  As reported in the Charleston Gazette this week, groups have sued EPA to compel such action. 

A coalition of environmental groups has filed a lawsuit trying to force the federal government to comply with a 6-year-old mandate to reduce toxic chemical emissions from coal-fired power plants.

The suit, filed Thursday in federal court in Washington, asks for a court order requiring the U.S. Environmental Protection Agency to set limits for mercury and dozens of other hazardous air pollutants.

The new lawsuit follows a major decision by a federal court in North Carolina (Southern Alliance for Clean Energy v. Duke) that invalidated a permit for construction of a new coal plant because the permit failed to show compliance with MACT for HAPs.  The main issue in the case was whether the MACT standards apply to the on-going construction of a coal plant following the New Jersey decision.  Notably, the Court ruled that MACT did apply even though the permit was issued and construction had already began on the new source.

While mercury and other HAPs won't be controlled from existing plants until EPA finalizes its MACT standards for EGUs, at least one federal court has said new plants must meet the yet to be established standard.  This presents another avenue for environmentalists to challenge air permits for coal plants, even permits issued prior to the February 8, 2008 decision.

• Email This
• Print
• Comments
• Trackbacks

President Elect Obama has prided himself on appointing a mix of opinions in his cabinet and senior advisors.  For example, his National Security team is made up a former political rival and a Republican from the Bush Administration.  Obama has said he studied history and identified a possible issue in past presidencies is not fostering a diverse mix of opinions to debate policy.  Here is what the President Elect said after making his National Security appointments:

“One of the dangers in a White House, based on my reading of history, is that you get wrapped up in groupthink, and everybody agrees with everything, and there's no discussion and there are not dissenting views,” Obama said, voicing a frequent criticism by some senior Bush-administration alumni.
“So I'm going to be welcoming a vigorous debate inside the White House. But I understand, I will be setting policy as president.

The diversity that was plainly evident in his Naitonal Security team seems to be missing on his Green Team.  Carol Browner as Climate Czar and past senior managers at EPA will fill the other important environmental posts. The announced appointments have met with a mix of reviews.  The USA Today praised the choice in an article title"Obama's Dream Green Team is Warmly Received." 

One is a Nobel Prize winner overseeing research of alternative energy. The three others all have one thing in common: experience working for the Environmental Protection Agency...

"This is clearly a green dream team," said Gene Karpinski, head of the League of Conservation Voters, an environmental group. "These people have shown they can get the job done."

Obama has mustered an "impressive team of experienced and capable leaders," said Tom Kuhn, president of the Edison Electric Institute, a group representing electric companies.

As an opposing view, the Wall Street Journal blasted the environmental appointments in an editorial:

The EPA long ago became the government arm of the environment lobby, but Ms. Browner was especially political. During her EPA salad days, she put out air-pollution standards that even the agency itself said would have no measurable impact on public health, purely as antibusiness punishment. She forced GE to dredge the Hudson River of PCBs that posed no threat to the public. Ms. Browner also rewrote a law called New Source Review so that power plants, refineries and other industries were always breaking the particulate emissions rules....

As for the "team of rivals" hype, the rest of Mr. Obama's energy list is heavy with Ms. Browner's acolytes. Lisa Jackson, for 16 years a top EPA enforcement officer, will now run that agency. At the White House Council on Environmental Quality will be Nancy Sutley, who was Ms. Browner's special assistant at EPA.

The Washington Post noted the commonality in the appointments in their piece covering the appointments titled "Seasoned Regulators to Lead Obama Environment Program." :

Word of their appointment was greeted enthusiastically yesterday by some environmental groups. The League of Conservation Voters called the group a "green dream team."

Industry groups were more cautious. At the U.S. Chamber of Commerce, Vice President William Kovacs said the group worried that the new officials would use their power to limit greenhouse-gas emissions and impose painful new costs on energy use.

"I think that they could be aggressive, and we're hoping that they're really going to look at the circumstances" of the economic downturn, Kovacs said. "That is our biggest single concern, because literally all three of them have a regulatory bent."

