Posted on January 2, 2013
Montana’s state constitution contains what is arguably the most stringent environmental protection clause of any state. Article II, Section 3 of the Montana Constitution guarantees all persons “the right to a clean and healthful environment.” This provision is paired with Article IX, Section 1, which says the “state and each person shall maintain and improve a clean and healthful environment in Montana for present and future generations.” Although these clauses have been in the state constitution since 1972, they rarely have been applied by the Montana Supreme Court to invalidate legislation, overturn state action or to provide a private remedy. In October, 2012, the Montana Supreme Court rejected the latest attempt to apply these provisions.
Montana is a coal-rich state. The State of Montana owns significant quantities of this coal. The State Land Board controls the leasing of state-owned coal. In 2010, the land board approved a massive lease to Arch Coal. Montana received an $85 million bonus payment for this lease.
In addition to the environmental-protection provisions of the state constitution, Montana has a state environmental policy act, structured similarly to the National Environmental Policy Act (NEPA). The Montana Environmental Policy Act (MEPA) contains a number of exemptions from environmental review that would otherwise be required. One of these provisions exempts the land board from the obligation to undertake environmental review at the leasing stage, so long as a lease contains a provision stating that actual mining is subject to further environmental permitting. The land board relied on this exemption to issue leases to Arch Coal without first undertaking MEPA review.
Several environmental groups challenged the land board’s leasing action, arguing that the application of the MEPA exemption violated the Montana Constitution on an as applied basis. They argued that the leasing decision opened the door to the mining and burning of large quantities of coal without environmental review. A state district court found that mining and burning coal could exacerbate global climate change, which in turn could adversely affect water, air and agriculture in Montana. Based on this finding, the district court declined to dismiss the case, but it also refused to grant summary judgment to the NGO plaintiffs on the constitutional claim. The district court concluded that the State retained sufficient environmental protection mechanisms at the mine permitting stage to meet its constitutional obligations.
The NGO plaintiffs appealed the case to the Montana Supreme Court. In Northern Plains Resource Council v. Montana Board of Land Commissioners, the Supreme Court upheld the district court and rejected the constitutional challenge. Although the Supreme Court confirmed the fundamental right to a clean and healthful environment and acknowledged potential global climate change implications of further coal development, the Court held that it was not required to apply a strict scrutiny analysis to the statutory exemption from MEPA. The Court concluded that “the act of leasing” did not interfere with the exercise of a fundamental right requiring “demonstration of a compelling State interest.” Instead, the Court applied a “rational basis” test to conclude that the potential for additional environmental review at the permitting stage was sufficient. On that basis, the Supreme Court held that the exemption from MEPA review did not violate the Montana Constitution.
Posted on December 14, 2012
All of us know that enforcement of the Clean Air Act’s (CAA) proscriptions against pollutant air emissions is premised on the concept of Acooperative federalism. We know that the CAA’s policy development and enforcement regime is based upon a division of state and federal regulatory responsibility. Stated simply, the concept is that the federal government, through the EPA, sets standards for permissible emissions of substances affecting ambient air quality while individual states retain responsibility for implementing programs to enforce these standards.
The States’ implementation mechanisms are aptly titled State Implementation Plans or SIPs. SIPs are employed to demonstrate that federal and state air pollution regulations will allow counties in a particular state to meet federally mandated ambient air quality standards (NAAQS). The SIP process approval results in pollution control requirements which govern and often times unduly complicate compliance efforts of state regulators. They can also increase compliance costs borne by the regulated community. One aspect of that conundrum is the fact that when States fail to meet deadlines for attaining these standards, the regulators themselves can face sanctions from EPA and even suits by the public. Litigation and its costs complicate matters further.
As some regulators in Pennsylvania recently observed . . . [T]he current aggressive schedules for NAAQS reviews, State Implementation Plan (SIP) development and promulgation of Maximum Achievable Control Technology (MACT) standards are significant problems. Taken together, these inefficiencies are a resource drain on EPA, the states, the regulated community and the economy as a whole. The messy situation described in this quote is the subject of this blog.
The turbulence inherent in this divided relationship has escalated in recent times fraying the long-standing statutory regulatory compact between the federal government and the States.
An instructive example of the conflict of enforcement concept and reality engendered by the CAA’s cooperative federalism scheme was clearly highlighted in the recent case WildEarth Guardians v. Jackson. This case dealt with EPA’s delays in approving SIPs or pollution control plans affecting discharges of fine particulate matter or PM2.5. The plaintiffs in Wild Earth alleged that EPA failed to take final action under section 110(k)(2) and (3) of the CAA to approve SIP submittals in twenty (20) states meeting applicable requirements respecting the 2006 PM2.5NAAQS.
In 2006, the U.S. Court of Appeals for the District of Columbia had found that EPA’s PM2.5 NAAQS had to change because it failed to adequately protect human health. A change in this NAAQS required a change in States SIPs. SIPs were proposed but languished at EPA. Five years later, the plaintiffs in Wild Earth alleged that . . . [W]ithout infrastructure plans, citizens are not afforded full protection against the harmful effects of PM2.5 while seeking declaratory and injunctive relief.
Shortly after the suit was filed the plaintiffs and the EPA entered into a settlement. A consent decree called for the EPA to approve or disapprove SIP submittals for the 2006 PM2.5 standard as early as September 12, 2012 for some of the states involved and as late as February 13, 2013 for others. The Consent Decree was entered and the case dismissed in May of 2012. Case closed and compliance efforts back on track?
Unfortunately, many of the underlying issues raised in Wild Earth, specifically, the lack of cooperation between the States and the federal government on implementation of the PM2.5 NAAQS have raged on unabated. For example, eleven (11) states sued the EPA over the agency’s alleged failure to promulgate final NAAQS for PM2.5. In New York v. Jackson the plaintiffs are seeking a declaration that EPA is in violation of Section 109(d)(1) requesting that EPA review, propose and promulgate a new PM2.5 NAAQS. On June 14, 2012, EPA announced a proposal to strengthen the NAAQS PM2.5. Almost simultaneously, the D.C. Circuit issued an order refusing to set a schedule for EPA to issue a new PM2.5 NAAQS. Am.Farm Bureau v. EPA.
