Is It Time To Re-Think Additionality?

Posted on October 14, 2015 by Wendy B. Jacobs

Many organizations have announced voluntary greenhouse gas emission reduction goals by which they aim to reduce their emissions of greenhouse gases despite the absence of any legal requirement to do so.  Meeting these goals implicates the concept of additionality when the goals are to be met, in part, through off-site actions, such as the purchase of carbon offsets, retirement of renewable energy credits, or construction of off-site renewable energy projects.  The concept of additionality seems simple: in principle, emission reductions attributable to an organization’s actions should only be recognized or “counted” if such reductions are more than what would have been achieved absent the action.  Applying the concept of additionality in the real-world, however, is complicated. Perhaps unnecessarily so? 

First, the “proof” of additionality required by many of the certifying bodies can be confusing and conflicting.  For the faint of heart, the concern about proof discourages any action other than the purchase of “certified” paper offsets.  A second, confounding problem results from the greening of the grid itself.  Emissions have been falling for many organizations simply because the electricity they procure from the grid is becoming less carbon intensive.  How to square these emission reductions with the concept of additionality leads one to question how the concept of additionality should be applied to voluntary emission reduction goals. 

In the context of regulated organizations, the idea of additionality makes sense.  Organizations that must comply with a regulatory scheme to reduce their emissions of greenhouse gases should not be allowed to claim credit for off-site actions if such actions do not, in fact, lower emissions beyond what they would have been absent the organization’s actions.  No organization (regulated or unregulated) wants to waste money paying for off-site actions that do not in fact lower emissions.  Establishing that a particular organization’s action will, in fact, lower emissions more than would have occurred absent that organization’s action turns out to be much more difficult than it at first appears given the multiplicity of variables that come into play:   who else might be inclined to take the same action?  When?  For what reason? Is the action occurring in an area governed by a renewable portfolio standard or not?  Many different criteria are used by regulatory agencies and voluntary verification programs.  Three examples are helpful.

The California Air Resources Board treats emission reductions as “additional” if they exceed what would be required by law or regulation and if they exceed what would “otherwise occur in a conservative business-as-usual scenario.”  17 CCR § 95802(a)(4).  The American College & University Presidents' Climate Commitment (“ACUPCC”) replaces “conservative business-as-usual” with “reasonable and realistic business-as-usual.” The Verified Carbon Standard adds a requirement that the reductions are additional only if they would not have occurred “but for” the offsite organization’s investment.  These different definitions have real consequences for the types of offset projects (i.e., emission reductions) qualifying as “additional.”  Energy efficiency projects at a school in an economically disadvantaged city might count as additional under ACUPCC’s definition because the schools are unlikely to undertake the energy efficiency measures themselves.  In contrast, such measures are unlikely to count as additional under the Verified Carbon Standard definition because the schools would save money from the efficiency measures if undertaken by themselves.

For unsophisticated organizations with limited resources, using the most conservative criteria for additionality that have been developed by other parties, whether regulatory agencies or voluntary verification programs, makes sense – emission reductions are assured and at minimal transactional cost to the organization.  For more sophisticated organizations with resources to experiment and innovate, strict adherence to conservative additionality criteria can be counterproductive.  Many large municipalities, large research universities and corporations have the in-house capacity to invest in bold and innovative experiments and to assess whether a given project or investment is in fact reducing emissions. Organizations such as these could use their in-house talent and money to develop creative, bold, innovative and novel projects that could reduce emissions, but will they do so if such projects might fail a strict additionality test?  At a university, such projects have the added benefit of complementing the core mission to teach, research, and demonstrate ideas that others beyond the university could leverage.  Should an organization abstain from pursuing such projects simply because they would fail a strict additionality test, which the organization is not legally obligated to apply?  Should we re-think the circumstances in which strict observance with additionality is necessary to avoid a public relations nightmare (i.e. being accused of not really meeting the voluntary goal)?

The application of additionality in the context of voluntary goals is also complicated by the fact that the electric grid itself is becoming greener.  Most organizations include in their greenhouse gas emission calculation the emissions resulting from their electricity consumption.  Many organizations first announced their voluntary emission reduction goals five to ten years ago when few predicted that the electric grid would become significantly greener so fast.  Here in Massachusetts, largely because of the increased use of natural gas, the electric grid now emits 20% less carbon dioxide per MWh consumed than it did ten years ago.  That means that an organization in Massachusetts that has not taken any action designed to reduce its emissions will nevertheless have lowered its emissions by consuming electricity from the local grid.  Crediting such emission reductions towards a voluntary goal is in tension with the concept of additionality because the reductions occurred without the need for the organization to take any action designed to reduce its emissions.   

Hence, the greening of the grid should cause an organization to re-think the nature of its voluntary emission reduction goal:  is the goal simply an accounting objective that can be met by actions external to the organization, such as the greening of the grid by electric utilities, or is it a a bigger, perhaps even moral, commitment to undertake a minimum level of effort to reduce emissions in addition to those resulting from the greening of the grid?  If the former, an organization committed to a voluntary goal can celebrate that the utilities have made its commitment cheaper to attain.  If the latter, perhaps an organization should make its goal even more stringent to avoid taking credit for emission reductions achieved by others.  Is this second approach more consistent with the concept of additionality?  Should we applaud an organization that is not required by law to make any emission reductions but that purchases some carbon offsets and declares it has accomplished its voluntary goal of emission reductions?  Should we applaud an organization that designs, invests in or otherwise makes an effort to create a project that actually achieves emission reductions even though it is possible that someone somewhere might also have the same idea and be willing to make the same investment?

I do not pretend to have the answers to these questions.  But, I do know that many organizations that have set voluntary goals are grappling with these questions now, and others will face them in the future.  I welcome your comments.  

UTAH, CHILE, PM2.5 AND THE RULEMAKING PROCESS

Posted on September 29, 2015 by James Holtkamp

My wife and I are 6 months into an 18-month adventure in South America.  Although we are roaming around a bit, most of our time is spent in Santiago, Chile, a city of 5 million nestled in a valley between the Andes to the east and coastal mountains to the west.  Santiago is a modern city, with a highly educated population.  It has lots of cars and lots of wood-burning fireplaces and stoves and the typical assortment of manufacturing and power generation facilities for a city of its size.  In the winter, high pressure settles in over the valley and the fine particulate pollution builds up, creating serious public health emergencies in which driving is restricted, industrial activities are curtailed, and people are urged not to engage in strenuous activities outside.  

In a sense I feel right at home, because along Utah´s Wasatch Front, winter inversions trap emissions from cars and wood burning to create grungy, unhealthy spikes in PM2.5 for days or even weeks at a time much like Santiago.  In Utah the issue is addressed through the Clean Air Act, with Salt Lake City and the associated metropolitan areas designated as non-attainment areas for the short-term national ambient air quality standards for fine particulate matter and a comprehensive State Implementation Plan (SIP) developed by the Utah Department of Environmental Quality with thorough stakeholder involvement.  

At the beginning of the SIP process, most of the public blamed the relatively few but highly visible industrial facilities (the refineries, the big Kennecott operations, etc.) as the principal culprits.  However, as the stakeholder process evolved, public awareness shifted dramatically, with most Utahns now acknowledging that vehicle use and the aggregate effect of individual small sources are major contributors to the problem, and that individual personal choices with regard to vehicle use and lifestyle habits will be key to improving the wintertime air quality.

In Chile, the legal requirements to address winter inversion pollution are just as sophisticated and detailed as those under the U.S. Clean Air Act.  The government has identified pretty much the same causes of the pollution as in Utah, i.e., cars, wood-burning, a variety of small businesses, and some but not many larger manufacturing sources.  Also, Chilean law specifies a rulemaking process analogous to that in the U.S., with scientific studies, technical and economic analyses, and stakeholder consultation before finalizing an environmental rule.  As a result, as in Utah, there is more public awareness in Chile of the role that individual choices play in environmental degradation which in turn leads to more of a shared sense of responsibility for dealing with it.

However, in my conversations with South American environmental lawyers outside of Chile about the legal systems for addressing environmental issues, I have found that they are not so much concerned about the substantive requirements on the books – those are not much different than those in the U.S. – but rather, are concerned that there are not always well-developed mechanisms for participation by the affected stakeholders in the development of environmental requirements. 

ACOEL is reaching out to entities around the world to make available the considerable expertise of its members to address environmental challenges.  In Latin America, ACOEL can play an important role in helping develop robust participatory processes which will yield great benefits in the development and enforcement of environmental requirements and the broader strengthening of participatory democratic institutions in this part of the world.

The D.C. Circuit Does It Again! Why Should EPA Even Bother to Propose CAA Rules?

Posted on August 10, 2015 by Richard G. Stoll

Last year I published an article in Bloomberg BNA entitled “Protection of Judicial Review Watered Down in D.C. Circuit.”  I focused on a recent D.C. Circuit ruling (UARG) I hoped would “turn out to be an unfollowed – and eventually forgotten – glitch.”  The effect of the “glitch” is to delay interminably judicial review of final Clean Air Act (“CAA”) rule provisions that EPA never hinted might be included in a final rule – even though the un-foreshadowed provisions go into full force and effect.

            The Court’s judges must have missed that BNA edition, because they have followed the same rationale at least twice more now – in their Mexichem opinion of May, 2015 and their “Transport Rule” (EME Homer) decision last week.

            This regrettable situation arises from the Court’s new interpretation of a CAA provision (§307(d)(7)(B)) which is quoted in full in my BNA article.  It begins with the hornbook proposition that you can’t attack a rule’s provision on judicial review on grounds that were not raised during the comment period.  It then provides for a process known as a “petition for reconsideration.”  If a party can show that it could not have raised an argument during the comment period, EPA must conduct a “reconsideration” process.  EPA’s actions in response to the petition are then subject to judicial review.  This provision has often been used where EPA supports a final rule with facts or rationale not included in the record when the public comment period was open.

Now consider the following hypothetical.  Assume EPA proposes a CAA rule requiring boilers to install a certain type of control device.  EPA’s final rule drops the control requirement and simply prohibits boilers from combusting coal, effective two years from the final rule’s issuance.  EPA’s proposal never mentioned coal prohibition as an option, and no one suggested it in their comments.  So most would assume that boiler owners could then file D.C. Circuit petitions for review and have slam-dunk arguments for vacatur.

