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

From K.B. Battaglini, GT Houston.

The EPA, alleging that Texas' 16-year-old pollution permitting program does not comply with the Federal Clean Air Act, has issued a Final Rule "disapproving revisions to the SIP...that relate to the State's Flexible Permits Program." The program, which permits companies to combine emissions from multiple sources under a single facility cap instead of imposing specific emissions limits for each individual polluting source, supposedly damages "public health and the environment by allowing companies to avoid clean air requirements." The disapproval of the flexible permits program affects the existing permits of 125 or more industrial facilities in Texas.  In turn, Texas has sued the EPA, asking the Fifth Circuit Court of Appeals to review the EPA's action. 

The Texas Commission on Environmental Quality, the state regulatory authority, says its program not only complies with the Clean Air Act, but that it also has contributed to improved air quality in Texas.  On June 16, the TCEQ had submitted proposed revisions to its flexible permitting program in an attempt to work with the federal government.   According to TCEQ Chairman Bryan Shaw, the proposed revisions were not considered by the EPA in issuing the Final Rule.  Texas Governor Rick Perry blasted the action, calling it "irresponsible and heavy-handed." Perry, believing that the EPA is blinded by an activist agenda, vowed to continue to fight "this federal takeover of a successful state program."

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The Senate has voted 47-53 to reject a resolution introduced by Sen. Lisa Murkowski  (S.J. Res. 26) to block EPA regulation of greenhouse gases.  Every Senate Republican, and six Democrats, supported the Resolution, which would have effectively killed EPA's efforts to promulgate and implement its new GHG regulations.  The Obama Administration, supported by environmentalists and business who stand to profit from carbon trading and carbon controls, lobbied hard to defeat the Resolution to preserve EPA's power and support its aggressive regulatory agenda and to increase the pressure on Congress to pass a cap and trade bill. 

You should expect to see the following: (1) The EPA's aggressive regulations will be a major campaign issue during the upcoming Congressional elections.  The opponents' ad message may likely be  "unelected bureaucrats are killing jobs and crippling the economy without improving the environment".  (2) More pressure from the Administration on one or two wavering Republicans to break a potential filibuster and thus to pass cap and trade.  The message will be cap and trade, plus the other incentives in Kerry-Lieberman, are the last best chance "to save the economy from EPA."   

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This report sheds light on EPA's current thinking regarding the environmental risks associated with natural gas extraction in the Marcellus Shale, described by EPA as "the most expansive shale gas play in the U.S."   EPA's primary concerns seem to be disposal of the wastewater from hydraulic fracturing used to extract natural gas and disposal of potentially radioactive waste generated during the extraction process.  According to EPA,  "shales contain naturally occurring radioactive material (NORM)...The Marcellus Shale is considered to have elevated levels of  NORM."

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The EPA has just issued a Federal Register notice stating it will deny Confidential Business Information (CBI) claims for the identity of chemicals in health and safety studies filed under the Toxic Substances Control Act (TSCA), unless the chemical identity explicitly contains “process information” or discloses “mixture information.”  This follows on EPA's January announcement that it will generally deny confidentiality claims for the chemical identity in TSCA Section 8(e) reporting for chemicals already listed on the public portion of the TSCA Inventory.  

EPA's actions to limit TSCA CBI protection are consistent with the agency's stated policy of pushing TSCA authorities beyond traditional limits. The agency's legal justification for this action is thin.  However, the policy goal is clear: "EPA believes these actions will make more health and safety information available to the public and support an important mission of the Agency to promote public understanding of the potential risks posed by chemical substances in commerce."

The Notice may be found at 75 Fed. Reg. 29755.

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The US Chamber of Commerce has announced its support for S.J. Res. 26, sponsored by Sens. Murkowski and Lincoln to prevent EPA from implementing any GHG rules.   The Chamber's decision to support this measure, coming hard on the heels of the Kerry-Lieberman energy bill roll out and the final EPA GHG rule, suggests there now may be enough votes to get the Resolution passed.  The political waters are becoming extremely murky. 