These developments will inevitably spawn additional delays in PM2.5 related SIP modifications and EPA approvals. That is the point of these comments on this small corner of CAA regulation and enforcement. Is the cooperative federalism underpinning of the CAA still workable? Can court’s recognize and respect the concept when regulatory policy, administrative lethargy and real human health concerns collide? These comments and observations have focused on the PM2.5 issue mainly because it has come up in some recent work in our office.
Without doubt other and more far-reaching examples of regulatory and judicial “turbulence abound, i.e., the raging fight over the EPA’s Cross State Air Pollution Rule (CSAPR). In a dissenting opinion on the CSAPR case, on the concept of cooperative federalism, Judge Rogers had this to say. . . [T] he result is an unsettling of the consistent precedent of this court strictly enforcing jurisdictional limits, a redesign of Congress’s vision of cooperative federalism between the states and the federal government in implementing the Clean Air Act based on the court’s own notions of absurdity and logic that are unsupported by a factual record, and a trampling on this court’s precedent on which the Environmental Protection Agency was entitled to rely . . . . Whew!
So what are CAA practitioners to make of the mess Judge Rogers eloquently describes? This blog entry offers no practical guidance for those laboring for an aggrieved client nor laments a bad result impairing enforcement prerogatives of the regulators. Instead, I only point out that it may be time for a concerted effort to step back and reconsider whether the CAA’s cooperative federalism’s bifurcation of rule promulgation and enforcement continues to make scientific, policy or common sense in today’s world.
Posted on November 16, 2012
Massachusetts’ ambitious plan to address greenhouse gas emissions on a state-wide basis attracted private money last month to measure its success and costs. Boston-based Barr Foundation’s grant of $230,000 will establish a “performance management tool” to track and measure the success of initiatives undertaken under Massachusetts’ Global Warming Solutions Act (“GWSA”). Supporters expect it to “serve as a national and regional model that other states can adopt to analyze” their own greenhouse gas reduction efforts. The GWSA, enacted in 2008, requires extremely ambitious reductions in greenhouse gas emissions within Massachusetts in the coming decades: an 80% emissions reduction goal by 2050 and 10-25% by 2020 from a 1990 emissions baseline The act directed the Secretary of Energy and Environmental Affairs to set the 2020 reductions and adopt a plan for achieving them.
The planning and regulatory documents issued since enactment recognize that the success of a single state’s effort to address the causes of climate change cannot be measured by the impact of its own reductions in greenhouse gas emissions in effecting changes in the global climate. The effect will simply be too small to measure. Instead, the state’s plan touts the beneficial effects of spurring economic development through the encouragement of green energy and other high tech businesses, the reduction of localized pollution, and the stabilization of energy prices. The success of the program in “bending the curve” of rising greenhouse gas emissions, however, rests entirely on its ability to serve as an example to other political entities – states mainly but, ultimately, geopolitical entities through broader global participation.
In December 2010, the Secretary of Energy and Environmental Affairs released the Massachusetts Clean Energy and Climate Plan for 2020 setting the reduction target at 25% below 1990 baseline. The Executive Summary summarizes reductions anticipated from existing and expected programs (table at page 6). Policies relating to Buildings (9.8% or more than one third of the 25% reduction), Electricity (7.7%) and Transportation (7.6%) account for the vast majority of the reductions. Within each sector, reductions are characterized as either “Existing Policy” (e.g., Federal and California vehicle efficiency and GHC standards – 2.6% reduction), “Expanded Policy” (e.g., advanced building energy codes – 1.6% reduction), or “New Policy” (e.g., Green DOT, the Massachusetts’ transportation agencies fulfillment of their sustainability commitment – 1.2% reduction). The Barr Foundation’s grant will help create the “dashboard” that presumably will take into account the likelihood of adoption of new programs or the expansion of existing ones and the ultimate efficacy of any of the programs, as it tracks the progress of the Massachusetts program.
Efforts to track the success of the Massachusetts program will build on the work done by MassINC, a Boston-based “independent think tank” that earlier this year released a book-length report titled “Rising to the Challenge/Assessing the Massachusetts Response to Climate Change.” This very thoughtful work looks specifically at Massachusetts’ progress to date and likely future success in emission reductions in various sectors; it provides useful capsule descriptions of other state’s programs and of regional and foreign initiatives. And it discusses the crucial issue of the economic costs and benefits of the program, as that will be a prime determinant of the program’s ability to be a role model for other jurisdictions.
The MassINC report recognizes that data on the subject of economic costs and benefits are subject to extremely complex and differing interpretations. The report notes there is general agreement in Massachusetts that “it is desirable to reduce greenhouse gases and develop clean energy [,] it is more difficult to reach consensus when the subject turns to the cost of addressing climate change ….” Id. at 75. Nonetheless, a convincing explanation of the specific costs and benefits of various courses of action is a necessary component of any successful program because the ultimate effectiveness of a state’s program rests on its attractiveness as a model for other jurisdictions – including those with different views of the appropriate tradeoffs between environmental protection and economic development.
Posted on September 27, 2012
Depending on how you count, advocates have led over 25 state legislatures or regulators to consider or adopt bans on certain uses of Bisphenol A (BPA), the recently publicized monomer that is (or was) present as a residual at low levels in some plastic products. Recently, the U.S. Food and Drug Administration (FDA) accepted a petition from the American Chemistry Council banning use of BPA in baby bottles and sippy cups, because the use had been abandoned by manufacturers.
For many, FDA’s scientific review of BPA studies and thoughtful analysis on the merits of regulation was too slow, and to those who conclude “I don’t want exposure to any substances of concern” use-by-use regulation did not (and will never) provide comfort. What started as a concern in baby bottles and sippy cups, and was the subject of numerous state bans several years ago -- before the FDA acted this summer to acknowledge the abandonment of BPA in those bottle and sippy cups -- is more recently the subject of additional state proposals for bans from lids of food cans and containers. Some ask: “Can you please ban it from any product that may reach my children?”
