Tag: EPA

United States Supreme Court Round-Up: Key Opinions from 2013 to 2014 and Upcoming High-Profile Business Disputes

Andrews Kurth

The 2013–2014 term of the United States Supreme Court resulted in a wide range of decisions of importance to business. In this article, we highlight some of the key opinions and explore their likely impacts. We also preview a few of the high-profile business disputes the Supreme Court has agreed to hear next term.

Key Business Cases from the 2013–2014 Term

American Chemistry Council v. Environmental Protection Agency: Holding: The Environmental Protection Agency (EPA) reasonably interpreted the Clean Air Act to require sources that would need permits based on their emission of chemical pollutants to comply with “best available control technology” for greenhouse gases. Effect: The decision reinforces the Supreme Court’s previous recognition that the EPA has the power to regulate greenhouse gases as pollutants. However, portions of the decision strongly cautioned the EPA against overreach, stating that the agency may not “bring about an enormous and transformative expansion in [its] regulatory authority without clear congressional authorization.” These comments suggest that the Supreme Court may take a hard line when the Obama Administration’s other climate regulations eventually go to court.

Daimler AG v. Bauman: Holding: A foreign company doing business in a state cannot be sued in that state for injuries allegedly caused by conduct that took place entirely outside of the United States. Effect: Daimler makes it much harder for plaintiffs to establish general jurisdiction over foreign entities. The opinion re-characterizes general jurisdiction as requiring the defendant to be “at home” in the state, a circumstance that the Supreme Court suggested will generally be limited to the places where the defendant is incorporated or where it has its principal place of business. Moreover, the fact that a domestic subsidiary whose activities are imputed to the foreign parent may be “at home” in the state will not make the foreign parent “at home” in that locale for purposes of general jurisdiction.

Halliburton v. Erica P. John Fund, Inc.: Holding: Plaintiffs in private securities fraud actions must prove that they relied on the defendants’ misrepresentations in choosing to buy stock. Basic v. Levinson’s holding that plaintiffs can satisfy this reliance requirement by invoking a presumption that the price of stock as traded in an efficient market reflects all public, material information, including material misstatements, remains viable. However, after Halliburton, defendants can defeat the presumption at the class certification stage by proving that the misrepresentation did not in fact affect the stock price. Effect: While investors will continue to pursue class actions following large dips in stock prices, the Halliburton decision helps to level the playing field by providing defendants a mechanism to stop such suits at the class certification stage.

Lawson v. FMR LLC: Holding: Employees of privately held contractors or subcontractors of a public company are protected by the anti-retaliation provision of the Sarbanes-Oxley Act of 2002 (SOX). Effect: Following Lawson, there will likely be an increase in SOX litigation against public and non-public companies. Because many of the issues concerning the scope and meaning of SOX have yet to be resolved, lower courts will continue to wrestle with defining the parameters of the law. Questions left unanswered byLawson include whether the whistleblower’s accusation must be related to work he or she performed for the company and whether the contract with the public company must have some relation to public accounting or securities compliance.

Chadbourne & Park LLP v. Troice: Holding: The Securities Litigation Uniform Standards Act of 1988 (SLUSA) does not preclude state-law class actions based on false representations that the uncovered securities that plaintiffs were purchasing were backed by covered securities. Effect: SLUSA bars the bringing of securities class actions “based upon statutory or common law of any state” in which the plaintiff alleges “a misrepresentation or omission of a material fact in connection with a purchase of sale of covered securities.” The statute defines “covered securities” to include only securities traded on a national securities exchange or those issued by investment companies.

U.S. v. Quality Stores: Holding: Severance payments to employees who are involuntarily terminated are taxable wages for purposes of the Federal Insurance Contributions Act. Effect: Employers should, under most circumstances, treat severance payments to involuntarily terminated employees as wages subject to FICA taxes. There are exceptions, however, and employers should therefore seek legal counsel to assist in determining the tax status of a particular severance arrangement.

Business Cases to Watch in the 2014–2015 Term

Integrity Staffing Solutions v. Busk: Whether time spent in security screenings is compensable under the Fair Labor Standards Act.

Mach Mining v. Equal Employment Opportunity Commission: Whether and to what extent a court may enforce the Equal Employment Opportunity Commission’s mandatory duty to conciliate discrimination claims before filing suit.

