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In Second Obama Term, Expect Significant Changes to Energy and Environmental Law

November 14, 2012

The Obama Administration is expected to advance major changes to energy and environmental laws in the next four years. There is already a backlog of pending legislation and proposed regulation to work through, and both environmental and industry groups will press for major reforms. This is the first in a series of articles describing what our readers can expect to see during the second Obama Administration.

Air

President Obama saved his first mention of climate change during his reelection campaign for his acceptance speech on the night of November 6. While his silence on the topic preceding that remark caused consternation among some in the environmental community, with his reelection there is little doubt that EPA will proceed with the regulation of greenhouse gas emissions under existing provisions of the federal Clean Air Act. EPA’s rules requiring controls on greenhouse gases in air permits for the construction and operation of major sources were upheld last summer by the D.C. Circuit Court of Appeals.[1] In the next few months, EPA is expected to finalize New Source Performance Standards limiting greenhouse gas emissions from power plants, and to propose similar regulations for refineries. EPA is required to act on both of these rules under settlement agreements with several states and environmental groups.

Challenges to several air rules adopted during the first term also are still playing out. EPA has stayed enforcement of the Boiler MACT rule, which has widespread application to America’s industrial facilities, since its adoption in March, 2011, while the Agency reconsidered certain portions of the rule. EPA reportedly is preparing to finalize its changes to the Boiler MACT rule, setting up renewed court challenges to that regulation. Also still pending in the courts are challenges to EPA’s mercury and air toxics standard (MATS) for utilities, and the Cross-State Air Pollution Rule. EPA also is expected to take final action soon on a national ambient air quality standard for very fine particulates (soot), and will continue deliberations on a more stringent ambient standard for ozone. President Obama delayed action on the ozone standard in the fall of 2011, pushing it out until at least 2013[2] – which now is upon us.

Energy Policy

President Obama adopted an “all of the above” energy strategy in his first term (although “all” apparently does not include conventional coal combustion), and that strategy is likely to continue in his second term. The presidential and congressional campaigns saw developing Republican opposition to federal renewable energy programs (objecting that the programs “picked winners” – sometimes without success), as well as a late push by Governor Romney in coal-dependent regions like southern Ohio. President Obama’s reelection means continuation of his energy policies, but it also did not sweep away Republican opposition.

An early test of the President’s commitment to renewable energy, and of Republican resolve, will come as Congress decides whether to extend the wind energy production tax credit, which is set to expire at the end of 2012. President Obama’s first term saw approval of 34 wind, solar and geothermal projects on federal lands, with combined production capacity over 13,750 megawatts. But even if the wind tax credit is renewed, the rapid pace of renewable energy development that occurred in the last few years is likely to slow. This is due in part to a significant increase in the domestic supply, and corresponding drop in price, of natural gas.

Growth in new drilling technology – hydraulic fracturing (“fracking”) and horizontal drilling – have generated an upsurge in the domestic oil and gas industry in the last few years that allowed President Obama, during his debates with Governor Romney, to tout historic increases in U.S. natural gas and oil production. But there also has been a corresponding increase in calls to regulate fracking practices. The coming year will see debate over the Administration’s newly issued proposal to regulate fracking on federal lands, and EPA’s ongoing study of potential drinking water resource impacts is slated to be completed in 2014. Fracking will remain a hot topic at the state and local level as well.

President Obama’s second term also will see continued attention to energy infrastructure. The Obama Administration will be asked to decide next year whether to authorize a re-routed Keystone XL pipeline from Canada to Texas, bring oil from Canada’s tar sands to the Gulf of Mexico. Proposed energy export projects further exemplify the changed energy landscape. While coal remains the odd man out in domestic energy policy, multiple proposals for coal export terminals are working their way through state agencies. Similarly, over a dozen liquefied natural gas export facilities have been proposed. The Department of Energy is poised to issue a report on the economic impacts of proposed LNG exports that will likely inform the development of official policy on that issue. Finally, the growth in renewable electric power generation continues to put pressure on an aging electrical grid, which also faces reliability concerns that are only heightened by experiences like the extensive outages and long delays in restoring power experienced during Superstorm Sandy.

Water Quality, Wetlands, and Water Resources

During President Obama’s second term, EPA will continue to grapple with several threshold issues regarding the reach and applicability of the Clean Water Act (“CWA”). Chief among these is the scope of CWA jurisdiction over “navigable waters,” particularly in the context of wetlands. In an effort to clarify divergent decisions from federal appellate courts on this issue, the Supreme Court issued a decision in 2006, Rapanos v. United States. [3] The failure of that decision to set out clear standards, however, has created confusion that the courts, EPA, and the Army Corps of Engineers (“Corps”) have yet to clarify. In June 2007 and again in December 2010, EPA and the Corps issued joint guidance memoranda on how their respective staff may determine CWA jurisdiction under the tests set forth in Rapanos.[4] In the spring of 2011, EPA and the Corps proposed but never enacted rules on CWA jurisdiction. The Obama Administration will likely now revisit the issue.

Another threshold issue, currently pending before the Supreme Court,[5] is the question of whether stormwater permits are required for discharges from ditches and culverts on logging roads. The Supreme Court, in a case of significant importance to public and private landowners and businesses throughout forested areas in the United States, is considering a challenge to a Ninth Circuit decision that reversed decades-old EPA policy in holding that such permits are required.[6] While the case has been pending, EPA has proposed revisions to its regulations to specify which, if any, logging road activity requires stormwater permits. On November 9, EPA sent a final rule to the White House for review. The Supreme Court currently is slated to hear oral argument on December 3, which will likely precede release of EPA’s new rule.