Because it is difficult to get the federal machine to act quickly, why not seek an audience in your state capital? It is easier to file legislation in many states than in Congress, easier to get exercised citizens to the state capital, easier to involve local media looking for a controversy, and cheaper for citizens to play at the state level than in Washington. However, state toxicologists and regulators often don’t have the resources of the FDA, they are often not as well equipped (and certainly not as experienced) in making the necessary risk evaluations and product regulations. And putting environmental police in the grocery aisles seems to squander limited state environmental resources. As Maine DEP Commissioner Patricia Aho recently put it: “We’re environmental regulators. You’re asking us to be the FDA in some regards here.”
Even assuming states are equipped to address those issues, how can national manufacturers (or national or regional retailers) deal with state-by-state regulation of different products using the same materials? Not very well! And how are consumers to understand why chemicals in a product present acceptable risks in one state, but unacceptable risks in another? They don’t. Why is state-by-state regulation of chemicals in products in the national interest when FDA has jurisdiction? Maybe it isn’t.
Congressman Markey has petitioned the FDA for a federal ban on coatings in infant formula packages (arguing abandonment), and the federal agency has sought comment. But that petition was made after extensive state efforts against use in baby bottles and sippy cups. The FDA will consider the matter, so it may be some time before the FDA acts. In the interim, states are still being encouraged to adopt their own bans on certain uses of BPA.
FDA is even more broadly considering BPA safety and its uses under FDA jurisdiction, but in the meantime, keep your eye on your local legislature if you want to watch a messy process that is frustrating for everyone.
Posted on August 30, 2012
On August 13, 2012, the United States Court of Appeals for the Fifth Circuit held that the Environmental Protection Agency’s (EPA) disapproval of the Texas Flexible Permit Program (TFPP) had been arbitrary and capricious, an abuse of discretion, not in accordance with law, and unsubstantiated by substantial evidence on the record taken as a whole. Accordingly, the Fifth Circuit granted the petition for review, vacated EPA’s disapproval of the Texas plan and remanded the matter to EPA.
The TFPP, a Minor new source review (NSR) permit program, had been submitted to EPA in November 1994 as a revision to the Texas State Implementation Plan (SIP). The TFPP authorized modifications to existing facilities without additional regulatory review provided the emissions increase would not exceed an aggregate limit specified in the permit.
Despite the mandate in the Clean Air Act (CAA) that EPA approve or disapprove a SIP revision within eighteen months of its submission, EPA failed to make a determination on the TFPP for more than sixteen years. By the time that EPA announced its disapproval, the State of Texas had issued approximately 140 permits under the TFPP. And despite the excessive delay in announcing its disapproval of the TFPP, EPA found time to promptly notify flexible permit holders in Texas that their facilities were operating without a SIP-approved air permit and that they were risking federal sanctions unless SIP-approved air permits, requiring current Best Available Control Technology, were obtained.
The State of Texas and ten industry and business groups subsequently filed suit challenging EPA’s disapproval, which had been based on three primary arguments: 1) the program might allow major sources to evade major NSR; 2) the provisions for monitoring, recordkeeping and reporting (MRR) are inadequate, and 3) the methodology for calculating permit emissions caps lacks clarity and is not replicable. Two of the justices on the 3-judge panel court rejected each of EPA’s contentions, with the third justice dissenting.
The majority rejected EPA’s contention that the TFPP allowed major sources to evade Major NSR because the TFPP includes three rules that affirmatively require compliance with Major NSR, and EPA could not identify a single provision in the CAA or the CAA implementing regulations that empowered EPA to disapprove a SIP that did not also contain an express negative statement that the Minor NSR permit could not be used to evade Major NSR. Further the court noted that in its briefings, EPA had conceded that language explicitly prohibiting circumvention of the Major NSR requirements is not ordinarily a minimum NSR SIP program element. 75 Fed. Reg. at 41,318-19.
The majority also rejected EPA’s contention that the TFPP allowed the Texas Commission on Environmental Quality executive director too much discretion in determining MRR requirements in a Minor NSR permit and that this amount of discretion is contrary to EPA policy. The court found that EPA could not identify an independent and authoritative standard in the CAA or its implementing regulations that required MRR requirements to be specified in a SIP, rather than based on the size, needs, and type of facility authorized in a Minor NSR permit. In addition, the court found that EPA failed to identify the purported policy of disfavoring “director discretion” in any comments that EPA submitted to the State of Texas on the TFPP regulations or in EPA’s disapproval of the requested Texas SIP revision. Thus, the court held that the purported policy is not in the record on which the court must review EPA’s disapproval under the APA. Although not a factor in its decision, the majority also noted that “other recent EPA action tends to not only undercut the assertion of such a policy but also to give the impression that EPA invented this policy for the sole purpose of disapproving Texas’ proposal.”
Finally, the majority rejected all of the arguments EPA gave for finding the TFPP to be deficient. Among other things, the court concluded that EPA could not identify a single provision in the CAA or EPA’s Minor NSR regulations that requires a state to specify the method of calculating emissions caps or to demonstrate replicability in its SIP or as a condition of approval of a state’s Minor NSR program. Similar to its comments on EPA’s second contention, the majority also noted that EPA appears to have adopted the third test solely for application to the TFPP.
Due to the uncertain status of the TFPP and the risk of federal enforcement, most flexible permit holders requested that the flexible permits be altered to reflect that the authorization meets the air permitting requirements already in the EPA-approved Texas SIP. Thus, EPA succeeded in gutting a Minor NSR permit program that it had wrongly disapproved, but it did not achieve any substantive changes in permit requirements. Although the majority vacated EPA’s disapproval of the TFPP and remanded the matter to the agency, EPA is not likely to act and facilities in Texas are not likely to decide on whether to pursue new flexible permits until after the November election.
Posted on August 29, 2012
The Cross-State Air Pollution Rule (Transport Rule) [76 Fed. Reg. 48208] adopted by EPA in mid-2011 -- requires sources in the eastern U.S. to reduce their emissions substantially. Numerous states and industry groups challenged the rule in the D.C. Circuit, and many of the petitioners asked the court to stay the rule pending litigation. One motions panel of the court stayed the Transport Rule in late 2011, and then a subsequent panel directed that all briefing in the case be completed -- and oral argument be held -- within approximately 100 days after the stay was issued.
