Environmental Law ReSource : Environmental Lawyer & Attorney : Reed Smith Law Firm : Climate Change, Sustainability

GAO’s report includes several recommendations to USEPA and indicated that these recommendations are already “in process” at the Agency:

• Complete its plan to issue a Significant New Use rule for nanomaterials.
• Modify Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) pesticide registration guidelines to require applicants to identify nanomaterial ingredients in pesticides.
• Complete its plan to clarify that nanoscale ingredients in already registered pesticides, as well as in those products for which registration is being sought, are to be reported to EPA and that EPA will consider nanoscale ingredients to be new.
• Should consider revising the Inventory Update under TSCA so that it will capture information on the production and use of nanomaterials and so that the agency will receive periodic updates on this material."
• Make greater use of the Agency’s authorities to gather information under existing environmental statutes. Specifically, USEPA should:
  • complete its plan to use data gathering and testing authorities under TSCA to gather information on nanomaterials, including production volumes, methods of manufacture and processing, exposure and release, as well as available health and safety studies; and
  • use information-gathering provisions of the Clean Water Act to collect information about potential discharges containing nanomaterials.

USEPA’s Reconsideration of the “Johnson Memo”

On April 2, 2010, EPA published a notice announcing its final reconsideration of the Bush administration's "Johnson memo" (issued December 18, 2008, by former EPA Administrator Johnson), indicating that permit requirements and regulation of GHGs would become effective no earlier than calendar year 2011 and delaying until after January 2, 2011 the date when PSD and Title V regulations will apply to GHGs.  This reconsideration is vulnerable to legal challenge for 60 days, until June 2, 2010. 

USEPA’s Tailoring Rule

Further, on May 13 EPA issued its final "tailoring" rule for GHG emissions, the rulemaking where EPA sets GHG emissions thresholds to define when (at what emission levels) permits under the New Source Review Prevention Significant Deterioration (PSD) and Title V Operating Permit programs are required for new and existing industrial facilities under the Clean Air Act.  Facilities responsible for nearly 70 percent of the national GHG emissions from stationary sources will be subject to permitting requirements under this rule. Emissions from small farms, restaurants, and all but the very largest commercial facilities will not be covered by these programs at this time.  At first, no sources would be subject to Clean Air Act permitting requirements due solely to GHG emissions.  As of Jan. 2, 2011, only sources currently subject to the PSD permitting program (i.e., those that are newly-constructed or modified in a way that significantly increases emissions of a pollutant other than GHGs) would be subject to permitting requirements for their GHG emissions over 75,000 tpy under PSD and operating permit programs.  Come July 1, 2011, for the first time PSD permitting requirements will cover new construction projects that emit GHG emissions of at least 100,000 tpy even if they do not exceed the permitting thresholds for any other pollutant.  This final rule too will likely be open to attack on substantive grounds and industrial and energy sector actors should watch this closely

USEPA’s BACT Guidance

Finally, USEPA will likely publish guidance with regard to how covered sources will be regulated and what constitutes Best Avaible Control Technology (“BACT”) for a covered source.  Although this guidance is not subject to the same appeal provisions as a rulemaking, industrial and energy sector actors should pay special attention to its development.

Another Key Federal Actor:  The Federal Energy Regulatory Commission

In addition to monitoring USEPA actions, the energy sector also needs to keep tabs on certain FERC initiatives.

For example, FERC announced on January 21, 2010, an inquiry into whether its regulatory policies should be modified to efficiently and reliably integrate the rapidly increasing number of variable energy resources into the nation’s power grid.  Variable energy resources include power generation which utilizes any fuel whose availability varies outside of the generator’s control, such as wind, solar and some hydroelectric resources.  FERC seeks public comments on the need for regulatory reforms in order to maintain power system reliability while also efficiently, and in a non-discriminatory manner, integrating such variable energy resources into the grid.

