Climate Change: The Year Ahead

On January 2, 2011, EPA rules took effect requiring that air permits issued for new power plants and other major new and modified emission sources include limits on greenhouse gases (GHGs). The courts have refused to stay EPA’s rules, although the legal challenges to them are proceeding. Many in Congress say they want to block the rules, but they did not do so in the lame duck session, and those efforts face an uncertain future in the next Congress. The states, which actually issue the permits, are not all ready to implement GHG permitting. Texas has refused to cooperate with EPA, and EPA has responded with a move to force federal permitting for GHGs in that state effective January 2, 2011. Other states, some of which have joined in the legal challenges to the rules, are nevertheless working with EPA to implement them, in order to avoid a de facto moratorium on air permitting in their States.

EPA’s regulations, a response to the Supreme Court’s 2007 decision in Massachusetts v. EPA[1], began as a backstop and spur for Congressional action on comprehensive climate change legislation. See Marten Law Environmental News, EPA Proposes Regulating Greenhouse Gases Under Clean Air Act (April 17, 2009). But as that legislation foundered in the United States Senate earlier this year, the EPA rules emerged as the primary vehicle for national regulation of GHG emissions.

In addition to the GHG rules, other aspects of the laws governing climate change also remain in flux. In December, the Supreme Court agreed to hear an appeal of a circuit court ruling allowing plaintiffs to bring federal common law nuisance claims against greenhouse gas emitters. The Solicitor General of the United States asked the Supreme Court to accept review and overturn the Second Circuit’s decision. Marten Law Environmental News, Solicitor General Sides with Utilities (Sept. 2, 2010).

I. The Year Ahead

A. Court Challenges to EPA’s GHG Regulations

In the upcoming year, the U.S. Court of Appeals for the District of Columbia will likely resolve a multitude of challenges to EPA’s greenhouse gas rules. At least 80 lawsuits have been filed by over 35 petitioners (including states, industry groups, environmental NGOs, and others) challenging the four rulemakings that form the backbone of EPA’s greenhouse gas regulatory program. The challenges have been consolidated into three principal proceedings:

1. Challenges to EPA’s determination that greenhouse gas emissions are “reasonably … anticipated to endanger human health and welfare” (the Endangerment Finding);[2]
2. Challenges to a joint EPA/NHTSA rule limiting greenhouse gas limitations on new passenger cars and light trucks (the Tailpipe Rule);[3] and
3. EPA’s rule to “tailor” the applicability of Clean Air Act standards for stationary sources for greenhouse gas emissions (the Tailoring Rule),[4] and EPA’s reconsideration of when restrictions on greenhouse gas emissions from stationary sources would trigger (the Johnson Memo Reconsideration).[5]

For a summary of EPA’s greenhouse gas rulemakings, please see With Climate Legislation Uncertain, Challenges to EPA’s Ability to Regulate Greenhouse Gases Mount, Marten Law Environmental News (July 1, 2010).

Challenges to the Endangerment Finding will likely focus on the scientific underpinnings of EPA’s determinations.[6] In particular, they are likely to focus on electronic mail messages and documents by climatologists at the Climate Research Unit (CRU) at the University of East Anglia that were disclosed last year. Challengers contend that those correspondences cast doubt on the reliability of the data used by the International Panel on Climate Change (IPCC), the National Oceanic and Atmospheric Administration (NOAA), the National Aeronautics and Space Administration (NASA), and ultimately EPA.

With respect to the Motor Vehicle Rule, petitioners will likely argue that the costs outweigh the benefits of the regulation, and that the greenhouse gas emission standards are duplicative of fuel efficiency standards already enacted by NHTSA.

Finally, challenges to the Tailoring Rule will likely focus on the three justifications EPA used to depart from the explicit applicability thresholds for PSD permitting established by Congress: absurd results, administrative necessity, and one-step-at-a-time.

On December 10, 2010, the U.S. Court of Appeals for the District of Columbia Circuit refused to stay implementation of EPA’s greenhouse gas rules pending the resolution of numerous lawsuits challenging those rules.[7] In seeking to stay EPA’s implementation of its greenhouse gas rules, petitioners argued that: (1) they were likely to succeed on the merits of their challenges; (2) they will suffer irreparable economic injuries if EPA is allowed to implement its rules pending resolution on the merits; (3) no other parties to the lawsuits will be injured by the stay; and (4) that the stay is in the public interest.