That the case was put on such a tight briefing schedule led many litigants to speculate that the court wanted to resolve the case quickly and would issue its decision within 60 days of the April 13, 2012 oral argument. When mid-June came and went with no decision, many of those same litigants then predicted the decision would come by mid-July so as not to interfere with the judges’ summer vacations. In support of their mid-July prediction, they also claimed that the head of EPA’s Air Office, Gina McCarthy, agreed with them. In early July, Ms. McCarthy had indeed told some state regulators that the court would issue its decision on Friday, July 13, but she had quickly added that her prediction should not be taken too seriously because she had been wrongly predicting the imminent issuance of the decision for the past thirty days. Nonetheless, several in the media reported her prediction as gospel, prompting all involved to stay glued to the D.C. Circuit’s website on Friday, July 13.
As one of those waiting for the court to issue its opinion on the Transport Rule, I was reminded of a similar waiting game in which I was involved in 1997. In May of that year, I had argued a case before a three-judge panel in the Fourth Circuit, where I had found one judge to be sympathetic to my argument, one judge to be antagonistic (but nicely so, because this was the Fourth Circuit after all), and the third judge to be a cipher. As soon as oral argument ended, my client started bombarding me daily with the same question: when would the court issue its decision? I couldn’t answer that question (no matter how often I was asked), but I thought retired Fourth Circuit Judge James Marshall Sprouse might have insights into the court’s decision-making process. He had been gracious enough – and patient enough -- to help me prepare for oral argument in my case (and to help me persuade the client to eliminate some of the more bombastic points from the argument).
Gamely consulting his crystal ball and taking into account that the case had been argued so late in the term, Judge Sprouse suggested that (1) if there was no dissent, then the court might issue its decision by the end of July; (2) if one judge dissented, then there might be a delay of another one to two months; and (3) if each of the three judges wrote a separate opinion or if one of the jurists was trying to be Solomon-esque -- finding areas of agreement and areas of disagreement with each of the other two judges on the panel -- then there might not be a decision until well into the fall. Judge Sprouse was spot on in my case: the decision -- which fell into Category 3 -- was issued in late October 1997.
Back to the present now. The D.C. Circuit issued its decision on the Transport Rule on August 21, 2012. In an opinion by Judge Brett Kavanaugh, joined by Judge Thomas Griffith, the court held that the Transport Rule exceeds EPA’s statutory authority in two respects, by (1) requiring upwind states to reduce emissions by more than their own significant contributions to nonattainment in other states, and (2) failing to allow states the initial opportunity to implement the emission reductions required by the Transport Rule. Judge Rogers wrote a stinging dissent.
I leave it to my ACOEL colleague Dave Flannery and his more detailed description of the decision below. I will add only that although Judge Sprouse passed away eight years ago, the timing of the decision was just what he might have predicted.
Posted on August 28, 2012
EPA was handed a setback in its efforts to establish aggressive controls on the energy industry in general, and the electric power industry in particular, when the D.C. Circuit issued its August 21, 2012 decision vacating the Cross-State Air Pollution Rule (CSAPR). EME Homer City Generation LP v. EPA, Case. No. 11-1302.
Significantly, the D.C. Circuit’s order not only vacated and remanded CSAPR, but also directed EPA to continue administering the previously-in-effect Clean Air Interstate Rule (CAIR) pending the promulgation of a valid replacement for CSAPR.
In a 2 to 1 decision, the court ruled that CSAPR exceeded EPA’s authority in two areas:
a. CSAPR impermissibly required upwind states to reduce more than their “significant contribution” to downwind non-attainment; and
b. CSAPR deprived upwind states of the initial opportunity to implement any required emission reductions by immediately imposing a Federal Implementation Plan.
Significantly, the opinion of the court sets forth a roadmap for the development of a CSAPR replacement rule. This is accomplished by the court’s establishing “several red lines that cabin EPA’s authority.” In many cases the court offers specific examples of the types of calculations that EPA would have to make in order to determine permissible emission reductions. These “red lines” and example calculations are summarized below:
1. EPA cannot force an upwind state to reduce more than its own contribution to a downwind state minus what level EPA determines to be insignificant.
Example: If 3 units were set at the level of insignificance and an upwind state’s contribution to nonattainment in a downwind state is 30 units, then the most reduction that could be required of the upwind state would be 27.
2. EPA’s authority to force reductions on upwind states ends at the point where the downwind state achieves attainment.
3. The extent to which an upwind state’s contribution is significant depends on the relative contribution to nonattainment of other upwind states. The obligation to reduce emissions in the upwind states must be allocated “in proportion to the size of their contributions to downwind non-attainment.”
Example 1: Assume that the relevant national ambient air quality standard (NAAQS) is 100 units, that the ambient level of the at-issue pollutant in downwind state A is 150 units, and that state A is contributing 90 units to that overall concentration. Assume also that three upwind states are each contributing 20 units to the total ambient concentration in downwind state A. Under those circumstances, downwind state A is entitled to at most 50 units of relief -- with the 3 upwind states each contributing 16 2/3 units.
Example 2: If the scenario in Example 1 were changed only to the extent that the upwind states contributed 10, 20 and 30 units respectively, the upwind states would be obligated to reduce their contributions by 8 1/3, 16 2/3 and 25 units, respectively.
Example 3: If the air quality measurement in Example 1 was 180 units and downwind state A contributed 120 of those units, with 3 upwind states contributing 20 units each, then downwind state A is entitled to at most 60 units of relief to be distributed proportionately among the upwind states.
4. EPA may consider costs, but only to further lower an individual state’s emission reduction obligation. EPA may do this in a way that benefits some upwind states more than others. The objective of reducing the control obligation of an upwind state would be to prevent exorbitant costs from being imposed on certain upwind states.
5. EPA must ensure that the combined obligations of the various upwind states do not produce more control than necessary for the downwind state to achieve the NAAQS.