Regardless of your opinions of any of appointments as individuals, it is hard to see a wide divergence of opinion emerging.  While there is no doubt seasoned veterans are needed to develop and implement a game changer like climate change legislation, I agree with the President elect...a diversity of opinion is a valuable asset that can improve decision making.

• Email This
• Print
• Comments
• Trackbacks

Is the Court showing signs that it may have gone too far is throwing out CAIR?  After EPA filed a request for rehearing, a hopeful sign emerged last month when the Court asked the parties challenging CAIR to respond to two questions:

1. Does any party really want the entire rule thrown out (vacatur)?
2. Should the Court stay the effectiveness of its decision to throw out the rule until EPA fixes and re-issues a new rule addressing the Court's issues?

In response, twenty-two (22) states, including North Carolina, told the Court they don't want the rule thrown out.  The States requested the Court to stay the effectiveness of its decision to allow EPA to fix the rule.  However, North Carolina was concerned with how much time EPA would have to fix the rule-it opposed an indefinite stay.  Rather, N.C. proposed a deadline of July 2009 after which the stay would end. 

The Utilities were split on the issue.  Some asked for the rule to be thrown out, while others preferred remand.  The argument in support of throwing out CAIR can be summed up by this quote from the brief filed by the Florida Association of Electric Utilities:

Regulatory certainty is critically important, and granting rehearing or staying the mandate would require CAIR states to immediately implement, and affected sources to immediately comply with a rule the Court has declared contains "more than several fatal flaws."

The Utilities opposing remand or a stay ask a valid question- What portion of a "fundamentally flawed" program are going to remain after EPA fixes the rule.  EPA has said it will take 2-3 years to fix CAIR.  The Utilities argue why should they be forced to comply with provisions of the rule that Court has said are fundamentally flawed for the next several years.

U.S. EPA also filed a brief in response to the two questions posed by the Court.  EPA says it prefers a stay of effectiveness of the vacatur decision while it fixes the program.  However, it also says it must have rehearing on certain critical issues or CAIR will be ineffectual at reducing pollution even if the Court grants a stay.

Principally, U.S. EPA wants rehearing on the Court's decision that EPA does not have the authority to adjust Title IV (acid rain) allowance under the CAIR program.  Without the authority, EPA argues it cannot create a program that will impose greater reductions of SO2 emissions. This would mean the less stringent caps under the old Acid Rain Program will remain.

EPA says this will also impact the emission reductions achieved during a potential stay.  Without clear authority to adjust Acid Rain caps and allowances, Utilities will have no incentive to hold banked allowances for future compliance.  This is because Utilities will not anticipate a stronger program will emerge after EPA fixes the rule.  Rather, Utilities will simply use up the allowances during the stay and emission reductions will not occur.

EPA raises an interesting issue-  Even if a stay is granted there will be tremendous uncertainty as to what the Utilities will do with allowances during the stay.  While EPA makes a valid point, they may have ended the possibility of a stay if the Court is unwilling to reconsider its position that the rule is fundamentally flawed. 

Given all the posturing by the Parties, it will be interesting to see what course of action the Court takes in response.

There appears to be growing awareness that the CAIR decision has major implications beyond just the Utilities. For instance, what about upcoming deadlines for attaining federal air quality standards (NAAQS)?  Without the CAIR SO2 reductions States will likely not be able to comply in time.  Should the State's be punished for EPA's failure to develop a legally enforceable program?

In yesterday's U.S. News and World Report  there was an article covering the uncertainty that swirls around the future of clean air post CAIR.  

Five months after a federal court struck down the Bush administration's top program aimed at curbing air pollution, the fate of air quality regulation—and, therefore, air quality—in much of the country is increasingly uncertain, if not imperiled.

I was interviewed for the story and was able to point out that the States can't fix air quality issues on their own.  Federal help through programs like CAIR is needed to address what is a regional issue, not a local issue.

"In the case of fine-particulate pollution, there is a huge regional soup of it," says Joseph Koncelik, an Ohio-based environmental lawyer and the former Ohio EPA director. "So, it's somewhat ineffective if states are working on their own, just trying to control a few factories in their jurisdiction."

