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)

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. 

 

On Monday I passed the LEED AP exam for New Construction after about a month and half of studying.  I can’t tell you how relieved I was when the computer screen at the testing center had the word "PASS" on it.  After the U.S. Green Building Council’s  (USGBC) launch of LEED v3, I am already known as a "Legacy AP" even though my accreditation is a mere three days old.  Even though the ink hasn’t dried yet on my AP credentials, I’d like to make a few observations of LEED v3. 

USGBC  launched LEED v3 on April 27, 2009.  The new version includes changes to the scoring system for projects, the LEED accreditation process and the LEED on-line tools for administering projects.   There were three major changes made to the scoring process under v3:

  • Harmonization- the new prerequisite/credit structure tries to take the various LEED rating systems (Core & Shell, New Construction, etc.) and equalize requirements for obtaining certain credits under each structure
  • Weighting of Credits- greater priority was given under the scoring structure to energy efficiency and climate change
  • Regionalization- new bonus points are awarded if your project achieves certain credits that are deemed priorities in the region the project is located

Bike Racks v. Brownfields

For new construction and major renovation projects, LEED NC v2.2 (old system) scored projects on a 69 point scale. Under LEED NC v2.2 achieving most credits you were awarded one point, which led to a great deal of criticism of the old scoring system. For example-

  • Putting up bike racks– if you put some bike racks in front the building = 1 point
  • Redevelopment of a brownfield- if you redeveloped a former brownfield with hazardous substance contamination that cost $4 million to address = 1 point

It was my hope that LEED v3 would address such inequities in the scoring system.  Unfortunately, it appears those still persist.  Perhaps I am partial to brownfield redevelopment, but I simply don’t understand why LEED v3 still only gives 1 possible point for achieving this credit.  To me this was the single biggest oversight in the revamping of the LEED scoring structure.

With the release of LEED v3 USGBC tried to give greater weight to energy efficiency and climate change.  As examples, EA Credit 1 Optimize Energy Performance went from 10 total possible points to 19.  EA Credit 2 On-Site Renewable Energy went from 3 possible points to 7. 

I understand the prioritization of climate change and energy efficiency which really impact the overall life cycle of a building.  However, I come at this from an environmental perspective given my background.  To me we should be encouraging addressing thousands of historically contaminated sites that liter our urban landscapes.  Due to the significant costs and liability issues associated with brownfields, many developers stay away from these projects all together.  

LEED v3 offered an opportunity to better promote brownfield development.  My recommendation would to have been to provide at least 4 possible points for brownfield redevelopment.  This would be equal to the new scoring system available points for WE Credit 1 Water Efficient Landscaping. The points could be awarded based up on the remediation costs associated with the property.  There is a correlation between remediation costs and levels of contamination, which would mean projects addressing more extensive contamination get more points.

Regionalization

Perhaps my focus on brownfields stems from living in the industrial Midwest where numerous abandoned factories occupy our cities.  LEED v3 also incorporates a new bonus point pool to recognize regional prioritization.  A project can achieve up to 4 bonus points for achieving certain LEED credits.  This would mean brownfield redevelopment could get 2 points instead of 1.  Still not enough in my mind, but at least 2 is greater than just 1. 

USGBC has created a spreadsheet first separated by State and then by zip code for virtually the entire U.S.  You can go into the spreadsheet and look up the zip code for your project and there will be six credits that have been prioritized by local USBBC Chapters.  For example, in the Cleveland area here are the six prioritized credits:

  1. Sustainable Sites Credit 6.1- Stormwater Quantity- reduction in rate and flow of stormwater post development
  2. Sustainable Sites Credit 6.2- Stormwater Quality- implementation of controls to capture 90% of the flow and remove 80% TSS
  3. Energy and Atmosphere Credit 2- On-site Renewable Energy- provide a minimum of 3% of energy needs from on-site renewable energy
  4. Water Efficiency Credit 2-  Innovative Wastewater- reduce generation of wastewater by 50%
  5. Materials and Resources Credit 2- Construction Waste Management- achieve reduction of 75% of C&D waste
  6. Materials and Resources Credit 6- Use Rapidly Renewable Materials- 2.5% of the cost of materials used on the project should be from rapidly renewable construction materials

I scratch my head at these regional priorities for the Cleveland area.  I am certainly okay with promoting renewable energy, but there are other critical issues that face Cleveland.  Why not prioritize these credits?