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The EPA GHG Rule is 16 pages long, but it is accompanied by 499 pages of explanation and justification.  This is the EPA website link  to a copy of the rule, a fact sheet, and an implementation time line.  Here is a summary and a brief analysis based on a quick first read and an EPA telephone briefing.  

To begin with, EPA admits that the Clean Air Act PSD and title V requirements presumptively apply, as of January 2, 2011, at the 100 or 250 tons per year (tpy) levels of CO2 or its equivalent ("CO2e").  On its face, this means just about every business, restaurant, and apartment building in the country is theoretically subject to EPA permits and control.  (p.15).  Therefore,  ostensibly for reasons of administrative convenience, the agency is attempting to buy time by "tailoring" the GHG rule to phase in the permitting requirements.  Thus, the rule bites in stages.  

Step 1 - beginning January 2, 2011, facilities currently subject to Clean Air Act new source review (primarily power plants and refineries) and that also will emit or will have the potential to emit 75,000 tpy CO2e or more, and existing major stationary source for a regulated NSR pollutant that is not GHGs, and also will have an emissions increase of a regulated NSR pollutant, and an emissions increase of 75,000 tpy CO2e or more, are subject to EPA GHG regulation, including PSD.

Step 2 - beginning July 1, 2011, EPA phases in additional large sources of GHG emissions. New sources as well as existing sources not already subject to title V that emit, or have the potential to emit, at least 100,000 tpy CO2e will become subject to the PSD and title V requirements. In addition, sources that emit or have the potential to emit at least 100,000 tpy CO2e and that undertake a modification that increases net emissions of GHGs by at least 75,000 tpy CO2 will also be subject to PSD requirements.  EPA said on the briefing call this will capture at least 550 new facilities, "mainly" municipal landfills, plus 900 additional PSD permits.  

Step 3 – EPA will “solicit comment” on lower GHGs thresholds for PSD applicability and issue a small source rule by July 1, 2013.  EPA has promised not to regulate emitters of less than 50,000 tpy CO2e until this "small source" rule is final.

Step 4 - No later than April 30, 2015 EPA shall complete a study projecting the administrative burdens that remain with respect to all other sources.  EPA promises to issue a small sources rule no later than April 30, 2016.  EPA says "We cannot say at this point how close to the statutory thresholds we will eventually reach. Because this rule establishes only the first two phases of the tailoring approach, we do not find it necessary to answer these questions in this rule, and instead we expect to resolve them through future rulemaking."  It also reserves the right to "exempt" small sources from regulation altogether, based on findings of "absurd results" and "administrative necessity."  

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EPA's long-anticipated GHG emissions rule is out.  For the first six months of 2011, GHG PSD  requirements are limited to stationary sources that already must comply with its requirements for other pollutants.  These facilities will be required to include greenhouse gas emissions in their PSD permit if they increase those emissions by 75,000 tons per year.  Starting in July 2011, the tailoring rule will apply PSD requirements to new sources that emit more than 100,000 tons per year of carbon dioxide-equivalent and to modified sources that emit more than 75,000 tons per year.  

Expect environmental groups to sue because EPA's rule sets limits that are contrary to the plain language of the Clean Air Act.

More on this Rule to come.

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The Power Act's Title I, Subtitle D, is titled "Renewable Energy and Energy Efficiency."  In Section 1601, Congress states that "large-scale deployment of renewable energy and substantial improvement in energy efficiency" is critical to "improved energy security", among other things.  However, this part of the Power Act is actually very limited in scope. 

First, Section 1602 of the Power Act authorizes EPA to give allowances to power districts, public utilities, and electrical co-op participating in the Rural Utilities Service loan program to be used to fund no-interest loans to consumers for energy efficiency measures.  This section also creates a permanent funding mechanism for a  "national" nonprofit organization with "significant experience" in providing "advice in legal and regulatory matters affecting electric service and the environment" to provide "verification services."  Second, Section 1603 authorizes EPA to distribute emissions allowances (i.e., permission to consume energy) to State governments to offset their higher energy costs.  One-third of the allowances are to be divided among the States equally, one-third shall be distributed ratably based on population, and one-third distributed ratably based on energy consumption.  The allowances are to be used "exclusively" for energy efficiency purposes, deployment of alternative energy projects, funding "Smart Grid" programs, and interestingly, "Providing the non-Federal share of support" for surface transportation capital projects.

