Environmental Law Archives - Page 39 of 43

Fiscal Cliff Legislation Extends Production and Investment Tax Credits

The National Law Review recently published an article, Fiscal Cliff Legislation Extends Production and Investment Tax Credits, written by Alexander W. Jones of Bracewell & Giuliani LLP:

The fiscal cliff legislation temporarily ends the uncertainty surrounding the extension of tax credits related to wind facilities that generate electricity. Under current law, the production tax credit (the “PTC”) applied to wind facilities that were operational by the end of 2012. The legislation amends the Code and provides that such PTC is available for wind facilities “the construction of which begins before January 1, 2014.” A wind facility typically cannot be planned and constructed within a calendar year, thus, the amended language could significantly increase the amount of facilities that are eligible to qualify for the PTC and cause an even greater demand in 2013 for wind turbines and other equipment necessary to generate electricity.

In addition, the fiscal cliff legislation extends the provision that allows developers and investors involved with wind facilities to elect to receive the investment tax credit (the “ITC”) in lieu of the PTC. The existing ITC provides for an immediate 30% tax credit in the year the facility is placed into service instead of the 2.2 cents per kilowatt hour PTC that is available for the 10 year period commencing when the wind facility is operational. The ability to elect to receive the ITC instead of the PTC will apply to most wind facilities that commence construction prior to January 1, 2014. The extension of such election should cause an increased amount of wind facility transactions to be partially financed by tax equity investors that prefer to take into account the ITC when the facility is completed.

The extension of the PTC and the amendment expanding the scope of wind facilities that are eligible to qualify for the PTC will be welcome by wind developers and investors and may result in increased investment in wind electricity in 2013. However, because the extension applies only for one year, there remains little certainty that the PTC will continue to be available for wind facilities the construction of which begins after 2013.

The Fiscal Cliff Deal’s Impact on Clean Energy

Bryan M. Stockton with Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. recently had an article, The Fiscal Cliff Deal’s Impact on Clean Energy, in The National Law Review:

Contains key tax provisions for renewable energy but funding for USDA energy programs is left out

Capping weeks of intense negotiations between the Obama Administration and Congressional leaders to avert the fiscal cliff, the House of Representatives late on the night of Jan. 1 passed HR 8, the American Taxpayer Relief Act, on vote of 257-167. The Act was passed by the Senate, 89-8, in a similar late night vote on Dec. 31, so it now goes to President Obama for his signature.

The Act is not a “grand bargain” or a comprehensive solution: sequestration—the automatic spending cuts Congress imposed on itself–has been postponed for only two months to give time for further negotiations. The Act allows federal tax rates to rise on those making over $400,000 ($450,000 for married couples) but also limits the impact of the Alternative Minimum Tax on 4 million taxpayers. The Act also includes a one-year extension of emergency unemployment benefits and a one-year extension of provisions to prevent doctors’ payments from Medicare from being cut.

The Act is a mixed bag for the clean energy industry but contains some significant wins on tax policy. The Act extends $46 billion in tax cuts for individuals and businesses—the so called tax extenders.Many of these tax extenders target the renewable energy and energy efficiency industries. For example, a tweak to the Section 45 production tax credit will allow projects that begin construction before Jan. 1, 2014 to take advantage of the credit. However, the Act is a disappointment for those depending on USDA Energy Title Programs as no mandatory funding was contained in the ninemonth reauthorization of Farm Bill programs included as part of the package.

Below is a summary of key clean energy provisions in the American Taxpayer Relief Act.