If the Court doesn't grant the stay and issues its mandate effectively throwing out CAIR, will EPA  still hold the States accountable for the 2010 deadline to meet the fine particle standard (PM 2.5)?

• Email This
• Print
• Comments
• Trackbacks

As reported by Platts, on October 21st the D.C. Circuit Court of Appeals asked whether the parties involved in the lawsuits that led to vacatur of the Clean Air Interstate Rule (CAIR) want the entire rule to be thrown out or to be kept in place until U.S. EPA revises the rule. 

The US Court of Appeals for the District of Columbia Circuit on Tuesday
ordered petitioners -- which include utilities Duke Energy and Entergy -- to
respond within 15 days to its inquiry.

It is a move CAIR supporters see as a hopeful sign.

"We see it as a sign that [the court is] working through the reasoning of
our position and, hopefully, will make the right decision" and keep CAIR in
place, said EPA spokesman Jonathan Shradar.

Asking the petitioners whether they want the entire rule thrown out or a
stay of the court mandate indicates the DC Circuit is "taking our petition
seriously," he added.

If the DC Circuit stays its mandate, CAIR could stay in place until EPA
puts in place a revised rule.

This puts the Utilities in an interesting position.  EPA has indicated that CAIR would need a significant rewrite which would include weakening protections that were provided to the Utilities under the original rule.  The weakening would likely include removal of the shield that EPA constructed that protected the Utilities from claims that interstate transport of pollution was not adequately addressed by CAIR.

Given the 15 day deadline, the briefs should have been filed.  It will be very interesting to how the Utilities like to gamble.  Would they prefer the rule to be thrown out and take their chances a new program is developed that is stronger?  Would the prefer maintaining at least the first phase of CAIR to give them some certainty in the allowance markets and be able to plan for new pollution controls?

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

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

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

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

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

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

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

I mentioned in my post discussing LADCO air quality meeting that I would put up the most relevant slides or graphics from all the presentation over the two days in Chicago.  I think I can pretty much boil it down to two slides.

This slide was put together by U.S. EPA when meeting to discuss their support of a Legislative fix to reinstate CAIR.  As discussed, no legislative fix appears possible at least in the short run. 

The bar chart shows the reductions of existing SO2 emissions based up various legislative fixes. The bar to the far left is emissions in 2005.  The short series of bars represents full reinstatement of Phase I (2009) and Phase II (2015) of CAIR.  Then we go through no fix, 2 year temporary  fix, 4 year temporary fix, and permanent reinstatement of only Phase I. 

Okay, so this is a great visual for the massive reductions in SO2 expected as a result of CAIR.  With no legislative fix and successful appeal of the Court's decision vacating CAIR unlikely, looks like we are at the "no fix" point on the graph. 

But what does this mean to air quality?  While the presentations from the States all indicate attainment of the 1997 ozone standard (.85 ppm) appears likely, its a much different story for P.M. 2.5 (fine particles).

This is the latest modeling of air quality in the Midwest without CAIR.  The map on the right shows no CAIR. The map on the left with CAIR.  The more color dots the more area not meeting U.S. EPA's PM 2.5 standard.

The chart below provides the overall scorecard.  We go from only 3 areas in the Midwest not meeting the standards, to a total of 20 area. 

Furthermore, all of the presentations discussed that PM 2.5 (fine particle) pollution is regional in nature.  Which means the states will find it probably impossible to attain the standard without regional reductions similar to CAIR's reductions from power plants. 

With more areas not attaining, more states will be forced to consider much costly controls on existing businesses.  In addition, areas that don't meet U.S. EPA's air quality standard find it more difficult to attract new business or plant expansions in their areas.  Not good news for the Midwest during these tough economic times. 

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

As reported by the Associated Press last week, U.S. EPA has adopted a new airborne lead standard.  U.S. EPA selected a standard at the lower range of those being considered.  The new standard is ten times more stringent than the old standard.  As was reported:

The new limit - 0.15 micrograms per cubic meter - is the first update to the lead standard since 1978, when it helped phase out leaded gasoline. It is 10 times lower than the old standard, which was 1.5 micrograms per cubic meter.

