USEPA Continues the Evolution of Its Clean Air Transport Rule

Posted on January 31, 2011 by David Flannery

EPA proposed its Clean Air Transport Rule (CATR) on August 2, 2010. The CATR would require extensive additional emissions controls on Electric Generating Units, or EGUs, in a 31 state area, purportedly for the purpose of attaining ozone and PM2.5 NAAQS and eliminating “significant contribution” to nonattainment (transport) from upwind states to downwind states.

 

The electric power industry submitted extensive comments on the CATR which provided EPA with new studies that demonstrate EPA’s failure to account for dramatic improvements in air quality in recent years and its failure to recognize future air quality improvement due to existing regulatory requirements. In particular, this data show that the proposed CATR ozone objectives can be achieved with no new controls beyond the existing regulatory requirements. The same study also concluded that PM2.5 objectives of the proposed CATR can be achieved with no new controls beyond the existing regulatory requirements, with the possible exception of additional local controls at the Allegheny County, PA and Brooke County, WV locations.

 


On January 7, 2011, EPA published its third Notice of Data Availability (NODA) with respect to CATR. The latest NODA provides data on potential allocation mechanisms and seeks comments on alternative approaches. EPA received numerous comments on allocation issues as a result of proposing the CATR. Following up on the comments, EPA analyzed allocation mechanisms for existing EGUs and is now providing data that it believes might support two alternative allocation mechanisms.
 

The two options include:

Option 1, which would allocate a state’s existing unit budget based on each unit’s proportionate share of the state’s total historic heat input. For each covered unit, annual heat input values for the baseline period of 2005 through 2009 would be identified using data reported to EPA or, where EPA data are unavailable, using data reported to the Energy Information Administration (EIA). For each unit, the three highest, non-zero annual heat input values within the 5-year baseline would be selected and averaged. 


Option 2, which would yield the same initial allocation pattern as Option 1 (based on historic heat input) but would then add a constraint (i.e., a limit on allocations) based on a unit’s reasonably foreseeable maximum emissions under the proposed Transport Rule trading programs. For those units with heat input-based allocations that would exceed historic emissions, this option would limit allocations so that the units would not be given allowances in excess of their reasonably foreseeable maximum emissions.

 


EPA is requesting comments through February 4, 2011 on the two allocation options and four other issues, including (1) the implications of the alternative allocation methodologies for the proposed assurance provisions; (2) an alternative approach to calculate allowance surrender requirements at the designated representative level for the assurance provisions; (3) a methodology for distributing allowances to new units that locate in Indian country within the Transport Rule region; and (4) possible options for states wishing to submit State Implementation Plans (SIPs) providing for state allocation of allowances in the Transport Rule trading programs. The NODA included references to state auctions of allowances in the description of acceptable options.

 


In other developments related to the transport rule, U.S. EPA announced in December 2010 that it needs until July 29, 2011, to complete the ozone NAAQS. With its second transport rule intended to implement this revise ozone standard, it is now uncertain as to when that proposal can be expected.

Regulatory Uncertainty and Structural Unemployment

Posted on January 26, 2011 by Kevin Finto
Almost every day we hear about the seemingly glacial pace of the current recovery and the unfortunate persistence of unemployment.  Some of the discourse has focused on regulatory uncertainty, more specifically, the numerous and amorphous dictates of health care and financial reform and whether they are a cause of structural unemployment.  Less often we hear similar concerns about EPA’s rule for green house gases.
 
 
            More pernicious to unemployment than these high profile government actions, however, are relatively small revisions to the law through agency actions on permits, orders and guidance, without the benefit of any rulemaking required by the Administrative Procedure Act (“APA”). This pattern of agency behavior creates not only uncertainty as to what the law is but also the perception, if not the real risk, that an agency might change the law at any time. This uncertainty inhibits the trust and confidence necessary for investment that create employment. A couple of recent examples illustrate this risk.
 
