E2 Law Blog : Environmental Lawyers & Attorneys : Greenberg Traurig Law Firm : Climate Change, Energy Legislation

From Joseph Z. Fleming at GT Miami:

Whether there is global warming, climate change, or not, other nations are increasingly taking action to reduce the “carbon” footprint in a manner that will impose an ever-increasing footprint on the American workplace. An example recently occurred with the E.U.’s determination that U.S. carriers must comply with E.U. emissions reductions or, in the alternative, pay fines which could add up to billions of dollars. The United States has officially complained about this policy. The outcome is not final.  

The dispute may be a harbinger of an increasing trend to impose restrictions related to climate change, which may be faced by American employers. In addition to this newly reported development, recent reports (see here and here) have confirmed that the Foreign Trade Agreements proposed by the United States with other nations increasingly contain not only labor but environmental standards, some of which are stricter than those in the United States. 

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As mentioned earlier, the United States Supreme Court, in AEP v. Connecticut, No. 10-174, had before it the issue of whether state attorneys general or environmental groups may sue owners of fossil-fuel-fired power plants under the federal common law of public nuisance for the plants' alleged contribution to climate change.  On June 20, the Supreme Court issued its opinion, which by a vote of 8-0 (Sotomayor, J. recused) found the Clean Air Act displaced any right to bring a public nuisance claim.

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From Thomas Sheehy of GT Sacramento:

The Global Warming Solutions Act of 2006 (AB 32) established the goal of reducing greenhouse gas emissions (GHGs) statewide to 1990 levels by the year 2020 and charged the California Air Resources Board (CARB) with monitoring and regulating the state's sources of GHGs. In December of 2010, a lawsuit was filed against CARB alleging that the board failed to follow statutory requirements of AB 32 and the California Environmental Quality Act (CEQA) in the development of CARB’s proposed cap-and-trade regulation. In its statement of decision, the lower court found that, because CARB failed to adequately describe and analyze cap-and-trade alternatives, it failed to proceed in the manner prescribed by law. In its final ruling, the court enjoined CARB from engaging in any cap-and-trade-related project activity until CARB has come into complete compliance with CEQA. CARB has stated that it is currently conducting further analysis, as required by the courts, but that it intends to file an appeal. CARB intends to proceed with the development of its cap-and-trade program during the appeal process.

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From Stephen C. Jones of GT Philadelphia:

The Western Climate Initiative (WCI) is a consortium of states and Canadian provinces which, as of 2012, are supposed to initiate a regional greenhouse gas cap and trade program.  Given that the proposed Midwestern Greenhouse Gas Reduction Accord seems to be going nowhere, WCI would be the only US cap and trade program other than the Northeast/Mid-Atlantic's Regional Greenhouse Gas Initiative (RGGI), and the only such program that attempts to cover all segments of the economy.  Arizona and several other states have indicated over the last year or two that they will not be ready to participate.  This has left only two states, California and New Mexico, that were making any significant progress toward participating in WCI.  Last week, New Mexico Governor Susana Martinez sent a strong signal that New Mexico is reconsidering its participation.  Citing their "anti-business stance," Governor Martinez has dismissed all members of the state's Environmental Improvement Board that cast votes approving New Mexico's cap and trade regulations.  Whether the next step will be the repeal of the regulations is not clear, but it is appearing more and more likely that California, and perhaps a few Canadian provinces, will be the only members of WCI.

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From Stephen C. Jones of GT Philadelphia:

The Environmental Protection Agency (EPA) took another dramatic step toward comprehensive regulation of greenhouse gases (GHGs) last week when it committed to issue sector-wide New Source Performance Standards (NSPS) to control GHG emissions from fossil-fuel based power plants and petroleum refineries.  Responsible for almost 40% of GHGs emitted in the United States, application of the new NSPS to these two industries is expected to have a significant impact on GHG emissions in this country.  While Congressional efforts over the past few years to control GHGs through comprehensive cap and trade programs generated much public discourse and awareness, federal, state, regional, and local governments and regulatory agencies have been working behind the scenes to limit GHG emissions, largely through regulation.  To the surprise of many, because of these regulatory efforts, the death of federal cap and trade in Congress has not meant the end of GHG regulation in the United States.  Instead, it is the beginning of what promises to become a comprehensive, mandatory regulatory scheme, involving all levels of government, that within the next three to five years will control GHGs in all sectors of the economy.  Instead of the flexible, market-based controls contemplated by federal cap and trade, however, businesses will face more stringent, and likely more costly, compulsory mandates requiring reductions in GHG emissions.