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Robert Verchick is EPA's Deputy Associate Administrator for Policy, Economics, and Innovation (OPEI). Previously, he was a law professor and a board member of something called the “Center for Progressive Reform,” a far left “think-tank” favoring federal government control over pretty much every aspect of human existence.

EPA issues scores of rules every year for implementation by State environmental agencies.   State regulators, who have found EPA’s implementation cost estimates almost always substantially underestimate costs, and who must obtain State budgetary appropriations to pay for EPA mandates, therefore have asked EPA to come up with a “cost of rules formula” the State agencies may use to help develop accurate budgets. Verchick’s response:

Pound sand. 

According to the invaluable Inside EPA, Verchick addressed a March 25 Environmental Council of the States conference and reportedly said:  “I’m not sure, personally, that this cost of rules focus is serving your interest…” Furthermore, Verchick reportedly said it was not possible to isolate the cost of EPA’s rules in any event.   One can only hope Verchick's statements were somehow taken out of context, for Federal bureaucratic arrogance is generally not a terribly adaptive strategy for implementing policy.  In any event, given Verchick's well-documented antipathy to cost-estimating regulatory burdens, it is likely State environmental agencies and State taxpayers will continue to suffer from EPA’s irrational refusal to disclose its rules' true costs.  

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The NNI's Third Report is out.  The environmental, health, and safety section calls for interagency coordination and identification of "plausible risks."    This is good policy and good science.  So why isn't EPA listening?  

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EPA today took action to aggressively advance the Administration's regulatory agenda and expand its control over the economy, despite Congress, and in defiance of the many lawsuits challenging the predicate endangerment determination.  EPA regulatory Notice is 115 pages long.  It is accompanied by a six page explanatory Fact Sheet.  The Notice is tremendously significant with far-reaching consequences and requires careful analysis.  What becomes immediately clear is that the Fact Sheet does not capture the economy-wide scope and ramifications of EPA's actions.  According to EPA, Clean Air Act PSD permit requirements for cars, light trucks and what EPA calls "larger emitting facilities", i.e., power plants, refineries, large office and apartment buildings, factories, and, if environmental groups are successful in their litigation strategy, potentially all other sources emitting more than 300 tons of CO2 a year, will be triggered in January 2011. 

More to follow in a couple days.

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EPA’s assault against nanotechnology seems to be getting serious.  The minutes of a recent EPA Scientific Advisory Panel (SAP) review of silver nanomaterials, commonly used due to their anti-microbial affect, seem to indicate EPA intends to slow down or even stop commercial use of this product. The SAP review comes against the backdrop of an ongoing campaign by anti-technology pressure groups to stop the use of silver and other nanomaterials. 

However, given the absence of evidence that these materials pose any meaningful human health or environmental risk, EPA's actions are difficult to understand.  To begin with, the SAP conceded an absence of data suggesting silver ions from silver nanomaterials behave differently than silver ions from any other source.  Yet, it assumed without data the rate of silver ion production, as well as the distribution of silver in tissue, “may differ substantially” between silver nanomaterials and other forms of silver.  As one industry group points out, these assumption are not well-founded.  Even so, the SAP concluded “most existing models are not appropriate for use with silver nanomaterials and will not accurately predict nanosilver exposure scenarios.” Significantly, the SAP used the absence of scientific data as justification for implementation of an onerous and costly testing regime that may deter FIFRA nanopesticide registrants.  