Particulate Matter Regulation
 
            Particulate matter has been regulated under the Clean Air Act since its inception. Over time, the regulated form or portion of the particulate matter has changed as EPA has focused on fine particulate and its potential for respiratory damage. In 1985 EPA issued regulations establishing National Ambient Air Quality Standards for PM10 (particulate matter with an aerodynamic diameter less than 10 microns).  Over time, EPA developed techniques for measurement, control, monitoring and modeling of PM10. In 1997, EPA defined a new pollutant, PM2.5 (particulate matter with an aerodynamic diameter les than 2.5 microns) and a new NAAQS for it. EPA recognized, however, that agencies and the regulated community lacked the “necessary tools to calculate emissions of PM2.5 and related precursors and project ambient air quality impacts.” and authorized use of PM10 as a surrogate for PM2.5.  This policy was affirmed in rulemakings in 2005 and 2008 (the latter established a transitional period through 2011 to direct regulation of PM2.5).
 
 
            A little over a year (and a change in Administrations) later, in the context of acting on a petition for an objection to a Title V permit for an individual power plant, EPA abruptly did an about face, declaring that “permit applicants and permitting authorities [must] determine whether PM10 is a reasonable surrogate for PM2.5 under the facts and circumstances of the specific permit at issue, and not proceed on a general presumption that PM10 is always a reasonable surrogate for PM2.5.” Remarkably, the Trimble Order provides no explanation whatsoever as to how the new “requirement” to conduct a case-by-case assessment overrides the transition rule for SIP-approved states established through notice and comment procedures in the PM2.5 NSR implementation rule. Moreover, the order fails to explain why the court opinions “that are properly read as limiting the use of PM10 as a surrogate” – all of which predated the 2008 PM2.5 NSR implementation rule somehow have greater force and effect now than they did at the time the transition policy was established in the implementation rule.
 
 
            EPA has vigorously insisted on the reasonableness analysis prescribed in the Trimble Order, regulated entities have been forced to attempt to comply with it and state agencies have enforced it. Clearly, EPA’s statements have the requisite practical binding effect to bring them under the purview of the APA. More importantly, this previously unknown requirement for a reasonableness analysis is not a trivial one, especially for projects that are in the middle of permitting, engineering design, financing or even construction. Attention must be diverted from making the project a reality to figuring out how to comply with a new requirement. Like so many recent pronouncements, in Trimble County, EPA made a policy pronouncement but provided no tools to implement it. That is a recipe for regulatory uncertainty leading to structural unemployment.
 
 
Prior Converted Croplands
 
            A more recent Corps decision regarding the treatment of prior converted croplands puts a finer point on the APA implications of rulemaking by permit, order or guidance. Under the Clean Water Act, a permit is required to discharge fill material to waters of the United States, including wetlands. In 1993, the Army Corps of Engineers, which administers the permit program issued a rule excluding prior converted croplands, i.e. lands that were drained to grow commodity crops prior to 1985, are not wetlands because they no longer exhibit the characteristics or serve the function of wetlands.   The only way for such lands to revert to Corps jurisdiction is for them to be abandoned as croplands and revert to their wetlands state. In July of 2009, the Jacksonville District Office of the Corps issued an “Issue Paper” in which it determined for the first time that prior converted cropland that is converted to non-agricultural uses are subject to Corps jurisdiction, regardless of there characteristics or function as wetlands. The Issue Paper, which was written in response to jurisdictional determinations for five limestone quarries, was sent to the Corps Headquarters for review and it was affirmed as agency policy. It was not, however, subject to notice and comment rulemaking.
 
 
            In a challenge brought by affected landowners, the United States District Court for the Southern District of Florida found that the Issue Paper was a rulemaking adopted without the required notice and comment under the APA and therefore was not valid.   The court explained that the rulemaking process was not a mere technicality because that procedure provided the agency with diverse public comment, accorded fairness to interested parties and allowed the development of record for judicial review. The Corps argued that the Issue Paper was a mere policy statement, but the court disagreed stating that it resulted in a shift in rules and a new binding norm regarding what the Corps considers wetlands from which district offices were not free to deviate in individual cases.
 
 
            Both Trimble County and New Hope Power Company reflect exactly the type of agency activity – the reversal of years of agency practice by a permit, order or guidance document and without a valid rulemaking – that creates regulatory uncertainty and structural unemployment. No matter how much private or stimulus money is thrown at it, no project can truly be “shovel ready” (i.e., fully designed, planned and financed) when there is no way to determine whether it complies with the law or whether the rules that apply to it will change while it is under construction. 