Tax extenders

Extension and modification of incentives for Sec. 45 renewable electricity property production tax credit. Under current law, taxpayers can claim either a 1.1 or 2.2 cent per kilowatt hour tax credit for electricity produced for a 10-year period from eligible facilities placed-in-service by the end of 2012 (wind) or 2013 (closed-loop biomass, open-loop biomass, landfill gas, or municipal solid waste facilities). The provision modifies section 45 to allow eligible renewable energy facilities that begin construction before the end of 2013 to claim the 10-year credit.
Extension of investment tax credit in lieu of production tax credit. The Act would allow facilities qualifying for the section 45 production tax credit to elect to take a 30% investment tax credit in lieu of the production tax credit for facilities that begin construction by the end of 2013.
Extension of alternative fuel vehicle refueling property credit (non-hydrogen refueling property). The Act extends for two years, through 2013, the 30% investment tax credit for alternative vehicle refueling property.
Extension of incentives for alternative fuel and alternative fuel mixtures (other than liquefied hydrogen). The Act extends through 2013 the $0.50 per gallon alternative fuel tax credit and alternative fuel mixture tax credit. This credit can be claimed as a nonrefundable excise tax credit or a refundable income tax credit. Due to claims of abuse in the alternative mixture tax credit, taxpayers can no longer claim the refundable portion of the alternative fuel mixture tax credit.
25C Credit for certain nonbusiness energy property. The Section 25C credit for energyefficient improvements to existing homes is extended for two years, through 2013. This reinstates the credit as it existed before passage of the American Recovery and Reinvestment Act.
Plug-in electric motorcycles and highway vehicles. The Act reforms and extends for two years, through 2013, the individual income tax credit for highway-capable plug-in motorcycles and 3-wheeled vehicles. It also makes golf carts and other low-speed vehicles ineligible for the credit.
Cellulosic biofuels producer tax credit. The Act extends the $1.01 per gallon production tax credit on cellulosic biofuel produced before the end of 2013. The definition of qualified cellulosic biofuel production is expanded to include algae-based fuel.
Biodiesel and renewable diesel credits. The Act extends through 2013 the $1.00 per gallon tax credit for biodiesel, as well as the $.10 per gallon small agri-biodiesel producer credit. The Act also renews through 2013 the $1.00 per gallon tax credit for diesel fuel created from biomass.
Credit for construction of new energy efficient homes. The tax credit for the construction of energy-efficient new homes that achieve a 30% or 50% reduction in heating and cooling energy consumption is extended for two years, through 2013.
Energy efficient appliance credit. The Act extends for two years, through 2013, a tax credit to US-based companies that manufacture energy-efficient clothes washers, dishwashers and refrigerators.
Cellulosic biofuels bonus depreciation. The 2008 Farm Bill allowed cellulosic biofuel facilities placed-in-service before the end of 2012 to expense half of their eligible capital costs in the first year of operation. The Act extends this bonus depreciation for one additional year for facilities placed-in-service before the end of 2013 and allows algae-based fuel to qualify for bonus depreciation.
Special rule for sales of transmission property. The Act extends the present law deferral of gain on sales of transmission property by vertically integrated electric utilities to FERC approved independent transmission companies. The Act allows gain on such sales prior to January 1, 2014 to be recognized ratably over an eight-year period.
Extension of New Markets Tax Credit. The federal government leverages New Markets Tax Credits (NMTCs) to encourage significant private investment in businesses in low-income communities. The program provides a 39 percent tax credit spread over 7 years. The Act extends NMTCs for two years, permitting a maximum annual amount of qualified equity investments of $3.5 billion each year.
Extension of bonus depreciation. Businesses are allowed to recover the cost of capital expenditures over time according to a depreciation schedule. Starting in 2008, Congress allowed businesses to take an additional depreciation deduction allowance in the first year. The Act extends the 50 percent accelerated expensing provision for qualifying property purchased and placed in service before January 1, 2014 (before January 1, 2015 for certain longer-lived and transportation assets).

Bioenergy funding

The Act also extends the 2008 Farm Act for nine-months (until the end of fiscal year 2013). A short term extension was necessary after the House refused to vote on a five-year reauthorization. The Act reauthorizes funding for US Department of Agriculture (USDA) Energy Title programs but does not provide mandatory funding. Despite hopeful signals that mandatory funding was included in an agreement between the Agriculture Committees’ leadership, it was not included in the final deal between Senate Minority Leader McConnell and the Obama Administration.

