Posted on May 7, 2015
The D.C. Circuit Court of Appeals just reversed and remanded EPA’s rule allowing backup generators to operate for up to 100 hours per year as necessary for demand response. It’s an important decision that could have lessons for EPA and the regulated community across a wide range of circumstances, including eventual challenges to EPA’s proposed GHG rule.
EPA said that the rule was necessary to allow demand response programs to succeed while maintaining grid reliability. Commenters had argued that, by encouraging greater use of uncontrolled backup generators, EPA’s rule makes other generators less economic, thus creating a negative feedback loop, with less and less power generated by controlled units, resulting in greater and greater need for uncontrolled backup generators. Here’s what the Court concluded:
- EPA failed adequately to respond to the commenters’ arguments. Noting that “an agency must respond sufficiently to “enable [the court] to see what major issues of policy were ventilated,” the Court instead found that EPA “refused to engage with the commenters’ dynamic markets argument."
- To the extent EPA did respond, it was “self-contradictory”, arguing that it was not justifying the regulation on reliability grounds, even though the final rule said that it was based on reliability concerns.
- The 100-hour rule was based on faulty evidence. EPA relied on evidence that backup sources had to be available at least 60 hours to participate in a PJM “Emergency Load Response Program.” However, PJM itself noted that this minimum does not apply to individual engines.
- Finally, and perhaps most importantly, while EPA justified the rule on reliability grounds, the Court stated that:
grid reliability is not a subject of the Clean Air Act and is not the province of EPA.
This last issue is the part of the opinion that could have some bearing on judicial review of EPA’s GHG rule. The Court noted that there was no evidence that FERC or NERC had participated in the backup generator rule or provided comments to EPA. When, during the course of the rulemaking, a commenter suggested that EPA work with FERC, this was EPA’s response:
the rulemaking’s purpose was to address emissions from the emergency engines “and to minimize such pollutants within the Agency’s authority under the CAA. It is not within the scope of this rulemaking to determine which resources are used for grid reliability, nor is it the responsibility of the EPA to decide which type of power is used to address emergency situations.”
This statement did not make the Court happy:
EPA cannot have it both ways it [sic] cannot simultaneously rely on reliability concerns and then brush off comments about those concerns as beyond its purview. EPA’s response to comments suggests that its 100-hour rule, to the extent that it impacts system reliability, is not “the product of agency expertise.”
And why is this relevant for the GHG rule?
First, because EPA had better consult with FERC and NERC, so that it can defend any statements it makes in the GHG rule about its impact, if any, on reliability. Second, it’s clear that the court will not show deference to EPA’s conclusions about reliability, since that is not within the scope of EPA’s expertise.
Posted on March 23, 2015
On January 15, 2015, Oklahoma Western District Judge Timothy DeGiusti dismissed a declaratory judgment action brought by the United States Environmental Protection Agency (EPA) against Oklahoma Gas and Electric Company (OG&E) under the Clean Air Act. In United States v. Okla. Gas & Elec. Co. , the Court found that it lacked subject matter jurisdiction over EPA’s claims.
The litigation involved certain modifications made by OG&E at its Muskogee and Sooner plants. These modifications occurred more than five (5) years prior to EPA’s suit. Before commencing each of the projects, OG&E submitted “Project Notifications” to the Oklahoma Department of Environmental Quality (DEQ) that: (1) stated that each of the modifications would not result in a significant emissions increase; and (2) committed to submitting annual reports supporting this conclusion. OG&E did not submit detailed emissions calculations. However, five years of data subsequent to the modifications confirmed that significant emissions increases did not occur.
Although the underlying dispute revolves around whether OG&E was required to obtain a Prevention of Significant Deterioration (PSD) permit before commencing each of the modifications, EPA did not allege that the projects were “major modifications” or that the projects resulted in “significant emissions increases” from the Sooner or Muskogee plants. Nor did the government seek penalties for violations of the PSD permit requirements or injunctive relief requiring OG&E to obtain permits, likely seeking to avoid the application of the five year general statute of limitations applicable to government claims for fines, 28 U.S.C. § 2462. Instead, the government only sought a declaration that OG&E did not properly project whether the modifications to the Sooner and Muskogee plants would result in a significant increase in emissions.
Given that the government did not allege a “major modification” or a “significant emissions increase” for any of the projects, the Court found that the government had not presented an actual case or controversy sufficient for the Court's exercise of jurisdiction.
Even if OG & E failed as a matter of law to evaluate whether the modifications would result in a significant increase in post-modification emissions of regulated pollutants at each facility, that failure to project is not, without more, determinative of whether a PSD permit is required. Unmoored from a claim that the modifications at issue are major modifications, Plaintiffs ask this Court to make a declaration as to a collateral legal issue governing aspects of a future potential suit. EPA's attempt at piecemeal litigation, therefore, cannot withstand the Court's jurisdictional limitations.
The Court also rejected EPA’s novel claim for injunctive relief seeking to require OG&E to properly calculate whether the projects were likely to result in a significant emissions increase prior to construction.
The Court is not aware of any decision in which the injunctive relief requested by EPA has been granted, or for that matter, ever requested. As the parties concede, there is no statutory or regulatory requirement that projections be submitted to EPA or any other regulatory authority in the first instance. And, as the Sixth Circuit addressed in DTE Energy, there is no prior approval required by the agency. Thus, if the Court were to grant the injunctive relief requested by EPA it would be directing OG & E to submit projections where no statutory or regulatory authority for such action exists. The availability of relief of the nature requested by EPA is a matter to be addressed by Congress, not this Court.
This is an important decision limiting EPA’s ability to “second-guess” a facility’s pre-construction permitting calculations in the absence of data demonstrating a significant emissions increase.
Posted on March 2, 2015
In Paradise Lost, John Milton wrote that “easy is the descent into Hell, for it is paved with good intentions.”
A modern environmental lawyer might say that the road to waste, inefficiency, and obstruction is paved with good intentions. Nowhere is that more apparent than with citizen suit provisions, as was demonstrated in the decision earlier this week in Nucor Steel-Arkansas v. Big River Steel.
Big River Steel obtained a permit from the Arkansas Department of Environmental Quality to construct a steel mill in Mississippi County, Arkansas. Nucor owns an existing steel mill in – you guessed it – Mississippi County, Arkansas. Nucor brought a host of claims in various forums (Sorry; I’m not a Latin scholar and cannot bring myself to say “fora”) in an effort to derail the Big River Steel project. It appealed the permit in Arkansas courts. It also petitioned EPA to object to the permit.
Finally – the subject of this case – it brought a citizens’ suit under the Clean Air Act alleging that the permit did not comport with various CAA provisions addressing permitting. The Court rightly dismissed the complaint, basically on the ground that the suit was simply an improper collateral attack on the air permit. The 5th and 9th Circuits have reached similar conclusions in similar circumstances.
The point here, however, is that clients don’t want to win law suits; they want to build projects. Even unsuccessful litigation can tie projects up in knots, jeopardizing project financing or causing a project to miss a development window.
The road to hell is paved with the pleadings of bogus citizen suits.
Posted on December 18, 2014
There has already been significant discussion of the economic impacts of climate change. Damage from catastrophic events, the cost to build adaptation measures such as sea walls; these have all been examined. Now, a National Bureau of Economic Research Working Paper suggests a much more direct measure. Apparently, we’re just not as productive as the planet warms.
Cole Porter knew what he was talking about.
Posted on December 4, 2014
In December 1952, John W. Davis, the senior name partner in one of the nation’s most prominent law firms and the Democratic candidate for President in 1924, appeared before the Supreme Court. He was defending the long-established Constitutional doctrine of “separate but equal” in public education and urged “judicial restraint” in any effort to overturn the Court’s 1896 decision in Plessy v. Ferguson which had blessed that practice as a socially and legally acceptable way of reconciling the competing claims of human equality and social stability in the United States.