  1. Sustainable Sites Credit 3 Brownfields- The Cuyahoga County Commissioners Department of Development provides the following statistics about brownfields:

    [Based on a US EPA funded study]- Approximately 4,623 acres of brownfields in Cuyahoga County with the majority of that land located in the City of Cleveland and its surrounding inner ring suburbs. Cleveland, alone, has approximately 350 brownfields and an estimated 1,000 to 2,000 condemned structures. Additionally, the Cuyahoga County Planning Commission found that 40,000 acres, or 14%, of the County’s land, has at some time been devoted to an industry that has historically been known to be a higher risk for environmental contamination.

  2. Sustainable Sites Credit 5 Protect and Restore Habitat and Maximize Open Space- it is really tough to find remaining greenspace in Cleveland.  It is estimated that 95% of the land in Cuyahoga County has been developed. The lack of open space/greenspace creates other issues such as flooding and stormwater control.  This would seem like a prime credit to be prioritized in the Cleveland Region.

These are great times to investigating potential brownfield projects in Ohio.  The State has two pots of money available under its Clean Ohio brownfield program.  1)  the Clean Ohio Revitalization Fund (CORF); and 2) the Clean Ohio Assistance Fund (COAF).  CORF is a competitive grant process where applications are pooled into rounds and the top projects in that round receive funding.  Under COAF, projects are evaluated on an individual basis and decisions are made by the Director of the Department of Development.

COAF- Areas Eligible to Apply for Funding is Greatly Expanded

 

 

 

 

 

 

 

 

 

 

This month, the Ohio Department of Development announced a major change to COAF-greatly expanding areas eligible to submit COAF applications.  Properties eligible to request  COAF funding are those located in a "inner city area", a "labor surplus area" or a "situational distress area" as defined by O.R.C. 122.65(H).  Each year the Ohio Department of Development releases a map of the State that identifies which areas fall under one of the three categories and could apply. 

On May 1, 2009, the Ohio Priority Investment Area Map was modified to reflect the recent changes made to the Federal Labor Surplus map. Under the old map 41 counties and certain cities were designated "priority investment areas" based on one of the three categories.  The new map designates 83 counties in Ohio as Labor Surplus Areas. This includes all of Cuyahoga County and most of the surrounding Counties. 

All areas designated on the Priority Investment Map are therefore eligible to file applications for the Clean Ohio Assistance Fund for assessment grants of up to $300,000 and cleanup grants of up to $750,000. COAF will have approximately $12 million for new grants in the coming year. Applications can be submitted on a rolling basis (no deadline). 

The Ohio Department of Development also modified the policies governing COAF.  One notable change is the prioritization of Phase II Environmental Assessment projects.  Here is what the Department said about this change:

In order to maximize assistance to distressed communities during the economic crisis and meet a critical need to prepare sites for cleanup and redevelopment, the Clean Ohio Assistance Fund will now reserve 75% for funding Phase II Environmental Assessments grants and 25% for funding cleanup grants.

CORF’s – Redevelopment Ready Track

If you are looking at a project with much higher clean up costs than $750,000, then CORF is still a great option.  The State recently provided more flexibility to the program.  Last summer, the Ohio Department of Development made a major change to the CORF program by adding the "redevelopment ready track." Before this change an applicant for CORF had to identify in its application a committed end user post clean up. Under the "redevelopment ready track" an applicant could qualify for up to $2 million in grant funds to pay for clean up costs even without an end user.

A significant amount of cleanup funding is available in the upcoming rounds of CORF. Funding for Round 7 (deadline July 25th) and Round 8 will total $48 million in the coming year ($24 million per round), which is the largest amount the program has experienced in its history.

Unlike other States, Ohio has a lot of funding available for brownfield investigation and clean up.  Over the last year the State has increased the flexibility in the program and expanded areas within the State eligible for funding.  While the economy is down, it is a great time to explore development options for brownfield sites.  As the economy comes back the competitiveness of these programs will increase. 