Omnicare v. Laborers District Council Construction Industry Pension Fund: Whether, for purposes of a claim under Section 11 of the Securities Act of 1933, a plaintiff may plead that a statement of opinion was untrue merely by alleging that the opinion itself was objectively wrong, or must the plaintiff also allege that the statement was subjectively false through allegations that the speaker’s actual opinion was different from the one expressed.

Young v. UPS: Whether, and in what circumstances, an employer that provides work accommodations to non-pregnant employees with work limitations must provide work accommodations to pregnant employees who are similar in their ability or inability to work.

As in recent years, the Supreme Court continues to grant review on more and more cases involving matters of concern to U.S. businesses. Andrews Kurth attorneys are available to provide further detail and guidance on the decisions highlighted here, and on any other issues of concern to your company that have reached the high court.

ARTICLE BY

Kelly Sandill
OF
Andrews Kurth

EPA Issues Changes to Due Diligence Requirements for All Appropriate Inquiries (AAI) Under Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)

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2005 ASTM No Longer Accepted Effective Oct. 6, 2015

On October 6, 2014, EPA issued a final rule mandating the use of the 2013 standard, ASTM E1527-13, for conducting Phase I Environmental Site Assessments for satisfaction of All Appropriate Inquiries (“AAI”) under CERCLA. [Click here for a copy of EPA’s preamble to the final rule, published in the federal register today].

In December 2013, EPA adopted a new AAI rule allowing use of the updated 2013 standard and continuing to allow use of the 2005 standard, ASTM E1527-05. The reference to both standards was widely criticized as a source of confusion in due diligence requirements. Prospective owners/operators were strongly encouraged to use the 2013 standard; however, they had flexibility to decide whether to use the 2013 or 2005 standard for each particular site.

Today’s revised AAI rule removes the reference to the 2005 standard, thus allowing use of only the 2013 standard for entities performing AAI. The new rule does not modify the 2013 standard; it merely mandates the use of it for AAI.

Notably, the new rule will not become effective until October 6, 2015, giving prospective property owners/operators and consultants one year to complete site assessments that are currently being performed consistent with the 2005 standard. Though EPA’s expectation is that entities will no longer use the 2005 standard and transition to the 2013 standard, the EPA’s rule allows use of the 2005 standard for property acquired prior to the effective date of October 6, 2015.

The primary differences between the 2013 and 2005 standards are:

  1. The 2013 standard requires evaluation of the potential for the release of subsurface vapor contamination (vapor migration), and more clearly identifies vapor migration as a recognized environmental condition. The 2005 standard did not explicitly require an analysis of vapor migration
  2. The 2013 standard clarifies existing and adds new definitions, which as a result, revises the potential scope of assessment. For example, the term “Controlled Recognized Environmental Condition” was added to the standard to include past releases that have been addressed but allow contamination to remain in place.
  3. The 2013 standard requires a more extensive review of agency files and historical site documents.

Overall, the 2013 standard is considered more comprehensive and thorough based on today’s realities and is touted by EPA in its final rule preamble as “the consensus-based, good customary business standard.”

Copyright © 2014 Ryley Carlock & Applewhite. A Professional Association. All Rights Reserved.
ARTICLE BY

Bert H. Acken
Jon Steeler
Julie A Rosen
OF
Ryley Carlock & Applewhite, A Professional Corporation

House Passes Bill to Prevent EPA Overreach

Varnum LLP

The U.S. House of Representatives recently passed legislation prohibiting the U.S. Army Corps of Engineers and the Environmental Protection Agency (EPA) from developing, finalizing, adopting, implementing, applying, administering, or enforcing the EPA rule defining what constitutes “waters of the United States” under the Clean Water Act.

This Waters of the United States Regulatory Overreach Protection Act of 2014, H.R. 5078, comes as a response to a move by the EPA in April of this year that proposed changes to how the EPA will define “waters of the United States.” The EPA’s update uses scientific terms from hydrogeology to define which waters are covered under the Clean Water Act.

Farmers, however, have criticized the EPA update as 80 pages of technical and legal jargon. After Congressional hearings, the House passed The Waters of the United States Regulatory Overreach Protection Act of 2014. This bill will go to the Senate next for consideration.