In May 1954, in Brown v. Board of Education, the Supreme Court unanimously reversed Plessy, finding that segregated schools were ‘inherently unequal”. The decision made possible a new America that, while still staggeringly unequal, is no longer premised on officially-sanctioned segregation of people by race.
Suppose John W. Davis had won his argument? What if the legions of respected and highly competent lawyers who represented southern states, towns and school districts had succeeded in their efforts to undermine the Brown decision by dragging out the Court’s injunction to dismantle segregation “with all deliberate speed” not simply for 20 years but for 50?
What kind of society would we be living in today if those efforts, supported by many years of precedent, deeply-held social beliefs and substantial economic interests, had succeeded? What role could the United States play in today’s world if we still sanctioned “separate but equal” treatment of our own citizens? How proud would those lawyers now be of their efforts to preserve a status quo that, as many of them must have known, had to fall for our nation to free itself of the legacy of slavery?
Climate change is not slavery or de jure racial segregation, though in truth it will affect the lives of hundreds of millions, perhaps billions, of people throughout the world for decades and quite likely centuries. But the failure of the United States to address its GHG emissions since the 1992 U.N. Framework Convention on Climate Change and the prospects for continuing litigation over even the modest EPA efforts now under way to restrict coal plant emissions can be viewed as a similar refusal to recognize the need for fundamental changes.
I believe that lawyers must at least consider whether they wish to be part of a scorched-earth litigation strategy to defer, for as long as possible, our nation’s efforts (and the efforts of other nations) to break free of reliance on coal, which has represented the single greatest source of the Earth’s increased GHG emissions since 2000.
John W. Davis surely believed he was behaving as lawyers should in defending his clients’ actions under then-prevailing law. However, I wonder whether, in retrospect, he would have preferred to be part of the solution instead of the continuing problem that still challenges our society.
If our nation today fails to confront climate change and the other nations of the world follow our dubious lead, how will future generations look at our profession’s role in that tragedy? How will we look at ourselves?
Posted on November 17, 2014
November 1967: The Moody Blues release their second album, Days of Future Passed, said to be an influential work of the countercultural, psychedelic era. May 2014: Wolverine goes back in time to rally the X-Men against the Sentinels in Days of Future Past. In between: Ed Muskie and Leon Billings roamed the Earth, particularly the U.S. Senate, and modern-day environmental law was born and thrives.
2014 also is the centennial of the birth of Muskie in the old mill town of Rumford, Maine. On November 15, almost exactly 47 years after release of Future Passed, Harvard Law Professor Richard Lazarus and Leon Billings, Senator Muskie’s former chief of staff, spoke on a panel looking back and to the future of laws like the Clean Air and Water Acts that were unanimously passed by the Senate through the guidance of Muskie and Billings.
Billings spoke of how what Muskie was able to shepherd through Congress and into law involved concepts still pervasive and taken for granted today—such as private attorneys general, nondegradation, open decision-making, the public’s right to breathe healthy air and removal of the right to pollute. He described Muskie’s insistence of and ability to achieve bipartisanship, with allies for the CAA and CWA efforts including such Senators as Baker, Eagleton, Cooper, Bayh, Boggs and Dole, as well as the exhaustive efforts to fully vet and document the need for legislation. For example, for the CWA the Senate Committee held 33 days of hearings with 1721 witnesses, 470 statements and 6,400 pages of testimony, followed by 45 sub-or-full-Committee markup sessions and 39 Conference meetings.
Billings then focused on two concepts that he said demonstrate Muskie’s ability over 40 years ago to look to the future. The first, “waters of the Unites States” grew out of the Senator’s knowledge of the 1899 Refuse Act; he successfully convinced his colleagues that the Act supported a broad view of “waters of the US” to include, for example, wetlands. Since then, the Supreme Court has gone “at least as far as we had expected, and more broadly than we could have hoped”, said Billings.
The second concept is that of climate change and the Clean Air Act. Billings was very clear: Section 111(d) was no accident, is not being misinterpreted, and Muskie intended there to be a legislative basis for then-unknown or undefined pollution problems like CO2, what Billings now calls the “epitome of the precautionary principle”. The phrase “selected air pollution agents” almost never made it out of the House-Senate Conference in December 1970, but a compromise was struck so late at night it never made it into the Conference reports. And while no one then envisioned CO2 and climate change, Billings said that if Muskie were alive when the Supreme Court ruled in Massachusetts v EPA that CO2 is a pollutant, he would have said, “Why do you think I put that provision in there in the first place?”
Richard Lazarus then spoke of Senator Muskie’s enduring legacy in the courts as the font of legislative intent underlying many environmental laws, including frequent references to Muskie in court opinions and during oral arguments at the Supreme Court. He also demonstrated that while President Nixon did sign the bills authored by Muskie and had the label of being an environmental President, in fact he was largely using the issue for a short time as a defensive measure to cut off Muskie’s prospects as a potential 1972 Presidential candidate. Richard then showed slides of handwritten notes made by Nixon’s Chief of Staff, H.R. Haldeman of three discussions with the President: in February 1971, even when they thought environmental protection “has to be done”, at the same time they thought it “is not worth a damn”; in June “should take on environment—it’s not a sacred cow”; and by July 1971 they wanted to put the “brakes on pollution bills…when we can without getting caught”, and to “reexamine all pollution bills in terms of current economic impact”.
Richard also discussed the current EPA rulemaking under 111, especially referencing the term “best system of emission reduction”; EPA’s June 2014 legal memorandum in support of its rulemaking proposal used Senator Muskie’s own words concerning “system” as encompassing the potential for emission reductions to occur outside the fence, and to include more than just controls. He said that for EPA, Muskie is its “Mr. Clean”.
During Q&A, both panelists discussed the partisanship of the past 10-20 years contrasted with during Muskie’s era. Billings mentioned how during Muskie’s opening presentation of the Clean Air Act on the Senate floor, the presiding officer was Senator Barry Goldwater, who sent down a note (now lost to history) saying, “Ed, that is the finest speech I think I have ever heard on the floor of the U.S. Senate.” Turning to NEPA, the concept of an” environmental impact statement” developed through a personal compromise Muskie struck with Senator Jackson.
Afterwards I asked Billings, “If Ed Muskie and you were in the Senate now, what would you be doing?” He said, “If we were the majority party, holding a lot of oversight hearings to bring in all the scientists and evidence; if the minority party, writing speeches.”
And that is how the Past (or Days Passed) in Environmental Law still have major force in today’s many controversies. Oh, by the way: The Moody Blues recently released a new box set, “Timeless Flight”, and are still touring. Long live rock and environmental laws!
Posted on November 6, 2014
Ozone is the quintessential ambient pollutant. It is the result of complicated chemical reactions involving NOx and VOCs, sunlight, humidity and temperature. It is primarily an urban pollutant, because that is where most of the NOx and VOCs are emitted, but it is also a regional challenge particularly in the eastern U.S.
The Uintah Basin of eastern Utah is the quintessential Western U.S. Empty Quarter. It is sparsely populated and windswept, and is a high-altitude desert. It is home to the Ute Indian Tribe, and the greater part of the Basin is Indian Country for purposes of environmental regulation, meaning EPA – not the State of Utah – has regulatory authority. The Basin is home to extensive reserves of oil, gas, oil shale and oil sands.
If the Basin is a dry, windy environment, then why have ambient ozone levels spiked dramatically in the Basin the last few years, during the winter, no less? It turns out that ozone is not only created during hot muggy summer days, but when VOCs build up during winter inversions with a lot of sun and snow. Periodic winter high pressure systems trap the VOCs and the ozone appears. EPA has classified the Basin as “unclassifiable” for ozone and has denied an administrative petition to classify the area as nonattainment. That denial is currently under review at the D.C. Circuit.