 

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)

Green marketing claims are running rampant, according to the April 2008 survey by Terrachoice a consulting firm that runs the Canadian government’s eco-labeling program.  Labels on products frequently claim “recycled content”, “biodegradable”, and “safe for the environment.”

The recent survey found that the number of big box store products making green claims grew 79 percent since its last report, in 2007.  In addition, the amount of advertising containing green claims has risen shapely.   Terrachoice reviewed 18,000 ads in recent issues of Time, Fortune, National Geographic, Sports Illustrated and Vanity Fair, TerraChoice found that more than 10 percent of all ads in 2008 made “green” claim, up from 3 percent in 2006. 

Businesses making these claims better pay even more attention to FTC requirements, known as the "Green Guides".  The FTC has recently began to take enforcement actions against businesses who can’t substantiate their green claims. I was recently contacted by a business owner who faced signing a consent order with the FTC to resolve allegations of "greenwashing." 

The FTC had taken a long hiatus from enforcement of the Green Guides.  As discussed on the Consumer Advertising Law Blog, one of the FTC Commissioners only as recently as June 2008 indicated the FTC had not brought any cases under the Green Guides since 2000. 

Commissioner Rosch gave two reasons for the fact that the FTC has not brought any cases under the Green Guides since 2000. First, industry has been abiding by the Guides. Second, private enforcement under the Lanham Act and self-regulation have developed into effective alternative enforcement mechanisms over the past 30 years. However, the eight-year enforcement hiatus may be coming to a close. In his speech, Commissioner Rosch noted that FTC “staff is currently investigating a variety of environmental product claims.”

Well, based upon the recent activity it appears the hiatus is over and FTC is actively enforcing the Green Guides.  This enforcement is taking place even though the FTC has yet to update the Green Guides after an extensive public involvement process.  The FTC enforces Section 5 of the FTC Act, which generally prohibits "unfair or deceptive acts or practices," including advertising that is false or misleading. 

Businesses should be careful to read the Green Guides and seek advice before making any green claims on their products.  Otherwise, they may face signing a FTC consent order that carries with it severe restrictions on the ability to market green attributes of its products. A few things to keep in mind:

  • FTC has enforcement authority to issue a cease and desist order for up to 20 years. 
  • The prohibition against unsupported or deceptive claims can extend to officers, subsidiaries and other divisions of the company.
  • Cease and Desist authority includes what is called "fencing in relief."  The relief is designed to prevent similar conduct.  As a result the prohibit against additional "deceptive" claims may cover all the company’s products.  The relief may also include more draconian terms that require notification if senior management responsible for marketing departs for a new company.  In other words, the terms of the consent order can follow significant decisions makers to other jobs.

While penalties will typically not become an issues until a cease and desist order is violated, the order itself will still carry very onerous terms and conditions.  For these reasons, company’s should really proactively review any green claims and ensure they meeting FTC requirements.

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)

Continue Reading Footnote 29 of EPA’s Endangerment Finding

On April 15, 2009 the Public Utilities Commission of Ohio finally adopted the long awaited rules that will govern Ohio’s energy efficiency requirements and its Alternative Energy Portfolio Standard (AEPS).  Ohio was one of the last states to have adopted a Renewable Portfolio Standard (RPS)- more broadly defined as a AEPS in Ohio.  However, as one of the largest energy intensive states in the Country the finalization of the rules will surely spur growth of "green energy" related business in Ohio.

As a former regulator, a frequent mantra in describing the decision making process was- "if both sides are unhappy then you know you did your job well."   Well the Commission appears to have followed that mantra in responding to the vast amount of comments that were filed on the rules.  It sided with the Utilities on many issues and it sided with consumer and green groups on many issues.  It rejected many suggestions and complaints by Utilities and it rejected many suggestions and complaints by consumer and green groups.

The rules cover three major aspects of S.B. 221 passed by the Ohio Legislature in the summer of 2008:

  1. Energy Efficiency and Demand Reduction Programs
  2. Alternative and Renewable Energy Portfolio Standards
  3. Greenhouse Gas Reporting and Carbon Dioxide Control Planning

Here is a brief recap of the changes made in response to comments.