ARTICLE BY

Aaron M. Phelps
Sherry X. Lin
OF
Varnum LLP

Report on State Preparedness to Implement EPA Clean Power Plan

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States are well positioned to implement the Environmental Protection Agency’s (EPA) Clean Power Plan, according to a new study conducted by Analysis Group Senior Advisor Susan Tierney and Vice Presidents Paul Hibbard and Andrea Okie. The report, “EPA’s Clean Power Plan: States’ Tools for Reducing Costs & Increasing Benefits to Consumers,”is based on a careful analysis of states that already have experience regulating carbon pollution. It finds that those states’ economies have seen net increases in economic output and jobs. “Several states have already put a price on carbon dioxide pollution, and their economies are doing fine. The bottom line: the economy can handle – and actually benefit from – these rules,” said Dr. Tierney.

The EPA’s proposed Clean Power Plan would regulate carbon emissions from existing fossil-fueled power plants using EPA’s existing authority under the Clean Air Act. The draft rules, due to be finalized next year, allow a variety of market-based and other approaches states can choose from to cut greenhouse gas emissions from power plants.

The Analysis Group team analyzed the carbon-control rules already in place in several states to see what insights they might hold for the success of the national rule. The report was based on states’ existing track records, rather than projecting costs and benefits that might be expected under the Clean Power Plan. The report, funded by the Energy Foundation and the Merck Family Fund, was released at the summer conference of the National Association of Regulatory Utility Commissioners (NARUC) in Dallas, Texas.

Read the report

ARTICLE BY

Susan F. Tierney, PhD
Paul J. Hibbard
Andrea Okie
 
OF
Analysis Group, Inc.

EPA Clarifies Standards for Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) Assessments

Covington BUrling Law Firm

In a move designed to provide greater certainty to those purchasing, selling, or evaluating industrial or commercial properties, the Environmental Protection Agency (EPA)recently proposed to remove any lingering effect of ASTM International’s E1527-05, a nine-year-old industry standard practice for evaluating potentially contaminated sites under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

As explained in detail in our February 24, 2014 E-Alert, “Amended All Appropriate Inquiries (AAI) Rule Offers New Due Diligence Standard, Focuses on Vapor Releases,” the EPA referenced and countenanced ASTM International’s updated framework, E1527-13, as an alternative due diligence standard to ASTM E1527-05.  Issued on June 16, 2014, the Proposed Rule would clarify Phase I Environmental Site Assessment (ESA) standards by replacing ASTM E1527-05 with ASTM E1527-13.  Yet these requirements still leave significant uncertainty in the absence of more detailed guidance about how to conduct vapor intrusion evaluations.

I.  Background

International standards organization ASTM International modeled E1527-05 on the EPA’s All Appropriate Inquiries (AAI) Rule in 2005.  The AAI Rule is a due diligence standard that allows buyers of potentially contaminated properties who conduct an investigation meeting the rule’s requirements to preserve certain defenses to federal cleanup liability under CERCLA when conducting Phase I ESAs.  See 40 C.F.R. § 312 (2013).  The ASTM E1527-05 framework was developed to provide guidance for such investigations, and instructed would-be purchasers to undertake all appropriate inquiries regarding the condition of a property before completing its sale.  Any buyer who conducted such inquiries in compliance with ASTM E1527-05 could then qualify for certain landowner liability protections under CERCLA, including the innocent landowner, bona fide prospective purchaser, and contiguous property owner defenses.

Last December, the EPA amended the AAI Rule to allow a purchaser to satisfy Phase I ESA requirements by following either ASTM E1527-05 or ASTM E1527-13.  See 78 Fed. Reg. 79319 (Dec. 30, 2013).  As explained in our February 24, 2014 E-Alert, the 2013 framework included new regulatory file review requirements, updated definitions of certain key terms, including “de minimis condition,” “release,” “Recognized Environmental Condition,” and “Historical Recognized Environmental Condition,” and expanded ASTM E1527-05’s definition of “migrate/migration” to include vapor migrations.

II.  Proposed Rule

The EPA amended the AAI Rule through direct final rulemaking, an approach whereby an agency publishes a rule and a notice of proposed rulemaking simultaneously because it expects that the rule will prove non-controversial.  But the move nonetheless introduced confusion because in endorsing both ASTM E1527-05 and ASTM E1527-13, it recognized two distinct standards.

Responding to that criticism, the EPA has now proposed to replace ASTM E1527-05 with ASTM E1527-13 for purposes of the AAI rule so as “to reduce any confusion associated with the regulatory reference to a historical standard” and “promote the use of the standard currently recognized by ASTM International as the consensus-based, good customary business standard.”  Amendment to Standards and Practices for All Appropriate Inquiries, 79 Fed. Reg. 34480 (proposed June 16, 2014) (to be codified at 40 C.F.R. 312), at 11.  Besides removing all references to ASTM E1527-05, the Proposed Rule would not alter the substance of the AAI Rule.