FERC issued its Notice of Inquiry in FERC Docket RM10-11, seeking public comment on whether to reform any of its rules or procedures as the nation’s generation portfolio expands to include more variable energy resources.  Growing use of these types of facilities presents unique challenges to the maintaining the reliability of the electric power system, such as managing the intermittent availability of energy generated by such resources, ensuring that sufficient other, non-variable energy sources are available when the availability of variable energy resources diminishes at various times of the day, and managing the transmission impacts of large variable energy resources being located at remote points on the nation’s grid.  FERC also recognized that increasing use of such variable energy resources also offers significant benefits such as low marginal energy costs and reduced greenhouse gas and other emissions.

Comments from industry continue to be submitted, several thousand pages to date, and the FERC has set no timetable for taking action in Docket RM10-11.  FERC's initiative gains in importance if congressional climate and energy legislation fails to pass

Further, the questions in the FERC inquiry suggest that FERC sees plenty of reason for concern about the prospects for wind and solar power based on the way the grid is run today.  Energy sector actors want to be sure FERC is leading where they can follow and flourish … and the only way to do that is comprehensive responses to inquiries like this one.

In addition, significant new transmission facilities will have to be constructed to enable many wind and solar resources in the U.S. to be developed due to their geographic remoteness from large power markets and the lack of consistent regulatory policies at the state level applicable to the construction of such transmission lines as they cross multiple states’ boundaries.  In FERC Docket AD09-8, FERC requested public comments on transmission planning processes, including (i) whether existing processes consider needs and solutions on a regional or interconnection-wide basis, (ii) whether such processes are capable of handling the challenges of such matters as the integration of large amounts of location-constrained generation and the treatment of demand response and energy efficiency resources, as well as (iii) the allocation of costs of such transmission facilities.  This process has also resulted in thousands of pages of comments from various electric industry participants, including wind and solar generation developers.

Fundamental differences exist in the industry over how the transmission grid should be planned, who should pay to expand it, and how climate benefits of remote wind and solar generation should be recognized in transmission planning and cost allocation.  Other issues have also arisen, such as whether incumbent electric utilities should have a right of first refusal to construct needed new transmission facilities.

Some Conclusions 

What USEPA and FERC will propose in response to these recent announcements and inquiries and what sort of regulatory scheme will ultimately become effective is still open, but those regulatory proceedings are underway and will continue regardless of whether Congress enacts new legislation.

Industrial and energy sectors should not sit still watching Senate developments, or assume the game is over if Congress fails to act.  Significant efforts should be placed on studying and commenting on federal agency actions as well.

Geologic sequestration research and development (R&D) projects (projects that receive federal funding for researching monitoring techniques and practices) would not be required to develop MRV plans or report the additional information required for geologic sequestration, but could choose to opt-in to these requirements.

For those facilities that inject CO2 for the purposes of enhanced oil and gas recovery and only report injection data, USEPA estimates the annualized cost of reporting for each facility to be $4,000. For those facilities that inject CO2 for the purposes of long-term geologic sequestration, additional reporting and monitoring would be required as indicated above and the estimated annualized cost of reporting for each facility required to report geologic sequestration is $300,000.

Most facilities that inject CO2 underground hold permits through USEPA’s Underground Injection Control (UIC) permitting program under the Safe Drinking Water Act. This rulemaking does not change any of the requirements to obtain or comply with a UIC permit. Through a separate rulemaking effort USEPA has proposed federal requirements under the UIC program for the underground injection of carbon dioxide to ensure protection of underground sources of drinking water. This action fulfills a separate but complementary goal which is to track the total amount of CO2 sequestered and to confirm that it remains sequestered and is not emitted to the atmosphere over the long term.

The first annual reports of CO2 injection amounts would be due to USEPA by March 31, 2012 for injection that occurs in 2011. The public comment period for this proposed rulemaking will be open for 60 days after publication in the Federal Register. In addition, a public hearing on this proposal will be held on April 19, 2010, in Arlington, VA.

