Proposed Legislation Seeking to Block EPA Greenhouse Gas Regulation Picks Up Speed

Congressional legislators in both houses have recently proposed bills to delay or block EPA from regulating greenhouse gases (GHGs) under the Clean Air Act (CAA) and other environmental laws. A growing, bipartisan group of legislators are supporting efforts to prohibit EPA from regulating GHGs and undo a number of existing EPA GHG actions. These legislative proposals complement efforts to block the GHG regulations through the courts. Over 80 lawsuits have been filed against EPA’s GHG regulations by over 35 petitioners including states, industry groups, environmental NGOs, and others. In a related move, House Republicans introduced spending legislation on February 11 that would block EPA’s current and pending GHG regulations for stationary sources for the remainder of the fiscal year.

How We Got Here: EPA’s GHG Regulations

Endangerment Finding: In December 2009, EPA formally concluded that carbon dioxide (CO2) and five other GHGs “taken in combination endanger both the public health and the public welfare of current and future generations.”[1] EPA’s finding was compelled by the U.S. Supreme Court’s 2007 Massachusetts v. EPA decision, where the Court held that several GHGs, including carbon dioxide (CO2), fell within the CAA’s “sweeping” definition of an “air pollutant.”[2] The Endangerment Finding paved the way for EPA’s April 2010 GHG tailpipe emission standards for mobile sources (i.e., cars and light trucks) under the CAA.

Tailpipe Emission Standards (Mobile Source Rule):[3] EPA’s Endangerment Finding compelled the Agency to issue new vehicle GHG emission standards (Tailpipe Emission Standards) applicable to new passenger vehicles and light trucks. In a joint rulemaking, EPA finalized the Tailpipe Emission Standards with the National Highway Traffic Safety Administration’s (NHTSA) corporate average fuel economy (“CAFE”) on April 1, 2010, imposing the nation’s first GHG standards. The standards, which apply to vehicle model years 2012 to 2016, require new vehicles to meet an estimated combined average emissions level of 250 grams of carbon dioxide per mile, equivalent to 35.5 miles per gallon (MPG) if the automobile industry were to meet this carbon dioxide level solely through fuel economy improvements.

Reconsideration of the Johnson Memorandum: Under the CAA’s “prevention of significant deterioration” (PSD) program for stationary sources (i.e., power plants and other industrial facilities), new facilities and existing facilities which undergo major modifications are required to implement the “best available control technology” (BACT) for each “air pollutant subject to regulation” under the CAA.[4] Prior to EPA’s Endangerment Finding, environmental groups sought to force the Bush-era EPA to include limits on GHG emissions in these permits, arguing that certain GHG monitoring and reporting requirements made them “subject to regulation.” Bush’s EPA Administrator, Stephen Johnson, issued a December 2008 memorandum clarifying the Agency’s position on the issue, explaining that a pollutant was not “subject to regulation” under the CAA until another provision mandated the “actual control of emissions” for that pollutant.[5] The Obama Administration EPA issued a “Reconsideration” of the Johnson Memorandum in March 2010.[6] By then, the issue had become of immediate importance, because EPA was poised to issue its Tailpipe Emission Standards in April 2010, which included the Agency’s first-ever GHG emissions limitations. The 2010 Reconsideration Memorandum affirmed the Johnson Memorandum’s conclusions, thereby delaying GHG limits for stationary source CAA permits until the Tailpipe Emission Standards took effect on January 2, 2011.

Tailoring Rule:[7] According to the Johnson Memorandum’s CAA interpretation, when EPA’s Tailpipe Emission Standards went into effect on January 2, 2011, they also triggered stationary source permitting requirements for GHGs. However, applying the CAA’s statutory thresholds (100 or 250 tons of any regulated air pollutant a year) would have vastly expanded the scope of the CAA’s stationary source permitting program (EPA estimated that the number of facilities subject to BACT would increase from less than 300 per year to over 41,000 per year). Therefore, EPA issued the “Tailoring Rule” to limit the applicability of stationary source permitting requirements for GHGs to the largest GHG sources. The Tailoring Rule raised the emission threshold for GHGs from 100 or 250 tons to 25,000 tons of CO2 equivalent per year.