So where is this aberrant ozone coming from? Although oil and gas has been produced in the Basin for decades, the fracking boom has swept into Eastern Utah with a vengeance, and the number of wells and associated facilities has mushroomed. Utah DEQ, EPA Region 8, the counties, the Tribe, NGOs and the operators are jointly working on strategies to mitigate the problem, including newly promulgated state rules requiring retrofit of existing wells with equipment to reduce VOCs. These efforts are complicated, however, by the jurisdictional differences over air issues as between Utah DEQ and EPA and the results are sometimes a bit clumsy. But all of the stakeholders see the need to address the ozone issue proactively, and the end result will hopefully be a model for addressing similar issues in North Dakota, western Wyoming and Western Colorado.
Posted on August 25, 2014
On August 12th, the 9th Circuit Court of Appeals issued a decision that arguably explains everything from why the Tea Party exists to why otherwise calm and sane executives suddenly lose all their hair. Perhaps most astounding, the decision is clearly correct. Perhaps the law is an ass.
In 2008, Avenal Power submitted an application to EPA for a PSD permit to construct a new 600 MW natural gas-fired power plant in Avenal, California. Although section 165(c) of the Clean Air Act requires EPA to act on such applications within one year, EPA failed to do so.
Subsequently, and before EPA ever did issue a permit, EPA revised the National Ambient Air Quality Standard for NOx. Avenal Power apparently could demonstrate that emissions from the new plant would comply with the old NAAQS, but could not demonstrate that it would not cause an exceedance of the new NAAQS. After some waffling, EPA took the position that it could grandfather the permit application and review it under the prior NAAQS. Citizen groups appealed and the Court of Appeals held that EPA had no authority to grandfather the application.
To the Court, this was a simple application of Step 1 of Chevron. The Court concluded that sections 165(a)(3) and (4) and 110(j) of the CAA unambiguously require EPA to apply the NAAQS in effect at the time a permit is issued. Thus, EPA has no discretion to grandfather permit applications, even though EPA was required by law to issue a permit decision at a time when more lenient requirements were in effect.
I think that the Court’s decision is clearly right on the law. The statutory language seems unambiguous. But what did the Court have to say to those who feel that the result is inequitable, because Avenal was legally entitled to a decision in one year, and would have obtained its permit if EPA had acted timely? Pretty much, tough luck:
Finally, EPA relies heavily on the argument that the equities weigh in favor of Avenal Power. In short, we agree. Avenal Power filed its application over six years ago, and endeavored to work with EPA for years, even after filing suit, to obtain a final decision. But however regrettable EPA’s treatment of Avenal Power has been, we simply cannot disregard the plain language of the Clean Air Act, or overlook the reason why an applicant must comply with revised and newly stringent standards —that is, “to protect and enhance the quality of the Nation’s air resources so as to promote the public health and welfare and the productive capacity of its population.” Honoring the statute’s plain language and overriding purpose, we must send EPA and Avenal Power back to the drawing board. (Emphasis added.)
In other words, EPA screwed up, and Avenal Power got screwed. Imagine having to explain that to your client.
Posted on April 29, 2014
On April 18, EPA lost another NSR enforcement case. Not only that, but this was a case EPA had previously won. As we noted last August, Chief Judge Philip Simon of the Northern District of Indiana, had previously ruled that the United States could pursue injunctive relief claims against United States Steel with respect to allegations by EPA that US Steel had made major modifications to its plant in Gary, Indiana, in 1990 without complying with NSR requirements.
Having reread the 7th Circuit opinion in United States v. Midwest Generation, Judge Simon has had a change of heart and now has concluded that injunctive relief claims (as well as damages) are barred by the statute of limitations, even where the same entity that allegedly caused the original violation still owns the facility. Judge Simon concluded that the Court of Appeals had spoken with sufficient clarity to bind him. The language he cited was this:
"Midwest cannot be liable when its predecessor in interest would not have been liable had it owned the plants continuously. (Italics supplied by Judge Simon.)"
Judge Simon seems to have felt more compelled than persuaded.
"Candidly, it is a little difficult to understand the basis for the statements in Midwest Generation that even claims for injunctions have to be brought within five years. But that is what Midwest Generation appears to mandate. And in a hierarchical system of courts, my job as a trial judge is to do as my superiors tell me.
So while the basis for applying a limitations period to the EPA’s injunction claim under §§ 7475 and 7503 is thinly explained in Midwest Generation, upon reconsideration I do think that’s the outcome required of me here."
One final note. In his original opinion, Judge Simon ruled against US Steel, in part, because the concurrent remedy doctrine, which US Steel argued barred injunctive relief where damages were not available, could not be applied against the United States. As Judge Simon noted, the 7th Circuit Court of Appeals did not discuss the concurrent remedy doctrine, so we don’t know the basis of its holding that a party continuously owning a facility that is alleged to have violated the NSR provisions of the CAA more than five years ago is not subject to injunctive relief. However, it is worth pointing out, as we discussed last month, that Judge James Payne, of the Eastern District of Oklahoma, dismissed injunctive relief claims brought by the Sierra Club (not the government, of course), relying on the concurrent remedy doctrine.
Something tells me that the United States isn’t quite ready to give up on these cases, notwithstanding a string of recent defeats. The NSR enforcement initiative may be in trouble, but it’s not quite dead yet.
Posted on April 18, 2014
Appalling environmental conditions that have accompanied China’s rapid growth have been described on Chinese social media as “postapocalyptic,” “terrifying,” and “beyond belief.” During the last year, air pollution in several Chinese cities became so horrendous at times that road travel, schools, construction projects, and airports temporarily were shut down. Epidemiologists estimate that 1.2 million Chinese die prematurely each year from exposure to air pollution. Due to widespread water pollution, tap water is not safe to drink, even in luxury hotels. Pollution is estimated to cost the Chinese economy more than 3.5% of gross domestic product annually.
Rising public demand to clean up the environment has caught the attention of China’s Communist Party leadership. In an address at the opening of the annual session of the National People’s Congress (NPC) last month, Chinese Premier Li Keqiang declared “war on pollution.” Chinese authorities agree that enforcement is the number one problem with their environmental laws. Bie Tao, Deputy Director General of Policies and Regulations of MEP, cited estimates that half of all regulated facilities in China violate the law and that pollution in China would be 70% less than it currently is if polluters were in full compliance with the law.
Problems with enforcement of China’s environmental laws run deep. China’s regulatory system is highly decentralized with the nation’s Ministry of Environmental Protection (MEP) less than a fiftieth the size of the U.S. EPA for a country with more than three times as many people than the U.S. Enforcement problems are compounded by local corruption, small penalties for violations, the lack of an independent judiciary and the absence of a long tradition of respect for the rule of law.
As Chinese authorities struggle to increase the enforceability of their environmental laws, two ACOEL members were given an unusual opportunity last month to peak into a window on the NPC’s legislative processes. On March 19, James A. Holtkamp and I were invited to appear before the Legislative Affairs Commission of the NPC’s Standing Committee in Beijing along with David Pettit, a senior attorney with the Los Angeles office of the Natural Resources Defense Council (NRDC). Billed as a “Green Dialogue,” the event was an extraordinary effort to obtain U.S. expert input to help resolve disagreements within the NPC on proposed amendments to make China’s basic Environmental Protection Law more enforceable.
Representatives of the NPC’s Standing Committee and MEP presented us with six sets of questions concerning U.S. enforcement procedures and policies. Many were directed at understanding how penalties for environmental violations are determined in the U.S. A proposal to provide that maximum fines for environmental violations in China be calculated in part based on the number of days the violation has occurred was one issue that had created disagreement within the NPC. We noted that this has become a fundamental principle of U.S. pollution control law and that it provides a powerful incentive for violators promptly to stop and correct violations. We emphasized the importance of monitoring and reporting requirements in environmental permits. We also suggested that China should consider adopting a policy that enforcement actions should recoup at least the economic benefit of the violation to ensure that companies do not profit from their violations. This has been EPA’s long-standing policy and there appears to be some interest in adopting such a policy in China.
