ClimateIntel.com

On August 16, 2010, the White House Council on Environmental Quality (CEQ) released a report on the National Environmental Policy Act (NEPA) procedures for environmental reviews conducted by the Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEM), the successor agency to the Minerals Management Service (MMS).  BOEM is the bureau in the Department of the Interior that regulates oil and gas exploration and production activities in the outer continental shelf (OCS).  Predictably, CEQ is recommending that BOEM undertake more extensive NEPA reviews before issuing permits.

As previously discussed on Akin Gump’s climate change blog, ClimateIntel.com, the Obama administration’s initiatives to “reinvigorate” NEPA have resulted in unnecessary and redundant obstacles to project development.  In analyzing CEQ’s “Draft NEPA Guidance on Consideration of the Effects of Climate Change and Greenhouse Gas Emissions,” issued February 18, 2010, in which the Council expressed the view that NEPA requirements apply to GHGs and climate change impacts, ClimateIntel recommended that CEQ promulgate categorical exclusions and seek necessary amendments to the statute to minimize redundancies in the modern environmental regulatory system.

In the August 16 report , CEQ does precisely the opposite.  Under the guise of “promot[ing] more robust and transparent implementation of NEPA practices, procedures and policies,” the administration announced a ban on the use of “categorical exemptions” for deepwater drilling activities.  The administration also announced that shallow water drilling activities would be subject to enhanced environmental review.  While the current moratorium on deepwater drilling renders these actions “academic,” as the moratorium is lifted, the oil and gas industry will face increased costs and further delays in obtaining regulatory approvals.

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Both the Senate and the House are making one last effort to pass tailored energy industry reform before the end of the session.  While the new strategy may increase the chance for something to pass, climate legislation will not be part of the package.

After abandoning plans for comprehensive energy and cap-and-trade climate legislation on July 22, 2010, Majority Leader Reid (D-NV) introduced a scaled-down alternative bill the following week, marrying various drilling and oil spill response reforms and a limited package of energy proposals addressing energy efficiency, natural gas vehicle and infrastructure incentives, and conservation.  Though less ambitious than prior iterations, the proposed “Clean Energy Jobs and Oil Company Accountability Act of 2010” still covers considerable ground, including provisions to:

• Remove the liability caps for owners and operators of offshore facilities;
• Establish procedures for processing damage claims;
• Strengthen emergency response planning obligations on regulated industries and establish expedited damage claim procedures;
• Expand and direct funding to oil spill prevention and response research, as well a funding to support land and water conservation projects and programs;
• Reorganize federal oversight of offshore drilling to separate leasing, environmental and safety oversight, and royalty collection efforts;
• Increase criminal penalties for violations of oil spill prevention requirements;
• Override recent case law limiting punitive damages under maritime law; and
• Upgrade federal capabilities to respond to future spills, as well as the ongoing Gulf Spill cleanup;
• Allow states to require, with some limitations, disclosure of substances used in hydraulic fracturing efforts associated with natural gas recovery.

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Washington D.C. will host the first-ever Clean Energy Ministerial on July 19-20, 2010, gathering ministers and official delegations from nearly two dozen governments to collaborate on long-term policies and programs for a global transition to clean energy technologies.  To be hosted by the U.S. Secretary of Energy, Dr. Steven Chu, the Clean Energy Ministerial is an initiative of the Major Economies Forum on Energy and Climate (”MEF”), which is comprised of 17 major developed and developing economies.

In July of 2009, the MEF initiated a Global Partnership to promote the advancement of low-carbon and climate-friendly technologies while simultaneously reducing greenhouse gas emissions.  The MEF requested that the Global Partnership create a set of Technology Action Plans directed to ten clean energy technologies that would address more than 80% of the carbon dioxide (CO2) emissions reduction potential for the energy sector, as recognized by the International Energy Agency (”IEA”).  The MEF also intended for the Technology Action Plans to encourage efforts among interested countries to advance action on technologies such as-

• advanced vehicles
• bioenergy
• carbon capture, use & storage
• cross cutting R&D (i.e., clean energy R&D)
• energy efficiency in the buildings and industrial sectors
• high-efficiency, low-emissions (HELE) coal technologies
• marine energy
• smart grids
• solar energy
• wind energy

In December 2009, the MEF’s Global Partnership released these Technology Action Plans, summarizing the information generated by government experts and describing possible roadmaps to advance the development and deployment of these clean energy technologies.  The Technology Action Plans also propose the foundations for long-term policy commitments that would enable governments and the private sector to speed the adoption of clean energy technologies, as well as the means to overcome current barriers to the adoption of these technologies, such as regulatory barriers and the high costs of adopting the technologies, in pursuit of the common goal of a global, low-carbon economy. 