In the United States’ continued effort to woo the world, today’s special guest at the US Pavilion was Secretary of Commerce Gary Locke.  Secretary Locke called for a “unified international action” that calls on “each of us” to do our part.  Not surprisingly, his speech focused on green job and how green commerce can spur the economy.  Retreating from Secretary of Interior’s statement regarding coal use in the future, Secretary Locke was clear that the days of fossil fuels, and fossil fuel subsidies, are “gone”. 

Secretary Locke specifically said we need to rely on the entrepreneurs and inventors an all countries to come up with ideas and ways to get us out of the climate crisis and create a “new model for economic growth”.  The transition to a clean energy economy, Secretary Locke said, will not be easy, but we can look to the Danish example that accomplished a two-fold increase in GDP while keeping energy consumption the same since 1970.  The change to a clean energy economy will take regulatory reform in zoning, permitting for renewables, as well as a gas tax and removal of any oil subsidies to promote renewable fuel.  To the naysayers that call cap and trade an “Armageddon”, Secretary Locke pointed to the success of the United States acid rain sulfur dioxide allowance trading program. He failed, however, to address the “scale” issues inherent in such a comparison: the acid rain program included a little over 100 sources; the proposed cap and trade system includes over 10,000 sources which is an increase by TWO orders of magnitude. Think of it this way: just because you can serve a nutritious dinner to 4 people and make sure everyone eats their vegetables, that does not mean it is just as easy or the food is as good when you prepare a meal for 4000. 

Also, the leaders of the AWG-KP were asked to name their biggest frustration so far in the negotiations, and all unanimously agreed that “lack of time” haunted them.  If it is to meet its mandate under the Bali plan (again, see Day 2 post), the AWG-KP only has two days to finalize negotiations and report to the COP.  AWG-KP leaders admitted there was still no consensus on major issues: what gases would be covered under the Kyoto Protocol in the new compliance period, what the length of time was for the new compliance period, the base year applicable to the new compliance period, and most important, the reduction commitments by Annex B countries (remember, not the United States) for the new commitment period. 

The most interesting question came from the floor regarding Canada’s lack of compliance and what, if anything, the AWG-KP was doing about it in this or the next compliance period. The Chair answered quickly and correctly that the commitment period under Kyoto Protocol ends in 2012, followed by a true-up period that ends 2015. So it’s not until 2015 that any determinations regarding non-compliance can be made. If there is a party in non-compliance, the Chair said there was a “complex committee” who would deal with that. He joked, “Thanks for the heads up” regarding Canada and they would be on the lookout for Canada’s compliance.

USEPA and its Endangerment Finding: Still in the News

Also today, David McIntosh, USEPA’s Associate Administrator in the Office of Congressional and Intergovernmental Relations, addressed BINGOs.  Perhaps to allay industry’s fears of little transparency if USEPA is solely responsible for regulating GHGs and in contrast to many expert opinions that the Endangerment Finding is “the most significant” action of USEPA in recent years, Mr. McIntosh stressed that the Endangerment Finding triggers three (and only three) USEPA actions under the Clean Air Act.  First, he said it triggered the GHG reporting rule.  This might be a bit disingenuous as my understanding was the GHG reporting rule was triggered by a congressional mandate buried in a budget bill.  Nonetheless, in an attempt to preempt challenges to the reporting threshold of 25,000 pounds, Mr. Mcintosh explained that the mandate required reporting at “reasonable” level and USEPA set that at 25,000 carbon dioxide equivalent, or roughly 2300 times the carbon footprint of the average US household. 