Chinese authorities are moving toward requiring greater transparency from polluters. Beginning on January 1, 2014, they mandated that China’s 15,000 largest companies provide the public with continuous data concerning their air and water emissions, something that would have been unthinkable just a few short years ago. By opening up a “Green Dialogue” on U.S. enforcement practices, China’s legislators are exhibiting a healthy appetite for entertaining new ideas to improve the effectiveness of their environmental laws. Our U.S. expert panel consisting of an industry practitioner, a public interest lawyer, and an academic apparently proved to be a persuasive coalition for we have learned that many of our recommendations are being incorporated into the new draft of China’s basic Environmental Law.
Posted on April 14, 2014
Last week, in response to shareholder requests that it disclose information regarding how climate change might affect it in the future, ExxonMobil released two reports, one titled Energy and Climate, and one titled Energy and Carbon – Managing the Risks. They actually make fascinating reading and seem to represent a new tack by ExxonMobil in its battle with those seeking aggressive action on climate change.
The reports do not deny the reality of climate change. Indeed, the reports acknowledge climate change, acknowledge the need for both mitigation and adaptation, acknowledge a need to reduce fossil fuel use (at some point), acknowledge the need to set a price on carbon, and acknowledge that ExxonMobil in fact already is making future planning decisions utilizing an internal “proxy” price on carbon that is as high as $80/ton of CO2 in the future.
The reaction of the shareholder activists who pushed for the disclosures? They are not happy. Why not?
Because ExxonMobil has said explicitly that it doesn’t believe that there will be sufficient worldwide pressure – meaning government regulations imposing very high carbon prices – to reduce fossil fuel use sufficiently quickly enough to limit global temperature rise to 2 degrees Celsius. It also does not believe that worldwide carbon regulation will leave it with any “stranded assets.”
I understand the moral case against fossil fuel use. Personally, however, I’d rather rely on a carbon price that provides the appropriate incentives to get the reductions in CO2 emissions that we need to mitigate climate change. On that score, sadly, it’s not obvious to me at this point that ExxonMobil’s analysis of likely outcomes is actually wrong.
My biggest complaint with the reports is the refusal to recognize that markets react dynamically to new regulatory requirements. The history of big regulatory programs is that they pretty much always cost less than the predictions made before the regulations are implemented. The lesson then is that the current projections of energy cost increases resulting from a high cost of carbon are likely to be overestimated.
Time will tell. At least I hope so.
Posted on March 31, 2014
Quarles & Brady recently represented Wisconsin Energy Corporation and Wisconsin Electric Power Company (doing business as "We Energies") in the construction and commencement of operation of a $250 million biomass-fueled co-generation plant. The project is located at Domtar Corporation's paper mill facility in Rothschild, Wisconsin. Wood, waste wood and sawdust are now being be used to produce 50 megawatts of electricity. The new co-generation project also supports Domtar's sustainable papermaking operations.
The new facility adds another technology to We Energies' renewable energy portfolio. That portfolio includes the 145 megawatt (MW) Blue Sky Green Field Wind Energy Center in Fond du Lac County and the 162 MW Glacier Hills Wind Park in Columbia County. Under Wisconsin law, utilities must use renewable energy to meet 10 percent of the electricity needs of their retail customers by the year 2015. With the start of commercial operation of the Rothschild biomass plant, We Energies estimates that it now has secured enough renewable energy to remain in compliance with the state mandate through 2022. Together, We Energies' three renewable energy operations are capable of delivering nearly 360 MW of renewable energy, enough to supply approximately 120,000 homes.
The Rothschild biomass project created approximately 400 construction jobs and 150 permanent jobs in the surrounding community. This includes independent wood suppliers and haulers from northern and central Wisconsin who are now securing waste wood for the project. We Energies appeared in proceedings before the Public Service Commission of Wisconsin in support of the Company's application for a Certificate of Authority for approval for the biomass plant. The Company filed an application for an air permit and other environmental approvals for the project, including the preparation of environmental assessments in support of the regulatory decisions.
The air permit for the project was issued on March 28, 2011. We Energies obtained one of the first PSD BACT (Prevention of Significant Deterioration - Best Available Control Technology) determinations for this project for Greenhouse Gas (GHG) emissions in the U.S. under EPA's GHG Tailoring Rule. The Company worked with the Wisconsin Department of Natural Resources (DNR) in developing a novel case-by-case Maximum Available Control Technology (MACT) determination for the biomass boiler under the Section 112 (hazardous air pollutant) provisions of the federal Clean Air Act. The permit was challenged by several environmental groups. The Company prevailed in the permit appeal process. The appeal was dismissed on the merits by the Marathon County Circuit Court in October, 2011. The facility started commercial operation on November 8, 2013.
Posted on February 13, 2014
A former federal district judge was fond of telling his law clerks that Fifth Circuit Court of Appeals opinions were like the Old Testament. “You can find something there to support about any proposition you want.” The January 31, 2014 release of the State Department’s Final Supplemental Environmental Impact Statement for the Keystone XL Pipeline Project brought Judge Roberts’ words to mind.
The Keystone XL Pipeline Project backers tout the report’s conclusion that because the Canadian tar sands oil will be developed with or without the construction of the pipeline, it will not “significantly exacerbate the effects of carbon pollution” (to use the President’s avowed standards for pipeline permit approval). On the other hand, pipeline opponents point to the fact the report does not specifically address the project’s greenhouse gas emissions. Both are valid points, but the gist of the report appears to be the project has finally cleared its environmental hurdle.
That said, other hurdles remain. While this long-awaited environmental impact statement is an important step in the process, it is just that, a step. Ultimately, the final decision on the pipeline permit will involve something more akin to the common standard for law firm attorney compensation, the so-called “all factors considered” standard. In this instance, that decision will involve economic and national and international political concerns, as well as how the project affects U.S. and international climate policy.
With the issuance of the report, the 90-day interagency consultation period begins. Once EPA, and the Departments of Energy, Defense, Transportation, Justice, Interior, Commerce, and Homeland Security weigh in, the Secretary of State will at some point make to President Obama a permit recommendation. The President, of course, has the final say.
Stay tuned; the project appears to have cleared another hurdle, but the five year and counting race is far from over.
Posted on February 11, 2014
Last week, EPA released its second external review draft of an updated Policy Assessment on the national ambient air quality standard for ozone. It also released updated draft risk and exposure assessments. To no one’s surprise, the new drafts confirm support for lowering the ozone NAAQS from 75 ppb to a range of 60 ppb to 70 ppb.
Why is this not a surprise? Because, as I noted some time ago, the prior draft policy assessment also supported a NAAQS in the range of 60 ppb to 70 ppb. Moreover, the Clean Air Science Advisory Committee weighed in on the prior draft, supporting a standard in the 60 ppb to 70 ppb range. In fact, before getting cold feet, CASAC had indicated that the data would support a standard below 60 ppb.
Courts’ deference to CASAC determinations on these issues is pretty well established. It seems clear that EPA has to lower the NAAQS to at most 70 ppb in order to survive judicial review. It’s not even obvious that 70 ppb would stick, though that will be clearer after CASAC has reviewed this most recent draft Policy Assessment.
The other significant question is when EPA will actually issue the new standard. After all, EPA was prepared to issue a new standard in 2011 or early 2012, when the White House put the proverbial kibosh on EPA’s plans. Will EPA somehow manage to delay issuance of the new standard until after the November elections? Now that the Super Bowl is over, I think that the Vegas bookies are putting their money on after.