III.  Implications

ASTM E1527-13 incorporates new language about the need to evaluate soil vapor risk when conducting Phase I ESAs.  Soil vapor intrusion is of particular focus with respect to TCE and other volatile organic compounds, but can also involve other contaminants.  The EPA has suggested, however, that a vapor intrusion evaluation may already have been required under ASTM E1527-05.  In its preamble to the rule offering ASTM E1527-13 as a new due diligence standard, the agency stated that it “in its view, vapor migration has always been a relevant potential source of release or threatened release that, depending on site-specific conditions, may warrant identification when conducting all appropriate inquires.”  78 Fed. Reg. 79319 (Dec. 30, 2013).  It is unclear, however, whether the EPA intended this statement to reflect near contemporary Phase I ESAs (conducted after ASTM E1527-13 was developed) or instead intended to suggest that the obligation has always existed.  Consequently, there may be future disputes as to whether a Phase I ESA not describing an evaluation of soil vapor intrusion actually satisfied the AAI Rule.

ASTM E1527-13 leaves open a number of key questions about vapor intrusion evaluations.  Neither ASTM E1527-13 nor the AAI Rule describes, for example, what levels in soil gas or groundwater should lead to concern or what levels would require mitigation.  The EPA and various states are developing guidance in this area to further clarify acceptable levels, how evaluations are to be conducted, whether one can evaluate risk based upon groundwater conditions alone, whether an evaluation must consider multiple lines of evidence, what vapor levels would be deemed acceptable in a residential setting, and what actions are required to mitigate risk.[1]

IV.  Conclusion

Consultants have already been transitioning toward the ASTM E1527-13 standard.  Should the Proposed Rule be adopted, ASTM E1527-05 will still satisfy the AAI Rule for properties acquired between November 1, 2005 and the effective date of the new action.  The EPA also anticipates providing for a delayed effective date of one year following any final action, to give those still using the previous framework time to complete ongoing investigations and become familiar with the updated standard.

However, it is important to recognize the potential that the EPA may claim that a failure to evaluate soil vapor, where otherwise appropriate, is a requirement under ASTM E1527-05 and not only ASTM E1527-13.  It is therefore essential that potentially-affected individuals keep current on EPA developments with respect to the evaluation of soil vapor intrusion, and obtain sound and up to date advice from environmental professionals.

[1]  See http://www.epa.gov/oswer/vaporintrusion/index.html.

ARTICLE BY

Kamila Lis
E. Donald Elliott
Theodore L. Garrett
Gary S. Guzy
Lawr
ence A. Hobel
 
OF
Covington & Burling LLP

New Supreme Court Ruling On EPA Authority Over Greenhouse Gases (GHGs) – Little Clarification on the 111(d) Regulations

Lewis Roca Rothgerber

Last week, the United States Supreme Court issued a significant decision in Utility Air Regulatory Group v. EPA, that substantially restricts the authority of the U.S. Environmental Protection Agency (EPA) to regulate greenhouse gas emissions (GHGs) from stationary sources under the Clean Air Act’s Prevention of Significant Deterioration (PSD) and Title V permitting programs. The Supreme Court’s decision holds that EPA may not impose permitting requirements on facilities based solely on their emissions of GHGs, but may regulate GHG emissions under the PSD and Title V programs, only if a facility is otherwise subject to major source permitting requirements.

Background

EPA interpreted the Clean Air Act to require stationary sources to obtain construction and operating permits under the PSD and Title V programs whenever a facility emits GHGs above certain threshold levels. The threshold levels EPA chose were different than the levels established by Congress in the Clean Air Act, because the statutory levels when applied to GHGs were too low (as compared to criteria pollutant thresholds), and applying those levels to GHG emissions would lead to “absurd results” by subjecting millions of small sources such as shopping malls, hospitals and churches to major source permitting requirements. These thresholds were established in what is known as the “Tailoring Rule.”

The Tailoring Rule triggered regulatory review for two different source categories (for purposes of GHG emissions): sources that were already subject to major source review under the Clean Air Act because of emissions of criteria pollutants in excess of the major source thresholds (so-called “anyway” sources) and those sources that would trigger major source review for the first time based solely on emissions of GHGs in excess of the “tailored” thresholds set by EPA.