As shown in my BNA article, the D.C. Circuit has on many occasions (as recently as December, 2013) done just that.  But since then, EPA and DOJ lawyers have advanced what I think is a ludicrous position: when a party believes a final CAA rule provision was issued in violation of notice-and-comment requirements, it cannot pursue judicial review on that issue unless and until it first files a petition under §307(d)(7)(B) and waits for EPA to take final action on that petition. 

Unfortunately, the D.C. Circuit has bought this position three times now.  Here is how the D.C. Circuit summarized the point in EME Homer last week:

[P]etitioners argue that EPA violated the Clean Air Act’s notice and comment requirements by significantly amending the Rule between the proposed and final versions without providing additional opportunity for notice and comment. Because that argument is an objection to the notice and comment process itself, petitioners obviously did not and could not have raised it during the period for public comment. Under Subsection 7607(d)(7)(B), however, the only appropriate path for petitioners to raise this issue is through an initial petition for reconsideration to EPA.

Note the opinion in effect concedes just how absurd this is.  The petitioners “obviously did not and could not” have raised this objection.  How can one object to EPA’s failure to propose something that EPA failed to propose?

EPA almost always delays action on §307(d)(7)(B) petitions for years so in the hypothetical above, the coal prohibition would go into effect before judicial review could even begin.  Boiler owners would either have to shut down operations or convert to non-coal burning facilities, at which point judicial review would become pointless.  The effect:  EPA stops coal burning at boilers by declining to propose such a requirement in the first place!

If you think EPA or the D.C. Circuit would out of fairness suspend application of rules in such situations, see the examples to the contrary in my BNA article and read the Mexichem opinion.  If you think I am exaggerating about how long it takes for a §307(d)(7)(B) petition to be processed, see the examples in my BNA article.  And consider that in last week’s EME Homer opinion, the Court concluded its discussion above by noting that at least one party had filed such a petition but that EPA had not yet acted upon it.  That petition was filed in 2011.

Homer’s Odyssey Redux in the DC Circuit

Posted on August 3, 2015 by Paul Seals

In the latest chapter of Homer’s Odyssey, the DC Circuit, on remand from the Supreme Court, determined that EPA had exceeded its statutory authority by imposing uniform emissions reductions under the Transport Rule also known as the Cross-State Air Pollution Rule.  On July 28, 2015, the DC Circuit held in EME Homer City Generation, L.P v. EPA that the 2014 sulfur dioxide (SO2) emissions budgets for Alabama, Georgia, South Carolina, and Texas, as well as the 2014 ozone-season nitrogen oxide (NOx) budgets for Florida, Maryland, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, and West Virginia are invalid.  The court remanded without vacatur to EPA for reconsideration.

A brief history of Homer’s voyage so far.

In 2011, EPA promulgated the Transport Rule to address emissions from upwind States that contribute to nonattainment of National Ambient Air Quality Standards (NAAQS) in a downwind State under the Clean Air Act’s “good neighbor provision”.  42 U.S.C. Sec. 7410(a)(2)(D)(i).  Upwind States challenged the Rule, contending that it would lead to over-control of emissions in the upwind States.  The Rule imposed uniform pollution reductions on upwind States regardless of the actual amount of pollution that individual upwind States contributed to the downwind States.

In 2012, the DC Circuit considered these over-control challenges, agreed with the petitioners, and vacated the Rule.   See EME Homer City Generation, L.P. v. EPA, 696 F/3d 7 (D.C. Cir. 2012)

On review, the Supreme Court reversed, holding that the potential for over-control did not require invalidation of the Rule on its face.  To address potential over-control in an upwind State, the Court recognized that requiring emissions reductions by more than is necessary to achieve attainment in every downwind State to which it is linked would be impermissible.  The Court explicitly authorized an upwind State to contest the emissions reductions under the Rule through “particularized, as-applied challenges.”  EPA v. EME Homer City Generation, L.P., 134 S.Ct. 1584 (2014).

On remand, the DC Circuit considered the “as-applied challenges” as informed by the Supreme Court decision.   The DC Circuit evaluated the challenges by determining whether a downwind location would still attain its NAAQS if linked upwind States were subject to less stringent emissions limits.   Based on the record, the Court determined that EPA’s uniform cost thresholds have required States to reduce pollutants beyond the point necessary to achieve downwind attainment, which violated the Supreme Court’s clear mandate.

Although invalidating the 2014 emissions budgets, the DC Circuit remanded without vacatur.   The Court stated that on remand, the parties may provide new evidence, data, or calculations for EPA to consider in establishing emissions budgets.

What will be the next chapter in this Odyssey?  What effect will the decision have on the emissions trading market developed around the 2014 emissions budget?  Will there be further appeals?  How and when will EPA reconsider the emissions budgets?

The voyage is not over!

Deference to EPA on the Wane?

Posted on July 13, 2015 by Renee Cipriano

The Supreme Court’s latest opinion in an environmental rule challenge, this to the Mercury and Air Toxics Standard, or MATS, raises more questions than it answers.  As discussed on this blog site (see here, here and here,) the Court in Michigan v. EPA held that EPA had not reasonably considered costs when determining to regulate power plant mercury emissions.  EPA must factor cost into its initial determination that it is “appropriate and necessary” to regulate hazardous pollutants from power plants.  The Court passed no judgment on whether EPA can meet that burden. 

At the heart of the issue was Congress’ acknowledgement that the 1990 Clean Air Act Amendments would subject power plants to numerous controls to reduce sulfur dioxide, nitrogen oxides, and particulates.  Section 112 of the Act requires EPA to regulate power plants if “regulation is appropriate and necessary after considering the results of the study.”  Congress further acknowledged that these measures also might reduce hazardous air pollutants, and that no one knew at the time whether additional controls would be required to protect human health from air toxics emitted by power plants. 

To determine that, EPA was required to conduct a study.  In 1998, EPA’s study concluded that regulation of coal and oil fired power plants was “appropriate and necessary.”  EPA reaffirmed this finding in 2012, noting that mercury and other hazardous air pollutants were “appropriate” to regulate because they posed a risk to human health and the environment and that controls were available to reduce the pollutants.  EPA found that it was “necessary” to regulate because other pollutant emission limits and requirements did not eliminate the risks. 

The Court, in a 5-4 decision written by Justice Scalia, analyzed EPA’s action through the Chevron deference standard, determining that “EPA strayed far beyond those bounds when it read §7412(n)(1) to mean that it could ignore cost when deciding whether to regulate power plants.”  Ultimately, the Court held that “Chevron allows agencies to choose among competing reasonable interpretations of a statute; it does not license interpretive gerrymanders under which an agency keeps parts of statutory context it likes while throwing away parts it does not.”  Id. at 9.

The Court went on to reject EPA’s contention that it need not factor cost into its initial determination to regulate because the agency must take cost into consideration when later determining how much to regulate.  The Court colorfully remarked that:  “By EPA’s logic, someone could decide whether it is ‘appropriate’ to buy a Ferrari without thinking about cost, because he plans to think about cost later when deciding whether to upgrade the sound system.” The Court’s strong language cautioning EPA to use “reasoned decision making” and not “gerrymander” statutory requirements should give EPA pause as it is set to promulgate greenhouse gas reduction measures for power plants in its Clean Power Plan this summer.  Numerous comments filed in the so-called Clean Power Plan rulemaking docket have charged EPA with overstepping its statutory boundaries, and the Court seems to be signaling its disfavor of such action.

Since the decision, speculation as to whether and how EPA will fix MATS has been rampant. 

  • Will EPA abandon MATS completely, requesting vacatur?  Not likely.  In public remarks and testimony before a Congressional subcommittee during the week of July 6, Administrator Gina McCarthy cited the health benefits already achieved by the rule, indicating the agency would not back down.
  • Can EPA fix the rule based on the current administrative record?  Some believe that EPA can simply re-jigger its existing analysis and logic, fronting the cost issue in the “appropriate and necessary” finding, perhaps calling this a “technical amendment” to the rule. 
  • Will EPA seek a stay of the existing rule while it recalculates costs and re-proposes the rule?  Because the rule went into effect in April 2015, companies already have installed a range of controls from activated carbon injection to installation of flue gas desulfurization equipment.  Each type of control has costs and benefits, as well as impact on other pollutants.  Many of these controls may remain operational to comply with other CAA requirements; therefore, a stay may have disproportionate impacts on industry members as some cease to operate controls and others continue to operate them.
  • But could EPA’s re-proposal result in even more stringent emission limits?   Absolutely.  Would EPA be wise to lower the standards further?  Given the cost and disruption caused by MATS so far, absolutely not.
  • And how will any of these possibilities affect the “already regulated” argument that will be used to attack the Clean Power Plan?  Section 111(d), the basis for the Clean Power Plan, prohibits regulation (whether of the source or the pollutant remains to be decided) if a Section 112 standard exists.  So if MATS goes away, does the legal basis for the Clean Power Plan become stronger?

How the ongoing, never-ending EPA effort to achieve hazardous pollutant reductions from power plants will play out remains to be seen.  The Supreme Court’s close reading of the directives contained in the statute, coupled with its references to balanced costs and benefits, leaves the impression that any rule with wide reach better be well-reasoned and justified.  No doubt EPA is taking notice. 

WILL POWER PLANT HAZARDOUS AIR POLLUTION SURVIVE MICHIGAN V. EPA?

Posted on July 8, 2015 by Leslie Carothers

Twenty-five years in the making, the Environmental Protection Agency’s regulations to reduce emissions of mercury and other hazardous air pollutants (HAPS) from power plants recently ran aground in the Supreme Court.  As discussed in this blog site last week, (see here and here,) the majority opinion by Justice Scalia in Michigan v. EPA held that EPA erred in failing to consider cost when it made the threshold statutory finding that listing of power plants for regulation was “appropriate” under a special provision for power plants in the hazardous pollutant sections of the Clean Air Act. 