Posted on December 30, 2013
On the eve of the December 10, 2013 oral argument before the U.S. Supreme Court in the litigation involving the Cross State Air Pollution Rule, nine Northeast states – Connecticut Delaware, Maryland, Massachusetts, New Hampshire, New York, Pennsylvania, Rhode Island and Vermont (Petitioners) – filed with EPA a petition under Section 176A of the Clean Air Act. Section 176A, a product of the 1990 Clean Air Act Amendments, allows EPA to establish, by rule, a transport region whenever the Administrator has reason to believe that the interstate transport of pollutants from one or more states contributes significantly to a violation of a NAAQS in another state or states.
Petitioners’ Section 176A petition seeks to expand the Northeast Ozone Transport Region (OTR) to include the states of Illinois, Indiana, Kentucky, Michigan, North Carolina, Ohio, Tennessee, Virginia and West Virginia. To review a copy of the petition click here. It alleges that the targeted upwind states have failed to fulfill all Clean Air Act requirements because their air pollution control programs do not require the installation of controls as stringent as required by the OTR and because air pollution from the upwind states is transported into the OTR, thus contributing to violations of the 2008 National Ambient Air Quality Standard for ozone within the OTR states. The Petitioners hope that the petition, if granted, will subject the targeted states to more stringent requirements in the form of revised State Implementation Plans for VOC and NOx emissions, including but not limited to additional requirements for enhanced Inspection and Maintenance of mobile sources, nonattainment New Source Review, and Reasonably Available Control Technology. Those opposed to Petitioners’ action question the technical basis for the petition, noting that it relies so heavily on data published no more recently than 2005. The Administrator of USEPA has 18 months to approve or disapprove of the petition.
The December 2013 Section 176A petition is the latest in a series of actions under the Clean Air Act to address interstate transport issues related to ozone in the Northeast. Many will recall that similar petitions were filed under Section 126 of the Clean Air Act in the late 1990’s even as USEPA was developing the NOx SIP Call. That rulemaking was followed by the Clean Air Interstate Rule and then by the Cross State Air Pollution Rule.
The Cross State Air Pollution Rule, which was struck down by the Court of Appeals for the District of Columbia in August of 2012, sought to address transport concerns by imposing additional pollution control requirements on coal fired power plants in the eastern half of the country. The Court of Appeals held that USEPA didn’t give states enough time to devise their own emissions reduction plans and did not limit the fix to each state’s “significant contribution” to the overall problem. It is that rule that is currently before the U.S. Supreme Court and is the subject of a recent article written by Andrea Field. To review a copy of that article click here.
Posted on December 13, 2013
December 10, 2013 was a banner day in Clean Air Act jurisprudence. On that date, the Supreme Court – which has heard only 19 environmental law cases in the past decade – set aside 90 minutes for argument concerning EPA’s Cross-State Air Pollution Rule (CSAPR). And at virtually the same time, just a short distance away, the D.C. Circuit was hearing challenges to major portions of EPA’s Mercury and Air Toxic Standards (MATS) Rule. If you were unable to attend either argument but want to know more about the arguments than you can learn from the press reports, then this “Advice from Air Act Andy” column is for you.
Question: Based on questions asked by the Justices in the CSAPR argument, the press is predicting that the Supreme Court is going to reverse the D.C. Circuit’s vacatur and remand of CSAPR. What do you think?
Air Act Andy: I learned years ago (in an earlier case involving interstate transport of pollution under the Clean Air Act) that it is unwise (and ultimately embarrassing) to predict what a court will do based on the questions asked at oral argument. That is particularly true of the December 10, 2013 CSAPR argument in the Supreme Court, where the vast majority of the Justices’ questions focused on what role costs should or may play in the drafting of a rule designed to address the interstate transport of air pollution. Admittedly, many of the Justices seemed to be on the same costs-can-play-a-role-in-this-kind-of-rulemaking band wagon; however, the cost issue was not a key part of the D.C. Circuit’s decision. (Indeed, some would say it wasn’t an issue at all in the D.C. Circuit.) Because the Court spent so much time on the cost issue and asked so few questions about the other bases for the D.C. Circuit’s vacatur of CSAPR, it would be foolhardy to predict what the Court will decide on those other crucial issues (including the so-called FIP/SIP issue and over-control issue).
Question: Was the CSAPR argument chocked full of analogies?
Air Act Andy: Indeed, it was. Malcolm Stewart (counsel for the government and apparently a basketball player) used a slew of basketball analogies to describe the concept of “significant contribution.” There were also charitable giving analogies, a pin-the-tail on the donkey analogy (from Justice Scalia), a shooting-and-stabbing the victim analogy (from Chief Justice Roberts), and an extended cow and sheep grazing analogy (from Justice Breyer).
Question: Did the Court take an exercise break in the midst of argument?
Air Act Andy: Yes. After Mr. Stewart’s argument, Chief Justice Roberts announced a “30 second break” during which several of the Justices stood up and did a limited round of Musical Chairs, but without removing any chairs.
Question: Did a lawyer from Texas admit to being an agnostic?
Air Act Andy: Kind of. On the issue of the role that costs should play in interstate transport rules, Texas’s Solicitor General said that the states “are remaining agnostic.”
Question: It has been my experience that the D.C. Circuit initially imposes strict time limits on oral advocates, but it then routinely lets those presenting argument take extra time to address issues of interest to the court. In the MATS case, the court gave the advocates much more time than usual to present their arguments. In exchange for giving advocates more time up front, did the court insist that advocates sit down when the red light went on?
Air Act Andy: That is not how it played out. Chief Judge Garland (who sat on the panel along with Judge Rogers and Judge Kavanaugh), told counsel at the outset that the court would keep to the pre-allotted two hours designated for all 12 arguing attorneys, but – in fact – the MATS argument lasted three hours. The panel peppered petitioners’ counsel and EPA’s counsel with questions, digging into several technical arguments with a fine-toothed comb of the record. Not one petitioners’ counsel had any time left for rebuttal.
Question: I heard that the courtroom had an explosive feel. Is that true?
Air Act Andy: Ah, perhaps you are referring to the moment when Judge Garland’s heavy binder of materials crashed to the floor near the beginning of EPA counsel’s remarks during the first of three phases of the argument. Unflappable as always, though, Judge Garland just told counsel to “Go ahead.” “Don’t mind us,” Judge Kavanaugh added.
Question: What is the appropriate dress for the Supreme Court?
Air Act Andy: I am so glad you asked this question. Based on what I saw people wearing on December 10, I would have said that “appropriate dress” is wearing anything that is black, charcoal gray, or navy blue. Having returned to the Court the next day to hear a colleague of mine argue a case, though, I must now amend my answer. When I arrived at the Court on December 11, wearing a long stylish gray cardigan sweater instead of a suit jacket, I was stopped by guards and politely told I would not be allowed to sit in the section reserved for members of the Supreme Court Bar unless I replaced my fashionable sweater with a suit jacket. Someone from the clerk’s office then graciously provided me with a nice-fitting ladies suit jacket with a label indicating that the jacket was from the “Lady Executive Signature Collection.” This is something Air Act Andy will keep in mind for the next visit to the Supreme Court – which will likely be in February 2014, when the Court is scheduled to hear argument on EPA’s greenhouse gas rules.
Posted on December 5, 2013
For the first time, the Office of Management and Budget ("OMB") is soliciting public comment on the Social Cost of Carbon ("SCC"). The SCC is a series of published values that represent the monetary impacts of marginal reductions in carbon emissions reductions, which are to be used by federal agencies when conducting cost-benefit analysis for rulemaking activities.