Example: If state A reduces 5,000 tons of NOx to achieve its largest downwind emission reduction obligation while state B reduces 2,000 tons for the same purpose, and if EPA modeling then shows that “all downwind non-attainment” would be resolved if the combined reduction of the two states were 10% lower, then EPA would be obligated to reduce the emissions reduction obligation of the upwind states by 10%.
The court’s ultimate holding on this aspect of the CSAPR decision is:
States are obligated to prohibit only those “amounts” of pollution “which will . . . contribute significantly” to downwind attainment problems – and no more. Because the Transport Rule exceeds those limits, and indeed does not really try to meet those requirements, it cannot stand.
Even as EPA considers its next steps in the wake of the decision, states and regulated sources will begin to focus on how to develop and implement a program to address interstate air quality that satisfies the new ground rules that have been established by the court.
Posted on August 7, 2012
On July 30, the United States Court of Appeals for the Fifth Circuit Court of Appeals handed down an opinion finding that EPA was within its authority to approve in part and to disapprove in part the most recent revisions to the state implementation plan (“SIP”) that Texas submitted to EPA in 2006 [Luminant Generation Co. LLC v. EPA, No. 10-60934 (5th Cir. July 20, 2012)]. EPA's action, effective on January 10, 2011, allowed an affirmative defense for unplanned startup, shutdown, and malfunction (“SSM”) events, but it disapproved the portion of the SIP revision providing an affirmative defense against civil penalties for planned SSM events.
Several groups of Environmental Petitioners (including the Environmental Integrity Project, Sierra Club, Environmental Texas Citizen Lobby, Citizens for Environmental Justice, Texas Environmental Justice Advocacy Services, Air Alliance Houston, and Community In-Power and Development Association) challenged EPA’s partial approval of that part of the SIP which created an affirmative defense for unplanned SSM events. The State of Texas and several Industry Petitioners and Intervenors (Luminant Generation Company, Sandow Power Company, Big Brown Power Company, Oak Grove Management Company, Texas Oil & Gas Association, Texas Association of Business, Texas Association of Manufacturers, and Texas Chemical Council) challenged that part of EPA’s action which disapproved the creation of an affirmative defense against civil penalties for planned SSM events.
A three-judge panel of the Fifth Circuit determined that EPA's decision was valid unless "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Applying that standard of review and citing myriad cases upholding the premise that a state is afforded "broad authority to determine the methods and particular control strategies [it] will use to achieve the statutory requirements," including consistency with the Clean Air Act and the attainment and maintenance of NAAQS of the Act, (referenced throughout the opinion as Chevron deference), the court found the EPA's administrative decision-making process had been "consistently formal and deliberative prior to and during its promulgation of final rules under the Act." In particular, the court cited the reasoning EPA set forth in the final rule to explain its decision approving the portion of the state's SIP which "squarely adheres to its past policy guidance" and observed that EPA’s decision was "the result of a formal and deliberative decision-making process." The court also found that the EPA's interpretation of the Clean Air Act was based on a permissible construction of the statute because the agency found: (1) the affirmative defense for unplanned SSM activity was narrowly tailored; (2) the affirmative defense did not interfere with the Act's requirement that a SIP's emission limitations be continuous or with the state's ability to enforce emission limitations; and (3) the affirmative defense did not interfere with any other applicable requirement of the Act, including the attainment of national ambient air quality standards (NAAQS). The court was not persuaded by Environmental Petitioners' arguments, in part because the wording of the affirmative defense excludes all emissions that could "cause or contribute to an exceedance of the NAAQS, PSD increments, or a condition of air pollution" and thereby was not inconsistent with EPA's past policy and guidance, referencing a 1999 Memorandum of Steven A. Herman relating to excess emissions during SSM events.
In evaluating the state’s and Industry Petitioners' arguments, the court – after applying virtually the same analysis and criteria – found that EPA had not been arbitrary or capricious in disapproving an affirmative defense for planned SSM events. In reaching that conclusion, the court relied in large part on the premise that such events and excess emissions from such events were "avoidable." Further, in upholding the disapproval and denying Texas’s and Industry Petitioners’ request for relief, the court observed that EPA's reasons provided for the disapproval "conform to minimal standards of rationality."
Posted on August 2, 2012
On June 14, the Washington Supreme Court heard oral arguments regarding the constitutionality of utilizing the proceeds from a state excise tax on motor vehicle fuel for non-highway related purposes. The tax in question is the Hazardous Substances Tax which went into effect in its current form in 1989 as part of the Model Toxics Control Act and covers the first in-state possession of petroleum products, pesticides, and a number of chemicals, with “possession” defined as “control of”, and “control” as the power to sell or use, or to authorize sale or use.
The tax is currently set at 0.7% of the fair market wholesale value of the substance in question, with 47.1% of the proceeds placed in the State Toxics Control Account and the remaining 52.9% in the Local Toxics Control Account. Those accounts provide funding for contaminated site cleanup and a number of other state and local environmental programs, particularly those relating to waste and toxics controls. The projected tax revenues for fiscal year 2013 are estimated to be $144 million, with more than 80% of those revenues attributable to payments made by in-state petroleum refineries.
According to the pleadings, the plaintiff Automobile United Trades Organization (“AUTO”) had some concerns about the legality of the Hazardous Substance Tax as adopted in 1989, but did not raise an objection at that time because AUTO also believed it was “good to clean up toxins in the environment”. As a result, the pleadings reference an “uneasy peace” that continued in effect until the Washington State Legislature diverted $180 million of the 2009 tax proceeds to the state’s general fund to help balance the state budget, and bills were introduced in both the state house and senate in 2010 to increase the tax rate from 0.7% to 2% and divert very substantial percentages of the additional revenues to the general fund for at least several years thereafter.
In 2010 the AUTO and Tower Energy Group filed a declaratory judgment action with respect to the constitutionality of the Hazardous Substance Tax as applied to motor vehicle fuel, arguing that any proceeds from taxing motor vehicle fuel must be used for highway purposes under the 18th Amendment of the Washington State Constitution (see Article II, Section 40). A lower court dismissed this argument, concluding that the Amendment did not require such use. It also found that the claim was barred by the doctrine of laches.