The dissenters, in an opinion by Justice Kagan, disagreed that costs had to be considered at the initial listing stage.  She contended that costs were properly addressed when specific standards and requirements were developed for various source categories in the course of the normal rulemaking process, and emphasized that a final cost-benefit analysis was conducted to evaluate and support the decisions made. 

Although Justice Scalia was at pains to say that the Court was not specifying the details of the cost analysis required, the majority was plainly troubled by the agency’s findings that the benefits of the mercury controls alone were valued at an annual value of only  $4-6 million compared to an annual cost of $9.6 billion.  However, mercury was not the only HAP controlled by the rule, and the co-benefits of incidental removal of other toxic fine particulate pollutants were estimated at $36-90 billion in EPA’s cost-benefit analysis.  Those big numbers reflect robust scientific evidence of the incidence of illness and death caused by particulate emissions. 

The majority did not address whether such co-benefits could be relied upon in a determination that the cost of the power plant rules was “appropriate.“ The D.C. Circuit will have to define the terms of EPA’s redo of the cost analysis.  We are likely to hear more about counting of co-benefits in cost benefit comparisons, an issue also presented in EPA’s proposed Clean Power Rule for power plant greenhouse gas emissions.  Reducing carbon emissions also reduces particulate emissions even more, and the monetized benefits of that effect exceed the harder to estimate benefits achieved in slowing global warming. 

Public Health and Environmental Consequences of the Decision

Despite the Supreme Court’s action, commentators on both sides of the issues agree that major benefits of the regulation will not be lost.  A trade publication estimated in May that half of the power plants subject to the rule have already installed the required emission control technology to meet multiple EPA air pollution rules, in addition to the hazardous pollutant rule.   Another 200 plants given an extra year to comply are installing and testing equipment.  Several dozen plants accounting for only 1% of industry capacity reportedly are the remaining uncontrolled sources that will continue to operate without controls or plans to install them until the Michigan case is concluded. 

Many companies that have complied with the rules are doubtless disappointed to see the perennial “free riders” get another reprieve; some intervened on EPA’s side in the Michigan case to complain about unfair competition from uncontrolled plants.  But the majority of power plants, to their credit, are already delivering the public health and environmental benefits of the rule for the community.  

Citizens unhappy with the continuing failure to regulate old coal plants may wish to support the divestment movement, recently joined by Georgetown University, in dumping coal company securities.  The day Michigan v. EPA was decided, the stock of three major coal producers rose about 10%.  If the price jump holds, now looks like a good time to sell.

Justices Agree Cost Matters, but Differ as to When

Posted on June 30, 2015 by Jonathan Z. Cannon

In Michigan v. EPA yesterday the Supreme Court held, 5-4, that EPA unreasonably declined to consider costs in deciding to regulate emissions of hazardous air pollutants (HAPs) from electric power plants.  At issue was the Agency’s interpretation of the Clean Air Act’s “appropriate and necessary” threshold for regulating emissions from power plants under Section 112.  The industry and state petitioners argued that the Agency could not reasonably interpret the phrase as excluding consideration of costs, whereas EPA contended that it could limit consideration of costs to a later phase of the regulatory process – i.e., the setting of emissions standards.

In Environment in the Balance: The Green Movement and the Supreme Court, I describe the competing cultural paradigms that orient us on environmental issues – paradigms immediately recognizable to anyone who works in environmental law and policy.  On the one hand, the new ecological model emphasizes the interconnectedness and fragility of natural systems and the importance of collective restraint in protecting those systems.  (Pope Francis’ Laudato Si embodies this model.)  On the other, the dominant social paradigm emphasizes individualism, entrepreneurial effort, and economic growth.  The postures of the justices in the Court’s environmental cases often reflect the influence of these paradigms.  Conservatives such as Chief Justice Roberts and Justices Scalia, Thomas and Alito tend to align in environmental cases with the dominant paradigm; liberals such as Justices Ginsburg, Kagan and Sotomayor with the ecological.  In the middle are Justice Kennedy, a conservative who has nevertheless been responsive to the ecological model in important cases, and Justice Breyer, a liberal who has expressed concern about extending environmental protections regardless of costs, as in his separate opinions in Whitman v. American Trucking Associations, Inc. and Entergy Corp. v. Riverkeeper, Inc. 

Consistent with these alignments, Michigan v. EPA revealed divergent responses among the justices to the economic burdens of environmental regulation.  Breyer held with his pro-environmentalist colleagues; Kennedy swung this time with the anti-regulatory faction; and the other justices lined up predictably according to their preferred worldviews.  But the divergence was less than it might have been, and the competing opinions reflected common ground among the justices on the importance of considering costs in environmental regulation to avoid “disproportionate outcomes.”  

Justice Scalia’s opinion for the Court argued that “reasonable regulation ordinarily requires paying attention to the advantages and disadvantages [i.e., costs] of agency decisions.”  (Scalia pointedly cites Breyer’s concurring opinion in Entergy here.)  Against a backdrop of the potential for burdensome and inefficient regulation, “appropriate and necessary” could not reasonably be read “as an invitation to ignore costs.”  That the agency did prepare and consider a cost-benefit analysis in the standard-setting phase did not salvage the validity of the threshold determination.  Costs were relevant at both stages.  As he did in his opinion for the Court in Entergy, Justice Scalia walked back the potentially expansive holding in American Trucking, which ruled that the Clean Air Act prevented consideration of costs in setting National Ambient Air Quality Standards; that decision, he wrote, stands only for “the modest principle” that EPA is not allowed to consider costs where Congress has used language that excludes them. 

Justice Kagan’s dissent (joined by Justices Ginsburg, Breyer and Sotomayor) agreed with the majority that rational regulation is generally not cost-blind: “absent a contrary indication from Congress” regulatory agencies must take costs into account.  But she differed from the Court in arguing that EPA’s consideration of costs in the standard-setting phase satisfied the requisites of reasonableness.  EPA’s cost-benefit analysis for the standards showed that the benefits (including the co-benefits of further reductions in particulate matter emissions) outweighed the costs by a factor of three to nine – a reasonable return indeed.  

Michigan v. EPA suggests a presumption, adhered to unanimously by the Court, that where Congress has not specifically addressed consideration of costs, agencies are required to consider them, because it would be unreasonable for them not to.  Only where Congress has evidenced its intent to preclude consideration of costs (the narrow niche to which American Trucking is now confined) are agencies free to ignore them.  Apart from the specific issues in the case, this is a significant development in the Court’s approach to regulatory review.  With both factions presuming that costs should be considered, the issue was not whether but when. 

Further Advice from Air Act Andy: What A Difference A Year – And a Broken Foot – Make

Posted on April 6, 2015 by Andrea Field

On March 25, 2015, the Supreme Court heard 90 minutes of argument in Michigan v. EPA, No. 14-46. Briefing and argument focused on one aspect of EPA’s Mercury and Air Toxic Standards (MATS) Rule: whether EPA unreasonably refused to consider costs in determining if it is appropriate to regulate hazardous pollutants emitted by electric utilities. If you were unable to attend the argument but want to know more about it 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 during argument, many predict this will be a 5-4 decision, with Justice Kennedy possibly casting the deciding vote. What do you think?

Air Act Andy: I will preface my answer with the disclosure that a year ago I told my client there was virtually no chance the Court would choose to hear the MATS case. With my prognostication credentials thus firmly established — and keeping in mind that it is unwise (and usually embarrassing) to predict what the Court will do based on the questions asked at oral argument — let me say only that I came away from the argument sensing a 4-3-2 split in the Court.  I leave it to you, gentle reader, to infer more.

Question: Did Justice Breyer and his clerks spend endless hours hypothesizing scenarios for how EPA might have taken costs into account in developing the MATS Rule?

Air Act Andy: Without speculating on how many hours Justice Breyer and his clerks spent thinking about this, I note that he arrived at argument armed with a long list of questions suggesting he was troubled by the idea that EPA might regulate hazardous air pollutant emissions from electric utilities without any consideration of costs. In particular, he asked whether costs had been, or could be, considered in the subcategorization of electric generating units, even if costs were not considered in EPA’s initial listing of those sources.

Question: What did the parties make of Justice Breyer’s focus on subcategorization?

Air Act Andy: I don’t have to speculate here. The government made enough of Justice Breyer’s questions that, one day after argument, the Solicitor General filed a letter with the Court to provide information relevant to “questions pertaining to how EPA assesses whether to establish subcategories of sources” under the pertinent provisions of the Clean Air Act.

Question: Isn’t it unusual to submit a post-argument letter to the Court?

Air Act Andy: The rules of the Court do not specifically cover this sort of filing, and only time will tell how helpful the filing was for the government. It is worth noting, though, that once General Verrilli filed his letter, other parties followed suit. In particular, petitioners’ counsel pointed the Court to specific language in the preamble to the final MATS Rule, 77 Fed. Reg. 9304, 9395 (Feb. 16, 2012), where EPA said it could not, and did not, consider costs during the subcategorization process:

Failing to demonstrate that coal-fired [electric generating units] are different based on emissions, the commenters turn to economic arguments, asserting that failing to subcategorize will impose an economic hardship on certain sources. Congress precluded consideration of costs in setting [technology standard] floors, and it is not appropriate to premise subcategorization on costs either.

Question: On a more personal note, was your trip to the Court less eventful than the last time you were there?

Air Act Andy: Ah, you are referring to my December 11, 2013 visit to the Court. On that snowy day, I arrived at the Court 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, acting like a fine restaurant’s maitre d’, swiftly provided me with a ladies suit jacket and allowed me into the courtroom. But when I returned to the Court last month to hear argument in Michigan v. EPA, I was not treated like a fashion felon. Instead, Court staff personally escorted me into the courtroom a half hour before anyone else from the public was allowed in the room, gave me a prime seat, and allowed me to sit quietly and take in the majesty of the room. 

Question: What is the reason for the different treatment?

Air Act Andy: Last month, I arrived wearing a foot cast instead of a gray cardigan. I had broken my foot the week before, and the Court’s wonderful staff gave me permission to arrive and get seated early.

Question: So, was it worth it to have a broken foot?

Air Act Andy: I wouldn’t recommend that you drop granite on your foot a week in advance of a trip to the Supreme Court, but being able to sit by myself in the courtroom for a half hour before others were admitted was pretty special.