EPA Section 404 Guidance For Surface Mining In Jeopardy

Posted on January 25, 2011 by Theodore Garrett

On January 10, 2011, the US district court in DC ruled that the mining industry is likely to succeed in challenging EPA's interim April 1, 2010, guidance on Clean Water Act (CWA) §404 permitting for surface mining projects in Appalachia, but denied industry's motion for a preliminary injunction. The decision, in a lawsuit brought by the National Mining Association, illustrates the pitfalls of agency regulation by guidance. The court’s opinion accepts the industry's arguments that EPA likely violated the notice-and-comment requirements of the Administrative Procedure Act and that EPA’s June 11, 2009 Enhanced Coordination Process memorandum, which subjects coal mining related §404 permits to enhanced scrutiny, “encroached upon the role carved out for the states under the Clean Water Act” However, the court held that the industry has not demonstrated the certainness of imminence of industry losses and, further, why any economic losses resulting from permitting delays “cannot ultimately be recovered if and when the mining projects in question are permitted to proceed.” The court denied the government’s motion to dismiss and held that the case is ripe for a determination on the merits, because no factual developments would clarify the issues.

Michigan Makes Sweeping Changes In Its Environmental Response Act

Posted on January 19, 2011 by Jack Shumate

When Michigan adopted the Environmental Response Act in 1995, codifying numerous statutes into a comprehensive code, people throughout the United States hailed Part 201 as the most business-friendly environmental remediation statute in the country. Part 201 of the new Michigan Environmental Response Act (MERA) largely did away with status liability and made it possible for a new owner or occupant, through the use of a vehicle called a Baseline Environmental Assessment (BEA) to take title or occupancy of contaminated property free of liability so long as it did not exacerbate the situation or expose occupants of the property to undue risk.

Almost from the moment that MERA was enacted, staff of the Michigan Environmental Regulatory Agency began to adopt and implement regulations making it increasingly difficult to obtain an approved BEA for industrial, and some commercial, properties. Regulations such as the Draconian ones regulating groundwater-surfacewater interface and vapor intrusion discouraged the re-use and redevelopment of contaminated corporate properties. Some of the district offices of the Michigan Department of Environmental Quality (MDEQ) even went so far as to flatly refuse to even consider review of a draft BEA seeking approval for a new use of contaminated property if the new owner or occupant was likely to generate any contamination identical to pre-existing contamination.
 

The debate between MDEQ staff and environmental groups on one side and business interests on the other raged until late 2010, when a lame duck Legislature approved, and lame duck Governor signed, an amendatory act making significant changes in Part 201. Now, the statute - and, hopefully, the regulations implementing the revised statute - will bring the Michigan procedure much more closely in line with the Federal All Appropriate Inquiry rules. It is believed that this will encourage Brownfields redevelopment and badly needed business expansion in the state.

Attached is a brief summary prepared by The Dragun Corporation, environmental consultants, highlighting some of the most significant changes - and also pointing out a few potential pitfalls.

For further information contact Jack Shumate at shumate@butzel.com or 248.258.1405.

Preserving the Tallgrass Prairie in the Face of Stringent Air Quality Standards: The Flint Hills Smoke Management Plan

Posted on January 17, 2011 by Charles Efflandt

It is an environmental truism that increasingly stringent air quality standards can cause collateral damage – typically economic in nature. It is less common for such standards to directly impact preservation of a significant North American ecosystem.

Comprising a vast area in eastern Kansas and northeast Oklahoma, the Flint Hills ecosystem remains today the last unfragmented expanse of tallgrass prairie on the continent. Roughly two-thirds of all tallgrass prairie in North America is contained in the Flint Hills. The Flint Hills provide a unique ecosystem for numerous mammals, birds, reptiles and cattle (the surrogate for the bison that once roamed this area and that served as a keystone species in maintaining biodiversity). The U.S. Fish & Wildlife Service and The Nature Conservancy have both identified the Flint Hills as a priority conservation action site.