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Recently, a district judge ordered the Department of the Interior to reconsider its listing of polar bears as "threatened" rather than "endangered" under the Endangered Species Act.  In re Polar Bear Endangered Species Act Listing and Section 4(d) Rule Litigation, No. 1:08-mc-764-EGS (D.D.C. Nov. 4, 2010).  The polar bear faces a threat because of the disappearance of sea ice, which the government attributes to climate change.  Under the listing decision, if the polar bear is "threatened," one cannot sue emitters of greenhouse gases for violations of the Endangered Species Act, 16 U.S.C. § 1531ff.  See 73 Fed. Reg. 28,212 (May 15, 2008).  That would not be true if the polar bear were classified as "endangered."

The specific question addressed by Judge Sullivan was whether the government properly relied on the "plain meaning" of the term to decide that the polar bear was not "endangered."  The statute contains ambiguities that the government has to address.  The court remanded the rule for the limited purpose of providing that additional explanation, and gave the government a deadline of December 23.  He will then consider the substance of the challenges to the rationale for the "threatened" listing.

On November 3, Karl Rove is reported to have announced to a large meeting of the natural gas industry that "climate is gone."  Comprehensive federal climate change legislation may be "gone," but the risk is not.  As we have previously commented, greenhouse gas emissions now face regulation under the Clean Air Act, and that is an awkward, expensive, and uncertain tool for the purpose.  As In re Polar Bear suggests, the litigation risk to greenhouse gas emitters also persists, and on relatively indirect theories

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Opposition from Republican and some Democratic senators, spurred on by industry groups, has successfully forestalled (if not killed, per our prior blog post) passage of comprehensive climate change legislation. However, as Greenberg Traurig shareholder David Mandelbaum notes in his monthly column for The Legal Intelligencer, EPA and some states (notably Pennsylvania) will be regulating greenhouse gas emissions, perhaps awkwardly, under the Clean Air Act and state analogs. Query whether we are better off driving nails with baseball bats or hammers?

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Stanford University physicist and Nobel Prize Winner Robert Laughlin suggests that the best thing governments can do about climate change is to simply chill out.  In an article titled "What The Earth Knows" appearing in the Summer 2010 issue of The American Scholar, Prof. Laughlin says “Common sense tells us that damaging a thing as old as [Earth] is somewhat easier to imagine than it is to accomplish – like invading Russia.” He notes  “The geologic record suggests that climate ought not to concern us too much when we gaze into the future, not because it’s unimportant but because it’s beyond our power to control.”   He recommends instead directing our focus and our money toward more traditional and much less glamorous conservation efforts - habitat preservation, for example.

The policy implications of Laughlin's argument are substantial and obvious.  If Laughlin is right about the science - and his reasoning is grounded in very basic and well-accepted geology -then the entire basis for EPA's claim of right to regulate CO2 emissions falls away.  At a minimum, Laughlin's argument suggests that those in Congress and EPA who rely on anthropogenic climate change as the justification for “remaking” our economy and imposing strict government regulation over consumption, production and transportation via cap and trade allowances, CO2 permits, and so forth, really ought to take a step back and slow down.    

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One of the most significant obstacles to deployment of clean energy in the U.S. is opposition litigation filed by “environmentalists.”  For example, a support group for disgruntled government bureaucrats called “Public Employees for Environmental Responsibility” (PEER) has filed suit against the federal agencies that, after nine years of review, granted permits for a 130-turbine wind farm proposed for Nantucket Sound. The suit, filed in U.S. District Court for the District of Columbia, alleges violations of the Endangered Species Act, the Migratory Bird Treaty Act, and NEPA. 

This perverse case demonstrates that the federal permit and review process is horribly broken.  To begin with, nine years of government review is a prima facie disgrace.  And, allowing lawsuits, whether by disgruntled “public employees” in all of their arrogance and disregard for the taxpayers (check out the PEER website - first you'll laugh, then you'll cry), or by anyone else, to delay an approved clean energy facility is irrational and indefensible.  If Congress is serious about promoting clean energy, then it must make permit reform a top priority.    

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"Climate change" legislation such as the Kerry-Lieberman Bill can be passed only if the base alliance between environmental activists (through their amen corner of politicians), invested scientists, and credulous media holds firm.  However, this Newsweek article, titled "Uncertain Science", suggests that the media may be cracking.

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From Greg Casas, GT Houston.