The Clean Power Plan: NOT Exactly What the Statute Tells EPA To Do

Posted on April 3, 2015 by Richard G. Stoll

As most followers of this blog know, EPA proposed its “Clean Power Plan” for existing electric power plants under the Clean Air Act (CAA) in June 2014. And just this week (March 31), the Obama Administration with great fanfare submitted its 2025 greenhouse gas (GHG) emissions target to the United Nations for the international climate change convention.

The Administration pledged to reduce U.S. GHG emissions by 26-28% (below 2005 levels) by 2025, and the bulk of these reductions are supposed to come from the Plan.  But will the massive reductions EPA claims will result from the Plan ever occur?

Defending the legality of the Plan in an interview published in the March 31 Wall Street Journal, EPA Administrator Gina McCarthy claims she is “following the direction of the Supreme Court” and doing “exactly what the statute [CAA] tells us we’re supposed to do.”

Huh? While the Supreme Court has recognized EPA’s authority to regulate GHGs under the CAA, it most certainly has not given EPA the “direction” EPA is taking in its pending proposal. And neither has Congress.

EPA’s Plan would mandate a panoply of groundbreaking controls on energy supply and demand. It would force utilities to use natural gas rather than coal, ramp up renewable energy use (wind, solar), and impose mandates for reducing energy consumption. Yet the CAA provision for which EPA claims authority for all this (§111(d)) only authorizes EPA to impose “standards for emissions” upon “existing sources” of air pollution — such as power plants. The controls must also be “adequately demonstrated.” In the past EPA applied this authority faithfully to the statutory terms, so “sources” that emit pollution are limited to prescribed amounts of emissions.

While EPA’s proposal includes some real emission standards for air pollution sources (power plants), the vast majority of GHG reductions are to come from the energy supply/demand measures that have no basis in the text of the CAA. If you are compelled through these mandates to limit your dishwasher use to specified hours or pay higher rates, is your dishwasher an “existing source” of “air pollution” and are the hourly restrictions “emission standards”? And how can such novel approaches be “adequately demonstrated”?

The Administration tried but failed to obtain amendments to the CAA from Congress to address climate change. EPA’s Plan might have been authorized by that failed effort, and it might be authorized by future legislation. The Plan’s pioneering provisions might arguably reflect good public policy. But under the CAA as it now stands, EPA is not authorized to impose them.

As for “direction” from the Supreme Court? In its recent Utility Air Regulatory Group v. EPA opinion (June 23, 2014), the Court rejected EPA’s attempt to regulate GHGs by “tailoring” the unambiguous text of the statute. The Clean Power Plan doesn’t just “tailor” the terms of the statute — it attempts to weave new authority out of whole cloth.

Oklahoma Federal Court Says It Lacks Jurisdiction to Award Declaratory Relief to EPA in Clean Air Act Case

Posted on March 23, 2015 by Donald Shandy

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.  

Death of the Malfunction Affirmative Defense (and Common Sense): Can EPA Actually Expect Facility Operators to Predict Future Malfunctions?

Posted on November 24, 2014 by John Jacus

Last September, EPA proposed to supplement a proposed SIP Call to effect the wholesale elimination of “malfunction” affirmative defense provisions in numerous states’ SIPs under the Clean Air Act (CAA).  This supplemental proposed rulemaking was a direct response to a decision of the D.C. Circuit in NRDC. v. EPAEPA’s alarming reaction to the decision in that case is unwarranted, reverses long-standing policy with regard to startup, shutdown and malfunction (SSM) events that has been affirmed by multiple reviewing courts as rational, and would effectively require facility operators to predict future malfunctions and permit for them or prevent them if they are to avoid civil penalties for malfunction-derived excess emissions.  If unable to do so, operators would incur penalties intended to deter their noncompliance, arising from their failure to predict and account for future malfunctions. 

The portion of the NRDC v. EPA decision that addressed affirmative defenses only considered EPA’s authority to create them in private suits under Section 304(a) of the CAA.  The D.C. Circuit found that federal courts, not EPA, have authority under Section 304(a) to apply affirmative defenses in such private suits, on important separation of powers principles.  The court specifically limited its holding to affirmative defenses in the context of citizen suits, noting that “[w]e do not here confront the question whether an affirmative defense may be appropriate in a State Implementation Plan.”  Of course, the vast majority of enforcement actions alleging violations of emissions limits and seeking penalties for such excess emissions are brought by state permitting authorities with delegated programs established in their SIPs.  Most SIPs contain some SSM affirmative defenses, including in cases of a qualifying “malfunction,” which will insulate the operator from civil penalties (though not injunctive relief) if the affirmative defense is properly invoked.  See prior ACOEL blogs on this important topic for more background (“Partners?,” by Steve McKinney, and “5th Circuit Upholds…” by Karen Crawford). 

EPA has long interpreted the CAA to allow states to include at least a limited affirmative defense for malfunctions in their SIPs, and Circuit Courts reviewing challenges to such affirmative defenses have agreed that this is a permissible interpretation of the statute.  More recent cases have narrowed SSM affirmative defenses in response to environmental group petitions, by (1) requiring continuous compliance with permit limits for scheduled, i.e., foreseeable, startup and shutdown emissions, so as not to result in or contribute to a violation of the NAAQS, and (2) clarifying that the protections of the affirmative defense from the imposition of civil penalties for excess emissions do not preclude regulators from seeking injunctive relief in response to a malfunction.  This balance was struck by EPA in the 2013 proposed SIP Call, although many industry stakeholders and states have opposed the elimination of affirmative defenses for excess emissions during startup and shutdown.

EPA’s sole justification for now completely abandoning SSM accommodations is the conclusion that an affirmative defense for malfunctions renders any and all of the seventeen SIPs containing such provisions “substantially inadequate” in the wake of NRDC v. EPA.  Yet that decision does not extend to affirmative defense provisions in SIPs, as noted above, and is therefore not a good reason for disregarding longstanding agency SSM policy.  Indeed, EPA’s wholesale reversal of its SSM Policy is directly contrary to numerous other federal appellate courts that have squarely addressed the issue and held that SIP and Federal Implementation Plan (“FIP”) affirmative defense provisions for malfunction events are consistent with the CAA.  See Luminant Generation Co. v. EPA; Mont. Sulphur & Chemical v. EPA; Ariz. Public Service Co. v. EPA.

Many facilities requiring air permits to operate have complex mechanical and electronic equipment with countless components that, by their nature, may inevitably fail or malfunction at some point, despite an operator’s best efforts and regular maintenance.  Most remaining affirmative defense provisions, based on EPA’s historical direction (and the efforts of Sierra Club and other environmental groups to eliminate all SSM provisions as somehow being illegal), would now be sufficiently tailored (following the 2013 SIP Call) to balance the practical realities of unforeseen component failure and the responsibility of facility operators to minimize excess emissions through adherence to good air pollution control practices.  Indeed, a malfunction affirmative defense may only be invoked in most states when the excess emissions were caused by a sudden, unavoidable breakdown of equipment, or a sudden, unavoidable failure of a process to operate in the normal or usual manner, beyond the reasonable control of the operator. See, e.g., Colorado Air Quality Control Commission Common Provisions Regulation Sect. II.E.1.  SSM affirmative defenses also typically require that operators make repairs as expeditiously as practicable, minimize the amount and duration of excess emissions, and take all reasonably possible steps to minimize the impact of the excess emissions on ambient air quality.  These important and material qualifying pre-conditions to availing oneself of a malfunction affirmative defense ensure that air quality is being protected to the maximum extent practicable, even during malfunctions, consistent with good air pollution control practice. 

Expecting operators to predict the future and imposing stiff penalties when they can’t defies common sense, and ignores centuries of jurisprudence that recognize the need for exceptions due to circumstances beyond one’s reasonable control, such as the universally understood concept of force majeure.  It is perhaps ironic that an agency that has focused upon the use of improved emerging and available technologies to create Next Generation or “NextGen” Compliance requirements simply doesn’t “get it” when a technology or device fails to operate as designed and intended, and then gets a hammer out to whack the operator, as if that will “deter” future malfunctions…bad machine! 

DAYS OF FUTURE PASSED…OR PAST

Posted on November 17, 2014 by Jeff Thaler

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!

Gradient of Connectivity: Coming to a 404 Process Near You!

Posted on November 3, 2014 by Rick Glick

The Science Advisory Board has at last released its peer review of EPA’s draft report on Connectivity of Streams and Wetlands to Downstream Waters: A Review and Synthesis, the technical support for the proposed rule on definition of “waters of the United States” under the Clean Water Act.  The SAB paper is generally supportive of EPA’s analysis.

The proposed rule has generated a great deal of controversy, causing EPA and the Corps to extend the comment period twice (November 14 is the current deadline).  Part of the controversy relates to EPA’s analysis of the technical literature supporting the proposed rule, particularly the effect of tributaries, intermittent and ephemeral streams on navigable waters.  A detailed explanation of the proposed rule, case law leading up to it, and prior agency guidance can be found here.

The SAB paper confirms EPA’s science, but recommends more nuance in some instances.  For example, the paper agrees that tributaries, intermittent and ephemeral streams can have a significant effect on the physical, biological and chemical integrity of receiving waters, but notes that the question is not simply whether there is a connection between upstream sources and navigable waters.  The SAB chides EPA for taking a “binary” view of connectivity—either  a water body is connected to a navigable water or it is not.  Rather, the paper urges EPA to acknowledge there is a “gradient of connectivity.” 

That there is a gradient of connectivity seems obvious, even from a lay standpoint; everything is connected at some level.  But that observation by itself is not terribly helpful, as EPA and the Corps have a regulatory function that is binary in nature—either there is Clean Water Act jurisdiction or there is not.  What would be helpful is guidance on where on the gradient government intervention matters; that is, how the agencies can recognize a truly “significant nexus” as prescribed by Justice Kennedy in Rapanos.

The SAB also makes recommendations to improve the clarity of the EPA report and  make more definitive statements.  For example, the SAB states that the literature supports a firmer statement on downstream functions of “unidirectional,” non-floodplain wetlands.  The SAB also recommended that EPA expand the discussion of approaches to quantifying connectivity, which would increase the utility of the document for regulators.