By comparison, the Senate Farm Bill passed last year contained approximately $800 billion over 10 years for USDA energy programs. It also would have expanded eligibility under certain programs to renewable chemicals. These USDA programs provide grants, loans, and loan guarantees to renewable energy and advanced biofuel projects; promote cultivation of cellulosic feedstocks; and provide research funding. Work on a new five-year Farm Act will now have to start again, though much of the groundwork has already been done by the committees.

EPA Enforcement in 2012 Protects Communities From Harmful Pollution

The National Law Review recently published an article by the U.S. Environmental Protection Agency, EPA Enforcement in 2012 Protects Communities From Harmful Pollution:

The U.S. Environmental Protection Agency (EPA) today released its annual enforcement results, showing significant environmental and public health protections achieved – a reduction of 2.2 billion pounds of air, water and land pollution, as well as 4.4 billion pounds of hazardous waste, and $252 million in civil and criminal penalties levied – while also focusing on enforcement efforts that reduce smaller amounts of pollution but have substantial health impacts in communities.

“Enforcement plays a vital role in protecting communities from harmful pollution,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. “We are using vigorous enforcement, as well as innovations in monitoring and transparency, to reduce pollution violations, protect and empower communities and focus on the environmental problems that matter most.”

FY 2012 results include:

Sustained and focused enforcement attention on serious violators of clean drinking water standards has resulted in improvements in compliance. The number of systems with serious violations has declined by more than 60 percent in the past three years as a result of combined federal and state enforcement work, protecting people’s health through safer drinking water.
More than 67 percent of large combined sewer systems serving people across the country are implementing clean water solutions to reduce raw sewage and contaminated stormwater and more are underway. EPA is working with communities to design integrated solutions to these water quality problems, and incorporating innovative and cost effective green infrastructure to save money and achieve multiple community benefits.
EPA is bringing criminal prosecutions where criminal activity threatens public health, like failing to use required pollution control equipment or knowingly violating pollution rules resulting in death or serious harm or falsifying pollution information. See a case example in Louisiana.
EPA is advancing environmental justice by incorporating fenceline monitoring, which requires companies to monitor their air emissions and make that data available public, into settlements, ensuring that local residents have access to critical information about pollution that may be affecting their community. EPA also secured $44 million in additional investments through settlements for supplemental environmental projects that benefit impacted communities. See an oil refinery case example.
EPA is increasing transparency to use the power of public accountability to help improve environmental compliance. EPA’s 2012 enforcement actions map provides information about violators in communities. EPA’sstate dashboards and Clean Water Act pollutant loading tool provides the public with information about local pollution that may affect them and allows the public to take a closer look at how government is responding to pollution problems.

More information about EPA’s FY 2012 enforcement results:
http://www.epa.gov/enforcement/data/eoy2012/index.html

Industry Groups File Suit to Block Conflict Minerals Rules and Resource Extraction Rules

The National Law Review recently featured an article by the Public Companies Group of Schiff Hardin LLP titled, Industry Groups File Suit to Block Conflict Minerals Rules and Resource Extraction Rules:

Late last month, the U.S. Chamber of Commerce and the National Association of Manufacturers filed suit in federal court requesting that the court either modify or set aside the SEC rules governing so-called conflict minerals. The petition, filed before the U.S. Court of Appeals for the District of Columbia Circuit, does not state a specific basis for the legal challenge, but in a joint statement, the groups stated that though well-intentioned, the rules are “not an effective approach to this complex issue” and characterized the rule as imposing “an unworkable, overly broad and burdensome system that will undermine jobs and growth and may not achieve Congress’s overall objectives.” This petition comes on the heels of the suit filed against the SEC early last month by a collection of industry groups asking a federal district court to block implementation of the resource extraction disclosure rules promulgated in late August. The plaintiff trade groups raised a number of claims, including a faulty cost-benefit analysis and deficiencies under the Administrative Procedures Act and Exchange Act. It is not clear at this time if the SEC will stay either of the controversial rules on a voluntary basis after negotiation with plaintiffs’ counsel. Should the SEC refuse to do so, the plaintiffs could petition the court for injunctive relief.