The MEF’s Clean Energy Ministerial will provide an opportunity to discuss these Technology Action Plans, including the policy obligations needed to accelerate the deployment of clean energy technologies.  The agenda also incorporates specific discussions relating to “Energy Efficiency/Smart Grid,” “Clean Energy Supply,” and “Energy Access” during the Public Forum on July 20. 

It is too early to tell how the oil spill in the Gulf of Mexico will impact efforts to pass climate change legislation in Congress.  Some stakeholders see the spill as a wake-up call to move away from reliance on extractive fossil fuels.  Others believe the increased public, press and political attention will complicate future efforts to expand deepwater offshore drilling that, as part of a climate bill, could have attracted bipartisan support of the bill.  A third possibility is the cacophony of competing political priorities-the Gulf spill, the economy, immigration reform, Afghanistan and the Gaza embargo-could drown out calls for action in the waning days of this Congress. 

Even before the spill, prospects for a final bill went awry when Senator Lindsey Graham (R-S.C), the primary Republican advocate for the legislation, withdrew from bipartisan efforts to craft a bill, citing the Administration’s effort to advance immigration reform.  If the furor over immigration reform increased the political cost of cooperation on climate legislation for moderate Republicans, however, the Gulf oil spill reduced their primary incentive.  Senator Graham predicated his support for climate legislation on receiving support from Democrats to increase drilling off the Atlantic Coast.  In the wake of the spill, Senator Graham acknowledged that “[w]hen it comes to getting 60 votes for legislation that includes additional oil and gas drilling with revenue sharing, the climb has gotten steeper because of the oil spill.” 

Climate bill advocates are doing their best to reverse the tide, investing millions in targeted ads and public service announcements (PSAs) and pressuring the Administration and key senators to support a climate/energy bill.  Recent Natural Resources Defense Counsel (NRDC) and VoteVets.org ads, for example, use the spill as one more reason to support immediate action.  The Democratic leadership in the Senate is taking a similar tack, hoping to use the spill to kick-start debate on the recent Kerry-Lieberman American Power Act.

While the spill may encourage national introspection into the country’s energy and climate policies, it may not push the climate bill to the top of a crowded legislative agenda.  Both parties remain conflicted on whether and how to shape binding national climate policy, as evinced by the surprising bipartisan support Senator Lisa Murkowski is receiving for her pending resolution to bar EPA’s regulation of greenhouse gases under the Clean Air Act (scheduled for vote on June 10).  It is also possible that the health, safety and ecological issues raised by the oil spill may divert attention and resources away from the longer-term climate policy debate.  In the short term, “plugging the hole” in the gulf has supplanted climate change as the most urgent environmental issue for the Administration.  Both issues must compete with a host of other domestic and international issues confronting the Administration and Congress. 

Can the climate bill beat out border security and immigration reform, financial reform, mid-East turmoil, “don’t-ask-don’t-tell” and other issues considered urgent by their respective constituencies? Maybe, but as the old saying goes, its supporters will have to rise early, work hard and strike oil.

According to a recent European Commission press release, greenhouse gas emissions reported by European industrial facilities subject to the EU Emissions Trading System (EU ETS) declined by 11.6% on a CO₂-equivalent basis from 2008 to 2009.  Verified emissions from the 12,622 facilities now covered by the EU ETS totaled 1.87 billion tons in 2009, down from 2.12 billion tons in 2009.

The EU ETS is currently in its second trading period, or “Phase II,” which runs from January 1, 2008 to December 31, 2012.  Phase II coincides with the period during which the EU is obligated, under the Kyoto Protocol to the U.N. Framework Convention for Climate Change, to reduce its greenhouse gas emissions to 2.08 billion tons annually.  With the EU-wide decline in emissions from 2008 to 2009, the EU easily met its Kyoto Protocol obligation for 2009.

Under the EU ETS, covered facilities must surrender one EU emissions allowance, or EUA, for each ton of CO₂ or equivalent emissions.  During Phase II of the EU ETS, covered facilities are allocated EUAs for a portion of their historical emissions levels at no cost; if their emissions exceed that level, they must purchase EUAs on the market.  Covered facilities may also surrender, in lieu of EUAs, international emission reduction credits provided through the Kyoto Protocol’s “flexible mechanisms.”  However, such credits accounted for only 4.3% of all surrendered allowances for 2009 emissions.

The sharp decline in EU-wide greenhouse gas emissions in 2009 appears to be attributable to a number of factors.  The main factor seems to be a substantial reduction in industrial activity triggered by the global financial crisis.  Another factor appears to be the relative pricing of natural gas and coal in 2009.  Natural gas prices were exceptionally low during much of 2009, prompting many facilities covered by the EU ETS to shift from coal to natural gas, which emits lower levels of greenhouse gases when burned.  A third factor may be the price of EUAs, which could have triggered efficiency improvements and other changes in the behavior of greenhouse gas-emitting facilities required to purchase them to cover total emissions.  EUAs currently trade near €15 per ton, but during much of 2009 were priced at roughly half that level.