EPA estimates that 18 counties in a dozen states across the country will violate the new standard, requiring state and local governments to find ways to further reduce lead emissions from smelters, metal mines and other sources.
 

Here are is a good graph and pie chart showing the reductions in lead and sources responsible for remaining airborne lead:

The graph on the right shows airborne lead levels have decreased by 94% since U.S. EPA banned lead from gasoline and took other measures.  The pie chart to the right shows the largest remaining contributor to airborne lead levels is leaded aviation fuel.  However, this would not explain why some counties have such high lead levels.  This can only be explained by factories or sources in those counties.

U.S. EPA's monitoring data that shows only 18 counties in the entire country violate the strengthened lead standard.  Compare that to the ozone and fine particle air quality standards where 30 counties in Ohio alone violated the standard.  This may be due in part to the inadequate monitoring network that exists for measuring airborne lead levels.

Once again Cuyahoga County gets the dubious distinction of being listed as one of the few counties in the country to violate the new lead standard.  However, a closer look at EPA lead monitoring shows Cuyahoga barely over the standard.  EPA data says airborne lead levels are .16 micograms per cubic meter and the standard is .15.  

Ohio's highest lead levels are in Fulton County with reading at .52 micrograms per cubic meter.  The highest in the Country are in Jefferson County, Missouri with a reading of 2.26 micrograms per cubic meter, about 15 times higher than the new standard. 

Placed into context, Cleveland should not face much of a challenge in meeting the new airborne lead standard.  This is good news to an area that has faced the greatest challenge in the state in meeitng ozone and fine particle standards.

• Email This
• Print
• Comments
• Trackbacks

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)

 

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

And now the latest....

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

U.S. EPA is encouraging the development of renewable energy by identifying currently and formerly contaminated lands and mining sites that present opportunities for renewable energy development. The federal agency has prepared state by state maps and incentives fact sheets to provide easy access to information about development opportunities.

The attached map is a clip from google earth on U.S. EPA's website.  The map developed by U.S. EPA identifies numerous contaminated sites around the country that could be used for renewable energy development. The EPA used data from DOE’s National Renewable Energy Laboratory, the Comprehensive Environment Response, Compensation & Liability Act (CERCLA) and the Resource Conservation & Recovery Act (RCRA) to establish the list.

U.S. EPA's main technique in developing the maps and list of incentives is to marry state/federal brownfield redevelopment incentives with state/federal renewable energy incentives.  The overall message being that there are may be more government funds available to fund your renewable energy project by building on contaminated land. (attached is the incentive sheet for Ohio)

Because there are few areas Ohio that have sufficient wind resources, the majority of site are identified for either biomass energy or biofuel production.  (Here is a link to the biofuel map for Ohio).

U.S. EPA's web site has information and resources for developers, industry, and anyone interested in renewable energy development on formerly contaminated land and mining sites.  Why develop renewable energy on formerly contaminated land?  U.S. EPA's web site provides the following list of reasons:

• Many EPA tracked lands, such as large Superfund and RCRA sites, and mining sites offer thousands of acres of land, and may be situated in areas where the presence of wind and solar structures are less likely to be met with aesthetic opposition.
• These EPA tracked lands have existing electric transmission lines and capacity and other critical infrastructure, such as roads, and are adequately zoned for such development. The avoided new infrastructure capital and zoning costs is often significant.
• Redevelopment of brownfields for "green" energy production can help reduce the stress on greenfields for construction of new energy facilities, and can provide clean, emission-free energy.
• Many EPA tracked lands are in areas where traditional redevelopment may not be an option because the site may be remote, or may simply be saddled with environmental conditions that are not well suited for traditional redevelopment such as residential or commercial.
• There are approximately 480,000 sites and almost 15 million acres of potentially contaminated properties across the United States that are tracked by EPA. Cleanup goals have been achieved and controls put in place to ensure long-term protection for more than 850,000 acres. This leaves open many potential opportunities to develop renewable energy facilities on these sites.

• Email This
• Print
• Comments
• Trackbacks

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.