US Supreme Court Accepts Certiorari in Koontz v. St. Johns River Water Management District — Confiscatory Takings Case

The National Law Review recently featured an article by Kerri L. Barsh of Greenberg Traurig, LLP regarding US Supreme Court Accepts Certiorari in Koontz v. St. Johns River Water Management District — Confiscatory Takings Case:

On Friday, October 5, 2012, the U.S. Supreme Court granted certiorari in Koontz v. St. Johns River Water Management District, an appeal from the Florida Supreme Court. The questions presented in Koontz are twofold : (1) whether the government can be held liable for a taking when it refuses to issue a land-use permit on the sole basis that the permit applicant did not accede to a permit condition that, if applied, would violate the essential nexus and rough proportionality tests set out in Nollan v. California Coastal Commission (1987) and Dolan v. City of Tigard (1994), and (2) whether the nexus and proportionality tests set out inNollan and Dolan apply to a land-use exaction that takes the form of a government demand that a permit applicant dedicate money, services, labor, or any other type of personal property to a public use. Petitioner Koontz argues in his Petition for Certiorari (a copy of which is attached) that the demands imposed by the St. Johns River Water Management District on the Koontz family as a condition of issuance of the permit were confiscatory and violated the 5th and 14th Amendments of the US. Constitution.

Another Hurdle for GHG Suits as Ninth Circuit Affirms District Court Ruling in Kivalina v. ExxonMobil

The National Law Review recently featured an article by Xiaorong Jajah Wu and Jane E. Montgomery of Schiff Hardin LLP regarding GHG Suits:

In a unanimous decision last week, the Ninth Circuit Court of Appeals ruled that federal common law public nuisance claims regarding domestic greenhouse gas emissions have been displaced by the Clean Air Act (“CAA”) and the United States Environmental Protection Agency (“USEPA”) action the CAA authorizes. Native Vill. of Kivalina v. ExxonMobil Corp., 09-17490, 2012 WL 4215921 (9th Cir. Sept. 21, 2012).

On February 28, 2008, the Village sued ExxonMobil Corporation in federal court along with eight other oil companies, fourteen power companies, and one coal company. The suit was based on, among other things, the federal common law theory of public nuisance. The Village alleged that the companies named in the suit are substantial contributors to global warming because of their high volume of greenhouse gas emissions, and that the Village was directly harmed by global warming because the melting of sea ice exposed the Village to erosive coastal storms. The Village sought monetary damages for the defendants’ contributions to global warming. The district court dismissed the case, holding that (1) the political question doctrine precluded judicial consideration of the Village’s federal public nuisance claims and (2) the Village lacked standing under Article III. Native Vill. of Kivalina v. ExxonMobil Corp., 663 F. Supp. 2d 863, 868 (N.D. Cal. 2009).

The Ninth Circuit affirmed the dismissal on the grounds that the Village had failed to satisfy the threshold question of whether or not legislative action has displaced the theory of public nuisance under federal common law. The court stated that “[i]f Congress has addressed a federal issue by statute, then there is no gap for federal common law to fill.” Relying heavily on the recent Supreme Court ruling in American Electric Power Co., Inc. v. Connecticut, 131 S. Ct. 2527 (2011), the court held that, because the CAA already “provides a means to seek limits on emissions of carbon dioxide from domestic power plants . . . [the CAA and] the EPA actions it authorizes displace any federal common law right” the Village might have to seek damages based on federal common law nuisance. The Ninth Circuit also refused to allow the absence of a damages remedy under the CAA in this case to revive the federal common law damages action. In its decision, the appeals court declined to discuss the issues of political question or standing. The ruling poses another hurdle for greenhouse gas suits based on the theory of public nuisance. At least in the Ninth Circuit, federal common law suits based on transboundary pollution claims against greenhouse gas emitters are now foreclosed. Further, the decision provides additional backing to USEPA to implement the suite of rules regulating GHG emissions pursuant to the CAA.

