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EPA Proposes Regulating Greenhouse Gases Under Clean Air Act: Hearing in Seattle on May 21, 2009

April 17, 2009

EPA, on April 17, 2009, released a proposed finding that greenhouse gas (“GHG”) emissions cause or contribute to air pollution that endangers public health and welfare.[1] EPA’s so-called “endangerment finding” implements the Supreme Court’s landmark 2007 decision, Massachusetts v. EPA,[2] which held that EPA has the authority to regulate GHGs. Publication of EPA’s notice in the Federal Register will open a 60 day comment period, which will include public hearings in Seattle, Washington on May 21, and Arlington, Virginia on May 18, 2009.

Some observers — including some members of Congress — see EPA’s action as more of a political stratagem than a serious effort at regulation. They point out that, in making the proposed finding, EPA was careful not to propose any specific rules, and point to language in EPA’s press release stating the agency’s preference that Congress act, so that it won’t have to. “It is now no longer a choice between doing a bill or doing nothing. It is now a choice between regulation and legislation,” said Rep. Ed Markey (D-Mass.), chairman of the Energy and Environment Subcommittee, who introduced a draft climate bill with House Energy and Commerce Chairman Henry Waxman (D-Calif.). “The EPA will have to act if Congress does not act, but they are right in the Obama administration to prefer legislation.”[3]

But if EPA’s action is a strategy only, it is a strategy that could explode, causing significant collateral damage. There is strong opposition among some industry groups to cap and trade legislation, which some Republican lawmakers have already taken to calling a “cap and tax” that the country can ill afford. With the endangerment finding made, the fuse is lit, and if Congress fails to act to preempt Clean Air Act regulation, thousands or even tens of thousands of sources of carbon dioxide and methane not currently regulated could come within the permit programs set up under the Clean Air Act. Regulating CO2 could by itself increase the number of air permits required by a factor of 10, and 550,000 additional sources could require operating permits (compared to 15,000-16,000 currently).[4]

Perhaps even more importantly, regardless of whether EPA or Congress acts first, environmental activists and their lawyers can be expected to immediately seize on EPA’s endangerment finding as a weapon to challenge power plants and other energy, transportation, development, and commercial projects — including stimulus-funded projects — under state and federal Clean Air Act laws, as well as under the National Environmental Policy Act and its state equivalents.

It has been two to three years now since a number of states began enacting climate change laws and regulations, many with the tacit expectation that Congress would act in time to prevent their having to implement those programs. But Congress has not acted, and many of those same states, lacking the funds or political will, now find themselves having to curtail or repeal laws they only recently enacted. Similarly, EPA appears to be hoping that by threatening to regulate, it will force Congress to legislate. If, however, Congress continues to bog down, and EPA is in fact forced to regulate, then an already complex situation could very quickly become even more unwieldy.

Origin of the Endangerment Finding

The Supreme Court’s decision almost two years ago in Massachusetts v. EPA that CO2 is an “air pollutant” within the meaning of the Clean Air Act provided the impetus for EPA’s action. See Marten Law Group Environmental News, Supreme Court Greenhouse Gas Decision Extends Beyond the Tailpipe (April 4, 2007). In that case, several states had petitioned EPA to use its authority under the Clean Air Act to regulate CO2 emissions from motor vehicles. The State petitions sought EPA action under section 202(a)(1) of the Clean Air Act, which requires EPA to regulate emissions of any air pollutants from motor vehicles that “may reasonably be anticipated to endanger public health or welfare.”[5] EPA rejected the petitions on grounds that CO2 is not an “air pollutant.” The Supreme Court’s 2007 decision reversed EPA, holding that the climate impacts of CO2 bring it within the Clean Air Act’s “sweeping definition” of air pollutant. But the Supreme Court left all other questions regarding the actual regulation of CO2 and other greenhouse gas emissions for later resolution by EPA, the courts, and Congress.

