Obama Administration Suffers Environmental Setback

On February 9, 2016, the United States Supreme Court dealt the Obama administration a setback when it temporarily blocked the Obama administration’s efforts to regulate emissions from coal-fired power plants in its attempt to combat global warming. In a 5-4 opinion, with the Court’s four liberal members dissenting, the Court granted a request by 29 states, along with dozens of corporations and industry groups, to temporarily halt an Environmental Protection Agency (“EPA”) regulation[1] before the matter was fully considered by a federal appeals court.

The EPA issued the challenged regulation in 2015. The regulation requires states to make major cuts to greenhouse gas pollution generated by electric power plants, which happen to be the United States’ largest source of greenhouse gases. The aim of the regulation is to transform the generation of electricity in the nation by cutting emissions from existing power plants by a third by 2030, by closing hundreds of heavily polluting coal-fired plants, and by increasing production of wind and solar power.

The 29 states challenging the regulation filed suit to stop its implementation because they contend the rule is unlawful, exceeds EPA’s authority, and constitutes an unlawful invasion of the State’s historic powers.

The Supreme Court’s decision to issue the stay was a shocking development. The Court has never halted a regulation before review by a federal court of appeals.

The Circuit Court of Appeals has expedited the case and scheduled oral argument for June 2, 2016.

 

[1]  80 Fed Reg. 64,662 (October 23, 2015), “Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units.”

Avoiding A Water Crisis Similar to That of Flint Will Require Both Technical and Practical Effort

The problems with the quality of drinking water in Flint, Michigan, are not necessarily an isolated collection of failures. From a technical standpoint, the potential for lead leaching into drinking water systems in many places in this country is a real issue. That potential is compounded if we see a repeat of the range of bureaucratic failures that occurred in Flint.

The basic conditions that exist in Flint are not unique; they are prevalent at least in the older water systems of the Northeast and Midwest. (National Geographic). As that article points out, the potential for leaching of lead has been known for many years, and EPA enacted regulations twenty-five years ago intended to avoid the problem. However, the mere fact that applicable regulations are in place clearly is not sufficient if those regulations are not diligently enforced. And compliance must be checked by periodic inspection, monitoring, and testing. (Environmental Leader).

The problems in Flint were not inevitable, but were essentially caused and then exacerbated by the failures of some to comply with regulatory obligations and of others to enforce those requirements. Initially, the lead problem probably could have been avoided or at least substantially limited when the source of drinking water changed from Lake Heron to the Flint River if regulatory requirements had been followed to evaluate the potential for the river water to cause leaching. The fact that state and local officials apparently failed to anticipate potential problems was compounded by the failure of federal, state and local officials to respond to the problems quickly when they became apparent, or even to respond with genuine concern to initial complaints from City residents. Instead, those complaints were reviewed with something bordering on disdain. (New York Times). While the response to known or suspected problems presumably would not have prevented the initial leaching, a prompt and substantive response would have prevented lead exposures from occurring for so long a period of time, especially for the most at-risk residents, the children. Indeed, State officials were providing their employees in Flint with bottled water for several months before publicly acknowledging the problem last October. (CBS and ABC).

Conditions similar to that in Flint are present in many places, but so are the protections, if government observes and follows them. The ultimate fix – that of removing all lead pipe from these systems – is extraordinarily expensive and probably unrealistic. However, applicable rules do require steps that should be taken and which can be expected to prevent similar problems at manageable cost. What Flint demonstrates is that at all levels – local, state and federal – the requirements of practical safeguards were simply not appreciated or followed.

 

Some Things Upcoming in 2016

As the New Year begins, a number of issues will compete for attention from Congress and the courts, and we may even get some final determinations about matters that have been long simmering. Much of the substantive work of the Obama Administration has been put into place and is currently subject to various challenges. Many of these will either be decided or will progress substantially during the coming year. Nonetheless, EPA has proposed a full agenda of rulemaking activities for 2016, including both projected notices of proposed rulemaking and publication of final rules for a wide variety of areas that it regulates. (OMB Fall 2015 EPA Rule List see also EPA Regulatory Development Tracker). Among these will include proposals for final rules for things such as standards for management of hazardous waste pharmaceuticals, changes to the hazardous waste generator rules, and a NESHAP for certain industrial commercial institutional boilers.