First published in 2010, the SCC is prepared by an interagency working group and is based upon three different integrated assessment models that project the economic impacts of climate change. The 2010 document setting for the SCC called for periodic review and update of the SCC as the science and economic understanding of climate change improves over time. The SCC values were updated in November of 2013 and have been increased to reflect improvements in the underlying integrated assessment models, including incorporation of the projected costs of sea level rise. Although OMB guidance directs that regulatory cost-benefit analyses should normally focus upon domestic costs and benefits, the SCC is a measure of the global benefits that are projected to result from marginal reductions in GHG emissions. The interagency working group concluded that the use of a global measure for carbon was appropriate because greenhouse gas emissions create a global externality, and the United States cannot resolve the projected impacts of climate change acting alone.
OMB is seeking public comment on the technical support document that explains how the SCC is set and specifically requests comment on (i) the selection of the integrated assessment models, (ii) how the distribution of SCC estimates should be used in regulatory impact analyses, and (iii) the strengths and limitations of the overall approach. The SCC is likely to be increasingly important as EPA proceeds with rulemaking activities to regulate greenhouse gas emissions from various sources. In fact, EPA employs the SCC in the regulatory impact analysis for the currently-pending proposal for New Source Performance Standards for power plants. The public comment period on the SCC runs through January 27, 2014.
Posted on December 3, 2013
On November 21, 2013 the Delaware Supreme Court issued a final ruling on an appeal closing out a long saga of litigation over the scientific evidence proffered in support claims of birth defects among children born to workers in the semiconductor manufacturing industry. In Tumlinson v. Advanced Micro Devices, the Supreme Court affirmed the trial court’s decision to exclude the plaintiffs’ key medical causation expert on Daubert grounds and thus dismissed one of the lead cases advancing the theory that working in so-called “clean rooms,” used for semiconductor wafer manufacturing, is unhealthy and can lead to birth defects in the offspring of such workers.
Wendolyn Tumlinson, one of the two adult plaintiffs, had worked at an AMD manufacturing site in San Antonio, Texas and her son was born with several birth defects, including anal atresia and stenosis, neurogenic bladder, renal agenesis/hypoplasia, imperforate anus and colo-vesicular fistula. The other adult plaintiff was married to Anthony Ontiveros who had worked at an AMD semiconductor manufacturing site in Austin, Texas and her daughter was born with several birth defects, including pulmonic stenosis, congenital pulmonary valve atresia, ventricular septal defect, right pulmonary hypoplasia, lower limb reduction defects, and situs inversus with dextrocardia. Each mother claimed that the exposures to chemicals in clean rooms were the cause of their child’s birth defects.
Plaintiffs filed their complaint on July 11, 2008 and for the next two years the parties engaged in discovery and motion practice. In December 2010, AMD moved to exclude the expert opinion of the plaintiffs’ expert, Dr. Linda Frazier, claiming it was unreliable and not relevant under Delaware Rule of Evidence 702. In April 2011, the trial court held a four-day Daubert-type evidentiary hearing to evaluate the admissibility of Dr. Frazier’s testimony and concluded that because her methodology was inadequate to establish causation under Texas substantive law (including the Texas’ courts’ interpretation of Daubert), it accordingly failed to satisfy Delaware procedural law and was excluded. As a result of the exclusion, judgment was entered for defendant AMD.
On appeal, the Delaware Supreme Court (there is no intermediate appellate court in Delaware), first remanded the case to the trial court with direction to determine the reliability of Dr. Frazier’s opinion under Delaware (as opposed to Texas) law. This time the trial court evaluated the reliability of Dr. Frazier’s testimony under the US Supreme Court’s decision in Daubert v. Merrell Dow Pharmaceuticals case principles as interpreted under Delaware law, and found Dr. Frazier’s opinion failed to meet that standard.
The Delaware Supreme Court then evaluated the trial court’s second decision and affirmed its conclusion. It focused on, among other things, Dr. Frazier’s failure to base her opinion on studies that were specific to (1) the clean room chemicals the parents were exposed to, and (2) the specific birth defect outcomes the plaintiff children suffered from. It also found that neither Dr. Frazier’s methodology for evaluating the medical literature, nor her conclusions, were peer reviewed or had appeared in any peer reviewed journals. It rejected an argument by plaintiffs that an affidavit submitted by other experts retained by the plaintiffs that “endorsed” Dr. Frazier’s opinion sufficed as a peer review. Further, the Court was critical of the expert’s opinion because it was not consistent with her research and writing outside of the pure litigation context.
As a result of this decision, the Tumlinson case is likely over (the deadline for the plaintiffs to seek en banc review by the Delaware Supreme Court is December 2, 2013). The decision may have a significant impact on the multiple other, nearly identical cases pending in Delaware against most of the major semiconductor manufacturers, as well as similar cases pending in many other state court jurisdictions.
Posted on October 4, 2013
EPA is still working the kinks out of its New Source Performance Standards (NSPS) for the Oil and Natural Gas Sector, i.e., 40 C.F.R. 60 Subpart OOOO, referred to by many as the “Oil and Gas NSPS” and by some as simply “Quad O”. EPA first published the proposed Oil and Gas NSPS on August 23, 2011, in conjunction with proposed revisions to three other air regulations affecting various segments of oil and natural gas operations. The proposal prompted more than 150,000 public comments and kindled a national discussion on emissions at natural gas well sites. The final Oil and Gas NSPS rule was published in August 2012. Although the rule is most famous for establishing the first federal air standards for hydraulically-fractured natural gas wells, the rule also set significant volatile organic compound (VOC) standards for “storage vessels” used by the oil and natural gas industries.
Several stakeholders responded to the August 2012 rulemaking by filing petitions for administrative reconsideration of the Oil and Gas NSPS. On April 12, 2013, EPA published a notice granting reconsideration for a number of issues and proposing revisions to the storage vessel standards, in particular. Evidently, EPA significantly underestimated the number of storage vessels coming online in the field when it developed the August 2012 final rule, which required individual storage tanks with VOC emissions of 6 tons or more per year to achieve at least 95% reduction in VOC emissions. Tanks are commonly used at natural gas well sites, for example, to store condensate, crude oil, and produced water. In light of an updated tank estimate, EPA recognized that additional time would be needed for manufacturers to produce a sufficient number of VOC control devices.
Most recently, on September 23, 2013, EPA published final revisions to the storage vessel requirements in the 2012 Oil and Gas NSPS. Per the revised rule, which was immediately effective, an individual tank may be considered an affected facility if its construction, modification or reconstruction commenced after August 23, 2011; it has potential VOC emissions of 6 tons or more per year; and it contains crude oil, condensate, intermediate hydrocarbon liquids, or produced water. EPA made a number of important adjustments in the revised rule, chief among them an extension of the compliance date to give tank owners and operators more time to purchase and install controls. For the so-called “Group 1” storage vessels (which were constructed, modified or reconstructed between the August 2011 original proposal and the April 2013 proposal), the deadline to control VOC emissions is now April 15, 2015. For “Group 2” storage vessels (i.e., vessels that come online after April 12, 2013), the compliance deadline is April 15, 2014. Notably, pursuant to the revised Oil and Gas NSPS, operators only have until October 15, 2013 to estimate potential VOC emissions of Group 1 storage vessels for purposes of determining whether the rule applies.
Meanwhile, the agency is continuing to evaluate other issues raised in the reconsideration petitions that were submitted in response to the August 2012 rulemaking. EPA has stated in the past that it intends to address the remaining issues by the end of 2014.
Posted on September 27, 2013
Last spring, my colleague Robby Sanoff complained on our firm’s blog about the problem resulting from appellate courts’ refusal to give appropriate discretion to district judges in performing their gatekeeping function under Daubert. As Robby put it:
"The difference between “shaky but admissible” and unreliable and inadmissible evidence would seem to be entirely in the eye of the beholder."