Holding

The Supreme Court’s divided 5-4 decision, authored by Justice Scalia, held that EPA’s rulemakings setting “tailored” thresholds for GHGs were invalid. The Court, however, stopped short of holding that GHGs could not be regulated at all under the PSD and Title V programs.

Specifically, the Supreme Court upheld EPA’s approach of requiring “best available control technology” (BACT) standards for GHGs for those sources otherwise required to obtain a PSD permit (the “anyway” sources). The Court emphasized, though, that it was not approving EPA’s current approach to BACT regulation of GHGs, or of any future approach that EPA might adopt. The Supreme Court categorized this aspect of the holding as having only a small impact on the regulated community, stating that 85 percent of all GHG major sources are “anyway” sources, while only an additional 3 percent would be major sources under the GHG tailoring trigger.

The Supreme Court also reaffirmed its decision in Massachusetts v. EPA, which held that GHGs qualify as an “air pollutant” for purposes of the term’s general definition in the Clean Air Act.

Takeaways and Import of This Case on 111(d) Regulations:

1)      GHG Emissions Alone Do Not Trigger Major Source Permitting Obligations – The principal legal holding of the decision is also considered the most significant from a practical perspective. Stationary sources cannot, under the Court’s ruling, be subject to permitting requirements based solely on their emissions of GHGs. The Court’s math on the number of sources impacted by this core aspect of the decision is questionable, and there is suspicion that many potentially major sources were specifically planning facilities to avoid major source permitting review by designing facilities to avoid the tailoring trigger for GHGs. In short, the impact of this decision is potentially very significant for the regulated community.

2)      Greenhouse Gas Emissions Are an “Air Pollutant” Subject to Regulation under the Clean Air Act. While the decision holds that GHGs are not an “air pollutant” for purposes of triggering PSD and Title V permitting requirements, it stops short of holding that GHGs are not an “air pollutant” for other purposes. To the contrary, the Court affirmed its prior holding in Massachusetts v. EPA, that the term “air pollutant,” as generally defined in the Clean Air Act, includes GHGs.

3)      Mixed Signals About EPA’s Authority to Issue NSPS Regulations Under 111(d). The Supreme Court was careful to note that EPA’s authority to regulate GHG emissions under the New Source Performance Standards (NSPS)  were not at issue and did not need to be addressed (that is, the Court specifically did not address the proposed 111(d) rules).

a)      As noted above, the Supreme Court reinforced that GHGs may be regulated as an air pollutant under other aspects of the Clean Air Act (just not PSD or Title V). Though the Supreme Court found that EPA was right to determine that the statutory thresholds for major source review would lead to “absurd results” in the PSD and Title V context for major source triggers, the Court said nothing about EPA’s authority to regulate under the NSPS provisions of Section 111(d). One way to interpret the decision is that it cloaks EPA with apparent authority to address GHGs as an “air pollutant” under Section 111(d).

b)      On the other hand, the Supreme Court took a stern tone in admonishing EPA for over-stepping its bounds. As an example, the Court warns EPA: “[W]hen an agency claims to discover in a long-extant statute an unheralded power to regulate ‘a significant portion of the American economy,’ we typically greet its announcement with a measure of skepticism.” That statement was directed at EPA’s attempt to regulate GHGs in the PSD and Title V programs, but the same argument might be made in the 111(d) context.

Conclusion

There are still many questions to be answered surrounding the 111(d) regulations proposed by EPA. This decision clarifies the overall picture of GHG regulation slightly, but does little to provide a clear boundary on EPA’s authority over GHGs. No doubt, this decision will be cited by both those in favor and those against the 111(d) regulations.

Article By:

Adam DeVoe
Of:
Lewis Roca Rothgerber LLP

What Does Regulation of Greenhouse Gas Emissions as Described by EPA in the “Tailoring Rule” have to do with the Clean Air Act?

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UARG v. EPA: Tailoring Rule Litigation

On June 23, 2014 Justice Scalia delivered the opinion of the U.S. Supreme Court on the question of whether EPA motor vehicle greenhouse gas regulations necessarily automatically triggers permitting requirements under the CAA for stationary sources that emit greenhouse gases. The statements in the opinion concerning EPA’s assertions of power are quite provoking. If read carefully, this opinion launches a warning to EPA about its future regulatory actions relative to greenhouse gases. The text of the opinion can be found here. The following quotes are offered as examples of that warning.