• Email This
• Print
• Comments
• Trackbacks

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

There are potential significant issues with CCS, including:

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

A lawsuit filed this week  raises an important question about the relationship between the federal government and states pertaining to environmental regulations.  At issue is how much flexibility state's have to modify their air pollution control plans used to comply with federal air quality standards.  As reported in the Columbus Dispatch, the Sierra Club has challenged Ohio's ability to increase the threshold for triggering the requirement to install best available technology (BAT) on smaller sources of air pollution. 

The specific exemption was included in Sentate Bill 265 which increased the BAT exemption from 1.8 tons per year to 10 tons per year.  These sources will still have to include air pollution controls, typically what is called "reasonably available control technology" (RACT).  However, they will no longer have to meet the more stringent BAT standard.

The Sierra Club goal is to prevent small pollution sources from being allowed to increase emissions.  However, they are missing the critical issue.  As long as overall pollution levels remain the same, shouldn't states be allowed to choose what methods they will employ to meet federal air quality standards?  Also, shouldn't states be allowed to change methods if they find one to be ineffective or inefficient?  

The increase in the BAT trigger threshold was adopted because there was a strong belief Ohio was over regulating small sources of air pollution.  As an example, Ohio regulates over 70,000 air sources while its neighbor, Michigan, only regulates 7,000.  Obviously the disparity is not attirubated to Michigan having far less industry or manufacturing, its attiributable to the fact Michigan has a higher threshold for triggering the need for a permit. The Legislation was an attempt to address this disparity.  [A prior post discussed the policy motivations behind the legislation and U.S. EPA's concerns with the changes]

The Sierra Club argues the change violates the Clean Air Act's "anti-backsliding" prohibition.  Under the Clean Air Act, state's are not allowed to undermine the progress made in improving air quality by reducing air pollution control requirements.  However, state's have some discretion to substitute old requirements with equally effective new requirements.

Ohio wants to amend its state air pollution control plan (SIP) to substitute the requirement to install BAT on small sources with other requirements targetting other sources that are currently being implemented.  The new requirements will more than make up for any pollution increase attributable to dropping BAT for small sources.

Shouldn't the State's be allowed to substitute less effective or inefficient pollution control requirements with new requirements that will produce equal or greater reductions?  Hopefully, the Courts and U.S. EPA will say yes.  Otherwise, less effective requirements remain on the books forever. 

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

As reported in Platts, the Court of Appeals has granted US EPA until September 24th to determine whether to pursue rehearing of the ruling that struck down the Clean Air Interstate Rule (CAIR).

The US Circuit Court of Appeals for the District of Columbia announced
....it was giving EPA more time to file any petition for a rehearing,
which it can seek either before the same three judges or before the full
six-judge court.

Any such petition would originally have been due August 24.

The extra time would likely delay implementation of the court's ruling
for at least another two to three months until the court decides whether it
will approve or deny any EPA petition, according to John Walke, clean air
director for the Natural Resources Defense Council.

The court would seek comments from other parties on any government
petition, giving them up to 30 days, before making a decision, Walke added.

The full effect of the Court's decision takes place on issuance of its "mandate" which effectively throws out the program. The Court of Appeals typically issues its mandate 7 days after the time period for appeal expires. So earliest the full decision would likely take effect is October 1st.

EPA could file a motion to stay the effectiveness of the mandate while it seeks appeal. If no one opposes the motion the stay is effective for 90 days. If the motion to stay is granted, then it will continue while EPA seeks review in front of the Supreme Court.  So, EPA through legal maneuvering can try and delay the inevitable.

Rehearing still appears unlikely as does any Congressional action to provide legal support for CAIR.  Also, the decision to seek more time will keep EPA silent on many aspects how it proposes to deal with CAIR decision.  EPA traditionally provide great deference to the Court while determining whether to seek an appeal.  An information vacuum is not the best thing right now for those struggling to understand how to effectively address the many ramifications of the Court's decision.

• Email This
• Print
• Comments
• Trackbacks

 Yesterday, U.S. EPA announced its proposed non-attainment designations for counties not meeting the new P.M. 2.5 (fine particle) pollution standard.  Ohio was second only to California in total counties designated non-attainment with 28 total counties. 