Robby will not be pleased by last’s week’s decision by the 11th Circuit Court of Appeals in United States v. Alabama Power, reversing a district court order excluding EPA’s expert testimony in support of its NSR enforcement action against Alabama Power. The Court majority performed an extensive review of the testimony provided in the Daubert hearing below, and concluded that the district court’s decision was clearly erroneous. (For those of you concerned with the merits of these cases, the question was whether EPA’s model, which clearly applied to determinations of emissions increases for baseload plants, could be applied as well to cycling plants generally and the plants at issue in the case in particular.)
The case is particularly interesting because Judge Hodges, taking Robby’s view, dissented. As Judge Hodges noted, prior to the Supreme Court decision in General Electric v. Joiner, appellate courts did not grant significant discretion to district courts in exclusion rulings. However, Joiner made clear that the abuse of discretion standard applies even in outcome-determinative exclusion rulings.
Next, Judge Hodges noted that, in Daubert rulings, there should be a “heavy thumb – really a thumb and a finger or two – that is put on the district court’s side of the scale.” He then rehearsed the actual statistics on Daubert reversals in the 11th Circuit: 3 reversals out of 54 cases.
Finally, Judge Hodges conducted a brief review of evidence tending to support the district court’s conclusion and determined that its decision was not “a clear error in judgment.” Concluding that a different result might be appropriate if review were de novo, Judge Hodges quoted Daubert itself:
"We recognize that, in practice, a gatekeeping role for the judge, no matter how flexible, inevitably on occasion will prevent the jury from learning of authentic insights and innovations. That, nevertheless, is the balance that is struck by Rules of Evidence designed not for the exhaustive search for cosmic understanding but for the particularized resolution of legal disputes."
Decisions such as this have to be discouraging to district court judges, as Robby noted. It’s worth pointing at that Judge Hodges is actually a district court judge, sitting on the court of appeals by designation. It seems fitting that the district judge on the panel would be the judge vainly trying to protect the discretion of district judges in Daubert matters.
Posted on August 28, 2013
A recent post from Mary Ellen Ternes characterized the August 23, 2013 decision in EME Homer City Generation as another blow to EPA’s ability to enforce against long ago violations of the requirement to obtain New Source Review.
The Third Circuit’s decision certainly is a blow to EPA’s NSR enforcement initiative, but not nearly a knock-out.
First, the decision depended on the fact that neither the Clean Air Act or Pennsylvania’s EPA-enforceable State Implementation Plan expressly requires a major source to operate in compliance with the results of a New Source Review. But some states do have that requirement in their EPA-enforceable SIPs, as the Third Circuit recognized in distinguishing other cases. In such states, major sources that did not go through NSR as allegedly required at the time of construction or modification should still anticipate potential EPA enforcement via the SIP.
Second, even where it is not illegal to operate in compliance with NSR, the question is still open whether the government may obtain injunctive relief anyway. In United States v. United States Steel Company (N.D. Indiana), the Court held on August 21, 2013 that no penalties could be imposed at law because there is no federally enforceable requirement in Indiana to operate in accordance with the results of an NSR. Yet the Court went on to hold that the United States still can seek injunctive relief against a plant that allegedly violated the NSR requirement. The Court reasoned that because the sovereign is not subject to laches, the government remains able to invoke the Court’s equitable powers and to seek an injunction to correct the violation.
On to the Seventh Circuit?
Posted on August 27, 2013
Followers of this Blog will not be at all surprised with the Third Circuit’s August 22, 2013 ruling denying EPA’s requested CAA New Source Review enforcement relief against former and current owners of the grandfathered and allegedly subsequently modified power plant that has been called “one of the largest air pollution sources in the nation.” Former and current owners of such aging power plants caught in EPA’s NSR national enforcement initiative are reassured with the Third Circuit’s finding that text of the Clean Air Act does not authorize injunctive relief for wholly past PSD violations, even if that violation causes ongoing harm.
Having lost its battle for the Cross-State Air Pollution Rule (CSAPR, or the Transport Rule) in August 2012, EPA was dealt another blow with United States v. EME Homer City Generation, in which the Third Circuit upheld the District Court’s 2011 dismissal of the government’s claims.
In 2011, the District Court for the Western District of Pennsylvania agreed with the current and former owners of the power plant that EPA had no authority to hold either party liable for alleged PSD violations arising from purported modifications to their grandfathered power plant. In reaching defendants’ bases for dismissal, the District Court reviewed the permit actions approved by air permitting authorities in 1991, 1994, 1995 and 1996, which EPA alleged with Notices of Violation in 2008 (against the current owner) and 2010 (against current and former owners), to have triggered PSD, and which caused the current Title V permit to be incomplete. The Court’s holding that the PSD violations constituted singular, separate failures by the former owner rather than ongoing failures meant that EPA was outside the five year statute of limitations, allowing no civil penalties against the former and current owners. Moreover, the District Court held EPA was left with no injunctive relief against the current owner because they were in no position to apply for a PSD permit prior to their acquisition of the plant in 1998, and thus could not have violated PSD.
The District Court separately addressed EPA’s claims of injunctive relief against the former owner, recognizing the ongoing higher SO2 emissions that occurred without the benefit of an historic PSD permit. The District Court was unwilling to reach a broad conclusion regarding its authority to award injunctive relief under the PSD program, but given that the former owners no longer owned or operated the plant, and therefore no longer violate PSD, held that there was no plausible basis for granting the rare and extraordinary remedy of injunctive relief, despite the higher emissions occurring the absence of BACT, which the court characterized as a present consequence of a one-time violation.
Upon review, the Third Circuit rejected EPA’s arguments that the current owners violated PSD by operating the plant without BACT with a simple, “no,” pursuant to the plain text of 42 USC 7475(a) which references merely “construction” and “modification,” not “operation, ” relying on U.S. v. Midwest Generation and Sierra Club v. Otter Tail Power Co., adopting the positions of the Seventh and Eighth Circuits that “even though the preconstruction permitting process may establish obligations which continue to govern a facility’s operation after construction, that does not necessarily mean that such parameters are enforceable independent of the permitting process,” and thoroughly refuting EPA’s arguments that PSD could somehow result in ongoing operational requirements outside the PSD permitting process.
Likewise, the Third Circuit rejected EPA’s proposed injunctive relief, which would have required the former owners to install BACT or purchase emission credits and retire them, affirming the District Court’s decision on narrower grounds. Specifically, the Third Circuit held that the text of the Clean Air Act does not authorize an injunction against former owners and operators for a wholly past PSD violation, even if that violation causes ongoing harm.
Hopefully, this Third Circuit decision, along with the Seventh and Eighth Circuit decisions relied upon therein, will signal a substantive end to EPA’s NSR/PSD Enforcement Initiative for similarly situated historic grandfathered power plants and their former and current owners. But, we may have to wait out EPA’s hard headed circuit by circuit enforcement approach. See e.g., EPA’s December 21, 2013 enforcement memorandum, “Applicability of the Summit Decision to EPA Title V and NSR Source Determinations,” following the Sixth Circuit’s Summit Petroleum Corp. v. EPA et al.
Posted on August 5, 2013
Enforcement with a Flair
EPA has seen the smoke.
This certainly is no joke.
Benzene is a neighborhood scare,
With upsets going to the flare.
On July 10, the Department of Justice and EPA announced the lodging of a consent decree with Shell Oil Company to resolve alleged Clean Air Act violations at Shell’s refinery and chemical plant in Deer Park Texas. This agreement represents the fourth “refinery flare consent decree” in the past year. More are expected.
Shell will spend $115 million to control emissions from flares and other processes, and will pay a $2.6 million civil penalty. EPA alleged that Shell was improperly operating its flaring devices resulting in excessive emissions of benzene and other hazardous air pollutants. Shell will spend $100 million to reduce flare emissions.
These flare consent decrees represent a new chapter in EPA’s national Petroleum Refinery Initiative (“PRI”), which, beginning in 2000, resulted in the entry of 31 settlements covering 107 refineries in 32 states, affecting 90% of the domestic refining capacity. EPA did address refinery flares as one of the marquee issues in PRI consent decrees – compliance with the New Source Performance Standards (“NSPS”) for Petroleum Refineries.