Rules Authorizing EPA to Limit GHG Emissions under State PSD Permit Programs:[8] In 2010, EPA identified thirteen states whose current PSD regulations did not cover GHG emissions. EPA issued a “state implementation plan (SIP) call” to these states, effectively requiring them to revise their PSD programs to include GHGs. Since many of the states were not able to change their SIPs prior to the January 2, 2011 deadline mentioned above, EPA promulgated a series of rules to provide federal permitting authorization while these states came into compliance. In response to EPA’s SIP call, Texas chose not to comply with EPA’s request. Therefore, EPA also promulgated rules to assume GHG related PSD permitting duties on Texas’ behalf.

EPA’s “Narrowing” Regulations Implementing the Tailoring Rule:[9] EPA issued two rules in December 2010 to implement the Tailoring Rule in a number of state CAA permitting programs. The first rule withdrew EPA SIP approval for twenty-four states whose GHG-emissions thresholds were more stringent than the Tailoring Rule. The second rule implemented the Tailoring Rule thresholds to a number of state CAA operating permit programs for stationary sources.

Proposed Legislation to Delay or Strike Down EPA’s Regulations

Two of the recent legislative proposals seek to block EPA’s effort to regulate GHGs altogether; while a third, introduced by Democratic Senator Jay Rockefeller of West Virginia, would delay EPA’s GHG regulations. Senator James Inhofe and Representatives Fred Upton and Ed Whitfield have circulated draft legislation entitled the Energy Tax Prevention Act of 2011 (the “Upton bill”);[10] while Senator John Barrasso of Wyoming has introduced a Senate bill termed Defending America’s Affordable Energy and Jobs Act (the “Barrasso bill”).[11] Both the Barrasso and Upton bills would block each of EPA’s GHG-related efforts under the CAA described above (except for the current Tailpipe Emission Standards). Barrasso’s bill would go even further by preventing federal agencies from considering GHG related effects under other environmental statutes. Key provisions of the Barrasso and Upton bills include the following:

• EPA’s CAA GHG Regulations: Both the Barrasso and Upton bills would invalidate most of EPA’s GHG-related actions under the CAA described above, including: the Endangerment Finding, the Johnson Memorandum and the Reconsideration Memorandum, the Tailoring Rule, EPA’s State PSD Regulations, and EPA’s Narrowing Regulations Implementing the Tailoring Rule.
• Tailpipe Emission Standards: Both Barrasso’s and Upton’s bills would grandfather EPA and NHTSA’s Tailpipe Standards set in 2010; however, each would bar consideration of GHGs in any future vehicle emissions rulemaking (the current Tailpipe Emission Standards only apply through the vehicle model year 2016).[12] In addition to preventing EPA from proposing new GHG vehicle emission standards, Barrasso’s bill would prevent the Secretary of Transportation from considering GHGs in any future CAFE standards.[13]
• California CAA Waivers: The CAA authorizes two sets of vehicle emissions standards – federal standards and standards set by California (which may be adopted by other states). Section 209(a) of the Clean Air Act (CAA) explicitly preempts states from adopting or enforcing vehicle emission standards; however, CAA Section 209(b) permits California to set its own state vehicle emissions standards as long as the standards are at least as protective of human health and the environment as federal standards and EPA grants California a waiver to do so.[14] California sued EPA after the Agency denied its GHG-related waiver request in 2007, and the Obama Administration EPA granted California’s waiver request in 2009.[15] The Barrasso and Upton proposals would prevent EPA from granting California a waiver to implement its own GHG vehicle emissions under CAA Section 209(b) in the future, and the Barrasso proposal would undo EPA’s 2009 waiver grant.[16] When combined with the bills’ prohibitions on federal GHG vehicle standards detailed above, these provisions would effectively eliminate the probability of any vehicle GHG emission limits after the current Tailpipe Emission Standards expire.
• State GHG Programs: Neither bill would affect a state’s ability to issue a GHG-related regulation or statute.[17] However, state GHG-related laws or regulations would not be federally enforceable in any way. For example, if a state chose to include GHG provisions within its CAA SIP, the federal government could not enforce those SIP provisions.[18] The Barrasso bill contains an additional state-related provision that would bar states from taxing, regulating, or requiring allowances from entities that produce GHG emissions outside of their borders.[19]
• Federal GHG Reporting Requirements: Both bills would also affect EPA’s mandatory GHG reporting requirements, which took effect for many industry sources on January 1, 2010.[20] The Barrasso bill would repeal EPA’s GHG emissions reporting requirements outright, while the Upton bill would prevent EPA from enforcing the reporting requirement’s provisions.[21]