The 18th Amendment was adopted in 1944 after the state legislature had used gas tax revenues to fund non-highway related projects. It provides that motor vehicle license fees, as well as all excise taxes collected by the State of Washington on the sale, distribution, or use of motor vehicle fuel and all other state revenue intended to be used for highway purposes, must be placed in a special fund to be used exclusively for highway purposes. It also includes a proviso that exempts certain taxes then in existence (vehicle operator license fees, excise taxes imposed on motor vehicles or their use in lieu of a property tax on such vehicles, or fees for certificates of motor vehicle ownership) from its purview, and it states that “this section shall not be construed to include revenue from general or special taxes or excises not levied primarily for highway purposes”.
The Washington State Attorney General argues that the proviso language just quoted limits the scope of the 18th Amendment to the previously noted gas tax and any other motor vehicle fuel excise tax specifically levied for highway purposes. Thus, the 18th Amendment would not apply to the Hazardous Substance Tax. The plaintiffs disagree, noting the Amendment’s reference to “all excise taxes”, and that the State Attorney General’s interpretation would dismantle its anti-diversionary policy. As made clear during oral argument, the plaintiffs interpret the quoted language as a catch-all provision intended to cover any tax levies in existence at the time of the Amendment’s passage that were similar to the two then existing taxes (a motor vehicle excise tax and a business and occupation tax) exempted from its purview.
Given the questions raised during oral argument, it appears that the Washington Supreme Court’s decision will address the scope of the 18th Amendment and its relationship to the Model Toxics Control Act. Regardless of the outcome, the sequence of events does bring to mind that old adage about sleeping dogs.
Posted on July 30, 2012
Based on a doctrine going back to Roman times – the “Public Trust Doctrine,” a consortium of national and state environmental organizations have brought a series of lawsuits, naming minors as plaintiffs, seeking declarations that federal and state governments have an independent, fiduciary responsibility to protect the quality of air as a public natural resource and to do so by regulating GHGs. Though generally unsuccessful, they have obtained two recent rulings that have lent some credence to their efforts. These rulings raise fundamental questions regarding the bases for government regulation to protect the environment.
On July 9, 2012, a Travis County district court judge, in response to the plea to the jurisdiction of the Defendant Texas Commission on Environmental Quality (TCEQ), found that the agency’s “conclusion that the public trust doctrine is exclusively limited to the conservation of water is legally invalid.” Bonser-Lain v. Texas Commission on Environmental Quality, Case No. D-1-GN-11-002194 (201st Dist. Ct., Travis County, Tex.). According to the court, the doctrine includes all the natural resources of the state. The court, however, also found that the agency’s refusal to exercise its authority, based on current litigation by TCEQ against EPA regarding the ability of EPA to regulate GHGs, was a reasonable exercise of discretion. The plaintiffs had filed a petition for rulemaking with the agency, which the agency had denied, that would have required, among other things, that GHG emissions from fossil fuels be frozen at 2012 levels and that a plan be developed to implement the corresponding reductions.
On June 29, 2012, a New Mexico district court judge, without much explanation, denied in part that state’s motion to dismiss a similar lawsuit, which sought a declaration that the state had failed to comply with its public trust obligation to protect the atmosphere. Sanders-Reed v. Martinez, Case No. D-101-CV-2011-01514 (Santa Fe County First Judicial District Court, NM). The court’s ruling allowed the law suit to go forward.
This series of suits and the decisions in these two cases raise fundamental questions about the bases for governmental regulation to protect the environment. First, should the atmosphere be considered a public trust resource? Although air is included in the definition of a natural resource under Superfund, it is different than other natural resources, e.g., land, fish, wildlife, biota, water, groundwater, and drinking water supplies, in that it is not something that can be captured and conserved or its use managed. Even assuming air is properly categorized as a public trust resource, should an independent common law duty be imposed on states requiring them to take action to protect it? As a practical matter, all states do have extensive regulatory schemes to protect air quality. What additional benefit does the imposition of a common law duty create? If a duty is to be imposed, should it be translated into specific requirements to compel a specific result, and, if so, based on what guidance. Are the specifics of air quality protection better left to federal and state legislatures and the agencies that implement their legislation? Finally, with regard to GHG emissions, in addition to concerns about identifying appropriate requirements, are they better managed on the federal and international level because, unlike traditional air pollutants, their impact is global rather than regional? These questions all appear to be political ones, better handled in forums other than the courts.
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Posted on July 23, 2012
The Supreme Court’s recent decision on the Patient Protection and Affordable Care Act (Act) caused equal parts celebration and outrage by upholding the constitutionality of the individual mandate as a tax. Environmental lawyers, however, are focusing on other, less prominent aspects of the decision, which could have implications for the constitutionality of environmental laws. These aspects are: (1) the conclusion of a bare majority of the Court that the Act’s individual mandate was not within Congress’ Commerce Power; (2) the holding -- concurred in by seven justices -- that the withholding of all Medicaid funds from states refusing to expand their coverage as required by the Act exceeded Congress’ power under the Spending Clause and ran afoul of the anti-commandeering principle of the Tenth Amendment.
The Court’s Commerce Clause ruling addressed the individual mandate’s requirement that those not participating in the health insurance market purchase health insurance unless covered by an exclusion. In their opinions on this issue, Chief Justice Roberts and Justices Scalia, Kennedy, Thomas and Alito agreed that failure to participate in the health insurance market did not warrant regulation under the Commerce Clause simply because that inactivity had an effect on the premiums charged to others buying health insurance. As Chief Justice Roberts put it: “The Framers gave Congress the power to regulate commerce, not to compel it.” Slip op. at 24 (emphasis in original). This feature of the Court’s ruling may have no precise analogue in environmental statutes: typically environmental statutes prohibit or restrict activity with an arguable relation to interstate commerce rather than compelling such activity. But certainly environmental lawyers will be searching for one.
More generally, the five justices in the majority on this issue made clear their resolve to extend the restrictive view of the Commerce Power announced in cases such as U.S. v. Lopez and U.S. v. Morrison and to cabin decisions suggesting a more generous view of that power, such as Wickard v. Filburn and Gonzales v. Raich. This resolve could affect future Commerce Clause rulings on the permissible scope of the Endangered Species Act, the Clean Water Act, and other environmental statutes: interpretations of the Clean Water Act influenced by restrictive commerce clause decisions have already narrowed its scope.