Fire is a critical ecological driver in the tallgrass prairie. Lightning is nature’s tool for this process of ecological renewal. The burning of large sections of the Flint Hills was practiced for centuries by Native Americans. In more modern times, controlled burning has been utilized by conservation agencies and organizations, as well as by ranchers, as an ecological and agricultural management tool. Tallgrass prairie preservation requires frequent burning to prevent the encroachment of woody species and maintain the integrity of the plant communities and wildlife habitat. From an agricultural perspective, the burning and renewal of the tallgrass has been shown to significantly increase the productivity of the rangeland for cattle ranching purposes.
 

Such frequent and widespread burning, however, creates health concerns. Air modeling has shown transport of PM and ozone precursors as far east as Tennessee during the burning season. Air pollutants from Flint Hills burning have also adversely impacted or threatened the NAAQS attainment status of areas in Kansas and Missouri. With more stringent ozone regulations imminent, this conflict between ecological preservation and compliance with air quality standards will be exacerbated.

A recent ACOEL posting suggested, in the climate change context, that the severe economic consequences of the traditional legislative/regulatory process can and should be mitigated through creative voluntary community effort. With the ecologically and agriculturally beneficial practice of tallgrass burning on a collision course with NAAQS attainment, such an approach was recently embraced by the U.S. EPA, Kansas Department of Health and Environment, conservation and agricultural organizations and academia. The December 2010 approval of the Flint Hills Smoke Management Plan was the result of over a year of collaborative effort by these stakeholders. The key elements of the Plan include:

  • A new website with a predictive plume modeling tool for public and private decision-making.
  • Development of fire management practices to mitigate adverse health consequences and NAAQS violations associated with controlled burning.
  • A comprehensive data collection effort to better characterize prairie burning and its consequences.
  • Proposed limited legal restrictions on open burning during critical time periods.
  • Extensive outreach and education efforts, including prescribed fire training programs, public-private information sharing, and media exposure.
  • A pilot project in the spring of 2011 in two Kansas counties to implement the predictive computer modeling and fire management practices.

The Plan has been attacked by certain environmental organizations as a “smoke screen” whose objective is to facilitate EPA exemption of burning from enforcement in order to maximize beef production. These critics discount the ecological motivation for the Plan and allege that it is unlikely to adequately protect public health. I would suggest that the Plan should not be viewed as the final answer. Rather, it should be considered a working document that will evolve as the results of modeling and data collection and level of voluntary implementation are evaluated. Time will tell the extent to which the Plan can be cited as further evidence of the power of voluntary, collaborative

California's New "Green Chemistry Initiative"

Posted on January 6, 2011 by Robert L. Falk

Manufacturers and retailers who import consumer products from overseas are facing a significant new challenge emerging from California. The State’s “Green Chemistry Initiative” has the goal of removing, reducing, or replacing potentially harmful chemicals in consumer products. Given that its market represents the world’s seventh largest economy, California’s Green Chemistry Initiative will likely have a significant impact upon the worldwide supply chains for these products.

 
California’s Green Chemistry Initiative was enacted on September 29, 2008, through two companion bills, Assembly Bill 1879 and Senate Bill 509. These statutes broadly describe a general structure for the law, with the details left to future regulations by the lead agency, the California Department of Toxic Substances Control (“DTSC”).DTSC released its most updated version of proposed implementing regulations on November 16, 2010. These consisted of requirements regarding:

  1. the prioritization of chemicals and products of high concern,
  2. requirements for an alternatives assessment process, and
  3. regulatory options for DTSC to exercise based on its review of such assessments, which may require a manufacture to reformulate a product or stop its sale in California.


Although the proposed regulations implementing the Green Chemistry Initiative were due to be finalized by January 1, 2011, given the impending swearing in of Jerry Brown as California’s new Governor, on December 23, 2010, the California Environmental Protection Agency stated that “substantive and valid concerns” had been raised by “industry, environmental groups, scientists, and legislative leaders,” such that the proposed regulations will be reviewed, and likely amended, by a “Green Ribbon Science Panel” before going into effect.