While the Ninth Circuit backed USEPA’s authority to address global warming through the CAA, the Republican-controlled House passed a deregulatory bill on the same day titled “Stop the War on Coal Act of 2012” (H.R. 3409). The proposed bill would prevent USEPA from enforcing its recent GHG regulations and require the agency to consider the costs and economic impacts of certain regulations. However, the future of the bill is uncertain because the Obama administration has issued a veto threat (182 DEN A-11, 9/20/12), and it is unlikely to move through the Democratic-controlled Senate. Future actions to address these issues are unlikely until after the November elections. Text of the Stop the War on Coal Act of 2012 (H.R. 3409) is available here

Details on each of the amendments to the bill are available here and by clicking on “Amendments” tab.

Coast Guard Proposes New Rule on Discharges in the Great Lakes

Varnum LLP‘s Timothy J. Lundgren recently had an article, Coast Guard Proposes New Rule on Discharges in the Great Lakes, published in The National Law Review:

The Coast Guard is proposing to replace its interim rule with a new rule to regulate the operation of U.S. and foreign vessels carrying bulk dry cargo (e.g., limestone, iron ore, coal) on U.S. waters of the Great Lakes, and the operation of U.S. bulk dry cargo vessels anywhere on the Great Lakes. The new requirements address the discharge of bulk dry cargo residue (“DCR”). The proposed rule would continue to allow non-hazardous and non-toxic discharges of bulk DCR in limited areas of the Great Lakes. However, vessel owners and operators would need to minimize DCR discharges and document their methods for doing so in DCR management plans. Certain additional DCR discharges currently allowed would be restricted.

The potential for DCR discharges to encourage non-native species, the interaction of this regulation with EPA’s Vessel General Permit and the states’ coastal zone management plans as well as various other laws and treaties, and a variety of other topics are covered in the Federal Register Notice. Comments on the proposed rule can be submitted to the online docket on or before October 29, 2012.

Court Strikes Down EPA Overreaching – Again

An article by Robert M. Stonestreet of Dinsmore & Shohl LLP regarding the EPA recently appeared in The National Law Review:

For the third time in the past 10 months, a federal court has declared that the Environmental Protection Agency (EPA) has violated the law through its efforts to impose additional restrictions on coal operations in the Appalachian States. On July 31, 2012, the federal District Court for the District of Columbia struck down EPA’s “guidance memorandum” for coal-related water permitting actions. The guidance purports to establish a number of “recommendations” and “suggestions” for the Corps of Engineers and State agencies like the West Virginia Department of Environmental Protection (WVDEP) to “consider” when processing applications for mining related permits. One of the recommendations is that permits should place limitations on conductivity levels in discharges from mining operations to ensure compliance with “narrative water quality standards,” such as the requirement that discharges into State waters do not cause a “significant adverse impact” to aquatic ecosystems. Conductivity is a measurement of how well water conducts electricity and is considered to be a rough surrogate for the concentration of total dissolved solids (TDS) present in water. Neither EPA nor the Appalachian States have adopted a water quality standard for conductivity. Nonetheless, for more than two years the State agencies have been effectively prevented from issuing new water discharge permits for mining-related projects unless they included conditions that implemented the views expressed in EPA’s “guidance.”