The D.C. Circuit rejected these claims, ruling that “petitioners have not shown that the harms they allege are ‘certain’ rather than speculative, or that the ‘alleged harm[s] will directly result from the action[s] which the movant[s] seek to enjoin.”[8] The court also ruled that it would coordinate the three proceedings by holding oral arguments on the same day before the same panel. EPA had previously opposed efforts to consolidate or coordinate challenges to its various greenhouse gas rules, and some observers have noted that, by placing the three cases before the same panel, the D.C. Circuit may be viewing the rules as more interrelated than EPA does.[9]

B. The Next Congress

Bi-partisan Congressional challenges to EPA’s greenhouse gas rules have stalled – at least for the time being. Last fall, Republican opponents of EPA’s greenhouse gas regulations threatened to add an amendment to EPA’s fiscal year 2011 budget that would have restricted the agency from implementing those regulations for up to two years, but those efforts fell short. Senator Rockefeller (D. WV) has also floated legislation that would similarly delay EPA’s ability to implement greenhouse gas regulations. Senator Rockefeller, however, announced in mid-December that he would abandon his efforts to stay EPA’s rules until the new Congress convenes in January 2011.[10] The three Republican candidates vying to chair the House Appropriations Committee have threatened to try to take away the funding of certain EPA programs, including EPA’s implementation of its greenhouse gas rules.[11]

C. The States

The federal Clean Air Act requires the states to take primary responsibility for implementing the permitting programs and other requirements that apply to individual air emission sources. To that end, each state was required years ago to develop a Statement Implementation Plan (SIP), which had to be approved by EPA. EPA must approve each change to a SIP, and once approved its provisions become enforceable by EPA. EPA also may require states to correct perceived deficiencies in their SIPS, and if a state fails to do so, may issue a Federal Implementation Plan (FIP) to address the deficiency until the state acts. One element of each state’s SIP is a permitting program for new and modified sources of air emissions, known as “new source review.” For larger sources, SIPs require what the Clean Air Act calls Prevention of Significant Deterioration (PSD) permits.

In September, EPA released a proposed determination that the SIPs in 13 states are “substantially inadequate” because their PSD programs will not automatically become applicable to GHG sources on January 2, 2011. Marten Law Environmental News, EPA Proposes to Require States to Update Clean Air Act Permitting Programs (September 24, 2010). On December 1, EPA’s Administrator issued a final determination that the PSD programs were deficient in all or part of the states of Arizona, Arkansas, California, Connecticut, Florida, Idaho, Kansas, Kentucky, Nebraska, Nevada, Oregon, Texas, and Wyoming.

All of the states other than Texas worked out schedules with EPA that will allow a FIP for GHG permitting to go into effect in those states relatively promptly while the states develop changes to their PSD programs. Some of these states are challenging EPA’s regulations in court, but were concerned that a failure to cooperate with EPA in the interim could result in an inability to issue PSD permits in their states while those challenges played out. Texas, however, has publicly criticized the other states for cooperating, suggesting that it might undercut their litigation position.

EPA responded to Texas’ intransigence with a move, announced December 23, to partially disapprove the Texas PSD program effective January 2, 2011, and to institute a FIP for GHG emissions in Texas. If this action survives the State’s legal challenge, then major new and modified sources in Texas will be required to obtain a dual permit, with EPA imposing conditions on GHG emissions and the State doing so for all other regulated emissions.

While there will be uncertainty in Texas until court challenges to EPA’s partial disapproval and FIP play out, elsewhere GHG permitting should begin to take effect in January or shortly thereafter, and depending on the state will be administered by the state alone, or with EPA involvement in setting GHG limits.

D. Supreme Court to Weigh in on GHG Emissions as Nuisance

In the coming year, the Supreme Court is expected to weigh in on whether lawsuits alleging that greenhouse gas emissions constitute a nuisance may proceed. In December, the Supreme Court granted certiorari in a widely-watched case addressing whether states and/or private parties can use the federal common law of nuisance as a vehicle to collect damages for injury due to greenhouse gases and seek court-ordered emissions caps. American Electric Power Co. v. Connecticut, No. 10-174 (AEP).

The AEP lawsuits (two consolidated actions) were originally brought in the Southern District of New York by a number of states, local jurisdictions, and environmental NGOs, seeking an injunction curbing the carbon dioxide emissions of six major power producers: the American Electric Power Company, the American Electric Power Service Company, the Southern Company, TVA, XCel Energy, Inc., and the Cinergy Corp. In 2005, the district court dismissed both cases on grounds that they raised non-justiciable political questions, and that the claims could not be adjudicated without the court making sweeping policy determinations.[12] See District Court Dismisses States’ Global Warming Lawsuit, Marten Law Environmental News (Oct. 19, 2005).