While the final shape of the regulations remains to be seen, the heart of DTSC’s draft scheme is likely to survive even if modified. Its key feature is an alternatives assessment requirement which mandates evaluation of the potential impacts of chemicals of concern in products and an identification of less toxic alternatives to reduce those impacts. This analysis must also consider how the product is manufactured and used; what happens to it after its useful life; and its other likely effects on health, the environment, and other resources throughout its life cycle. As drafted, the regulations ultimately would require the manufacturer to select and propose to DTSC the alternative it intends to implement and to provide DTSC with the rationale for the selection and a proposed timetable for implementation. The process by which DTSC reviews a manufacturer’s alternatives assessment and provides an approval is likely to be resource-intensive, requiring management of an enormous amount of detailed and potentially conflicting scientific information. At a time when California faces a large fiscal crisis, funding such a new and far reaching program may prove unrealistic; this funding gap may dictate a change in the proposed regulations. Notwithstanding the Green Ribbon Science Panel’s forthcoming review, all eyes will be on newly-inaugurated Governor Brown’s office to provide direction on the future of this program.


The California Legislature believed the Green Chemistry Initiative will lead to safer products, fewer exposures to potentially harmful chemicals, and a healthier environment. While these goals are laudable, as a practical matter, it remains to be seen whether the State’s plan for implementing this ambitious law will be successful or end up being crushed by its own weight.
 

"No More Business as Usual": A Preview of Climate Change and the California Environmental Quality Act in 2011

Posted on January 5, 2011 by Patrick Dennis

As goes California, so goes the rest of the nation? That could be the case with respect to climate change and the regulation of greenhouse gas (GHG) emissions. Climate change and the implications of California’s Global Warming Solutions Act of 2006 (also known as AB 32) continue to remain a topic of great debate and speculation nationwide, as well as in California. AB 32 recently survived an initiative challenge during California’s November 2010 election cycle, and deadlines established in AB 32 to meet greenhouse gas reduction goals continue to loom. Recently, Governor Arnold Schwarzenegger, who just left office a few days ago, gave remarks at a California Air Resources Board meeting and acknowledged the “great, great benefits” from the creation of green jobs and venture capital being provided to GHG reduction projects. However, the Governor’s excitement for the benefits of AB 32 and climate change initiatives were tempered by California’s economic reality. According to the Governor:

 


We have to be sensitive because it is an economic downturn and this Air Resources Board knows that they have to be sensitive. But we have to reach our goal by 2020, our reductions of 25 percent and we’ve got to go and have our 33 percent of renewables by 2020. There are no two ways about that.

 


So what does this mean as we look forward to 2011 with a new Governor and lingering fiscal issues?
 

One area of law where climate change is bound to remain an active topic of discussion, and likely litigation and regulatory development, is with respect to the California Environmental Quality Act (CEQA). At the time AB 32 was adopted, there was uncertainty about the type of greenhouse gas emissions analysis that would be required under CEQA, and opponents of development projects filed several lawsuits to challenge projects on that basis. The early California State superior court decisions after passage of AB 32 ran the gamut from not requiring climate change analysis or a discussion of AB 32 , to finding an environmental impact report inadequate for failing to make a meaningful attempt to determine the project’s effect on global warming simply because it was “speculative”. In 2007, California adopted SB 97, which directed the Governor’s Office of Planning and Research (OPR) to develop recommended amendments to the State CEQA Guidelines for addressing greenhouse gas emissions , with the goal of creating a coordinated policy – instead of a “piecemeal approach dictated by litigation .” The amendments became effective in March 2010.

 


Despite the adoption of the CEQA guidelines amendments, how state and local agencies should analyze and, when necessary, mitigate greenhouse gas emissions still remain somewhat of a mystery, because the amended guidelines and most local governing bodies have fallen short of providing a clear threshold as to what constitutes a significant impact under CEQA, and what should be done to mitigate the impact. However, what we can anticipate for 2011 is that project applicants must “do something” – business as usual (i.e. developing projects without evaluating and, as necessary, reducing GHG emissions) will likely not suffice. The amended guidelines have been adopted, models for quantifying GHG emissions are available, and state and local agencies such as the Attorney General’s Office ) and various air quality management districts have provided recommended mitigation measures and performance-based and numeric thresholds related to climate change. The California Court of Appeal also weighed in on the “do something” mantra in April 2010 in concluding that an environmental impact report was inadequate because it improperly deferred an evaluation of GHG mitigation measures. It held that, “[d]ifficulties caused by evolving technologies and scientific protocols do not justify a lead agency’s failure to meet its responsibilities under CEQA by not even attempting to formulate a legally adequate mitigation plan.”