A county's designation as non-attainment makes economic development efforts more difficult and increases competitive pressure on existing businesses.  The designations mean regulatory restrictions on economic growth and increased pollution control compliance costs for existing businesses. 

How is economic growth impacted?  Before a company can build a new factory or expand, if that factory will result in a moderate pollution increase of fine particles it must offset that emission increase.  An offset is achieved through pollution reductions from existing businesses already located in that county.  The offset requirement, as part of U.S. EPA's New Source Review Program, acts as a strong disincentive to locate in non-attainment counties.  The offset requirement only goes away if the county is redesignated attainment.

How does County get out of its non-attainment designation?  Through reductions in fine particle pollution to levels that comply with the federal standards. Reductions are achieved through a combination of federal and state pollution programs.  The State must develop a pollution control plan (SIP) that shows its strategy for achieving the federal air quality standard by the applicable deadline (2012).

What are the largest sources contributing to fine particle pollution?  Transportation, in particular diesel engines and coal-fired power plants.  While, fine particle pollution is more localized than ozone, it still has a regional component.  Therefore, counties must see state and regional reductions in order to achieve the standard. (Note: the recent letter from State EPA heads to U.S. EPA)

How can Ohio and other states effectively achieve reductions from these sources?  While U.S. EPA has adopted tougher standards for diesel engines, the reductions won't come until there is turnover in the fleet.  Therefore, the full benefits may not be seen for 25 years.  That is why programs like DERG that accelerate diesel reductions are so important. (see yesterday's post on Ohio's diesel grant program). 

Furthermore, Ohio and the other state's efforts to meet the fine particle standard are further complicated by the court decision throwing out U.S. EPA's CAIR program.  CAIR, as described by U.S. EPA, was the "linchpin" program designed to help states achieve attainment with ozone and fine particle standards. (see post "CAIR Decision Will Have Many Aftershocks")

Implementation of the new standard: Below is U.S. EPA's implementation schedule for both the old (65 ug/m3)  and new (35 ug/m3) 24-hour fine particle standards.  While Ohio submitted its SIP in July for the old standard it relied heavily upon CAIR.  So, even for the old program Ohio's SIP will need significant revisions.  It is yet to be seen how states can achieve either standard without regional reductions from coal-fired power plants.  Unfortunately, it doesn't appear Congress is going to act quickly to provide relief to the States.

• Email This
• Print
• Comments
• Trackbacks

Governor Perry of Texas had filed a request to waive 50% of the national volume requirements for the renewable fuel standard (RFS).  The Governor's Waiver Request cited to the following factors to support issuance of a waiver:

• Since ethanol mandates were instituted, more of the U.S. corn crop is being diverted to produce fuel
• 25% of the corn crop was diverted in 2007 and its projected to rise to 30 to 35% in 2008
• Corn prices have skyrocketed, going from $2.06/bushel to at least $4.00/bushel
• Globally, corn prices are up 138% over the past three years
• Global food prices have increase 83% over that same time period
• Translates to a $1.17 billion dollar negative impact on the current Texas economy

The RFS mandate came about through the Energy Policy Act of 2005 and was expanded in the Energy and Independence Security Act of 2007.  The total volume of renewable fuels, such as ethanol and biodiesel, mandated by law to be blended into the fuel supply is 9 billion gallons in 2008 and 11.1 billion gallons in 2009.

EPA denied the request the RFS waiver request based upon its analysis of the evidence suggesting a waiver would have only a nominal impact on corn prices (on average $0.30 per bushel of corn).  The EPA concluded there was no evidence to support the claim the RFS mandate was causing "severe harm" to the economy of a State, region, or the United States.

I would guess this will not be the last waiver request submitted.  However, in denying the request, EPA also provided insight into its interpretation of the requirements for issuing a waiver.  The legal standard articulated with be very difficult to meet. Generally, EPA found it has only narrow waiver authority:

• EPA would have to determine that the implementation of the mandate itself would severely harm the economy; it is not enough to determine that implementation of RFS would contribute to such harm;
• EPA would also have to find that there is a generally high degree of confidence that the RFS is severely harming the economy; and
• This requirement calls for a high threshold for the nature and degree of harm that would support the issuance of a waiver based on "severe harm" to the economy of a State, region, or the United States.