Energy Efficiency and Demand Reduction Programs- The Commission completely restructured the rules governing energy efficiency and peak demand reductions.  The Commission revisions where designed to "reflect a focus on the program planning and review process."

  • Cost Effectiveness– added new definitions of "cost effective" and "total resource cost test" that are applied to energy efficiency programs.
  • Procedures for Review of Compliance Plans-  New hearing requirements were added on the planned portfolio of programs offered by an electric utility to meet energy efficiency benchmarks.  The hearing requirement was added in response to criticism that the benchmark review process be opened up and follow traditional Commission rate case procedures.
  • Independent Auditors- Commission requires use of independent program evaluators (hired by the Utility but work at the direction of Commission Staff) to review and verify claimed energy savings and peak-demand reductions
  • Calculating the Baseline for  Measuring Efficiency Improvements- the baseline will be measured by a "rolling average" of the last three years of kilowatt hours purchased instead of a fixed average of 2006 through 2008.  The Commission basically rejected claims by Utilities that using a rolling average keeps raising the bar because it incorporates the energy efficiency improvements each year.  As a result, the Utilities argued the energy saving requirement is closer to 39% than the 22.2% required in S.B. 221
  • Banking "Overcompliance"- Commission will allow Utilities to "bank" over compliance with the energy efficiency benchmark and apply the overcompliance to future years
  • Adjusting for Economic Growth– Baseline can be adjusted to account for either growth or reductions in economic growth.  The idea is to remove the influence of a changing economy on achieving energy efficiency improvements
  • Mandated Efficiency Improvements- Utilities cannot count energy savings that result from customer installed appliances or equipment that are mandated by law including the Energy Independence and Security Act of 2007

Alternative Energy Portfolio Standard- S.B. 221 splits the 25% of electricity energy by 2025 standard into two separate benchmarks- one for "alternative energy" sources and another for "renewable energy sources."  The rules put a lot more teeth into the renewable energy benchmark, including specific interim benchmarks. 

Overall, the Commission did not address significant concern with some of the loose aspects of the Alternative Energy benchmarks.  These include the definition of what constitutes "Clean Coal" as well as what can be counted toward meeting the Alternative Energy Benchmark.  However, as detailed below, the Commission did put teeth into the "cost cap" provisions associated with compliance with either benchmark.

  • RFP– Rejected a suggestion that renewable and alternative energy be procured through a Commission sponsored RFP process to ensure transparency
  • Biomass- with regard to wood resources, the Commission allows use of wood and paper manufacturing waste, urban wood and tree residues, forestry residues, forest management or other land clearing.  However, forest resources must be from "sustainable forest management operations."
  • Clean Coal- the Commission rejected criticism that the current rule would provide credit to technology that is "designed" to reduce CO2 irregardless of whether the reductions are actually achieved.
  • Co-firing- will qualify as a renewable energy resource as determined by the proportion of energy input from the renewable energy resource.
  • "Delivered into this State"- Commission will still require a power flow study and/or deliverability study to show power in the PJM or MISO transmission systems are deliverable into the state.
  • Distributed Generation- renewable energy credits (RECs) generated from distributed energy sources belong to the owner of the equipment
  • "Double Counting"- cannot use one project to meet both the energy efficiency benchmarks and the AEPS
  • "Unbundling"-  Cannot unbundle other positive environmental attributes associated with creation of a REC and sell those attributes separately.  The classic example is you cannot sell the climate change CO2 reductions as well as RECs from one project.  You will have to choose with credits are more valuable
  • Energy Storage- by itself cannot be considered a renewable energy resource
  • Cost Cap- rejected utilities argument that the advanced energy and renewable energy cost caps be aggregated as one 3% cap. Also, rejected claim that the 3% increase is measured by isolating cost of generating the renewable or alternative energy.  Rather, the cost cap is triggered only if overall cost of supplying all forms of electricity rises more than 3% in order to meet the alternative energy or renewable energy benchmarks.  This ruling makes it far more difficult for Utilities to trigger the cost cap provisions.
  • "Catch-up Provision- Commission effectively drops the requirement that future year benchmark compliance requirements be increased by the amount of undercompliance of the previous year due to the 3% cost cap

Greenhouse Gas Reporting Requirements

The Commission rejected concerns raised by Utilities regarding the mandate in the rules to become participating members in the Climate Registry.  The Commission noted that  S.B. 221 requires reporting and tracking of CO2 emissions must be performed.