The Court’s holding on the Medicaid expansion provision could have more direct implications for environmental statutes, particularly for cooperative federalism arrangements under statutes such as the Clean Air Act that threaten to withhold federal funds if states do not agree to implement prescribed programs. The expansion provision required states to expand coverage to low income individuals as well as make other changes; states that failed to undertake this expansion were threatened with loss of all federal Medicaid funds. Seven justices agreed that the choice the Act offered to the states – expand or forfeit all Medicaid funds – was not a choice at all, but coercion and therefore impermissible. Their views appear in two opinions, one by Chief Justice Roberts, joined by Justices Breyer and Kagan, and another by Justices Scalia, Kennedy, Thomas, and Alito.
While coming to the same conclusion on this issue, the two opinions were not entirely aligned on the features of the case that justified this conclusion, and neither drew clear lines for application in future cases. Both opinions stressed the relative size of the forfeiture – all of Medicaid funds, which equaled nearly 22% of all state expenditures. Both noted that the penalty upheld in South Dakota v. Dole -- withholding of 5% of federal-aid highway funds from states that failed to raise their drinking age to 21 – amounted to less than half of one percent of South Dakota’s budget. But neither offered to fix the outermost line: too much is somewhere between 0.5 and 22%. In a theme not picked up by the others, Justice Roberts’ opinion also argued that the expansion represented a new program, which impermissibly used the funds provided through an existing program (pre-expansion Medicaid) to leverage its acceptance by the states. How the courts develop these different strains of analysis in future cases and what lines of demarcation emerge will determine the significance of threats to existing or future environmental law provisions that rely on the Spending Power.
Posted on June 8, 2012
On June 6, Oregon Governor John Kitzhaber released his draft 10-Year Energy Action Plan. Written comments on the draft plan may be submitted to email@example.com and accepted through July 31. Three public workshops will be held at times and places to be announced.
The plan consists of a broad range of goals for the state government, private sector and public-private collaboration to address what the Governor calls the:
fundamental challenge—that is, to develop a comprehensive energy strategy that meets the state’s carbon reduction, energy conservation and renewable energy goals and timetables, and that balances complex needs– including affordability and reliability – while enhancing Oregon’s economic objectives.
The plan seeks to build off of existing programs and redirect funding to advance its three central strategies, the details of which are to be developed through a lot of public participation:
1. Maximizing energy efficiency and conservation to meet 100 percent of new electric load growth. The plan is unclear as to when this goal would be achieved, but refers to the Northwest Power and Conservation Council’s goal of using conservation to meet new electric demand by 2020. Key to implementing this goal is creation of a new State Building Innovation Lab. The Lab would focus initially on improving efficiency in four million square feet of state office space and then using the Lab as a model and resource for others.
2. Enhancing clean energy infrastructure development by removing finance and regulatory barriers. Streamlining the siting process, including use of a strong project manager to help navigate state regulatory requirements, would bring certainty to developers of facilities. Also, conducting planning on a “landscape level” would help to ensure protection of natural resources.
3. Accelerating the market transition to a more efficient, cleaner transportation system. Central to this goal, over the next ten years the plan would convert 20% of large fleets to electric, compressed or liquefied natural gas or other alternative fuel vehicles.
The plan is self-congratulatory on various initiatives already in place and reads like a compendium of good ideas on how to secure a clean energy future. So ambitious a plan requires continual commitment over a long period of time—at the highest levels of state government—to keep it from becoming yet another plan on the shelf. Such sustained effort of course is not assured.
In the early 1980s I was chair of the City of Portland Energy Commission whose job it was to further develop the City’s Energy Conservation Policy, which at the time was seen as cutting edge. Then as now, energy planning was a hot topic for policy makers. Champions arise to push forward change. In those days it was Mayor Neil Goldschmidt and Commissioner Mike Lindberg, today it is Governor Kitzhaber. While Portland has made progress, many of the elements of the Governor’s plan echo what we were talking about back then. I hope that the Governor builds a governance platform to continue work on the plan after he departs the scene.
Implementation of the plan depends on new legislation and regulatory reform among several state and local agencies. Whether the plan can develop the consensus necessary to achieve such change will depend on how the details emerge over the coming months and the enthusiasm the plan can garner.
Posted on July 18, 2008
Alabama joined a number of other states dealing with environmental covenants when it enacted the Alabama Uniform Environmental Covenants Act, effective January 1, 2008. Ala. Code§35-19-1 et seq. (“Act”).The Alabama Department of Environmental Management (“ADEM”) has been working on implementing regulations, which are expected to mimic the Act and be released in the next few months. ADEM will also charge a fee for implementation and oversight of the program and covenants.
For those not familiar with the concept, in many situations environmental contamination cannot be completely addressed by total removal (clean closure) of the offending soil or remediation of the groundwater to a level allowed for unrestricted use. Some amount or concentration of contamination must be left behind. In those situations, EPA and ADEM will require additional measures, such as land use controls or continuing monitoring and maintenance. The idea is that if property has contamination on it unsuitable for a residential housing development or the construction of a school, those interested in buying or developing the property are put on notice of the limit of the property to commercial or industrial use. These controls and obligations are often embodied in deed restrictions or recorded declarations which could be terminated by various common law mechanisms; therefore, the Uniform Environmental Covenants Act was created to provide a mechanism by which environmental covenants and land use restrictions survive the potential fatal operations of the common law. States were encouraged to adopt the uniform act, and Alabama has now done so.
An “Environmental Covenant” is defined as “[a] servitude arising under an environmental response project that imposes activity and use limitations.” Ala. Code § 35-19-2(5). Such “environmental response projects” can arise under state or federal hazardous waste cleanup laws, such as CERCLA, RCRA, or Alabama’s version of brownfields.