Second, Mr. McIntosh explained that the Endangerment Finding required USEPA to take steps under the Clean Air Act to regulate mobile sources. To meet this mandate, USEPA proposed (in September 2009) and will finalize in March 2010 the rules for light duty vehicles for model years 2012-2016.  Mr. McIntosh clearly inferred that these were the only rules USEPA would publish - that this covered all mobile sources.  This is clearly disingenuous as Title II of the Clean Air Act covers all mobile sources (that is, anything with wheels, aviation included) not just light duty vehicles.  Finally, McIntosh explained that the only other automatic implication of the Endangerment Finding is that once the light-duty rule is finalized (that is, as of March 2010), any new (or major modification to an existing) large stationary source must include GHGs in the best available control technology (BACT) demonstration for permitting.

Most experts agree it will be harder for Congress to act to preempt USEPA with regard to regulating GHG from stationary sources once USEPA actually starts to regulate GHGs from stationary sources, so one could view the March 2010 date stated by Mr. McIntosh as a deadline given by USEPA to Congress and industry, that is, if you want cap and trade, pass it by March 2010 – otherwise you’ll get BACT and command and control permitting.  To ease industry’s fears with regard to BACT permitting, USEPA is preparing guidance.  Such guidance will focus on “available” technology, and Mr. McIntosh specifically said, for example, that the Agency would not consider carbon capture and storage as “available”.  In fact, the guidance will likely rely on merely requiring state of the art efficiency for existing stationary sources rather than require (at least immediately) any new control equipment for GHGs.  Mr. McIntosh also stated that USEPA will be coming out with carbon capture and storage regulations under the Safe Drinking Water Act, but such regulations will not address any CERCLA and RCRA concerns that may arise under carbon capture and storage.

Instead of Marvin Gaye, the Secretary of Interior Sings from the US Pavilion

Today at the US pavilion, Secretary of Interior Ken Salazar (accompanied by Deputy Secretary of Interior, David Hays) addressed a SRO crowd, stating the US understands the danger that climate change presents and that the United States is committed to confronting that danger “together with our partners in the international community”. As for its part to combat climate change, the U.S. Department of Interior (DOI) has three roles: (1) promote renewable energy (particularly mentioned at least in the near term was solar and wind, although nothing was ruled out), (2) identify the right places on public lands for carbon capture and storage, and (3) promote certain adaption measures (address shifting water supplies, wildlife corridors, and raising sea levels).  Specifically, Secretary Salazar stated that by the end of 2010, DOI expects to have more than 5300 MW worth of new solar and wind projects ready for construction - enough to meet the needs of 1.6 million houses and create 56,000 new jobs.  He elaborated on DOI’s recent announcement to open up a new office for renewable energy permitting in the Atlantic states, to promote, among other things permitting for wind energy on the outer continental shelf in Delaware and New Jersey.  In conclusion, Secretary Salazar stated his belief that those who believe climate change is not real are “wrong”, and that as a nation we will pass comprehensive energy and climate change legislation, we will build a clean energy future, and we will establish a comprehensive international framework to address GHGs.

So with that, it’s time to head for the best tasting “kaffe” I can find.

While it takes two in Copenhagen, it also takes two in Washington, DC. After Laurie Fulton, U.S. Ambassador to Denmark introduced USEPA Administrator Lisa Jackson, Ms. Jackson’s first comment was to note that “each of us” has responsibilities regarding GHG reduction to “make up for lost time”. She then touted USEPA accomplishments in addressing responsibilities to this point – the Administration’s Clean Energy incentives including $80 billion in renewable energy, the largest such investment in renewable energy in history, Energy STAR, Clean Cars program, GHG reporting requirements, and newly published Endangerment Finding. 

At the mention of the last, the room erupted into spontaneous applause. But Administrator Jackson was careful to clarify the significance of the Endangerment Finding. She stated that 2009 marks the year that the United States “seriously addresses” climate change, and stressed that USEPA only intends to continue as it always has under the Clean Air Act to address GHG - that is, to take “reasonable efforts” and “meaningful commonsense steps” to address GHG under the Act. She stressed that the Administration still expects to “work closely with Congress to pass Clean Energy reform” because only through Congressional action can the US get economy-wide legislation that sends a clear signal regarding the United States’ commitment to GHG and accomplish the buy-in that is necessary for national legislation through “give and take”. What does this mean? Again, it takes two. 