The Supreme Court’s direction to EPA on remand was to choose one of three paths: (1) find that CO2 causes or contributes to air pollution that endangers public health or welfare; (2) find that it does not cause or contribute to air pollution; or (3) offer a reasonable explanation as to why it cannot determine the answer to that question.[6]

In July, 2008, the Bush Administration issued a lengthy Advanced Notice of Proposed Rulemaking (“ANPR”) that effectively punted responsibility for a full response to Massachusetts v. EPA to the next administration. The stated purpose of the ANPR was to take comment on the potential implications of an endangerment finding. To that end it summarized existing Clean Air Act programs and assessed how those programs could be used to potentially regulate GHG emissions. It concluded that the Clean Air Act was a cumbersome tool, at best, one that would create a potential bureaucratic nightmare and create unnecessary costs on the public. See Marten Law Group Environmental News, EPA Says Clean Air Act “Ill-Suited” to Address Greenhouse Gases(July 16, 2008). Opponents of GHG regulation have often seized on the ANPR to bolster their arguments that the country cannot afford to regulate carbon emissions.

EPA Hoping Congress Will Act

The Obama Administration, interestingly, appears to agree that the Clean Air Act is the wrong instrument for regulating greenhouse gases. Nevertheless, Administrator Lisa Jackson declared in a press release accompanying the proposed endangerment finding that her agency was compelled by the Supreme Court to act, and that she hoped the agency’s decision would spur Congress to enact a law specifically addressing greenhouse gases.

The House Energy and Commerce Committee is scheduled to hold four days of hearings next week on the Waxman-Markey bill, which is expected to be the vehicle for House consideration of climate change legislation. But that bill has already drawn intense opposition, some of it from Democrats expressing concern about the economic costs of regulating carbon dioxide. Meanwhile, no significant action on comprehensive climate legislation is currently scheduled in the Senate, nor is any expected in the near term.

The Waxman-Markey bill, titled the “American Clean Energy and Security Act of 2009,” borrows heavily from the Dingell-Boucher bill introduced in the fall of 2008 and the bill that Congressman Markey introduced last year as well. See Marten Law Group Environmental News, Three Key Issues Emerge in Congressional Climate Debate (October 16, 2008). The 648-page Waxman-Markey proposal contains four titles that address: (1) “clean” energy sources; (2) energy efficiency; (3) a federal GHG cap-and-trade program, and (4) measures offering some protection to consumers, and to energy-intensive industries and that may be hurt by a U.S. transition to carbon controls.

As with most of the major cap-and-trade bills introduced in the last Congress, the Waxman-Dingell bill would directly cap emissions from large industrial and electric power sources. Emissions from smaller sources would be indirectly capped by regulating hydrocarbon-based fuels. The Waxman-Markey bill also would mesh cap-and-trade with existing Clean Air Act authorities by blocking application of most of them to GHG emissions. EPA would be directed not to establish National Ambient Air Quality Standards (“NAAQS”) for GHGs, or treat them as hazardous air pollutants. The bill would prohibit EPA from establishing GHG-based new source performance standards (“NSPS”) for major sources that are subject to the cap, but would direct EPA to consider NSPS standards for smaller sources whose GHG emissions would not be capped. Sources subject to the GHG cap would have those obligations incorporated into their Title V air operating permits, but EPA would be directed not to consider GHG emissions when determining whether facilities are required to obtain a Title V permit.

These provisions beg the question of how those various CAA authorities will come into play if the Proposed Endangerment Finding is finalized and no legislation similar to the Markey-Waxman bill makes its way out of the Congress.

The Proposed Endangerment Finding

EPA begins its 134-page Proposed Endangerment Finding by stating that high atmospheric levels of greenhouse gases “are the unambiguous result of human emissions, and are very likely the cause of the observed increase in average temperatures and other climatic changes.” EPA has expanded its analysis beyond CO2, which was the subject of the Supreme Court’s Massachusetts v. EPA decision, to all six of the greenhouse gases that have been regulated internationally – CO2, methane (CH4), nitrous oxide (N20), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6).