• Email This
• Print
• Comments
• Trackbacks

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

The Senators and all who testified agreed on certain items:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In a prior post discussing the impact of the Supreme Court's rulings limiting federal jurisdiction over waterways, I discussed how state's may feel increasing pressure to fill the gaps in federal authority.  A recent article in the Boston Globe on diminished EPA enforcement suggests the states are probably dusting off their legal theories as we speak. The Globe reported the following: 

The Bush administration didn't pursue hundreds of potential water pollution cases after a 2006 Supreme Court decision that restricted the Environmental Protection Agency's authority to regulate seasonal streams and wetlands.

From July 2006 through December 2007 there were 304 instances where the EPA found what would have been violations of the Clean Water Act before the court's ruling, according to a memo by the agency's enforcement chief.

Two questions I have relative to this story.  First, does this foretell a strange trend where US EPA starts referring cases to the states for enforcement?  Second question- when will the battle shift to permitting?  It cannot be long before a company challenges federal authority to require an NPDES permit.  The most likely candidate in my mind will be something like the requirement to obtain a permit for construction activities.

• Email This
• Print
• Comments
• Trackbacks

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

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.

• Email This
• Print
• Comments
• Trackbacks

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.   

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

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

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

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

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

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

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

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

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

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

• Email This
• Print
• Comments
• Trackbacks

Ohio EPA recently received a letter from U.S. EPA's Region V requesting justification for changes made to the State's air pollution control plan.  The changes to the State plan came about as a result of reform legislation passed by the Ohio Legislature in 2006.  Much has recently been made about the letter sent by U.S. EPA.  There has been two articles (article 1 and article 2) by Spencer Hunt in the Columbus Dispatch discussing the letter.  Also, there was recently an Editorial in the Toledo Blade chastising the Agency for being easy on "polluters" and for failing to timely submit the required information to U.S. EPA. 

Environmental groups have strongly criticized the portion of the legislation that allows smaller facilities (less than 10 tons per year) to avoid installing best available technology (BAT) and install reasonably available control technology (RACT) in its place.  This change has been described as weakening the protection of Ohio's environment.  In reality, it at worst will men minimal increases of pollution from these small sources.  As discussed below, increases that are more than offset by other programs.

I am familiar with these arguments having been at the center of the storm during the legislative debates over S.B. 265.  The editorial and comments strongly criticizing these changes seem to ignore some fundamental facts about Ohio's regulation of air pollution. 

The criticism ignores the fact that federal air quality standards are getting more stringent, not weakening.  Most notably, U.S. EPA recently strengthened the ozone standard.  Ohio still must meet the federal air quality standards.  The state legislation (S.B. 265) provided more flexibility in choosing how to comply.  Bottom line, Ohio's air quality has improved and will continue to improve.

So what was the purpose of the legislation?  Did you know Ohio regulates over 70,000 air sources while its neighbor, Michigan, only regulates 7,000?  This is not because we have so many more sources in Ohio, its because we decided long ago to regulate much smaller sources of air pollution in the state. With Ohio's struggling economy, it makes sense to be more efficient and effective in how Ohio met federal air quality standards.

Maybe this puts the 10 tpy threshold in perspective-the brand new permit for the AMP Ohio Coal fired power plant allows it to emit 3,194 tpy of NOx and 6,820 tons of SO2.  That is one source.  The equivalent of at least 300 or 600 smaller sources taking advantage of the 10 tpy exemption.  (Remember sources less than 10 tpy still must have controls, they just don't have to install more costly controls).

Even when the AMP Ohio facility comes on line, total emissions from Ohio's power plants will be drastically reduced. The total emission budget for Ohio power plants under the federal CAIR program in Ohio is 180,677 tpy of NOx which will be reduced to 95,556 tpy of NOx in 2015.  The reduction of some 85,000 tons of NOx will more than offset any insignificant increase attributable to small sources installing less costly controls.  And that is just one major reduction on-the-books, more reductions will also be forthcoming.

• Email This
• Print
• Comments
• Trackbacks