It also means that the Endangerment Finding opens the door to USEPA regulation of GHGs under existing regulation through the Clean Air Act and, although a blunt tool, technically no congressional action would be necessary to move forward with GHG regulation in this country. So when President Obama shows up here for negotiations next week, it is not necessary for him to only agree to GHG limits that Congress would agree to. But on the international level, Congress still holds the upper hand, because Senate approval (by a two-thirds vote) is required to ratify any international treaty. 

So unless Administrator Jackson wants a repeat of what happened in Kyoto (delegation agrees to certain limits, only to have that agreement repudiated by Congress), the President must be careful from a political standpoint how he uses the Endangerment Finding. And based on Ms. Jackson's statement, the Administration is carefully signaling that regulation of GHGs in this country is “both/and” not “either/or” when the question is whether Congress or USEPA will regulate GHGs. Ms. Jackson also took pains to calm what might be jittery corporate nerves (corporation worry about the “lack of transparency” if USEPA solely has authority over regulation of GHG) by stating at least twice that any move by USEPA to regulate GHG under the Clean Air Act would be through “reasonable” and “common sense” approaches that has served as the hallmark of regulation under the Clean Air Act since its inception in 1970. 

So the Endangerment Finding should not be veiled as a red flag to be waived in the face of Congress with a warning that USEPA will act in the face of continued congressional inaction. Nor should it be viewed as a carte blanche pass for negotiation of the US delegation at the COP. Rather, according Administrator Jackson, it is merely a “clear signal” (to other countries and industry) that the United States “is on the road to putting price on carbon”. The Administrator also took a moment to refute the recent attack on climate science (i.e., Climategate) saying that climate change is a household word and that the data and the science behind it has been extensively “peer reviewed”. This statement anticipates the likely court challenge to the Endangerment Finding that will make the argument that there is no “scientific basis” for such a finding.

Potentially, USEPA’s endangerment finding could trigger a series of steps by the Agency beginning with the designation under the Clean Air Act of greenhouse gases as “criteria” air pollutants and concluding with development of new source performance standards for major categories of new and modified stationary pollution sources along with state implementation plans which contain enforceable emission controls for existing pollution sources within individual states. See Sections 108(a)(i), 111 and 110(a) of the Clean Air Act. On December 2, 2009 in anticipation of the endangerment finding the Center for Biological Diversity and an organization called 350.org filed a petition with USEPA asking the Agency to go forward and regulate greenhouse gases pursuant to the provisions of the Clean Air Act. Petitioners propose that EPA establish national primary and secondary pollution “caps” for greenhouse gases pursuant to Section 109(a) of the Clean Air Act and expeditiously facilitate and aid the states in the state implementation process. This petition has been criticized within the environmental community as being counterproductive to the development of comprehensive legislation.

            USEPA’s decision to announce its action has two apparent purposes. The first is to encourage the House and Senate to move forward with climate change legislation because it is generally seen in most quarters that, if USEPA undertakes to control greenhouse gases under the Clean Air Act, it will bring litigation, uncertainty and more onerous requirements than a comprehensive economy-wide legislative approach. At present both the House and Senate bills being debated contain provisions which would prevent or limit USEPA’s regulation of greenhouse gases under the Clean Air Act, so a vote for the legislation could allow legislators some cover even if it had provisions that were not constituent friendly. The second apparent purpose is that yesterday was the first day of the United Nations Climate Change Conference in Copenhagen and USEPA’s action will help President Obama reinforce his leadership position in Copenhagen, and according to Ms. Jackson will demonstrate to the world the United States’ strong commitment to action on climate change. Reed Smith attorneys are attending the conference as delegates.

            The greenhouse gases covered by the endangerment finding are carbon dioxide, methane, nitrous oxide, hydrofluoro carbons, perfluorcarbons and sulfur hexafluoride.