As the Senate turns to an energy/cap and trade/tax bill to reduce GHG emissions, the pundits are turning to the question of whether cap and trade (a) will be enacted and/or (b) reduce GHGs. The Huffington Post’s Robert Stavins links the demise of cap and trade to the failing economy, to an endemic lack of faith in markets, and to the fact that cap and trade was the leading proposal to limit and reduce greenhouse gas emissions. In other words, cap and trade has been attacked by Republicans and coal-state Democrats because it was supported by the everyone else. 

The problem with this is that not “everyone else” supports cap and trade. For example, Annie Leonard launches a hyperbolic attack on cap and trade (e.g. cap and "giveaway" was designed by Enron alumni and Goldman Sachs, and is akin to the pyramid scheme of Bernie Madoff), and misinformation about how markets actually work .    According to Leonard, cap and trade is bad, can never work and will be abused by big business to make money and continue to pollute. 

Leonard is not entirely wrong. Improper cap and trade programs accomplish nothing. However, Leonard substitutes invective for analysis. Her solution is to slap carbon fees on “polluters” – neglecting to mention that these “fees” will be paid by consumers – and then sending the money overseas to pay our "ecological debt." Her approach calls for severe regulation, which even she admits will be "painful," to reduce emissions.

A recent MIT report, offhandedly and wrongly cited by Leonard, demonstrates the fallacy of her approach by concluding proper cap and trade systems can reduce GHGs without significant economic impact.  MIT assumes free allocations of allowances might be necessary at the outset, but that allowances will be auctioned as the system matures. Further, allowances must be created based upon realistic expectations for manufacturing and energy production. Overestimating the need will result in no incentive to reduce emissions, or worse, the misuse of unused allowances, as in Hungary. Underestimating need, on the other hand, will result in skyrocketing prices and in fact tank the economy as critics warn. 

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Texas has joined the climate change "Data Wars".

 The gravamen of the petition is:

EPA’s Administrator…outsourced the actual scientific study, as well as her required review of the scientific literature necessary to [determine endangerment and]…relied primarily on the conclusions of outside organizations, particularly the United Nations International Panel on Climate Change (“IPCC”).   EPA’s reliance on the IPCC’s assessment to make a decision of this magnitude is not legally supported. Since the Endangerment Finding’s public comment period ended in June, 2009, troubling revelations about the conduct, objectivity, reliability, and propriety of the IPCC’s processes, assessments, and contributors have become public. Previously private email exchanges among top IPCC climatologists reveal an entrenched group of  activists focused less on reaching an objective scientific conclusion than on achieving their desired outcome. These scientists worked to prevent contravening studies from being published, colluded to hide research flaws, and collaborated to obstruct the public’s legal right to public information under open records laws.

Real Climate defends the IPCC from attack asserting:

[T]he IPCC assessment reports reflect the state of scientific knowledge very well. There have been a few isolated errors, and these have been acknowledged and corrected. What is seriously amiss is something else: the public perception of the IPCC, and of climate science in general, has been massively distorted by the recent media storm. All of these various “gates” – Climategate, Amazongate, Seagate, Africagate, etc., do not represent scandals of the IPCC or of climate science. Rather, they are the embarrassing battle-cries of a media scandal, in which a few journalists have misled the public with grossly overblown or entirely fabricated pseudogates, and many others have naively and willingly followed along without seeing through the scam.

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Special thanks to John S. "Chip" Rainey, a shareholder in GT's Austin, Texas office, for this post.

Although cap and trade legislation is stalled, the SEC has determined public companies are nonetheless required to consider "climate change" disclosures in their public filings. In a 3-2 party line vote, the SEC adopted a “Guidance Regarding Disclosures Related To Climate Change.”   Notably, the guidance requires reporting companies to consider both “reputational risks” and the "impact of physical events from climate change."   Click here for GT’s in-depth Alert and analysis.

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The informative Texas Energy and Environmental Blog reports "At a briefing this morning with reporters from The Dallas Morning Newsand other outlets, White House senior advisor David Axelrod didn't list climate change as a top priority for 2010. (The list basically consisted of finding ways to create jobs and passing a major financial regulation bill.)" and asks "is climate change is still a priority for Team Obama?"

Well, it is, but not through legislation.  Instead, the Administration is acting by expanding Federal agency power and control.  For example, at the January 20 meeting of the US Conference of Mayors, EPA Administrator Lisa Jackson again made it clear EPA intends to control local land use for "sustainability," as we discussed here.  