From an enforcement standpoint, EPA has indicated in its Biennial National Program Manager Guidance and its National Enforcement Initiatives that it will be focusing on several specific areas in the various media that it regulates. Within its national enforcement agenda we apparently will see some focus on areas including: large air emission sources, energy extraction, minerals processing, and animal waste management.

Much will also be going on in the courts as various EPA final regulations have been challenged and we will see those challenges progress. This involves a long list of regulations, but perhaps some of the most significant will be challenges to the Administration’s Clean Power Rule, the Waters of the United States Rule, and the Mercury and Air Toxics Rule. Regarding the Clean Power or Carbon Rule addressing carbon emissions from power plants, this is pending and is subject to a briefing schedule initially on the issue of whether to grant a stay of the rule pending further litigation. The D.C. Circuit set a briefing agenda and apparently oral arguments will be scheduled during the first few weeks of the new year. (Washington Examiner). A stay has been granted by the Sixth Circuit with respect to the Waters of the U.S. Rule (WOTUS) and EPA has issued a statement indicating that it will comply with the stay and, in the interim, will administer the wetlands protection programs along with the Corps of Engineers using its previous approach interpreting existing regulations in accordance with its view of the relevant case law. (EPA Clean Water Rule litigation statement).

The status of the Mercury and Air Toxics Rule appears to be that the rule can be implemented even though EPA must propose certain changes or provide additional substantiation for the rule. The Supreme Court overturned the rule on the basis that the agency had not taken into account economic factors that might tend to make the rule untenable as a result of excess cost of compliance. (Michigan v. EPA). Despite this ruling, the D.C. Circuit refused to grant a stay of the rule while EPA seeks to evaluate the economic issues identified by the Supreme Court. (Utility Dive). The EPA has issued some updated information more recently intended to address the Supreme Court’s concerns. (EPA Mercury Air Toxics Site).

Congress will continue in its collective efforts to undo much of the regulatory agenda put in place by the Administration. Apparently this includes efforts with respect to the carbon (clean power) rule, efforts to defund implementation of the Clean Water or Waters of the U.S. rule and various efforts intended to limit or untrack the Administration’s implementation of the Global Warming Summit held recently in Paris. There will also be an effort to enact legislation to change the method of regulation of coal combustion residuals. That rule, which became effective in the fall, has also been challenged in court.

To conclude on what may be considered a more positive note, Congress did agree to extend tax credits for alternative energy sources. As a result, the development of alternative domestic sources, primarily wind and solar, is now assured for the next five years. (Wall Street Journal) These credits have had some significant impact on the development of this type of power generation (The Hill and National Renewable Energy Laboratory) and would now appear that those sources will continue to develop and expand play an increasingly greater role in power production in the United States.

 

Climate Change: Nations United-Nations Divided?

The third global summit on climate change has begun its meetings in Paris. Unlike the two previous summits, in Kyoto (1997) and Copenhagen (2009), there is optimism that an agreement under the auspices of the United Nations might be reached. (Paris Deal Important First Step). This optimism apparently has its origin, in substantial part, based on an agreement between the United States and China, the two largest carbon pollution emitters in the world.

Yet, while the President may have made inroads to persuading China that emissions reductions are merited, and he has also put his own Clean Power Plan into regulations that may survive court challenge, he has been unsuccessful in pulling together a political majority that recognizes and seeks to act on issues related to climate change. The leadership in the House and the Senate are squarely opposed to any position that might affect U.S. industry or its economy. (The Hill). The House is scheduled to vote today on two joint resolutions to disapprove EPA regulations on emissions for new and existing electric power plants. (Majority Leader’s Floor Schedule). And last Friday, Senate Majority Leader McConell laid out a reminder that the Senate would certainly not go along with any treaty that may come out of the Paris conference. (Op-Ed). Indeed, the legal debate rages over to what extent any agreements made in Paris would become enforceable in the United States. (Washington Post).

This divide is not necessarily merely political, but it does reflect recent polling indicating the sharp party-line split over the climate debate. A Washington Post-ABC News Poll indicates that, while 8 in 10 persons identifying themselves as Democrats believe global warming is a serious problem, nearly 6 in 10 Republicans say it is not. And, of the latter group, apparently two-thirds think there is “a lot of disagreement” among scientists over the existence of global warming, or at least the likelihood that such warming is caused by human activity. [A January 2015 report from the Pew Research Center indicates that 87% of scientists connected to the American Association for the Advancement of Science believe that climate change is mostly due to human activity.] Interestingly, Post-ABC survey finds that the biggest partisan disagreements exist among those with more education with Democratic-leaning college grads 43 percentage points more likely than Americans who lean Republican to say scientists agree on global warming. [As a side note, this may dispel the perception that all liberal arts majors are Democrats.]