“EPA’s interpretation is also unreasonable because it would bring about an enormous and transformative expansion in EPA’s regulatory authority without clear congressional authorization. When an agency claims to discover in a long-extant statute an unheralded power to regulate “a significant portion of the American economy,” Brown & Williamson, 529 U.S. at 159, we typically greet its announcement with a measure of skepticism. We expect Congress to speak clearly if it wishes to assign to an agency decisions of vast “economic and political significance.” Id., at 160; See Also MCI Telecommunications Corp. v. American Telephone & Telegraph Co., 512 U.S. 218, 231 (1994); Industrial Union Dept., APL-CIO v. American Petroleum Institute, 448 U.S. 607, 645-646 (1980) (plurality opinion). Slip op at 19.

“. . . in EPA’s assertion of that authority, we confront a singular situation: an agency laying claim to extravagant statutory power over the national economy while at the same time strenuously asserting that the authority claimed would render the statute “unrecognizable to the Congress that designed” it. “ Slip op at 20.

“We are not willing to stand on the dock and wave goodbye as EPA embarks on this multiyear voyage of discovery. We reaffirm the core administrative-law principle that an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate.” Slip op at 23.

In a step wise fashion the opinion presents and answers the following:

1.  The question before the Court was “. . .whether it was permissible for EPA to determine that it motor-vehicle greenhouse-gas regulations automatically triggered permitting requirements under the Act for stationary sources that emit greenhouse gases.” Slip op at 2.

First we decide whether EPA permissibly interpreted the statute to provide that a source may be required to obtain a PSD or Title V permit on the sole basis of its potential greenhouse-gas emissions. Slip op at 10.

“It is plain as day that the Act does not envision an elaborate, burdensome permitting process for major emitters of steam, oxygen, or other harmless airborne substances. It takes some cheek for EPA to insist that it cannot possibly give “air pollutant” a reasonable, context-appropriate meaning in the PSD and Title V context when it has been doing precisely that for decades.” Slip op at 12.

“Massachusetts does not strip EPA of authority to exclude greenhouse gases from the class of regulable air pollutants under other parts of the Act where their inclusion would be inconsistent with the statutory scheme.” Slip op at 14.

“In sum, there is no insuperable textual barrier to EPA’s interpreting “any air pollutant” in the permitting triggers of PSD and Title V to encompass only pollutants emitted in quantities that enable them to be sensibly regulated at the statutory thresholds, and to exclude those atypical pollutants that, like greenhouse gases, are emitted in such vast quantities that their inclusion would radically transform those programs and render them unworkable as written.” Slip op at 16.

2.  . . . we next consider the Agency’s alternative position that its interpretation was justified as an exercise of its “discretion” to adopt “a reasonable construction of the statute.” Tailoring Rule 31517. We conclude that EPA’s interpretation is not permissible.” Slip op at 16.

“EPA itself has repeatedly acknowledged that applying the PSD and Title V permitting requirements to greenhouse gases would be inconsistent with – in fact, would overthrow – the Act’s structure and design.” Slip op at 17.

“A brief review of the relevant statutory provisions leaves no doubt that the PSD program and Title V are designed to apply to, and cannot rationally be extended beyond, a relative handful of large sources capable of shouldering heavy substantive and procedural burdens.” Slip op at 18.

3.  “We now consider whether EPA reasonably interpreted the Act to require those sources to comply with “best available control technology” emission standards for greenhouse gases.” Slip op at 25.

“EPA argues that carbon capture is reasonably comparable to more traditional, end-of-stack BACT technologies, . . . and petitioners do not dispute that.” Slip op at 26. “. . . it has long been held that BACT cannot be used to order a fundamental redesign of the facility.” “. . . EPA has long interpreted BACT as required only for pollutants that the source itself emits; accordingly, EPA acknowledges that BACT may not be used to require “reductions in a facility’s demand for energy from the electric grid.” Slip op at 27.

“The question before us is whether EPA’s decision to require BACT for greenhouse gases emitted by sources otherwise subject to PSD review is, as a general matter, a permissible interpretation of the statute under Chevron. We conclude that it is.” Slip op at 27.

“We acknowledge the potential for greenhouse-gas BACT to lead to an unreasonable and unanticipated degree of regulation, and our decision should not be taken as an endorsement of all aspects of EPA’s current approach, nor as free rein for any future regulatory application of BACT in this distinct context. Our narrow holding is that nothing in the statute categorically prohibits EPA from interpreting the BACT provision to apply to greenhouse gases emitted by “anyway” sources.” Slip op at 28.