In 2009, the Second Circuit reversed, holding that: (1) that the case did not present non-justiciable political questions; (2) that federal common law on nuisance governs the plaintiffs’ claims and that the plaintiffs had stated claims under the federal common law; and (3) that the plaintiffs’ claims were not preempted by either EPA regulation or Congressional action.[13]

The Supreme Court’s resolution of the AEP case will likely have consequences for a number of “greenhouse gas emission as nuisance” cases in other jurisdictions. See North Carolina, ex rel. Cooper v. Tennessee Valley Authority, 615 F.3d 291 (4th Cir. 2010); Comer v. Murphy Oil, USA, 609 F.3d 1049 (5th Cir. 2010); and Native Vill. of Kivalina v. ExxonMobil Corp., 663 F. Supp. 2d 863, 879-80 (N.D. Cal. 2009). For an analysis of these cases, please see Supreme Court to Decide Whether Nuisance Action for GHG Emissions May Proceed, Marten Law Environmental News (Dec. 9, 2010).

E. New Source Performance Standards for Power Plants and Refineries

In late December, EPA settled two lawsuits which challenged EPA’s decision to not set new source performance standards (NSPS) for GHG emissions from power plants and petroleum refineries under Section 111 of the Clean Air Act. While EPA’s new PSD regulations discussed above require a case-by-case BACT determination for all new and modified sources over a certain size threshold, NSPS standards would set a common emission performance floor for specific types of new and modified sources in specific industrial sectors. Section 111 also gives EPA authority to set emission guidelines for existing sources, and in the settlement agreements EPA indicated it intends to propose existing source guidelines as well as standards for new and modified sources in these two industry categories. If EPA does adopt emission guidelines for existing refineries and power plants, that would also potentially impact the AEP cases discussed in Section I(D) above, as the plaintiffs have acknowledged in court filings that they would have to dismiss their suit if EPA was regulating emissions from existing sources.[14]

Under the first settlement, EPA must propose emission performance standards for electric generation units by July 26, 2011, and publish final rules no later than May 26, 2010. Under the second settlement, EPA must propose standards for refinery emissions by December 15, 2011, and finalize them no later than November 15, 2012.

F. Status of International Negotiations

With modest expectations, the Sixteenth Conference of Parties (COP 16) to the United Nations Framework Convention on Climate Change (UNFCCC) took place in Cancun, Mexico between November 29 and December 10, 2010. Adopted in 1992, the UNFCCC established a process for stabilizing atmospheric concentrations of greenhouse gas. Under the subsequently-enacted Kyoto Protocol, almost 40 nations agreed to reduce their greenhouse gas emissions by an average of 5.2% below 1990 levels between 2008 and 2012. The COP-15 negotiations in Copenhagen last year and COP-16 negotiations in Cancun this year centered, in large part, on developing a framework for post-2012 emission reductions.

While the Cancun negotiations did not finalize binding post-Kyoto Protocol emission reduction targets, the participants did reach agreement on a number of significant issues, including an agreement to keep temperature rise below 2 degrees Celsius above pre-industrial levels. Developed countries are urged to make more aggressive emission cut pledges (25% - 40% below 1990 levels by 2020). Participants also agreed to continue negotiating an agreement covering post-2012 emission reductions to prevent a gap in emission reduction targets following the expiration of the Kyoto Protocol’s first commitment period. A framework for monitoring, reporting, and verifying (MRV) emissions from developed nations was also agreed to. Finally, agreement was also reached on a number of funding issues, including $30 billion in “fast start” financing for adaptation measures taken by developing nations in 2012, and the establishment of a Green Climate Fund administered by the United Nations that will distribute funds for mitigation and adaptation projects in developing countries.

II. Conclusion

Despite considerable uncertainty surrounding their eventual fate, major new and modified sources will be required to obtain air permits with GHG limits beginning in January, 2011. Other GHG regulatory efforts have slowed or faltered, and the fate of common law nuisance claims based on climate impacts remain in doubt.

For more information about EPA’s rules for GHG permitting and other GHG developments, please contact Svend Brandt-Erichsen, Dustin Till or any member of Marten Law’s Climate Change practice.