The likelihood of success in Paris seems greater than a translation of that success in the United States, and thus, at least within the U. S., the entire process may be doomed from the outset.

 

Sixth Circuit Issues Nationwide Stay of Clean Water Rule

The U.S. Court of Appeals for the Sixth Circuit issued a nationwide stay of the controversial EPA/Corps of Engineers Clean Water Rule which was effective August 28, 2015. A copy of the decision is HERE. Some 30 states, industry and environmental groups had petitions pending in a number of circuit courts and all were consolidated in the Sixth Circuit. In what appears to be an interesting ruling, the three judge panel essentially expressed a desire to have the rule fully litigated before enforcing it. According to the Court:

A stay temporarily silences the whirlwind of confusion that springs from uncertainty about the requirements of the new Rule and whether they will survive legal testing. A stay honors the policy of cooperative federalism that informs the Clean Water Act and must attend the shared responsibility for safeguarding the nation’s waters. See 33 U.S.C. § 1251(b) (“It is the policy of Congress to recognize, preserve, and protect the primary responsibilities and rights of the States to prevent, reduce, and eliminate pollution.”).

However, the Court did not answer the question as to whether it had subject matter jurisdiction to stay the rule in the first place, but stated it still had authority to stay the rules pending resolution of the jurisdictional question. Briefing on that aspect is to begin shortly.

 

Clean Power Rule Challenges Will Proceed Sooner or Later, But Its Goal May Already Be Close at Hand

Legal challenges filed almost immediately after President Obama announced the Clean Power Rule may be premature. That is what attorneys for EPA told the U.S. Court of Appeals for the District of Columbia Circuit recently in response to an action brought by West Virginia and several other states. The fundamental issue according to EPA attorneys is that a challenge is not ripe until the regulation is published in the Federal Register, and that may not occur for several weeks. (The Hill).

The particular issue raised by the petitioners is an effort to stay the effect of the Rule while the challenge is proceeding. As we have noticed previously, a failure to obtain a stay associated with a challenge to EPA’s Mercury and Air Toxics Standard (“MATS”) effectively resulted in substantial compliance with that rule during the COURSE OF lengthy litigation and before the Supreme Court invalidated MATS earlier this summer. As a practical matter, many power companies proceeded with actions necessary to comply with MATS, including the shutdown of some older power plants and a conversion from coal to natural gas for others. Indeed, the Governor of Michigan, the State that lead the challenge to MATS, announced earlier this week that the State will comply with the Clean Power Plan even though Michigan’s Attorney General is participating in the challenge led by West Virginia. (Michigan Stance Highlights Clean Power Plan Fray) EPA has indicated that publication of the Clean Power Rule in the Federal Register will occur in less than two months.

While challenges to the Clean Power Rule will certainly be pursued, the Rule’s goal of a substantial reduction in carbon emissions seems to be well along the way. This has apparently occurred primarily due to a substantial increase in the availability and use of natural gas resulting from the boom in hydraulic fracturing, particularly with respect to shale gas. Recent articles in Forbes (Fracking is Our Clean Power Plan) and (Greenhouse Gas Emissions Plunge) note the dramatic increase in the availability of fracked natural gas and that this has been a key to reducing carbon emissions in the U.S. to their lowest levels since 1988. Indeed, the argument is made that the goal set out in the Clean Power Plan for a 32% reduction in carbon emissions from 2005 levels by 2030, is substantially at hand. The indications are that there has already been approximately 25% reduction since 2007, deemed attributable to fracking specifically and the greater availability of natural gas generally. Viewed from a somewhat different prospective, by 2012, the United States had achieved approximately 70% of the CO2 emissions reductions targeted under the Kyoto Agreement.

While the coal industry has focused on what it refers as to as a regulatory “war on coal,” the dramatic shift in the source of energy for power plants appears, at least to this point, to be primarily due to the availability of relatively cheap natural gas. For example, electricity generated from coal-fired plants declined approximately 25% from 2007 to 2012 while generation from natural gas-fired plants increased by approximately 35%. While it is true that power generation from renewable sources has also increased, to date, the real shift appears to be to natural gas.