The SAB paper certainly is a necessary element of the scientific support for EPA’s and the Corps’ proposed rule for determining jurisdiction.  But it is unfortunate that the agencies reached their policy choices in the proposed rule without first having the benefit of the SAB’s input.  That opens the door to criticism that the SAB paper is just window dressing.

Whether that reversed sequence matters in the long term remains to be seen.  Even if EPA and the Corps had waited until the SAB completed its peer review, the rule would probably have come out roughly the same and attracted as much comment.

40 Years Ago In History

Posted on October 3, 2014 by Andrea Field

The Blog Calendar Gods directed me to post something on September 16, 2014, which just happens to be the 40th anniversary of the date that I first started to practice law.  Not wanting that coincidence to go to waste, I decided to look back 40 years, to a time when the practice of environmental law was far less complex – or, at least, the things that EPA then published in the Federal Register were a lot shorter. 

On September 16, 1974, EPA’s rules and notices took up less than four pages in the Federal Register and consisted of a notice of receipt of applications for pesticide registration under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA); a correction to one line of a previously-published notice of proposed rulemaking under the Clean Water Act; and the approval of a compliance schedule under the State of Kansas’ state implementation plan.   The entire Federal Register on that date was only 104 pages long.   

Fast forward 40 years.  EPA’s fairly typical Federal Register postings on September 16, 2014, include – as was the case 40 years ago – rulemaking proposals and notices under the Clean Air Act, Clean Water Act, and FIFRA; however, the September 16, 2014 proposals and notices from EPA take up more than 125 pages of the Federal Register, and a typical edition of the Federal Register these days is well over 300 pages long.  I could complain that EPA did not celebrate my anniversary with the publication of a splashy huge new rule in the Federal Register – but I think many of my clients would consider that to be a good thing.       

Perhaps the most significant change over the past 40 years, though, is to the overall length and complexity of the rules that are now appear in volume 40 of the Code of Federal Regulations.  (There is that number “40” again.)  In 1974, 40 C.F.R. – the volume of the code containing most of EPA’s regulations – was about 2000 pages long.  In the decades following that time, 40 C.F.R. has steadily increased in size (and complexity).  In 1984, it was approximately 5,800 pages long; by 1993, it topped 11,000 pages; and in 2012, there were over 25,000 pages of regulations in 40 C.F.R.          

For those of you wondering what else was going on 40 years ago (outside of the practice of environmental law), let me share the following tidbits from September 16, 1974.  The big news that day was President Ford’s announcement of his “Program for the Return of Vietnam Era Draft Evaders and Military Deserters.”  In addition, on that day, BART began operations in the Bay area, Bob Dylan recorded Blood on the Tracks, the Royal Canadian Mounted Police swore-in their first female recruits, and Joe Namath was on the cover of Sports Illustrated (he was shown rehabbing his battered knees, hoping to play one more season in his $250,000-per-year contract with the New York Jets).  Also, if I had stopped cutting my hair 40 years ago today, my golden locks would be more than six yards longer than they are today.

I will be thinking about all of this as I lift my glass this evening and toast all of you and begin year 41.

Do Air Emissions Constitute Disposal of Solid Waste? The 9th Circuit's Answer is "No".

Posted on August 27, 2014 by Karen Crawford

On August 20, 2014 the 9th Circuit Court of Appeals issued its opinion in Center For Community Action and Environmental Justice; East Yard Communities For Environmental Justice; Natural Resources Defense Council, Inc. v. BNSF Railway Company; Union Pacific Railroad Company, No. 12-56086, D.C. No. 2:11-cv-08608-SJO-SS, determining that emissions of diesel particulate matter does not constitute "disposal" of solid waste under the Resource Conservation and Recovery Act (RCRA).  As a result, plaintiffs could not state a plausible claim for relief under RCRA’s Citizens’ Suit provision, 42 U.S.C. §6972(a)(1)(B). 

A number of environmental organizations had sought to enjoin the emission from defendants' rail yards of particulate matter found in diesel exhaust from locomotive, truck, and other heavy-duty vehicle engines operated on or near 16 rail yards in California.  Plaintiffs cited studies by both EPA and the state agency, which identified diesel particulate matter as a toxic air contaminant with the potential or likelihood "to cause cancer and other adverse health problems, including respiratory illnesses and increased risk of heart disease."  Plaintiffs contended that, while the particulate emissions were initially emitted into the air, they ultimately were deposited on land and water.  They argued that people inhale the exhaust while it is airborne and after deposition (because the particulates are "re-entrained" into the air by wind, air currents, and passing vehicles).  Defendants moved to dismiss arguing that RCRA only applies to air emissions from burning fuel which itself consists of or contains "solid" or hazardous" waste, i.e. a "discarded material."  Otherwise, emissions fall within the scope of the Clean Air Act, which, they argued, was inapplicable. 

The district court concluded that (1) any gap that might exist between the two regulatory schemes as they apply (or don't apply) to mobile sources of air pollution "was created through a series of reasoned and calculated decisions by Congress and EPA," and, independently, (2) plaintiffs failed to state a claim under RCRA because, even if RCRA does apply, diesel exhaust is not a "solid or hazardous waste." 

In affirming, the appeals court cited (and distinguished) prior case law, but for the most part relied on the plain language of the statutes and pertinent legislative history of Congressional actions (or intentional inaction) related to regulation of mobile sources of diesel exhausts and rail yards.  Relying on the principle of expressio unius est exclusio alterius (when Congress expresses meaning through a list, a court may assume that what is not listed is excluded), the court of appeals noted that "emitting" is excluded from the definition in RCRA of "disposal."  Citing §6903(3), the court of appeals added that the specific statutory text further limits the definition of "disposal" to "placement" of solid waste "into or on any land or water" and concluded that emitting the exhaust into the air does not equate to placing the exhaust into or on any land or water. The 9th Circuit concluded that to decide otherwise would be rearranging the wording of the statute which courts cannot do.  Specifically, the court of appeals held, "Reading §6903(3) as Congress has drafted it, ‘disposal’ does not extend to emissions of solid waste directly into the air." 

The 9th Circuit might have stopped there, but it did not  The Court of Appeals further supported its decision by (1) recognizing that the term "emitting" was used elsewhere in the statute and, therefore, was intentionally excluded from the definition of "disposal," and (2) reviewing the legislative history and determining that Congress had opted not to address diesel emissions from locomotives, heavy-duty trucks, and buses at various points in the history of the Clean Air Act amendments adopted in 1970. It also noted that a railroad emissions study required during the planning of a 1977 Clean Air Act overhaul (only one year after enactment of RCRA) omitted rail yards and mobile sources and resulted in a prohibition of federal regulation of "indirect sources" that included corridors attracting mobile sources, like roads or highways, leaving regulation of those sources entirely to the states. The opinion also discussed later amendments to the Clean Air Act, finding that in the 1990 Amendments to the Clean Air Act, Congress finally required EPA to promulgate regulations setting forth standards applicable to emissions from new locomotives and new engines used in locomotives and prohibited states from doing the same, but left the regulation of indirect sources including rail yards, exclusively to the states, noting that, once again, in 1990, RCRA applied to neither. 

The court  of appeals was not persuaded by plaintiffs' argument that the two statutes should be "harmonized" to fill any gaps, or that there was irreconcilable conflict between the two statutes, observing that in actuality no conflict existed because neither statute applied to rail yards' diesel exhausts.  But to put an exclamation point on its holding, the 9th Circuit added: “[H]owever, to the extent that its text is ambiguous, RCRA's statutory and legislative histories resolve that ambiguity.”

The 9th Circuit's straightforward analysis of the plain language of the statutes and the  statutory history of Congressional action in this opinion is a refreshing contrast to recent opinions in which courts have struggled to find justification for EPA's attempts to regulate in areas where Congress has clearly failed to take action. 

Looking ahead to EPA’s next GHG Permit Program: more 2/3rds solutions when Congress goes missing

Posted on July 10, 2014 by Michael R. Barr

Last Monday June 23,  it was the Supreme Court’s turn in the UARG case to decide whether EPA could “tailor” its climate policy to fit the PSD and operating permit programs in the current Clean Air Act.  Both the Court and EPA faced the issue without any precise guidance from the missing branch:  Congress.

As a result, yet another court – the DC Circuit – must next consider the proper remedy in the UARG case and, if past DC Circuit decisions are a sound guide, remand the matter back to EPA to take action consistent with the courts’ decisions.  The DC Circuit will almost certainly not tell EPA what it can do, nor should it tell EPA how to exercise its remaining substantial discretion.  The courts are only telling EPA what it cannot do in certain respects.  Thus, the courts’ guidance to EPA is limited.

EPA will retain considerable discretion when it tries again to regulate GHG emissions from major stationary sources and major stationary source modifications under titles 1 and 5 of the Clean Air Act.  EPA has loads of options, as many commenters pointed out during the prior EPA rulemaking.  The options may fit the current Clean Air Act to varying degrees.  In the words of the Supreme Court in the June 23 UARG decision, though, “Even under Chevron’s deferential framework, agencies must operate ‘within the bounds of reasonable interpretation.’” (J. Scalia for the Court, slip opinion at p. 16)  

EPA may try to avoid options that would be most vulnerable to challenge under the principles expressed by the Court in the UARG opinion.  One Court majority held that EPA lacked authority to “tailor” the Act’s numerical thresholds governing the PSD and operating permit programs.  A different Court majority upheld EPA’s BACT rules for GHGs.  Some commenters will undoubtedly urge EPA to continue its drive towards regulating GHGs under titles 1 and 5 of the current Clean Air Act.  But, EPA should re-solicit the broadest public comment and carefully consider all options, as the Supreme Court requires under the Chevron standard of judicial review.  After all, there will be a national election in 2016 and there will be a new Administration with its own views on the options.  If the current Administration wishes to leave a lasting legacy in this area, it would be well advised to act on the basis of the most solid record and adopt moderate, fully vetted polices that can survive.  As retiring Congressman John Dingell recently said in a farewell speech held by the National Press Club in Washington, D.C., “Compromise is an honorable word."  