The Barrasso bill also includes several provisions absent from the Upton proposal. First, the bill would bar any “cause of action, whether based on common law or civil tort (including nuisance) or any other legal or equitable theory” for money damages or injunctive relief arising from the impact of GHGs on climate change.[22] The provision was apparently intended to prevent further GHG nuisance suits such as American Electric Power Co. v. Connecticut, which is currently pending before the U.S. Supreme Court.[23] The Barrasso legislation would also prevent federal agencies from evaluating GHG considerations when enforcing other environmental laws, such as the National Environmental Policy Act (NEPA), the Clean Water Act (CWA), or the Endangered Species Act (ESA).[24] This provision would effectively undo the White House Council on Environmental Quality’s NEPA GHG guidance,[25] and would bar GHG-related NEPA challenges to projects requiring federal approval. The provision would also reverse the increasing role that GHGs have begun to play under the CWA and ESA. For instance, EPA has begun to consider GHG-related impacts on ocean acidification under the CWA,[26] in addition to considering the impact of climate change on the habitat of endangered species, such as the polar bear, under the ESA.[27] The Barrasso bill would undo these efforts and bar future GHG consideration as well. According to sources familiar with the legislation, the Upton bill did not include similar provisions that would apply to other environmental laws because the House Energy and Commerce Committee, which Upton chairs, lacks jurisdiction over those environmental laws.[28]

Democratic Senator Jay Rockefeller of West Virginia has advanced a competing proposal to the Republicans’ efforts to preempt EPA’s GHG regulations. Rockefeller’s bill, the EPA Regulations Suspension Act of 2011,[29] takes a more moderate line by suspending selected EPA GHG regulations for two years. During the two-year hiatus imposed by the bill, EPA would be prohibited from taking action under the CAA regarding any stationary source permitting requirement or any new source performance standards relating to CO2 or methane. Rockefeller’s bill would not affect EPA’s GHG reporting rules or the current Tailpipe Emission Standards.

What Happens Next

On February 9, 2011, a subcommittee of the House Energy and Commerce Committee held a hearing on the Upton bill, at which both EPA Administrator Lisa Jackson and Republican Senator James Inhofe, a leading opponent of EPA’s GHG regulations, testified.[30] The testimony at the hearing, which was described as “confrontational” at times, ranged from EPA’s GHG regulatory efforts to the current science underlying climate change.[31] Both Barrasso’s and Rockefeller’s bills have been assigned to the Senate Environment and Public Works Committee, and although Barrasso and fellow committee member James Inhofe buttonholed Lisa Jackson regarding EPA’s GHG regulations at a February 2, 2011 hearing regarding drinking water issues,[32] the Committee has not yet scheduled any formal hearings on either proposal.

Meanwhile, House Republicans recently introduced a funding measure that would temporarily block EPA’s GHG regulations.[33] The proposed “Continuing Resolution” (CR) cuts off funding for EPA’s GHG regulations – effectively barring implementation until September 30th, the end of the fiscal year. The full House began debate on the CR on Tuesday, February 15. Since the current CR funding measure is set to expire on March 4, Congress will need to act fast on the proposed CR to prevent the possibility of a government shutdown.

For more information about the proposed federal legislation, EPA’s rules for GHG permitting, and other GHG developments, please contact Russell Prugh or any member of Marten Law’s Climate Change practice.