With this in mind, it bears noting that the Clean Power Plan will likely have an adverse impact on the use of natural gas for power generation. The Plan places a significant emphasis on renewable sources and away from those which generate CO2, including natural gas. Thus, and assuming that the Rule is substantially upheld in its present form, the question may become one of the significance of the individual state emissions budgets and how they might impact total CO2 emissions regardless of whether the source is coal or natural gas.

 

Obama Announces Clean Power Plan, Fights to Follow

On August 3, 2015, President Obama announced the finalization of the long-awaited Clean Power Plan, a policy primarily intended to further the commitment to combatting global warming. The Plan focuses on the electric power generating sector of the nation’s economy, which is responsible for approximately 31% of U.S. greenhouse gas emissions (primarily carbon dioxide, fluorinated gases, and nitrous oxide). The Plan intends to reduce greenhouse gas emissions by 2030 to levels below those generated in 2005. (Washington Post ).

A fact sheet provided by U.S. EPA to accompany the President’s announcement (Overview) indicates that the new rules call for the States to develop individual plans aimed at reducing levels of greenhouse gases from power generation for existing sources while EPA develops the standards for new sources. States will have to work under individual greenhouse emissions limits or budgets and will have incentives to encourage renewable sources such as wind, solar and nuclear. States must submit a final plan, or alternatively, an initial submission with an extension request, by September 6, 2016. Those States receiving extensions must submit final plans no later than September 6, 2018. Thereafter, the rule allows 15 years for full implementation of all reduction measures.

States may choose either source-specific requirements to require all of effected power plants to meet emissions performance rates or State-specific rate-based or mass-based goals. Alternatively, State plans can include a mixture of measures to include renewable energy standards and programs to improve residential energy efficiency. In addition, States may work together in a cooperative or multi-state approach including emissions trading. While most of the attention to the Plan has focused on the perceived ‘War on Coal’, the Plan seeks to limit greenhouse emissions from power plants regardless of fuel source. So, even though plants fueled by natural gas produce less greenhouse emissions, those will also be counted in overall State caps or limits.

Reaction from opponents was quick. Several States have indicated they will directly oppose the regulations in court challenges and, yesterday, sixteen State Attorneys General sent a letter to EPA Administrator Gina McCarthy requesting that she suspend the rules while a court challenge proceeds. (Salt Lake Tribune). The States will no doubt be joined in this effort by affected industry groups. Legal challenges will not be ripe until the rule becomes final with publication in the Federal Register, although that is expected to occur soon.

While legal challenges will play out over the next several years, leaders in Congress are already moving in a variety of directions to thwart or limit the effectiveness of the rules. (The Hill). These actions are expected to take the form of both legislation to undo or limit the scope of regulations and efforts to limit appropriations necessary to implement the Plan.

To the extent that opponents view this simply as a war on coal, they may be missing the scope of the Plan and ignoring things that have already happened. It seems clear that the combined effects of cheap natural gas and the EPA mercury regulation affecting the power industry have already substantially reduced the use of coal. With respect to the mercury rule, although the Supreme Court invalidated it earlier this summer (Michigan v. EPA), the rule had not been stayed during the course of the litigation, and many power producers took significant steps to meet its requirements in the interim. As a consequence, many noted that the actual effects of the mercury rule and related efforts, by prompting closure of some older coal-fired plants, the conversion of others to natural gas, and the on-going planning for new plants, mean that the effort to reduce significantly the emissions from coal-fired power generation is already well underway. (See, for example Forbes – James Conca and comments from various utilities to BNA last April). If so, these most recent rules, while important for a variety of reasons, may prove to be significant on the issue of burning coal for power production primarily because they continue a process that has already begun.

EPA Issues Clean Water Rule Defining Waters Of The United States

On Tuesday, May 26, 2015, EPA issued a long-awaited rule defining “Waters of the United States.” The final rule is available as a prepublication version. Elsewhere, on EPA’s Clean Water Rule webpage, there are a number of fact sheets and information intended to explain and support the rule as proposed. EPA apparently found this scope of detail and explanation necessary due to the significant opposition to the rule.

Even before publication, the rule had generated a great deal of opposition. The proposed definition has been viewed by a number of groups as effecting a broad expansion of federal authority over water-bearing bodies that had previously not been considered to fall within the definition of “Waters of the United States.” For example, the National Association of Manufacturers provides a detailed graphic on its website reflecting that Association’s view of the expansive nature of the rule.