EPA is now pushing the envelope to impose “regulatory requirements plus.” Through an enforcement alert in August of last year, EPA warned industry that there were significant issues with flare efficiency and excessive emissions. EPA Enforcement Alert: EPA Enforcement Targets Flaring Efficiency Violations.
What is EPA doing? What is the basis of this Petroleum Refinery Initiative 2.0 and the imposition of “regulatory requirements plus”?
EPA bases this new initiative on the “general duty” requirements. NSPS requires that at all times owners and operators should operate and maintain a facility or source consistent with “good air pollution control practices.” In addition, Section 112r of the CAA requires owners and operators to maintain a safe facility by taking such steps as are necessary to prevent releases of hazardous air pollutants (“HAP”), and to minimize the consequences of accidental releases which do occur. Accordingly, with no threshold amount, any release of a listed HAP (e.g. benzene) that could have been prevented violates this general duty. If a flare smokes, there must be a violation.
This general duty is used to require control measures that go beyond those specified in the regulations. The consent decrees include conditions addressing flare combustion efficiency limits incorporating automated controls with complex and expensive monitoring systems, flaring caps for individual flares and the overall refinery, and flare gas recovery systems for individual flares.
The enforcement train has left the station. Who will be next in line? How much will the ticket cost? Are there rulemaking or other actions that may be taken to slowdown or stop the train? Flares are not unique to petroleum refineries and petrochemical plants (e.g. flaring in oil and gas production facilities). Will EPA provide other industries the opportunity to go for a train ride?
Posted on July 31, 2013
On Friday, July 19, the Court of Appeals for the 10th Circuit, in Oklahoma v. EPA, affirmed EPA’s rejection of Oklahoma’s state implementation plan setting forth its determination of the Best Available Retrofit Technology, or BART, to address regional haze. The Court also affirmed EPA’s promulgation of a federal implementation plan in place of the Oklahoma SIP. While rehearsing the Clean Air Act’s “cooperative federalism” approach, the Court seemed more focused on deference to EPA’s technical assessment of the SIP than on any obligation by EPA to cooperate with states.
"Given that the statute mandates that the EPA must ensure SIPs comply with the statute, we fail to see how the EPA would be without the authority to review BART determinations for compliance with the guidelines.
While the legislative history may evidence an intent to prevent the EPA from directly making those BART decisions, it does not necessarily evidence an intent to deprive the EPA of any authority to ensure that these BART decisions comply with the statute."
Judge Kelly dissented. As he noted, while the courts normally grant deference to EPA’s decisions, such deference is appropriately limited where “EPA rejected Oklahoma’s evidentiary support with no clear evidence of its own to support its contrary conclusion.” Judge Kelly also noted that, even in a statute relying substantially on state implementation, the amount of power given to the states to implement the regional haze program is particularly evident.
I don’t know whether Oklahoma will seeking rehearing en banc. (It’s difficult to imagine that the Supreme Court would be interested in hearing this case.) I do know that cooperation is in the eye of the beholder.
Posted on July 10, 2013
In April of 2013 the Arkansas legislature put an end to the ad hoc policy of implementing the NAAQS through stationary source permitting based upon source specific NAAQS modeling. The Arkansas legislature did not need a crystal ball to predict the chaos that was about to occur when the new NAAQS (PM2.5, one hour SO2 and one hour NO2) were swept into the existing Arkansas regulatory program. Arkansas’ environmental agency, the Arkansas Department of Environmental Quality (ADEQ) has relied upon its stationary source permitting program to implement the NAAQS for years, as opposed to relying upon state implementation plan (SIP) development. ADEQ has required every permit applicant to submit air dispersion modeling, and thereby demonstrate that the source will not cause a NAAQS violation. By comparison, EPA generally requires only PSD permit applicants to submit NAAQS dispersion modeling, and requires the states to otherwise address NAAQS compliance through their SIPs.
When Arkansas’ SIP permit procedures were last updated in 2000, minor (non-Title V) sources, and “minor modifications” at major sources were not required to undertake NAAQS modeling. Arkansas’ policies regarding NAAQS modeling were generally in sync with the Clean Air Act and most other states. Over the ensuing years regulatory creep expanded Arkansas’ NAAQS modeling program to the point that nearly every stationary source permit application was involved. ADEQ permit engineers required NAAQS dispersion modeling for minor sources, for minor mods at major sources, and then for any permit renewal—even no change renewals, “just to make sure that the source is still OK.” For example, a facility that had operated in full permit compliance for decades, without any modifications, could face permit renewal problems for no reason other than background conditions or recent meteorological data changed the NAAQS modeling results. Suffice to say this development was unpopular, making permitting expensive, time consuming, and uncertain.
The uncertainty was predicted to become chaos in September of 2012 when ADEQ proposed to drop the new NAAQS into its existing SIP. ADEQ’s “plan” was that the new NAAQS would also be implemented through stationary source permitting, including ADEQ’s expansive NAAQS modeling policies. Of particular concern is the PM2.5 standard, which, at 12 ug/cm3, is already near or exceeded by the background levels measured at the majority of the ambient monitoring stations throughout the state—background that is rarely, if ever, the result of any stationary source activity, but more likely the result of rural road dust and other non-stationary sources.
It became apparent to the regulated community that each permit review following adoption of the new NAAQS would generate ad hoc findings of modeled exceedances of the new NAAQS. By implementing the NAAQS through stationary source permitting rather than SIP planning, ADEQ eliminated any evaluation of regional cause and effect, and precluded any consideration of comprehensive solutions that involve all contributing sources. Under ADEQ’s “plan,” the unwitting permit applicant is forced to stand alone and face the consequences of a failed NAAQS modeling exercise. Concerns raised by the regulated community fell on deaf ears.
The Arkansas legislature stepped in, and in April of 2013 it enacted Act 1302, which required ADEQ to stop “protecting the NAAQS” by requiring stationary source permit applicants to undertake dispersion modeling, except in enumerated circumstances. Act 1302 prohibits ADEQ from using modeling for stationary source permit decisions or requiring retrofit pollution control technology. With the exception of PSD and other limited situations, dispersion modeling can only be used when there is a source or pollutant-specific SIP requirement. The Clean Air Act requires states to develop a SIP “for maintenance and protection of the NAAQS,” and Act 1302 requires ADEQ to implement the NAAQS as required by the Clean Air Act. The legislature did not neuter the agency’s efforts to protect clean air (which was the agency’s unsuccessful lobbying position). The legislature just said quit implementing the NAAQS through ad hoc permit decisions based on source specific air dispersion modeling. The legislature told ADEQ to use its ambient monitoring network, area modeling, and other tools to evaluate NAAQS compliance, and where non-attainment occurs, do the comprehensive planning that is required by the Clean Air Act to address it. Act 1302 was carefully drafted to compliment the Clean Air Act, and serves as a good model for any state facing similar NAAQS implementation issues.
During the two months since Act 1302 has been the law in Arkansas the agency has gone through some needed growing pains. The proposed rulemaking to enact the new NAAQS in Arkansas is being re-evaluated in light of the requirements of Act 1302. Much of the regulatory creep that occurred over the past decade has been curtailed, such that minor sources, minor modifications and no change permit renewals are no longer being required to submit dispersion modeling or demonstrate NAAQS compliance.
There is nothing like the heavy hand of the legislature to bring reason back into agency decision making. It appears that ADEQ now recognizes (much like most other states) that modeling has its limitations, and these minor stationary source projects are not causing, nor are they likely to cause any NAAQS problems. There is still a lot of work to be done as the new NAAQS are adopted, and real SIP planning commences. But sometimes it takes a pre-emptive strike to get the process started on the right track.