Before the Act was passed, ADEM still required a restrictive covenant or deed of some kind when contaminants were being left behind, but it was never sure what might happen to the restriction upon a subsequent sale of the property because it had no enforcement authority. If the property changed hands several times, there was no manner by which ADEM could require the Seller and the Buyer to maintain that restriction as a part of the sale. With the Act, there is a “holder” of the covenant which can enforce the covenant, and ADEM has enforcement power even if it is not a holder. A holder can be any person, a governmental agency (such as ADEM), an environmental group, or a unit of local government. The interest of a holder is considered to be an interest in real property; however, the Department’s interest in a covenant, unless it becomes a holder, will not be considered to be an interest in real property. There are certain elements that each covenant must meet in order to be effective, and those are clearly set out in the Act. Importantly, each environmental covenant requires at least one holder, and a holder can be the fee simple owner and/or the grantor of the covenant.
If, at the time an environmental covenant is recorded or registered, the Act does not abrogate the common-law doctrine of “first in time, first in right” as it relates to prior and valid property interests. If there are other interests in the subject real property with priority over the covenant, unless the prior interest in the property is made subordinate to the covenant by the owner of such interest, then the prior interest is not affected.
The grantor of an environmental covenant has a statutory responsibility to notify certain persons or entities of the covenant. Specifically, the grantor must provide a copy of the covenant to (i) each person signing the covenant; (ii) each person with a “recorded interest” in the subject property; (iii) each tenant or person in possession of the subject property; and (iv) each county or municipality in which the real property is located (normally the county or municipal office where deeds are recorded, such as the probate office). You also have the option of filing the covenant with ADEM (it keeps a registry), and then filing a notice with the county probate office in lieu of the entire covenant.
Environmental covenants are perpetual although there are exceptions set out in the Act, such as if the covenant itself has a specified length of time, a condition allowing termination is satisfied, or a court is petitioned for its modification. Of course, one always has the option of conducting additional remediation of the property to reach unrestricted use standards, which would then allow for termination of the covenant.
The author wishes to acknowledge the contributions made to this article by Bryan Nichols of Maynard, Cooper & Gale, P.C.
Posted on June 9, 2008
The Connecticut Department of Environmental Protection (“DEP”) has submitted for legislative approval regulations to control carbon dioxide (CO2) emissions and establish a CO2 emissions credit program.[i] The controversial regulations are designed to fulfill Connecticut’s commitment to the Regional Greenhouse Gas Initiative (“RGGI”), which establishes a CO2 emissions cap and trade program for power plants in nine Northeastern and Mid-Atlantic states.[ii] RGGI is designed to be a model for a broader, national market-driven program to establish a market value for greenhouse gas (“GHG”) emissions to provide incentives for reducing GHG emissions over the long term.
Carbon dioxide is the most significant GHG by volume. Unlike many other pollutants emitted by the combustion of fossil fuels, there are no commercially available control technologies to limit CO2 emissions. Therefore, programs to reduce GHG emissions focus on improving energy efficiency, reducing the use of fossil fuels through conservation efforts, and using renewable and alternative fuels.
[i] Proposed Conn. Agencies Regs. § 22a-174-31 and 31a.
[ii] Information about RGGI can be found at http://rggi.org.
The regulations impose a tonnage cap on CO2 emissions from large fossil fuel-fired electricity generating units in Connecticut. The initial tonnage cap is 10.7 million tons. The regulations seek to stabilize CO2 emissions from these units in 2009-2014, then reduce those emissions by 2.5% per year in 2015-2018 from the electric utility sector. The regulations allow allocation of emissions offsets to be used for compliance where real reduction of greenhouse gases are achieved outside the regulated utility sector. They require auctioning of CO2 allowances and the use of auction proceeds for consumer benefit or strategic energy purposes as required by Conn. Gen. Stat. § 22a-200c.Finally, the regulations require a demonstration of compliance every three years.
The regulations must be approved by the Legislative Regulations Review Committee of the General Assembly before they can become effective. Significant controversy surrounds several of the key provisions which have been opposed by companies with electric generating facilities in the state.
One concern is that the CO2 allowance costs will push the price of electricity up for consumers, despite industry investments in energy efficiency. Critics of the regulation advocate direct per kilowatt-hour rate relief, which is not provided in the proposed regulations.
A second problem for the electric generating companies is the Department’s refusal to limit auction participation to RGGI regulated sources – the owners and operators of fossil-fueled electric generating facilities. DEP fears that closed auctions might result in lower prices for carbon allowances, due to lessened competition. However, with no cap on auction allowance prices, the regulated entities fear that financial speculators may drive up the price of this new commodity. There is also a significant concern that environmental organizations could purchase these allowances and “retire” them by taking them off the market, driving up the price of the remaining carbon allowances and possibly creating a shortage. Historical data suggests that generators in Connecticut may need 94% of the available allowances in 2009 in order to operate at levels expected to meet demand.
Another significant issue is that the proposed Connecticut regulations provide no cap or ceiling on the auction price for the CO2 allowances. DEP estimates that the allowance price in 2009 will be approximately $2 per ton, increasing to $5 per ton in 2024. The allowance price will have a direct impact on electric rates.
The anticipated rate impact prompted Maine, New Hampshire, and New Jersey to establish cap mechanisms to protect consumers. Maine established a limit of $5 per ton, the highest price estimated by Connecticut DEP, beyond which auction proceeds would be applied to kilowatt-hour rebates to ratepayers. New Hampshire is establishing a $6 per ton rate cap, above which funds would be rebated to consumers, similar to the Maine auction provisions. New Jersey has mandated that if two consecutive regional auctions result in allowance prices above $7 per ton, an action plan must be developed for ratepayer relief.
Finally, the regulations provide that DEP will retain 7.5% of the funds realized from the auctions for administrative costs and programs to mitigate the impacts of climate change, despite the fact that the agency concedes that it only needs a quarter of this retainage to cover the administrative costs of the program.
The proposed regulations were submitted to the Regulations Review Committee on June 6, 2008. The Committee has 65 days to approve, recommend modifications, or reject the proposed regulations. Whether the regulations will be in place before the first RGGI auction scheduled in September remains to be seen.
Gregory A. Sharp
Murtha Cullina LLP