Congress is very unlikely to provide any additional guidance in this area any time soon, though.  The nation will miss some basic policy decisions and compromises, such as:

Should the PSD and operating permit programs apply to GHGs?  How?

Which sources should be covered?  When?  With a phase-in?  Tied to what?

In the PSD program, can and should BACT work the same way for GHGs as for criteria pollutants?

In the operating permit program, when should sources have to add GHG provisions (since there aren’t yet any substantive requirements for the operating permits to pick up)?

What substantive requirement should EPA develop and for which sources?  When? E.g., should EPA set GHG emissions standards or other requirements for power plants and other source categories under section 111(d) of the Act, as EPA recently proposed?

What role(s) should state and local agencies and programs play?

In the 1990 Clean Air Act amendments, Congress resolved issues like these in the Act itself.  The leading precedent is title 4 – acid rain – where Congress even allocated emissions of SO2 by individual numbered electric power generators in named powerplants in named states.  Both houses and both parties held hands and made this deal under the Capitol dome – a deal which has resulted in a stunning and stable policy success.  The acid rain deal largely avoided the dilemmas that EPA and the courts now face in dealing with stationary source permitting under titles 1 and 5 of the Clean Air Act.  It seems most likely that whatever EPA does next under the current Clean Air Act will be challenged vigorously in court – again and again – until Congress can once again come together under the dome.

A Splash of Cold Water: Supreme Court Trims EPA’s GHG Permit Program

Posted on June 27, 2014 by Robert Wyman

Having unleashed EPA rulemaking of unprecedented scale in Massachusetts v. EPA (holding GHGs are “air pollutants” under the Clean Air Act (CAA) that EPA must regulate upon finding “endangerment”) and having further acknowledged EPA’s GHG authority in AEP v. Connecticut (holding CAA displaces federal nuisance common law), early this week in Utility Air Regulatory Group v. Environmental Protection Agency et al., the Supreme Court started the inevitable process of reining in the Agency’s exercise of its potentially boundless GHG authority under a statute designed for regulation of conventional air pollutants.  Although interpretive gymnastics would be required whatever direction it took, the Court decided in a fractured decision that the CAA’s preconstruction Prevention of Significant Deterioration (PSD) and Title V operating permit programs allow EPA to impose Best Available Control Technology (BACT) for GHGs only when a source has triggered these programs “anyway” due to its conventional criteria pollutant emissions.

The consolidated cases below challenged a full basket of major EPA GHG rulemakings, including EPA’s endangerment finding, motor vehicle regulations (the Tailpipe Rule) and stationary source permitting rules.  But the Court granted certiorari on only one question - whether EPA permissibly determined  that its regulation of greenhouse gas emissions from new motor vehicles under one part of the Act triggered permitting requirements under the Act for stationary sources that emit greenhouse gases under another part of the Act.  The Court rejected EPA’s PSD and Title V Triggering and Tailoring Rules, leaving intact only the ancillary BACT review of a source’s non-de minimis GHG emissions when a source otherwise undergoes PSD review for conventional pollutants.

The PSD program requires a permit to construct or modify a “major emitting facility”—defined as any stationary source with the potential to emit 250 tons per year of “any air pollutant” or 100 tons per year for certain types of sources—in areas where the PSD program applies.  To qualify for a permit, the facility must, among other things, comply with emissions limitations that reflect BACT for “each pollutant subject to regulation under” the CAA.  Title V requires a comprehensive operating permit to operate any “major source”—defined as any stationary source with the potential to emit 100 tons per year of “any air pollutant”—wherever located.

Recognizing that applying these thresholds to GHGs would result in permitting for numerous small sources, such as schools, hospitals and even large homes, EPA promulgated the so-called Tailoring Rule with special thresholds for GHGs that would apply in addition to the statutory thresholds and said that it would revisit whether to continue applying these special thresholds after five years, during which time it would study the feasibility of extending permitting to the small sources per the statutory thresholds.  Under Step 1 of the Tailoring Rule, commencing January 2, 2011 (the effective date for its Tailpipe Rule), it obligated sources already required to obtain permits under the PSD program or Title V (so-called “anyway” sources) to comply with BACT for GHGs if they emitted at least 75,000 tons per year (tpy) of carbon dioxide equivalent (CO2e) units.  Then, under Step 2, commencing July 1, 2011, it obligated sources with the potential to emit at least 100,000 tpy of CO2e to obtain permits under the PSD program and Title V for construction and operation, and sources with the potential to emit at least 75,000 tpy of CO2e to obtain permits under the PSD program for modifications.  These higher thresholds were needed on a temporary basis, according to the EPA, because the number of permit applications would otherwise grow by several orders of magnitude, exceeding the agency’s administrative resources and subjecting to the major permit programs sources that Congress clearly did not intend to cover.  EPA’s Tailoring Rule also contemplated a Step 3 where GHG permitting would apply to additional sources as well as a five year study on how to extend the program to remaining sources per the statutory thresholds.

Writing for the Court, Justice Scalia, joined by Justices Roberts, Kennedy, Thomas, and Alito, concluded that EPA’s legal interpretation that the PSD and Title V programs were triggered once EPA regulated GHGs under the mobile source program not only is not compelled, but moreover, simply is not reasonable.  He reasoned that the “air pollutants encompassed by the Act-wide definition as interpreted in Massachusetts” are not the same “air pollutants referred to in the permit-requiring provisions” at issue.  This is so because EPA has routinely given “air pollutant” in the permit-requiring provisions a narrower, context-driven meaning.  The same five justices also concluded that EPA is not permitted to augment with additional thresholds – even temporarily, as EPA claimed – the 100 tpy and 250 tpy statutorily-defined thresholds for triggering the PSD program and Title V permitting requirements.  He writes that the need for such an adjustment simply demonstrates that the PSD program and Title V were never intended to be expanded in this way, and adds that the EPA does not have the power to “rewrit[e] unambiguous statutory terms” such as the statutorily-defined numerical thresholds for applying the PSD program and Title V.

Justice Scalia, joined in this part by Justices Roberts, Kennedy, Ginsberg, Breyer, Sotomayor, and Kagan, then determined that the EPA reasonably interpreted the CAA to require that those new and modified sources already subject to PSD permitting due to their potential to emit conventional criteria pollutants also must comply with BACT for GHGs.  In this context, he emphasizes that the statutory language  – once permitting already has been triggered – requiring BACT “for each pollutant subject to regulation under this chapter” contextually leaves less room for interpretations that could limit BACT to a smaller set of pollutants, in contrast to the triggering “any air pollutant” language, which must be read contextually in a more limited manner.  Additionally, he argues that applying BACT to greenhouse gases “is not so disastrously unworkable, and need not result in such a dramatic expansion of agency authority, as to convince us that EPA’s interpretation is unreasonable.”

Justice Breyer concurred in part and dissented in part, joined by Justices Ginsburg, Sotomayor, and Kagan.  He joins the Court’s opinion as to the application of BACT to greenhouse gases, but asserts that the EPA is also permitted to interpret the CAA so as to trigger permitting requirements for stationary sources that emit an adjusted threshold level of greenhouse gases.  Justice Alito concurred in part and dissented in part, joined by Justice Thomas.  He argues that neither the EPA’s interpretation of provisions triggering permitting requirements nor its interpretation regarding BACT is permissible.

The Court’s decision to require independent PSD and BACT applicability before subjecting sources to BACT for GHG emissions squares fully with significant industry input to EPA early in its discussion of stationary source permitting.  Our National Climate Coalition, for example, urged EPA to embrace such an interpretation in our 2009 Tailoring Rule comments and 2010 PSD White Paper.

Although this decision does not directly affect EPA’s authority to regulate stationary source GHG emissions by establishing New (or Existing) Source Performance Standards under section 111 of the Act, it portends significant challenges for the agency’s recent §111(d) proposal.  Most notable are the several statements in the 5-4 portion of Justice Scalia’s opinion in which he cautions the agency not to “rewrite clear statutory terms to suit its own sense of how the statute should operate.”  In articulating the Court’s test for whether an agency interpretation of ambiguous terms is reasonable, he stresses that an interpretation is less likely be viewed as reasonable to the extent it:

brings about an enormous and transformative expansion in EPA’s regulatory authority without clear congressional authorization.  When an agency claims to discover in a long-extant statute an unheralded power to regulate a ‘significant portion of the American economy,’ [cite omitted], we typically greet its announcement with a measure of skepticism.  We expect Congress to speak clearly if it wishes to assign to an agency decisions of vast ‘economic and political significance.’

This portion of the Court’s ruling will likely figure prominently in the Court’s inevitable review of the agency’s §111(d) proposal.  It thus may behoove EPA to consider in its final rulemaking approaches that bring the existing source program somewhat closer to its traditional rulemakings under that section.

Pulling the Plug on Greenhouse Gas Emissions

Posted on June 12, 2014 by Robert Wyman

Buoyed by favorable recent Supreme Court and DC Circuit decisions recognizing EPA’s broad discretion under the Clean Air Act, on Monday, June 2, EPA scaled new heights of legal adventurism by proposing the Clean Power Plan, a greenhouse gas reduction program for the power sector that would compel states to implement supply- and demand-side energy strategies.  EPA projects that its proposal would achieve approximately a 30% reduction from 2005 levels by 2030.

EPA’s action is under section 111(d) of the Clean Air Act, a little-utilized section that authorizes EPA to set emission guidelines for states to regulate listed source categories whose emissions are not regulated under either the Act’s criteria pollutant program under section 108 or the hazardous air pollutant program of section 112.  The College recently prepared an excellent overview of section 111 authority for the Environmental Council of the States (ECOS).

Certain aspects of EPA’s proposal are worth noting.  First, in stark contrast to prior stationary source rules, EPA seeks to harness the entire energy system, not just efforts at individual sources.  The bulk of the proposed emission reductions will come not from the minor expected heat rate improvements at individual electric generating units (EGUs)(EPA’s first “building block”), but from directing states to increase generation at natural gas plants and renewables while reducing electricity demand.  Three of EPA’s four “building blocks”  thus address emission reductions that are outside the control of EGUs, the listed source category.  Consistent with this approach, EPA proposes a portfolio enforcement approach by which states would be authorized to oblige entities other than the affected source for the reductions in building blocks two through four.  The proposal calls for an overall state energy plan, not just for implementing emission reduction opportunities available to individual sources.