What's happening in Congress is and probably always has been little more than a distraction to the Administration.  The real action is in the Federal bureaucracy, but almost no one is paying attention.   Team Obama wants "transformative change" to the economy, and has opted for agency rules over legislation to avoid the "distractions" of the legislative process - i.e., popular opposition (the Landrieu (D-La.)/Murkowski (R-Alaska) bipartisan effort to block EPA from regulating greenhouse gases under the Clean Air Act, health care, etc.)  Republican Scott Brown's stunning election will encourage Team Obama to accelerate its efforts on the agency front. They know rules and guidance once issued almost never die. 

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There is an old saying that watching how sausage is made, or legislation is enacted, will turn even the strongest of stomachs. 

For a sense of what's happening with climate change bill lobbying, check out Chris Horner's post at National Review Online titled "Little Green Men and Their ‘Indispensible’ Big Green Lobbyists" here.

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North Dakota's member of the House of Representatives, Democrat Earl Pomeroy, has introduced H.R. 4396, the "Save Our Energy Jobs Act", to prohibit EPA from regulating CO2.  

The Bill proposes to amend Section 302(g) of the Clean Air Act (42 U.S.C. 7602(g)) to read "The term `air pollutant' shall not include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, or sulfur hexafluoride."   It also contains a "sense of Congress" provision providing (1) Congress did not intend to regulate greenhouse gases under the Clean Air Act.  (2) EPA should not regulate greenhouse gas emissions without explicit authority to do so. (3) GHG rules will significantly affect nearly all aspects of the US economy and should not be left to administrative rulemaking absent congressional action.  (4) Comprehensive GHG regulations must only be enacted--(A) at the direction of Congress; and (B) if Congress specifically intends such regulations to be implemented.

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The Southeastern Legal Foundation has filed a Petition for Reconsideration of the EPA's endangerment determination due to Climategate.  Although EPA likely will reject the Petition, it makes for interesting reading and provides a good foundation for future litigation.

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Greg Casas on cap and trade here.   Well worth your time.

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So, in the end, was the UN Copenhagen climate summit  nothing more than a good party  and a massive waste of hot air?  And what now for US businesses and consumers?  

It is, frankly, far too early to evaluate the potential long-term impact (or lack thereof) of the Copenhagen Accord.  It is evident the combination of a massive recession and concerns regarding the science used to justify stringent CO2 controls are having a legislative impact.  And it certainly seems carbon traders took a hit because Copenhagen is widely perceived to have been a bust.   But in the final analysis, it is EPA's endangerment finding, and not the Copenhagen Accord, that matters most for US businesses, consumers, and politicians. 

Here's why:  EPA's endangerment finding effectively triggers significant Clean Air Act regulatory requirements, and thereby places the fate of US businesses and consumers in the hands of the federal courts.  Absent Congressional action taking CO2 regulation away from EPA (and right now passage of climate change or energy policy legislation taking ownership of the CO2 issues is unlikely due to splits in the Democratic Party) there will be a muti-year torrent of litigation from environmentalists, business groups, and everyone in between challenging pretty much everything EPA chooses to do (or not do).  This means, in turn, that the courts will effectively make or break US energy policy and thereby shape the future of the US economy.  

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Joe R. Reeder is a 1970 West Point graduate, an Army Ranger, the 14th Undersecretary of the Army (Clinton Administration), and the past Chairman of the Panama Canal Commission's Board of Directors, among other things.  In a recent speech before dignitaries, officials, and industry leaders at a plenary session of the Watec 09 international energy and environmental conference and exhibition in Tel Aviv, Israel Mr. Reeder explained the U.S. national security imperative of clean energy.  Based on Lawrence Livermore Laboratory research, Reeder called for a dual program of advanced research and practical, incremental measures, including federal, state, and local legal reforms to speed development and deployment of an efficient advanced electrical grid and alternative energy systems, an open fuel standard for cars and trucks, and a full bore commitment to nuclear power.  Reeder used Patton's Third Army march through France during 1944 and the Arab oil embargo of 1973 to drive home the strategic importance of secure and reliable energy supply and the crippling consequences of dependency on foreign oil.

What with climate change legislation bogged down in the Senate, the growing scandal over the apparent manipulation and misrepresentation of data by pro-regulatory scientists dubbed "Climategate", and apparent public scepticism about the entire issue, perhaps it is time for clean energy advocates to stop worrying about "saving the world" and instead to start focusing on what's good for America. Asking "What Would Patton Do?" might be a good start indeed.  

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