A significant number of groups and organizations have expressed opposition to the proposed rule, and the U.S. House of Representatives passed legislation that would force the EPA and the Army Corps of Engineers to rewrite and modify the rule in consultation with the States. (Politico, May 27). The House enactment came before EPA’s final action, and the Senate is considering a similar measure. The White House has promised a veto.

Regardless, the rule is likely to be the subject of a court challenge as soon as it becomes effective. EPA’s action on Wednesday was the final required agency action. However, by its terms, the rule will not become effective until sixty days after publication in the Federal Register, which has yet to occur.

EPA’s Rules Related to Carbon Emissions and Climate Change Prompt A New Focus By The Opposition

EPA’s new rules for limiting emissions of carbon dioxide for both existing power plants and proposed plants have prompted at least two substantive reports by public policy institutes focusing on the economic aspects of the proposals. The Beacon Hill Institute at Suffolk University and The Heritage Foundation have recently published reports that estimate the potential costs, particularly in terms of jobs, associated with the adoption of these regulations. These reports can be viewed here (Beacon Hill) and (Heritage Foundation).

The Heritage Foundation report has apparently generated the greatest interest due to its effort to detail the number of jobs that the regulations may cost each state. Thus, a recent article on www.al.com covering several Alabama news sources, noted that the regulations may cost Alabama as many as 10,700 jobs or about 4.14% of the State’s manufacturing employment. (Wake Up Call al.com 2/20/15 ). Overall, the Heritage Foundation estimates that over a half million manufacturing jobs will be lost nationwide

Although the very issue of climate change continues to have prominent deniers, the arguments put forth by those who oppose climate change regulations seem to be edging away from absolute denial of the science supporting the fact of any change in the earth’s average temperature and towards the potential economic and social impacts of the issue. Until fairly recently, there has been a vocal group of individuals with scientific credentials who openly rejected the scientific basis for the position that the world’s climate is warming. As scientists have moved to a general consensus that the problem is real, the argument has generally moved from outright denial that the earth’s temperatures are rising to one that questions the cause. Many who originally denied that there was any climate change now acknowledge that temperatures are increasing, but argue that the cause is primarily the result of a natural climate cycle and not the result of human activity such as through the combustion of coal. Even that debate tends to be between scientists and senior policy-makers. These recent studies may indicate a further shift towards more practical aspects of climate change issues: the impacts of the various regulatory proposals the situation has prompted. Regardless of whether the estimates of costs, particularly in jobs, are valid, the fear of the loss of jobs in significant numbers seems much more likely to raise concerns on the part of the general public than has a debate between scientists.

 

Fracking: To Ban Or Not To Ban?

The process of hydraulic fracturing (also known simply as “fracking”) continues to divide the public and public policymakers, even as resulting lower natural gas prices have encouraged industries, including many power plants, to convert from coal-fired boilers as one means as coping with coming limitations on the emissions of carbon monoxide.

Local concerns about fracking activity have their origin in concern about pollution of drinking water sources. Those concerns have now expanded to include concerns about the management of fracking fluid wastes and the possibility that the activity may prompt localized seismic activity. For example, scientists at the Universities of Miami and Ohio have asserted that fracking activity prompted localized earthquakes in a part of the state. (Ohio earthquakes).

A number of anti-fracking proposals were on state and local ballots this past year and many of them were adopted. (Local measures). And New York recently imposed a fracking ban by executive action, prompting suggestions that there may be similar actions in other states. (National Geographic).

At least part of the Obama Administration is arguing against such localized bans. Interior Secretary Sally Jewel recently criticized the bans stating that they prompt confusion for the oil and natural gas industries. (The Hill). She acknowledged the need for more scientific research, but in the interim, will rely on scientists at the U.S. Geological Survey to help guide her decisions about allowing fracking on federal lands. Ultimately, she believes it would be better to have uniform regulations for the activity. The Administration is, in fact, pursuing a set of regulations that would direct fracking activities on federal lands, but these have been pending for almost a year. (White House reviewing fracking rules). And EPA initiated a scientific study of fracking in 2011 with the intention of providing a final report last year. That report is yet to be issued. (EPA Fracking Study)

If broader regulation covering activities in the industry, both on federal lands and non-federal lands, is coming, the Administration may need to move promptly if it hopes to get out ahead of local action.