Opinion of Breyer, with whom Ginsburg, Sotomayor and Kagan join, concurring in part and dissenting in part. Rather than exempting certain air pollutants like greenhouse gas emissions from the statute, it makes more sense to read into the statute an exemption for certain sources that were never intended to be subject to PSD.

Opinion of Alito, with whom Thomas joins, comments that Massachusetts v. EPA was wrongly decided at the time, and these cases further expose the flaw with that decision.

 

The Supreme Court’s Greenhouse Gas Permitting Decision – What Does It Mean?

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The U.S. Supreme Court today partly upheld and partly rejected the U.S. Environmental Protection Agency’s federal Clean Air Act permitting regulations governing greenhouse gas (GHG) emissions from stationary sources.  The decision is mostly a victory for EPA, and its narrow scope means that it will almost certainly not disrupt, let alone invalidate, EPA’s ongoing Section 111(d) rulemaking to set GHG emission limits for existing power plants.  At the same time, the decision does not necessarily mean that EPA’s 111(d) proposal is free from legal challenge.  That is because the decision does not address 111(d).

Today’s decision concerns the Clean Air Act’s two stationary source permitting programs – the prevention of significant deterioration (PSD) program and the Title V program.  In 2010, EPA announced that it was including GHG emissions within the scope of both programs.  Various states and industry groups challenged that announcement, and today, the Supreme Court partly agreed and partly disagreed with the challengers.

First, five justices (Scalia, Roberts, Kennedy, Alito and Thomas) held that a source’s GHG emissions, standing alone, cannot trigger the obligation to undergo PSD and Title V permitting.  That part of the decision is a loss for EPA.  But the second part of the decision is a victory for the agency.  Seven justices (Scalia, Roberts, Kennedy, Ginsburg, Beyer, Sotomayor and Kagan) held that EPA canrequire sources that are subject to PSD “anyway,” because they emit other types of pollutants in significantly large quantities, to control their GHG emissions.  In sum, GHG emissions cannot trigger the obligation to undergo PSD permitting, but EPA can use the PSD permitting process to impose source-specific GHG emission limits on facilities that trigger the process for other reasons.

The decision does not address EPA’s authority to impose substantive limits on GHG emissions using other statutory provisions such as Clean Air Act Section 111(d).

Article By:

Jacob Hollinger
Of:
McDermott Will & Emery

Curbing Greenhouse Gas (GHG) Emissions – Good for the Environment, Bad for Investors?

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On June 2, 2014, EPA issued a proposed rule to control greenhouse gas emissions (GHGs) from the electric power generation sector of the United States. EPA’s goal is to obtain a reduction of GHG emissions in 2030 from this sector of 30% from the baseline year 2005. The 2005 baseline allows EPA to take credit for GHG emission reductions that have occurred since that time without any regulatory obligation. The proposal establishes GHG emission targets for each State (expect the District of Columbia and Vermont who do not have goals under the rule). Interim emission targets must be obtained in the 2020-2029 timeframe with final targets obtained by 2030.

The proposal does not suggest any particular emission limit on particular plants, but imposes the obligation on the States to derive a plan to achieve the reductions. The only penalty for noncompliance in the proposal is that EPA would impose an EPA-developed plan within the State if it fails to submit an approvable plan. While EPA has not dictated any particular approach a State may employ, the proposal favors a cap and trade or carbon tax system as the primary manner to obtain GHG emissions reductions.

So here are the two burning questions from the perspective of investors. First, will this rule actually survive in anywhere near this form?  Second, when will affected power projects need to start ramping up investment in order to comply with the rule, i.e., when should investors start to worry about financial capacity?

In terms of a “review for reality,” many industry experts suggest that it is nearly impossible to obtain the proposed 6% efficiency improvement at existing coal-fired power plants without major capital improvements, which could require complex Clean Air Act permitting under other provisions of the law. Other goals can only be achieved through substantial purchases of carbon credits (i.e., offsets) or the implementation of technologies that haven’t yet been proven to be commercially viable. (You’ve likely heard the aspirations to develop carbon capture and sequestration.) EPA also assumes that natural gas-fired power plants will be running at 70% capacity year-round, which may be difficult to achieve in practice. Finally, EPA assumes that energy efficiency improvements at the consumer level will be obtained at a rate of 1.5% every year until 2030 – an ambitious goal.