Second, the proposal does not establish common performance standards, but sets highly-variable standards for each state based on EPA’s assessment of the state’s individual capacity to reduce emissions under each of the four building blocks.  EPA clearly listened to state pre-proposal input regarding material differences in each state’s EGU portfolio, its capacity to harness wind and solar generating technologies and other state differences.

Although the proposal’s projected benefits reflect an estimated 30% emission reduction from 2005 levels, EPA actually uses 2012 as the baseline for measuring a state’s starting carbon intensity.  Because EPA sets each state’s interim and future carbon intensity targets based on the state’s capacity for reducing, shifting or avoiding EGU emissions, it is not surprising that the proposal does not provide any state with early action credit in the traditional sense.  Some states are further along on their individual progress lines, but as currently designed the proposal does not allow any state to monetize its early reductions nor to avoid future progress based on its prior actions.  This means that some states will be expected to do more than others for the foreseeable future.  And, unless a true early action mechanism is included in EPA’s final rule, some states, such as California, may continue to incur net energy costs higher than their neighbors.

Several commenters have noted the material legal risk that EPA takes with this proposal.  Among the many expected challenges will be that EPA cannot regulate EGUs under section 111(d) because the House version of that section precludes such regulation if the source category already has been listed under section 112.  The proposal also could be challenged for including in the “best system of emission reduction” (BSER) emission reductions outside the control of the source and for obliging the state and entities other than EGUs to achieve such reductions.  EPA argues in its proposal that it can require states to consider any measure that has the effect of reducing EGU emissions (i.e., an “effects” or “ends” test), but some will argue that section 111 only allows EPA to require those emission reduction options (i.e., “means”) available to the EGU itself.

Should EPA fail to finalize one or both of its section 111(b) new and modified/reconstructed unit proposals, then it may be challenged for a failure to finalize the prerequisite 111(b) rule.  Other challenges could relate to an alleged failure properly to subcategorize facilities and for stepping beyond its emission reduction role to, in essence, regulate a state’s energy policy.

EPA has left some important design issues unresolved.  EPA strongly encourages interstate cooperation, including the use of emissions trading, but it leaves the actual shape of such linkages undefined.  Similarly unresolved is the question of how states can interact if they act alone.  Given the regional nature of power markets and the fact that emission reductions occurring in one state often result from investment (on either the supply or demand side) in another, states and companies will need to know the ground rules for adjudicating potentially-conflicting claims for state plan credit and company compliance credit.  EPA seeks comment on these and other critical issues.

For those interested, a more substantive analysis of the proposal can be found here.

EPA Meets Regional Uniformity Requirement – the Hard Way

Posted on June 3, 2014 by Robert Wyman

On Friday, in a case argued by my colleague, Greg Garre and briefed by Leslie Ritts, the D.C. Circuit decided a closely watched case construing the EPA’s “regional uniformity” requirement under the Clean Air Act (CAA.)  The court declared the agency’s directive to regional offices outside the Sixth Circuit to ignore a 2012 Sixth Circuit decision interpreting the CAA’s “single source” requirements as inconsistent with EPA’s uniformity requirement. The decision brings to light an important component of the CAA’s nationwide scheme.

Under the CAA, any “major source” of pollution is subject to certain heightened requirements.  EPA regulations provide that multiple pollutant-emitting activities will be considered together for purposes of the “major source” analysis if they are—among other things—“adjacent.”  But EPA has, in recent years at least, given “adjacent” an expansive and atextual meaning, concluding that even facilities separated by considerable physical distance should be deemed “adjacent” as long as they are “functionally interrelated.” 

In 2012, the Sixth Circuit in Summit Petroleum Corp. v. EPA held that EPA’s interpretation was “unreasonable and contrary to the plain meaning of the term ‘adjacent.’”  The EPA opted not to seek Supreme Court review of the Sixth Circuit’s ruling.  A few months after the Summit decision, however, EPA circulated a directive to the Regional Air Directors informing them that the agency would abide by the Sixth Circuit’s decision within the Sixth Circuit, but that “[o]utside the [Sixth] Circuit, at this time, the EPA does not intend to change its longstanding practice of considering interrelatedness in the EPA permitting actions.”

The National Environmental Development Association’s Clean Air Project (NEDA/CAP), an industry group, filed a petition for review in the D.C. Circuit, challenging the EPA’s “Summit Directive” as contrary to the statute and EPA’s own regulations.  NEDA/CAP explained that EPA’s Directive would impermissibly place NEDA/CAP members operating outside of the Sixth Circuit at a competitive disadvantage, subject to a more onerous permitting regime than their peers operating within the Sixth Circuit’s jurisdiction.  That disparity between regions, NEDA/CAP explained, was inconsistent with the CAA’s requirement that EPA assure “uniformity in the criteria, procedures, and policies applied by the various regions,” 42 U. S. C. § 7601(a)(2), as well as EPA regulations that similarly require inter-regional uniformity.

On Friday, the D.C. Circuit issued a decision agreeing with NEDA/CAP in National Environmental Development Association’s Clean Air Project v. EPA. Rejecting EPA arguments that the policy could only be challenged in the context of a discrete stationary source permit application, the Court held that NEDA/CAP’s blanket challenge to the EPA’s creation of two different permitting regimes across the country could be challenged today because of the competitive disadvantages it created for companies operating in different parts of the country.  

On the merits, the Court concluded that maintaining a standard in the Sixth Circuit different from the one applied elsewhere in the country was inconsistent with the agency’s regulatory commitment to national uniformity.  The Court recognized that an agency is ordinarily free, under the doctrine of “intercircuit nonacquiescence,” to refuse to follow a circuit court’s holding outside that court’s jurisdiction.  Here, however, the Court held that EPA’s own regulations required it to “respond to the Summit Petroleum decision in a manner that eliminated regional inconsistency, not preserved it.”  Finding that the agency’s “current regulations preclude EPA’s inter-circuit nonacquiescence in this instance,” the Court vacated the directive.

The decision is noteworthy in a number of respects.  Not only does the decision roundly reject EPA’s threshold objections to NEDA/CAP’s petition (standing, finality, and ripeness), but it appears to represent the first time a court has applied EPA’s uniformity regulations to invalidate a rule.  The decision therefore puts a light on an important component of the CAA’s nationwide enforcement scheme—the “regional uniformity” requirement.    

Beware the Specter of Debarment

Posted on May 8, 2014 by Tom Sansonetti

Debarment is the process whereby the federal government can permanently prevent a company from doing business with the federal government or suspend a company from doing business with the federal government for a period of years.  The debarment process has been available for decades to the United States to be used against companies or persons whom the government believes are untrustworthy. For instance, removal from EPA’s list of violating facilities requires agency evaluation of corporate attitude. But the Obama Administration has broadened the scope of the process to potentially ensnare many an unsuspecting entity.

The debarment process as it currently exists has resulted in the following scenarios:

A. An oil company in the Rocky Mountain region settled a regulatory violation with the Department of the Interior’s Bureau of Land Management and as part of the agreement paid a substantial seven figure fine and adopted new procedures designed to prevent a reoccurrence of the violation and a two-year period of probation.  Imagine the surprise of the company’s managers and in-house lawyers when eighteen months after the settlement was executed, they received a Notice of Debarment for a three-year period preventing the use of their federal leases requiring new permits.

B. A wind farm owner that was convicted for killing bald eagles discovered that the company could not sell future electricity production to a federal facility.

C. An oil and gas company that pleaded guilty to a Clean Water Act spill faced debarment from being able to bid on federal oil and gas leases for five years.

Companies or persons found to be in violation of civil or criminal statutes or departmental regulations are subject to debarment.  While in egregious cases debarments can be perpetual, most debarments are for a period of three to nine years.  Debarments do not affect a company’s current government contracts, but do affect renewals of those contracts or the need for new permits on federal lands.  The debarments are company-wide.  Consequently, the above-mentioned wind farm owner also could not sell its electricity produced from its coal fired power plants to federal facilities.

Debarment proceedings are administered by the various Offices of Debarment, located within each cabinet department, with the closest responsibility for enforcing the law that was violated.  Thus, the Department of the Interior’s Office of Debarment (staffed by the Inspector General’s personnel) handles violations of fish and wildlife, public lands and Indian law.  Environmental Protection Agency lawyers in the grants and debarment program handle debarment proceedings authorized by Section 508 of the Clean Water Act or Section 306 of the Clean Air Act.

Upon the entry of a federal court judgment or consent decree a representative of the Department of Justice, often an Assistant United States Attorney, forwards the document to the appropriate cabinet department’s Office of Debarment.  The government deems debarment proceedings to be separate from the underlying litigation.  Agreements to avoid debarment may not be a condition of any plea bargain or consent decree.  Adverse outcomes after executive branch debarment hearings may be appealed to a federal district court under deferential Administrative Procedures Act standards. 

Homer's Odyssey Continues Without Cooperative Federalism

Posted on April 30, 2014 by Paul Seals

On April 29, 2014, Justice Ginsburg delivered the opinion of the Supreme Court in EPA v. EME Homer City Generation, L.P., 572 U.S._(2014) reversing the DC Circuit’s decision regarding the Transport Rule, also known as the Cross-State Air Pollution Rule (CSAPR), a rulemaking designed to address the significant contribution of upwind States to nonattainment of National Ambient Air Quality Standards in downwind States under the Good Neighbor Provision of the Clean Air Act (CAA).   In addition to upholding EPA’s cost-effective allocation of air pollutant emission reductions among upwind States as a permissible interpretation of the Good Neighbor Provision, the majority held that the CAA does not compel EPA to provide States with an opportunity to file a SIP after EPA has quantified the State’s interstate pollution obligations.  This opinion is a severe blow to cooperative federalism.

In the majority opinion, cooperative federalism was relegated to a single footnote, which was surprising given the issues for which certiorari was granted.  The second issue addressed in the briefs and argument – whether states are excused from adopting state implementation plans prohibiting emissions that “contribute significantly” to air pollution problems in other states until after the EPA has adopted a rule quantifying each state’s inter-state pollution obligations – provided the Supreme Court with an opportunity to address the relative health of cooperative federalism and whether the federalism bar should be raised or lowered in the context of the CAA. 