The National Mining Association and the States of West Virginia and Kentucky sued EPA on the grounds that EPA’s “suggestions” and “recommendations” were effectively binding obligations, and therefore constituted a rulemaking action that EPA undertook without following the procedures required by law for issuing new regulations. U. S. District Court Judge Reggie Walton agreed. “Review of the Final Guidance itself and of the post-implementation evidence before the Court makes clear that the Final Guidance, whether intentionally or not, has caused EPA field offices and the State permitting authorities to believe that permits should and will be denied if its ‘suggestions’ and ‘recommendations’ are not satisfied.” Judge Walton further found that the guidance improperly interjected EPA into the permitting process for “dredge and fill” permits issued by the Army Corps of Engineers under Section 404 of the Clean Water Act, as well as the mining-related permits issued by State agencies like WVDEP, which have obtained federal approval to administer those permitting programs.

Judge Walton’s decision invalidating EPA’s guidance is only the latest in a string of court defeats for the EPA. In October 2011, as part of the same lawsuit, Judge Walton declared that EPA’s efforts to develop a new procedure for processing and evaluating “dredge and fill” permit applications for coal mining projects in Appalachia exceeded EPA’s authority under the Clean Water Act. Following that decision, federal Judge Amy Berman Jackson, an Obama appointee, ruled on March 23, 2012 that EPA violated the Clean Water Act in January 2011 by attempting to retroactively “veto” a permit that was granted to Mingo Logan Coal Company in January 2007.

What does this latest decision mean for the coal industry in West Virginia?

The upshot is an affirmation that the Corps of Engineers and WVDEP are the lead regulatory agencies responsible for determining the terms of mining-related permits. More importantly, Judge Walton’s decision invalidating EPA’s guidance should mean that WVDEP is free to interpret and apply West Virginia law to determine the appropriate terms to include in mining-related permits, including what requirements are necessary to ensure compliance with West Virginia’s narrative water quality standards. Earlier this year, the West Virginia Legislature passed a bill making clear that WVDEP has the authority to interpret and apply those standards, and established a number of specific factors for WVDEP to consider. Through its guidance, EPA had effectively arrogated to itself the role of interpreting and applying the narrative water quality standards in West Virginia and the other Appalachian States.

The practical effect of the decision may be negligible, or at least short-lived. EPA has a right to review and comment on all proposed water discharge permits issued by WVDEP. EPA can formally object to those permits, and if the grounds for those objections are not resolved to its satisfaction, EPA can prevent WVDEP from issuing the permits. EPA could undertake the required rulemaking process to formally implement the invalidated guidance. EPA is also in the process of developing a water quality standard for conductivity that could potentially be forced on the States. That would present a substantial regulatory burden on all West Virginia businesses because virtually all industrial discharges, particularly from publicly owned water treatment plants and any activity entailing even temporary earth disturbance, have conductivity levels in excess of background levels, and treatment is very expensive. Right now, EPA’s focus is on the coal industry. But other industries beware. You could be next.

D.C. Circuit Court Vacates EPA’s Cross-State Emissions Rule

Kerri L. Barsh of Greenberg Traurig, LLP recently had an article regarding The EPA’s Cross-State Emissions Rule, featured in The National Law Review:

In a 2-1 decision issued today, the U.S. Court of Appeals for the District of Columbia Circuit ruled in EME Homer City Generation, L.P v. EPA, that the U.S. Environmental Protection Agency exceeded its statutory authority in adopting the Cross State Air Pollution Rule (CSAPR or Transport Rule). The D.C. Circuit found that EPA’s Transport Rule exceeded the agency’s authority on 2 separate grounds, both of which violated the Clean Air Act and required that the Rule be vacated.

Led by Texas, various States, local governments, industry groups and labor organizations had challenged the Rule, which was a significant air policy regulation of the Obama administration. Acknowledging the complexity of the facts, Judge Brett Kavanaugh, writing for the majority, noted that “the legal principles that govern this case are straightforward : Absent a claim of constitutional authority (and there is none here), executive agencies may exercise only the authority conferred by statute, and agencies may not transgress statutory limits on that authority.” The Court went on to note that its decision should not be viewed as a comment on the Rule’s wisdom or underlying merits but rather “to ensure that the agency stays within the boundaries Congress has set.”