In terms of a “review for timing,” this is only the beginning of a very long process. After the usual rounds of public comment, EPA has targeted issuance of the final rule by June 1, 2015. Then the lawsuits will start. Then a new President with his/her own views will take office. Plus, even under the EPA’s own best case scenario, the proposed rule allows states until June 2016 to submit plans, with the potential for extension to June 2017. Once a state submits a plan, EPA must approve or disapprove it through notice and comment rulemaking. The proposal allows for EPA to complete the review of the plans within 12 months of the state plan submittal. If a state doesn’t submit a plan or EPA disapproves the plan, EPA must make a plan for the state. State plans must begin to meet an interim goal in 2020 and must achieve their final goal by 2030. Plus, State plans and EPA approval/disapproval present a separate source of litigation and associated delay.

So no need for panic dumping of carbon-intensive investments just yet, but keeping an eye on the process would be wise, including consideration of whether, if your industry investments are large enough, you should participate in, or form/join a group to participate in, the comment-making phase plus working with members of Congress. The earlier the involvement, the greater the opportunity to help shape the results.

Article By:

Jeffrey R. Holmstead
Richard Alonso
Jason B. Hutt
Evan D. Flaschen
Of:
Bracewell & Giuliani LLP

EPA’s Power-Plant Cooling Water Rule Takes a Surprise Endangered Species Turn

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A surprise awaits those who reach page 334 of the 559-page preamble to EPA’s final cooling-water-intake rule – a potentially significant expansion of the Endangered Species Act.   

The rule, which EPA has not yet officially published, is intended to protect aquatic species affected by cooling water intake at power plants and other large facilities.  It is the result of a lawsuit by environmental groups, settled by EPA, and delayed on several occasions.  Most recently, the rule was hung up as a result of concerns voiced by the U.S. Fish and Wildlife Service and National Marine Fisheries Service (the Services) about whether the final rule would do enough to protect threatened and endangered species.  EPA thought it would; the Services disagreed.  The Services’ concerns eventually caused EPA to miss a court-ordered deadline to publish the final rule.

Now that the rule is out, it appears that, in order to finally get the Service’s approval, EPA included in the final rule a first-of-its kind process that expands the Endangered Species Act to entities that previously didn’t have to comply with it.  Understanding why requires a paragraph of background:

The ESA applies to (1) anyone who might harm or harass a listed species and (2) federal government actions in general.  Federal government compliance typically involves a process under Section 7 of the Act called “consultation,” which essentially involves the agency working with the Services to determine if the action will harm species or their habitat.  Many federal environmental responsibilities are carried out at the state level, including issuing clean water act permits like the ones involved in the 316(b) rule.  But states don’t have to engage in consultation when they undertake these federal responsibilities.  Until now.

EPA’s 316(b) rule doesn’t call the new process consultation, but it looks a lot like it.  Consultation involves the federal action agency, in concert with the Services, determining whether the action will jeopardize the recovery of protected species or adversely modify their habitat.  Often, if the Services conclude that there might be an ESA issue, they recommend project changes to eliminate the possibility.  Since projects can’t go forward if the Services believe species or their habitat will be adversely affected, these recommended changes are usually adopted by the action agency.

The new 316(b) process looks very similar: The state drafts a 316(b) permit for a facility’s cooling-water intake structure.  But rather than finalize it and send it to the facility, which they do for every other clean water act permit, the state will send a copy of the draft 316(b) permit to the Services.  The Services may then provide “recommendations” on the permit.  If they do, the state must include those recommendations in the permit and the facility receiving the permit must implement them.  If not, the facility is in violation of 316(b). 

In other words, just as in consultation, the Services are consulted about impacts to species and their habitat.  If the Services have concerns, they will provide recommended changes to the State permit writer.  The State has to adopt those changes and the facility has to implement them or else the project can’t go forward.  Thus, for the first time, states issuing federal permits will have to function like a federal agency for Section 7 purposes.  We’ve attached a copy of the Services’ flowchart of the process below (in the flowchart, the state is referred to as the “Director.”). 

We’ll be following this process closely, both to see if it is challenged and to see if it spreads to other federal clean water or clean air act permitting carried out at the state level.

EPA

Article By:

Lowell M. Rothschild
Of:
Bracewell & Giuliani LLP