EPA also has stated that it intends to propose a rule to strengthen the national stormwater program by June 10, 2013 and complete final action by December 10, 2014. These new rules are likely to affect industrial facilities and municipalities.

Natural Resources

In 2009, the Obama Administration established an Interagency Ocean Policy Task Force, led by the White House Council on Environmental Quality, to develop recommendations for a national policy that ensures protection, maintenance, and restoration of oceans, coasts, and the Great Lakes, as well as a framework for coastal and marine spatial planning. [7] Following through on Task Force recommendations, President Obama’s second term is likely to see a push for major changes in ocean management, including “zoning” of offshore areas. The Administration, acting through the National Ocean Council, is expected to publish a final implementation plan in early 2013. The resulting policy changes – if fully implemented – are likely to affect many industries: fishing, aquaculture, agriculture, offshore energy development, and others.

The next few years also are likely to see a material increase in the number of species listed as “threatened” or “endangered” under the Endangered Species Act (“ESA”). The U.S. Fish & Wildlife Service (“FWS”) has committed to take final action by 2016 on 251 species currently listed as “candidates” for ESA listing, and to make initial findings on listing eligibility for many more species, as part of a 2011 settlement with Center for Biological Diversity and WildEarth Guardians. The upswing in ESA listing likely to result from this effort will likely complicate resource development in the West and in other regions of the nation.

FWS and NOAA Fisheries are also expected to publish a final rule—originally proposed in late 2012—that mandates publication of a draft economic analysis for public comment at the time critical habitat is proposed for ESA-listed species.[8] The rule would require use of the “baseline” approach in that analysis, which limits the scope of economic impacts considered to those for which designation is the “but for” cause.

Hazardous Waste and Chemicals Regulation

With an otherwise full regulatory agenda, EPA may find it difficult to focus too much attention on issues involving the regulation of solid and hazardous waste. Some commenters have urged that the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA,” or the federal Superfund statute), which went into effect in the 1980’s and has not been substantially amended since, is overdue for a comprehensive overhaul; however, other than a few initiatives focused on procedural matters, EPA has not signaled much interest in a more expansive regulatory update. EPA does seem likely to move forward with its proposal to regulate coal combustion residuals (“CCRs,” commonly known as coal ash) from electrical power generation under the Resource Conservation and Recovery Act (“RCRA”). CCRs currently are exempt from regulation as RCRA hazardous waste. EPA issued a proposed rule in July 2010 that identified different possible alternatives for regulating CCRs as either “special” wastes under RCRA subtitle C or non-hazardous solid wastes under subtitle D. While the proposal has effectively been on hold since 2010, EPA has now indicated that it may adopt a new rule before the end of 2012. Opponents of a proposed rule already are lining up to challenge it in the courts.

On yet another front, a possible sleeper issue for the Administration’s second term could be the reform of federal chemicals regulation under the Toxic Substances Control Act (“TSCA”). TSCA has been on the books now, without substantial amendment, for over 35 years. During that period, regulatory initiatives in other countries (such as the European Community’s REACH (Registration, Evaluation, Authorisation and Restriction of Chemical Substances) and among the states (such as California’s Green Chemistry Initiative[9]) have threatened to make TSCA look obsolete. Efforts to modernize TSCA legislatively have made little progress (although the most recent attempt at TSCA reform, S. 847 (the Safe Chemicals Act of 2011) was voted out of the Senate Environment and Public Works committee – along party lines – for the first time this summer). EPA Administrator Lisa Jackson has been a strong advocate for a more aggressive federal approach toward chemicals regulation overall, and depending on how things shape up within EPA’s leadership during the second term, support for TSCA reform could manifest itself in significant new regulatory initiatives.

Conclusion

Energy, the environment and the economy are intertwined in ways that will require constant balancing in the next four years. Over the next several weeks, Marten Law News will continue to explore, in greater depth, the key energy and environmental issues confronting the administration.

[1] See EPA’s Greenhouse Gas Regulations Upheld By Federal Court of Appeals, Environmental News (June 28, 2012).

[2] See Obama Administration Withdraws Proposed Ozone Standard, Environmental News (September 6, 2011).

[3] 126 S. Ct. 2208 (2006).

[4] See J. Kray, Post-Rapanos Guidance on Clean Water Act Jurisdiction Issued by EPA and Corps, Environmental News (June 6, 2007).

[5] The Supreme Court is reviewing two consolidated petitions for review, Decker v. Northwest Environmental Defense Center and Georgia-Pacific v. Northwest Environmental Defense Center. Both petitions appeal the Ninth Circuit’s decision in Northwest Environmental Defense Center v. Brown, 640 F.3d 1063 (9th Cir. 2011).

[6] See Georgia-Pacific West v. Northwest Environmental Defense Center, Environmental News (October 8, 2012).

[7] See J. Ferrell, The Year Ahead in Energy and Environmental Law: Natural Resources, Environmental News (January 14, 2010).

[8] See J. Ferrell, Proposed Rule Would Limit Extent of Economic Impacts Considered in ESA Critical Habitat Designations, Environmental News (October 12, 2012).

[9] See K. Haroff, California Pursuing New Approach to Chemicals Regulation, Environmental News (September 13, 2012).

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