Because this proposal has been issued under authority of section 202 of the Clean Air Act, which applies only to motor vehicles, EPA’s analysis is presented in the context of emissions from new cars and trucks. The Proposed Endangerment Finding describes a two part test under section 202(a): whether a form of air pollution may “reasonably be anticipated” to endanger public health or welfare, and separately, whether emissions from new motor vehicles “cause or contribute” to that air pollution.

Under the “reasonably anticipated” element of the test, EPA concludes that it is required to protect public health and welfare, but need not wait until harm has actually occurred.[7] The Agency also states that in evaluating the risk posed by air pollutants, it may balance the likelihood and severity of the effect, and so may find “endangerment” when the harm may be catastrophic but the likelihood of occurrence may be small.[8] EPA also notes that it must consider the cumulative impact of pollutant sources, and must consider potential impacts to all aspects of the population, including vulnerable subpopulations.[9]

In evaluating whether emissions from new motor vehicles “cause or contribute” to the risk to public health and welfare posed by air pollution, EPA says that it need not find that the sources or groups of sources are the sole or even major part of the air pollution problem.[10]

After discussing the current state of scientific understanding regarding each of the six greenhouse gases, the Proposed Endangerment Finding concludes that GHG emissions from new motor vehicles are “reasonably … anticipated to endanger human health and welfare.” EPA characterizes its proposed decision as follows:

This is not a close case in which the magnitude of the harm is small and the probability great, or the magnitude large and the probability small. In both magnitude and probability, climate change is an enormous problem. The greenhouse gases that are responsible for it endanger public health and welfare within the meaning of the Clean Air Act.[11]

This proposed “endangerment” determination is based on EPA’s consideration of observed environmental effects (e.g. widespread changes in temperature and precipitation patters), projected future environmental effects (e.g. rising sea levels), projected impacts to public health (e.g. ozone concentrations), and projected impacts to public welfare (e.g. increased drought).

EPA also determined that greenhouse gases from new motor vehicles cumulatively “cause or contribute to” such air pollution. In reaching this conclusion, EPA notes that the United States’ greenhouse gas emissions constitute 18% of global emissions, while motor vehicles are responsible for 24% of the United States’ emissions. EPA further notes the unique character of the issue it is attempting to address:

If the U.S. and the rest of the world are to combat the risks associated with global climate change, contributors must do their part even if their contributions to the global problem, measured in terms of percentage, are smaller than typically encountered when tackling solely regional or local environmental issues.[12]

While EPA does not propose any specific pollution emission standards, it does propose defining greenhouse gases as “air pollutants” under the Clean Air Act. EPA proposes cumulatively defining the six primary greenhouse gases – (CO2, CH4, N20, HFCs, PFCs, and SF6) – as a single pollutant, rather the defining them individually. EPA explained its decision as follows:

It is the Administrator’s judgment that this collective approach for the contribution test is most consistent with the treatment of greenhouse gases by those studying climate change science and policy, where it has become common practice to evaluate greenhouse gases on a collective CO2-equivalent basis.[13]

EPA will accept public comment for 60 days from the date the Proposed Endangerment Finding is published in the Federal Register. It will hold public hearings on May 18 in Arlington, Virginia, and on May 21 in Seattle, Washington.

Where Endangerment Leads

While EPA normally proposes emission control standards concurrently with an endangerment finding, it did not do so here. EPA indicated that it is moving forward with developing emission control standards for new motor vehicles under section 202(a) of the Clean Air Act, and expects that if Congress does not act first, then the proposed standards will be available for public comment “several months from now.”[14] EPA indicated that it is similarly evaluating its response to the numerous rulemaking petitions that followed in the wake of Massachusetts v. EPA, including requests that EPA regulate greenhouse gas emissions from a broad range of mobile and stationary sources.[15]