Justice Ginsburg’s footnote addressed Justice Scalia’s dissenting opinion in which he criticized the majority for “making hash of the Clean Air Act, transforming it from a program based on cooperative federalism to one of centralized federal control.”  EPA’s promulgation of federal implementation plans without providing the States with a meaningful opportunity to perform the emissions reductions through state implementation plans is inconsistent with the core principle and regulatory strategy of cooperative federalism embedded in the CAA – air pollution control at its source is the primary responsibility of States and local governments.   

Homer’s Odyssey continues.  For the next chapter, his ship will not sail under the fair winds of cooperative federalism.

D.C. Circuit Affirms EPA’s Utility Air Toxics Rule: An “Appropriate” Rule Need Not Be Justified By Cost-Benefit Analysis

Posted on April 17, 2014 by Seth Jaffe
On April 15th, the D.C. Circuit Court of Appeals affirmed EPA’s rule setting limits for emissions of mercury and other air toxics from fossil-fuel-fired electric steam generating units.  The focus of the decision – and the issue on which Judge Kavanaugh dissented – was whether EPA was required to consider the costs that would be imposed by the rule.  EPA said no and the majority agreed.

Section 112(n) of the Clean Air Act required EPA to perform a study of the health hazards related to hazardous emissions from EGUs prior to regulating them.  How was EPA to utilize the results of the study?

"The Administrator shall regulate [EGUs] under this section, if the Administrator finds such regulation is appropriate and necessary after considering the results of the study required by this subparagraph."

The industry petitioners and Judge Kavanaugh took the position that Congress’s use of the word “appropriate” evidenced an intent to require EPA to consider costs.  To Judge Kavanaugh, “that’s just common sense and sound government practice.”  However, persuasive Judge Kavanaugh may be as a matter of policy, the majority was not persuaded that the law requires a consideration of cost.

As the majority noted, nothing in section 112(n) requires that EPA consider cost.  Indeed, the word “cost” is not mentioned in section 112(n).  Moreover, Congress required EPA to make the “appropriate and necessary” determination based on a study of health impacts, not a study of costs.  Finally, as EPA and the majority noted, the Supreme Court, in Whitman v. American Trucking Ass’ns, cautioned against finding authority – let alone a mandate – to consider costs in ambiguous provisions of the CAA, given that there are sections of the Act which do address costs.

I’m with Judge Kavanaugh as a matter of policy (though it’s worth noting that EPA in fact did a cost-benefit analysis and found that the benefits of the rule substantially outweigh its costs).  On the law, however, the dissent seems pretty much a case of ipse dixit.  When the rule was promulgated, I said that I would be “stunned” if the rule was not upheld on judicial review. Notwithstanding the dissent, I’d be equally stunned if the Supreme Court flips this decision.  I don’t think that there’s anything here warranting Supreme Court review.

ACOEL Members Assist ECOS On Clean Air Act Issues

Posted on April 15, 2014 by Theodore Garrett

This week, the Environmental Council of the States (ECOS)  publicly announced a memorandum prepared by ACOEL members concerning important issues arising under the Clean Air Act.  In May 2013 ACOEL entered into a Memorandum of Understanding with ECOS to facilitate a relationship pursuant to which members of ACOEL will provide assistance on issues of interest to ECOS. 

In accord with the President’s June 2013 Climate Action Plan, EPA announced plans to use existing Clean Air Act Section 111 authority to develop greenhouse gas emissions (GHG) standards for new and existing sources.  Thereafter, ECOS contacted ACOEL and requested an extensive and neutral review of the history and background of section 111(d) of the Act.  A diverse group of ACOEL members from academia, private law firms, and public interest groups volunteered and produced the attached comprehensive memorandum, which was well received by ECOS.  This week, ECOS made the memorandum publicly available. 

In announcing the memorandum, Dick Pedersen, the President of ECOS and Director of the Oregon Department of Environmental Quality, thanked the members of ACOEL for their significant time and effort in preparing the memorandum, and added that ECOS looks forward to working with ACOEL in the future.  ACOEL hopes that this memorandum will serve as a valuable resource in connection with EPA’s anticipated rulemaking efforts in this area.

ACOEL: Memorandum for ECOS Concerning Clean Air Act 111(d) Issues pdf

The Trains Don’t Wait... GHG Permits Leaving the Station

Posted on March 24, 2014 by Catherine R. McCabe

While the world waits for the Supreme Court to decide whether EPA can regulate greenhouse gas (GHG) emissions from stationary sources under the Clean Air Act, EPA and state permitting authorities have moved ahead to issue GHG permits. Some of those permits are encountering legal challenges. The Sierra Club and citizen activists are challenging permits issued by EPA Regions as insufficiently stringent, and urging EPA to use its Prevention of Significant Deterioration (PSD) permitting authority to require greater use of solar energy and carbon capture and sequestration (CCS) at new facilities.

So far, EPA’s Environmental Appeals Board has rejected two citizen challenges to GHG PSD permits issued by EPA Regions. On March 14, 2014, the Board denied the Sierra Club’s petition for review of a GHG permit issued by Region 6 for a new natural gas-fired power plant in Harlingen, Texas. In re La Paloma Energy Center, LLC. (Those of you who follow events in Texas will recall that EPA is currently running the GHG permitting program in that state, but has proposed to approve the state’s application to assume responsibility for that program.) The Board rejected Sierra Club’s arguments that the permit’s GHG emission limits were not stringent enough to meet BACT standards and that Region 6 should have required La Paloma to consider adding a solar energy component to its power plant. The Board cautioned, however, that there is no “automatic BACT off-ramp” for solar energy alternatives, and emphasized that permitting authorities must consider suggestions for adding solar energy components at new facilities on a case-specific basis.

In 2012 the Board rejected similar arguments by citizen activists who urged Region 9 to use its PSD permitting authority to require a new hybrid (gas-solar) power plant in California to reduce GHG emissions by increasing its planned solar generation capacity. In re City of Palmdale. The proposed plant was to be fueled primarily by natural gas, with a modest (10%) solar power component to satisfy California renewable energy requirements. The decisions in both City of Palmdale and La Paloma relied heavily on the Regions’ findings that there was insufficient space at the project sites to accommodate the solar power generation capacity that the petitioners were advocating. 

The Palmdale decision also upheld Region 9’s rejection of CCS as a BACT requirement for that facility based on cost considerations. The estimated annual cost of CCS would have been twice the project cost (annualized over 20 years) in that case. Sierra Club has renewed the debate over the affordability of CCS in a new PSD permit appeal that is currently pending before the Board. In re ExxonMobil Chemical Company Baytown Olefins Plant. Region 6 rejected the CCS option in this case based on a finding that the cost would be disproportionately high. Stay tuned for a Board decision in the next few months . . . 

*Any views expressed herein are the views of the author and do not necessarily reflect the views of the U.S. Environmental Protection Agency or the United States.

What Would Leon Billings Think?

Posted on March 7, 2014 by Richard Lazarus

Almost as soon as U.S. Supreme Court Justice Scalia joined the bench in the fall of 1986, he made clear his disdain for arguments that the meaning of statutory text could be gleaned from its legislative history. And advocates before the Court who made the mistake of equating “congressional intent” with a statement made by an individual member of Congress during a hearing or a colloquy on a chamber floor could expect a sharp rebuke from the Justice.

The debate at the Court about the proper role of legislative history in statutory construction was not fully joined, however, until 1994 when Justice Stephen Breyer joined the bench. From the outset, Breyer, a former Senate staffer, made equally plain his view that legislative history was both fair game and could be highly relevant.

Indeed, Scalia’s and Breyer’s contrasting views regarding textualism in both statutory and constitutional interpretation became so celebrated that they literally took their debate on the road. To be sure, theirs was a far cry from the Lincoln-Douglas Debates on slavery 150 years earlier, but for legal scholars and Supreme Court observers, it was High Court entertainment.

During the oral arguments last month before the Supreme Court in Utility Air Regulatory Group v. EPA, Justice Breyer managed to take the debate to yet a new level. The issue before the Justices concerned the lawfulness of EPA’s regulations applying the Clean Air Act’s Prevention of Significant Deterioration Program to the emissions of greenhouse gases from new and modified stationary sources. As the Justices struggled to decipher the meaning of statutory terms and phrases that befuddle even seasoned environmental lawyers, Justice Breyer made a surprising reference. He did not merely ask what Senator Edmund Muskie, the bill’s chief sponsor, might have been intending in drafting the language at dispute before the Court. He asked what “Mr. Billings, I think, is the staff person” would have intended if faced with the policy issue that EPA now faced in trying to apply the language he drafted to greenhouse gases.

The Supreme Court courtroom was filled to capacity for the argument. Yet, I can probably safely say that fewer than ten, and likely fewer than five people in the room had any idea to whom the Justice was referring. And those few most certainly did not include any of the Justice’s colleagues on the bench or any of the advocates before him.

But for a few of us, who thrive on environmental law’s history, it was a moment of glory. The Justice was referring, of course, to Leon Billings who was Senator Ed Muskie’s chief staffer for the drafting of almost all of the nation’s path-breaking environmental laws during the 1970s, including, as the Justice correctly surmised, the Clean Air Act of 1970. The statutes were revolutionary in their reach, as they sought no less than to redefine the relationship of human activities to the nation’s environment.

Not relying merely on the soaring rhetoric of a law like the National Environmental Policy Act, these new pollution control laws got into the nitty-gritty of lawmaking. They addressed the extent to which costs, benefits, risk assessment, scientific uncertainty, and technological availability should all be relevant in determining the pollution control standards. They brokered compromises across partisan divides and remained nonetheless exceedingly ambitious and demanding in their reach.

The nation, more than four decades later, has reason to be grateful for the work of former congressional staffers like Leon Billings. Their impressive work lies in sharp contrast to that of Congresses over the past twenty plus years, which have passed no comparably significant environmental laws and done little more than deepen partisan divides even further.  For that reason, the Supreme Court shout-out to “Mr. Billings” was a great moment at the Court. And the Justice’s question an apt one too.