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Sen. Jay Rockefeller and several other coal state Democrats sent a letter to EPA's Lisa Jackson dated February 19, expressing concern regarding the economic impact of GHG regulation. Jackson responded on February 22, stating no permits would be required in 2010 and detailing an aggressive "Five Year Plan" for regulating CO2 sources.  The same day, Sen. Rockefeller issued a press release saying the Plan was "good progress" but that he remained "concerned" and that Congress needed to "set in stone through legislation enough time" to consider a "comprehensive energy bill" (the new euphemism for legislative GHG controls via cap and trade).

Was this all just political kabuki, choreographed to fog the optics and protect exposed Democrats from "cap and tax" backlash in the November elections?  And what should be made of a statement by an environmental group operative, about a week before Jackson's letter was issued, revealing the Five Year Plan?  Well, it could be the Rockefeller - Jackson letters likely were "worked out" by both parties ahead of time.  This would explain why EPA responded as quickly as it did.  Also, the White House makes EPA policy and the White House is working hand in glove with the environmental special interests.  Therefore, it should not surprise anyone that EPA's Plan was "put out there" by one of these groups - in fact, they likely helped write that Plan in the first place.

Or so some people say. 

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The FY2011 Budget is out.  The numbers provide useful indications of key Obama Administration environmental and energy policies.   Highlights include an aggressive EPA rule-making agenda to control GHGs and more money for DOE 's renewable energy research but huge cuts in DOE's fossil fuel programs.

To begin with, the term "cap and trade", which was prominently featured in the FY2010 Budget (see for example page 21) is missing entirely from the FY2011 Budget.   The new and apparently improved euphemism for mandatory GHG emission controls is "comprehensive market-based policy that will reduce greenhouse gas emissions."  While the Administration has apparently jettisoned "cap and trade" as a political liability, it remains committed to regulating GHG emissions and has requested significant funding for EPA to do so through command and control regulations. The Administration allocates "$56 million– including $43 million in new funding – for the EPA and states to address climate change effectively through regulatory initiatives to control greenhouse gas emissions."   The budget is $25 million for states to regulate GHG emissions under the New Source Review and Title V operating permits programs, $7 million for New Source Performance Standards (NSPS) to regulate GHG emissions from major stationary sources, $6 million to implement the 2010 auto emissions rule and to develop regulations for large mobile sources, and $5 million to develop guidance regarding the best available practices and technologies to control GHG emissions through command and control permits.   My suggestion here that key Administration policymakers viewed GHG legislation as a mere side-show and were instead committed to administrative rule-makings seems to have been on the mark. 

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As I noted here, EPA's leadership has targeted the nanotechnology industry for regulation.  The Agency's December Action Initiation List reflects this, stating EPA is developing a significant new use rule under TSCA section 5(a)(2) "for nanoscale materials."  The rule will require "persons who intend to manufacture, import, or process" nanomaterials to "notify EPA at least 90 days before commencing that activity" so EPA may "prohibit or limit that activity before it occurs" to prevent "unreasonable risk to human health or the environment." 

EPA's intentions, particularly given the massive methodological and data quality problems of nanomaterial risk assessment, need to be better understood.  Inter-agency coordination between EPA and the rest of the Federal Government on nanotechnology regulation should be a priority, yet it seems EPA is moving forward without substantive consultation.  As a first step, the industry should request more transparency from the Agency, especially with respect to the data it relies on to support this regulatory initiative.     

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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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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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The push to leverage GHG regulation into federal control over local land use, transportation, and development is accelerating.  The new House transportation bill, titled the Surface Transportation Authorization Act of 2009, authorizes the EPA to establish "national transportation related" GHG "goals," and requires States to "develop [approved] surface transportation-related greenhouse gas emission" limits.  In other words,  States must sync local land use with EPA's GHG limits.   

EPA, in turn, has been hard at work developing the analytic tools needed to extend federal control.  For example, in 2008 EPA circulated for "peer review" a draft report assessing  "land-use scenarios consistent with climate change emission story lines" to better "model" the impact of population growth and land use on "climate change," on the premise that "climate change interacts with existing and future land uses, such as residential housing and roads."  This report, though technically not "final" signals clearly where EPA intends to go. 

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