The rate and direction of change from 2008 to 2009 of verified emissions levels among EU member states varied tremendously.  One state, Luxemburg, experienced a slight increase in emissions for its 15 covered facilities, from 2.10 million tons in 2008 to 2.18 million tons in 2009.  Norway, with 115 covered facilities, experienced only a slight decline in emissions, from 19.34 million tons in 2008 to 19.22 million tons in 2009.  In contrast, Germany, which accounts for 1,971 covered facilities - by far the largest number in the EU - experienced a nearly 10% decline in emissions, from 472.67 million tons in 2008 to 428.18 million tons in 2009.  Spain, with 1,108 covered facilities, had an even greater decline of about 16%, from 163.46 million tons in 2008 to 136.93 million tons in 2009.

With Europe’s continuing but erratic recovery from the global financial crisis, it remains to be seen if the EU will be able to stay within its Kyoto Protocol emissions target for 2010.  However, it is clear, with EUAs trading at roughly twice their 2009 price, that the cost of compliance for those covered facilities that must purchase them is increasing.

In the late ‘60’s and early 70’s, as Congress enacted NEPA and established the Environmental Protection Agency and environmental issues became subject to greater public attention, plaintiffs sought to use common law nuisance claims to augment the relatively meager federal statutory schemes.  In recent years, states, local government units, nongovernmental organizations and private individuals have revived the public nuisance doctrine.  Plaintiffs have commenced civil actions in federal district courts against corporations characterized as “large” emitters of greenhouse gases under theories that the emissions of GHGs constitute a public nuisance for which the defendants can be assessed damages or enjoined from continuing to emit.To date, the courts have disposed of these cases on jurisdictional issues related to the plaintiffs’ “standing to sue” and whether the claims asserted may not be heard by reason of the political question doctrine. Should plaintiffs in any of the cases survive the jurisdictional challenges, attention will turn to the elements of proof for federal common law claims of public nuisance.

A critical line of cases on which plaintiffs have been relying arose under the Clean Water Act in which the states of Illinois and Michigan sued Milwaukee, three other cities in Wisconsin, and local sewer and water agencies for discharging untreated sewage into Lake Michigan.  The states contended that such actions constituted a public nuisance and sought an order requiring that the discharges be abated. 

Illinois originally sought to invoke the Court’s original jurisdiction.  The Court denied that motion, ruling that Illinois could sue the Wisconsin public entities in federal district court.  (Illinois v. City of Milwaukee, 406 U.S. 91, 101 (1972)).  The Court went on to review the Water Pollution Control Act, determined that the remedies therein did not cover the relief sought by Illinois, and ruled that “application of federal common law to abate a public nuisance in interstate or navigable waters is not inconsistent with [the statute].”  (Id. at 104).  The Court also noted that “[i]t may happen that new federal laws and new federal regulations may in time preempt the field of federal common law of nuisance.”  (Id. at 107). 

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EPA and DOT “Clean Vehicles” Rule

The Environmental Protection Agency and Department of Transportation finalized a joint rule March 31, implementing more stringent fuel economy requirements and the first-ever greenhouse gas (GHG) emissions standards for passenger cars and light trucks for model years 2012 through 2016.  Under the new rule, manufacturers will be required to increase fleet-wide fuel economy averages and reduce greenhouse gas emissions by approximately 5 percent per year, achieving a corporate average fuel economy of 35.5 miles per gallon and a combined average emissions level of 250 grams of carbon dioxide per mile by 2016.  EPA and DOT estimate that the new rules will reduce carbon dioxide emissions by about 960 million metric tons and conserve about 1.8 billion barrels of oil over the lifetime of the vehicles regulated, EPA estimates that the lifetime cost of 2012-2016 model year vehicles under the national program are less than $52 billion, well below the expected benefits, which are expected to be approximately $240 billion.   EPA and DOT also expect that by 2016, the average individuals who purchases a new car will save $3,000 over the life of the vehicle. 

The rule is significant because it marks the first instance of federal regulation of greenhouse gas emissions under the Clean Air Act and, thereby, triggers the potential for EPA to regulate emissions from utilities and other stationary sources as early as March 31, 2010.  This latter point generated considerable concern from lawmakers, especially in states with fossil-fuel driven economies.  EPA has indicated that it will “phase-in” any regulations on stationary sources, beginning no sooner than January 2011 and, during the initial stages, will apply such rules only to sources emitting 75,000 tons of GHG emissions or more annually.  Administrator Jackson has taken several related measures, including promulgating a final decision reconsidering the “Johnson Memorandum” and advancing a “Tailoring Rule” to control the timing and scope of applying GHG regulations to stationary sources.