D.C. Circuit Vacates CSAPR, Instructs USEPA to Continue Administering CAIR

Schiff Hardin LLP‘s Environmental Group recently had an article regarding CSAPR published in The National Law Review:

In a 2-1 decision, the Court of Appeals for the D.C. Circuit vacated the United States Environmental Protection Agency’s (“USEPA”) Cross-State Air Pollution Rule (“CSAPR” or the “Transport Rule”), USEPA’s attempt to “fix” the Clean Air Interstate Rule (“CAIR”) to regulate downwind state air pollution under the Clean Air Act (“CAA”). EME Homer City Generation LP v. EPA, D.C. Cir. No. 11-1302 (Aug. 21, 2012). In 2008, the D.C. Circuit struck down and remanded CAIR, with instructions to USEPA to continue administration of the CAIR until the replacement rule was implemented. Here, in light of the vacatur of the CSAPR, the D.C. Circuit has instructed USEPA to “continue administering CAIR pending [USEPA’s] promulgation of a valid replacement.”

By way of background, USEPA promulgated the Transport Rule in August 2011 in response to the court’s order in North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008) remanding the CAIR, and to address the 2006 24-hour national ambient air quality standard (“NAAQS”) for fine particulate matter. The Transport Rule established an interstate program to require power companies in 28 “upwind” states to reduce emissions of sulfur dioxide (“SO2”) and nitrogen oxides (“NOx”) to enable downwind states to achieve and maintain NAAQS for ozone and fine particulate matter. Following challenges by affected states and industry, the D.C. Circuit stayed the Transport Rule on December 30, 2011. The stay remained in effect until today’s decision on the merits, where the D.C. Circuit provided two independent grounds for vacatur.

First, the court found that USEPA exceeded its statutory authority granted under Section 110(a)(2)(D), the so-called “good neighbor” provisions of the CAA, by potentially requiring an upwind state to reduce emissions in excess of its contribution to a downwind states exceedance of air quality standards. In so ruling, the court explained that USEPA may require an upwind state to “eliminate only its own ‘amounts which will . . . contribute significantly’ to a downwind State’s ‘nonattainment,'” and “may not require any upwind State to ‘share the burden of reducing other upwind states’ emissions.'” Moreover, while the court acknowledged that USEPA may consider the cost of pollution reductions to lessen the burden upon an upwind state, it may not, as the court found USEPA did in establishing emission reductions under the Transport Rule, use cost considerations to impose pollution reduction obligations above and beyond what was necessary for downwind states to meet air quality standards.

Second, the D.C. Circuit struck USEPA’s decision to require that each state comply with a federal implementation plan (“FIP”) to implement the emission reductions mandated by the Transport Rule rather than allowing each state to determine how best to achieve the reductions within the state, i.e., the FIP-first approach included in the Transport Rule. By imposing a FIP prior to allowing states to implement their own plans, USEPA had usurped a role that was clearly designated by statute to the states. With regard to the “good neighbor” provision, the court held that USEPA must first inform states of their reduction obligations and then provide the states time to develop and submit SIPs, just as it does for new NAAQS. USEPA may not impose a FIP that directs each state on how to achieve the requirements of the Transport Rule without first providing each state a “reasonable time to implement that requirement [under a state implementation plan] with respect to sources within the State.”

The D.C. Circuit advised that its “decision … should not be interpreted as a comment on the wisdom or policy merits of EPA’s Transport Rule” and that USEPA should “proceed expeditiously” to promulgate yet another replacement for CAIR consistent with this decision and, presumably, with the North Carolina decision. The decision in this case further clarifies USEPA’s role and obligations regarding identifying states’ air quality impacts on downwind states. It also emphasizes that the cooperative federalism concept embodied in the CAA is vital to successful implementation of the Act.

Category: Environmental Law

Fiscal Cliff Legislation Extends Production and Investment Tax Credits

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