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) 

So you are about to deploy the first commercial version of your new technology.  Or you are about to select your site for a new renewable or advanced energy project. In ramping up your cleantech project, everything has looked great in small scale trial tests.  You have had great result and are excited to bring this to market as the "next big thing." 

Deployment of new technologies and choosing sites for your renewable energy project can always present major challenges.  What looks good during small scale tests or on paper may prove to be unworkable or too costly in the field. 

How can you better assess your situation and proceed to a smooth launch of your technology or successfully deploy your project?  Here are some suggestions I have developed either from my years as a regulator or in working with clients.  Hopefully, taking careful consideration of some these issues can better position your company and avoid some "unseen enemies." 

1.  Site Selection-  Study closely the practical aspects of various proposed locations for your new facility.  Often company’s select a site based upon expected customer demands or other business considerations.  However, prior to moving forward with the significant investment in terms of lease or purchase agreements, permitting, and zoning/building approvals significant investigation should be performed to evaluate the viability of the proposed site.

  • What the local zoning and building requirements?
  • Transportation routes should be evaluated
  • Any significant history with regards to citizen or environmental groups in the area?- Cleantech companies can naively think they are immune to NIMBY concerns only to find themselves immersed in costly and protracted litigation
  • Will your project require significant amounts of water?  If so, is there a readily available source or any issues with tapping into that source?

2.  Environmental Permitting and Regulatory Requirements-  Will your source have air or water emissions?  Will you generate significant solid waste or hazardous waste?  You should have an assessment of how environmental permitting and regulatory requirements could impact either the location or configuration of the facility at the site.  You should also know whether environmental requirements are going to impact the ultimate engineering design of your facility.  I have seen companies forced to completely redesign their process because they did not fully incorporate environmental permitting issues into their designs.

  • Will you have air emissions at levels that will require pollution controls?
  • Are you co-located at a location with an existing air source where EPA requirements may force you to aggregate emissions with that existing source?
  • Will you have a wastewater discharge? If so, can you hook into the wastewater treatment system or need a direct discharge.  If hooking into a pre-existing wastewater treatment system what are the pre-treatment requirements. 
    • What if the local wastewater treatment plant is under investigation or a federal consent decree?  Will that result in stricter standards that could drive up your pre-treatment requirements on-site?

3.  Lease Agreement and Construction Documents-  While you may believe you are headed to a wildly successful deployment or expansion, if anything has been shown in the last six months its that the market place is unpredictable.  You should make sure you understand and negotiate termination provisions in your lease agreements, construction documents or other legal documents governing your relationships with customers or business partners.  While you may be very disappointed you have to cancel the project, you may really be frustrated if you find yourself in a costly legal battle with potential customers, contractors and/or property owners.

4. Feasibility Studies-  Make sure when hiring a consultant to perform a feasibility study that  they have the expertise and knowledge regarding the state and local requirements associated with the project.  Many may be familiar with federal requirements, but you need to take into account local site selection issues as well.

  • Local ordinances- many renewable energy projects will be highly impacted by local ordinances that contain siting requirements.  Make sure your consultant takes into account the hurdles involved in deploying your project.
  • Include assessment of possible environmental market trading mechanisms-  Will you generate CO2 offsets?  Are you deploying renewable energy that could qualify for renewable energy credits?  Is your consultant or project team considering the current market fluctuations in these markets when evaluating whether carbon credits or RECs add to the viability of your project?

5.  Incentives-  It seems every lawyer and consultant is promoting their knowledge regarding availability of federal stimulus funding.  However, don’t forget there are many state and even local programs that can provide grants and tax incentives for green businesses and energy.  Make sure you have someone on your project team that has knowledge of these incentives and understands the process for obtaining funds. 

(Photo:jurvetson/everystockphoto.com)