 


All in all, with AB 32 left intact, the adoption of the new CEQA Guidelines, and the CARB regulatory package for implementation of AB 32 likely to be put in place, 2011 promises to be an active year in California’s legal and regulatory environment – one that the nation will continue to closely monitor as California takes the lead.

EPA Issues First Ever Numeric Nutrient Water Quality Criteria and Standards for Florida Lakes and Rivers

Posted on January 4, 2011 by Lee A. DeHihns, III

On November 15, 2010, EPA announced that it had issued final numeric nutrient water quality criteria (NNC) for lakes, rivers, streams and springs in Florida, marking the first time that EPA has set numerical nutrient standards for a state. EPA’s rationale for these standards is that excess loads of nitrogen and phosphorus, the most common nutrients found in water bodies, are one of the most prevalent causes of water quality impairment in the United States and that it is a “widespread, persistent, and growing problem.” The nutrient standards establish nutrient criteria for lakes and streams by requiring that total nitrogen (TN) and total phosphorus (TP) be no higher than set levels for five different watershed regions and three different classes of lakes. For lakes, EPA also set criteria for chlorophyll a.

 

EPA identified 193 point municipal and industrial dischargers that are potentially affected by the rule. For municipal entities, current annual average permit limits are 3.0 mg/l for TN and .1 mg/l for TP. EPA expects that municipalities will need to employ advanced biological nutrient removal (BNR) to meet the lower levels in the rule. EPA’s annual cost estimates to implement the rule are between $135 and 206 million. EPA states that the average homeowner will pay an estimated $40 to 71 annually in increased utility bills.
 

Two main concerns emerged in the commentary on the proposal. First, critics asserted that the science behind the proposal is not sound. For example, The Florida Department of Environmental Protection (FDEP), in its comments on EPA’s proposal, noted that “EPA stream criteria for protection of downstream estuaries were not scientifically valid, that EPA’s approach to the stream criteria is not appropriate, that some aspects of what EPA has done are not adequately protective of the environment, are not linked to biological response, and, (in particular for lakes) the EPA’s approach was too simplistic.”

 

Second, they assert that the costs are both too high and not proportionate to the environmental benefits that EPA is hoping to achieve. The Florida Water Environment Association Utility Counsel (FWEA) released a report which said that treatment costs to meet the new standards are estimated to be “between $4.2 and $6.7 billion, and the annual debt service, including incremental operating and maintenance costs, is expected to range from $430 million to $620 million per year. Typical increases in customer charges are expected to range from $570 to $990 per year.” Similarly, the Florida Water Quality Coalition stated that the “costs of the proposed federal NNC regulations far exceed the EPA estimates. If EPA enforces ‘end-of-pipe’ criteria (requiring all discharger effluent levels to be at or below the NNC), the total annual costs could range from $3.1 to $8.4 billion.”

 

This is, no doubt, one of the most significant acts that EPA has taken in the water quality standards field for quite some time, and even though the standards are being set for just one state, EPA has taken a giant step down the path to imposing numeric criteria in nationwide. There will be a lot of litigation (six law suits have already been filed challenging the regulations), political push-back and a lot of discussion about how these standards are going to be implemented, delaying the actual implementation for a period of time. While EPA has pushed the effective date of the rule to 15 months following promulgation in order to allow time to comply, even this delay will likely prove to be insufficient to resolve the many contested issues.

 

For those readers seeking more detail on these EPA’s regulations and their consequences, please see the Alston & Bird Environmental and Land Development Advisory titled "EPA Issues First Ever Numeric Nutrient Water Quality Criteria and Standards for Florida Lakes and Rivers" here.