Meanwhile, EPA is all but certain to reverse its Bush-era decision to deny California’s request for a Clean Air Act waiver, which would allow California and many other states to adopt stricter GHG emission standards for motor vehicles than currently required by federal law. See Marten Law Group Environmental News, EPA Rejects California’s Waiver Request for State-Specific Vehicle Emissions Standards (December 17, 2007). At least seventeen states have either adopted California’s GHG vehicle standards, or stated their intent do so. If Congress does not act to create an alternative to regulating GHGs under the Clean Air Act, then EPA will be forced by timelines under the Act to start the rulemaking process. As the discussion of the Markey-Waxman bill above suggests, if Congress does not act, then EPA’s options under the Clean Air Act would include listing GHG as criteria pollutants and establishing NAAQS under section 108 and 109 of the Act.[16] Compliance with NAAQS is implemented by the states through State Implementation Plans. If EPA were to pursue that path, it would immediately confront the problem of determining what constitutes a “safe” concentration of GHG in the atmosphere, followed by identification of those areas that fail to attain NAAQS.

EPA also could set new source performance standards for GHG emissions from specific industries or types of sources, under section 111 of the Act.[17] It also could regulate GHG emissions under section 129[18] through solid waste combustion standards. But much of the focus in the future will be on how GHG emission controls fit into the context of the Prevention of Significant Deterioration (“PSD”) construction permitting program under section 165,[19] and the Title V air operating permit program.[20]

A PSD permit must be obtained before constructing or modifying a “major emitting facility,” and that permit must require that the facility uses the “best available control technology for each pollutant subject to regulation under this chapter.”[21] Currently, a “major emitting facility” is one that emits more than 250 tons a year of a regulated air pollutant, or for some categories of sources, emits more than 100 tons a year. Even relatively small sources emit more than 100 tons of CO2 a year, so the concern is that the current thresholds could sweep thousands of previously unregulated sources into the PSD permitting program.

The issue of the scope of the PSD program and its BACT requirement was squarely presented to EPA in December, 2008, when the Agency’s Administrative Appeals Board rejected the PSD permit for a Utah power plant in In re Deseret Power Cooperative. The Board did not rule on whether CO2 is “subject to regulation” within the meaning of the PSD program, but rejected EPA’s rationale for not requiring BACT for CO2. It held that EPA’s decision was unsupported by the administrative record, and remanded to EPA for further deliberations. For a detailed discussion of the In re Deseret decision and its implications for the PSD program, see Marten Law Group Environmental News, EPA Appeals Board Decision Stirs the Pot on Whether to Address Carbon Emissions by Regulation or Legislation(December 3, 2008).

As the In re Deseret case demonstrates, environmental plaintiffs were arguing that the Clean Air Act requires limits on CO2 emissions long before the Obama Administration’s Proposed Endangerment Finding. They will not wait for EPA rulemaking before incorporating this latest Agency action into future court proceedings. We also can expect to see the Proposed Endangerment Finding cited in comments on environmental impact statements, and in litigation under NEPA and its state counterparts. Meanwhile, the pressure on Congress to enact federal climate change legislation continues to mount.

For more information, please contact Brad Marten, or any member of Marten Law Group’s Climate Change Practice Group.

[1] In addition to its 134-page Proposed Endangerment Find that will soon be published in the Federal Register, EPA also released a 171-page technical support document that is available on the Agency’s web site.

[2] 127 S. Ct. 1438 (2007).

[3] E&E News, EPA’s Endangerment Finding Seen As Spur For Legislation (April 17, 2009) (subscription required).

[4] 73 Fed. Reg. at 44,499, 44,511.

[5] 42 U.S.C. § 7521(a)(1).

[6] 127 S. Ct. at 1462-63.

[7] Proposed Endangerment Finding at 25.

[8] Id. at 26.

[9] Id. at 26.

[10] Id. at 35.

[11] Id. at 100.

[12] Id. at 117.

[13] Id. at 102.

[14] Id. at 23-24.

[15] Id. at 24.

[16] 42 U.S.C. §§ 7408 & 7409.

[17] 42 U.S.C. § 7411.

[18] 42 U.S.C. § 7429.

[19] 42 U.S.C. § 7475(a).

[20] 42 U.S.C. §§ 7661 – 7661f.

[21] 42 U.S.C. § 7475(a)(4).

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