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 As discussed in the previous post in this series, when first enacted, NEPA played a significant role in requiring the consideration of environmental impacts in connection with covered projects because the substantive environmental laws then in effect did not provided comprehensive, or in many cases, effective regulation.  Over forty years later, while federal and state statutes and regulations have expanded across the spectrum of environmental media and issues, NEPA’s mandates remain essentially unchanged.  In recent weeks, the White House’s Council on Environmental Quality, seemingly oblivious to this history, issued three draft guidance documents intended to “reinvigorate” the statute.One of the three documents, “Draft NEPA Guidance on Consideration of the Effects of Climate Change and Greenhouse Gas Emissions,” issued February 18, 2010, affirmed CEQ’s view that NEPA requirements apply to GHGs and climate change impacts.  The draft guidance advised federal agencies that they should consider opportunities to reduce GHG emissions caused by proposed federal actions.  Moreover, federal agencies would be required to adapt their actions to climate change impacts throughout the NEPA process and to address these issues in their agency NEPA procedures.

The draft guidance on GHG emissions provides examples of proposals for federal agency action that “may warrant a discussion of the GHG impacts of various alternatives, as well as possible measures to mitigate climate change impacts.”  Specific examples provided by CEQ include: “approval of a large solid waste landfill; approval of energy facilities such as a coal-fired power plant; or authorization of a methane venting coal mine.” 

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Less than a week after the U.S. Environmental Protection Agency (EPA) reversed its position on the applicability of the Clean Air Act’s New Source Review requirements to greenhouse gas emissions at stationary sources, a coalition of industry groups has filed a petition with the D.C. Circuit Court of Appeals challenging the move.  The March 31, 2010 policy formally reverses EPA’s position from the stance articulated in December 2008 by then-EPA Administrator Stephen Johnson. There, EPA had interpreted the definition of a “regulated NSR pollutant” in 40 C.F.R. 8 52.21(b)(50) to exclude pollutants for which EPA regulations only require monitoring or reporting. This exclusion meant that greenhouse gas emissions were not subject to the Clean Air Act’s Prevention of Significant Deterioration program, which requires facilities to meet certain technical requirements and obtain a permit before constructing or modifying major emission sources.  The Obama Administration signaled its intent to revisit this interpretation in September 2009, when it issued a proposed rule to permit large stationary sources of greenhouse gases, and the Administration further demonstrated its resolve in December 2009 when it issued a final endangerment finding under the Clean Air Act’s mobile source program, setting the stage for regulation of auto and truck emissions.

The industry petition, filed April 2, 2010, was co-signed by the Coalition for Responsible Regulation Inc., the Industrial Minerals Association-North America, the National Cattlemen’s Beef Association, Great Northern Project Development LP, Rosebud Mining Co., and Alpha Natural Resources Inc.  The April 2 Petition is just one of several recent efforts by the Coalition to challenge EPA’s efforts to regulate greenhouse gases under its Clean Air Act Authority. A similar petition, filed with the D.C. Circuit December 23, 2009,  asked for review of EPA’s mobile source endangerment finding.  In February 2010, the coalition provided a preview of some of its likely arguments when it petitioned EPA directly to reconsider its mobile source endangerment finding, arguing that EPA had relied upon flawed climate data in making its finding, that the climate science peer review process had been compromised, that EPA’s reliance on IPCC data constituted an unlawful delegation of its statutory responsibilities, and that EPA’s decision making process violated the Administrative Procedure Act. 

Parties have 60 days from the publication of the new policy in the Federal Register to file their own petitions for review. 

When President Nixon signed into law the National Environmental Policy Act of 1969, federal regulation of environmental issues largely existed in name only.  In the absence of comprehensive federal legislation, federal courts began expanding the federal common law of public nuisance.  Draft guidance issued by the Obama Administration’s Council on Environmental Quality requiring federal agencies to consider climate change in the course of discharging their statutory duties and the recent proliferation of common law nuisance actions seeking to abate or recover damages for emission of greenhouse gases suggests that two relics of a bygone era may be revived and applied to ill-fitting facts and circumstances. 

In a series of three posts, ClimateIntel will first briefly summarize the changes in the federal environmental regulatory landscape since the Nixon Administration.  In the second post, ClimateIntel will describe how the CEQ’s draft guidance results in unnecessary and redundant obstacles to project development.  In the third post, ClimateIntel will discuss the jurisprudential issues raised by the recent expansion of the federal common law of public nuisance.

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