Existing sources will have three years to comply with the new emissions limits.  State permitting authorities may grant individual sources an additional year to comply under certain circumstances.

The rule also includes revisions to the New Source Performance Standards; these revisions apply to new coal- and oil-fired power plants and set standards for emissions of particulate matter, sulfur dioxide, and nitrogen oxides.

EPA’s web page on the rule may be found here; a press release is available here. In addition, EPA has prepared, broken down by state, a list of facilities that it anticipates will be covered by the new air toxics rules.

For additional information, contact Ed Roggenkamp.

In response to the Supreme Court’s 2007 Massachusetts v. EPA decision, which affirmed EPA’s authority to regulate GHGs under the Clean Air Act, EPA finalized a series of regulations limiting GHG emissions from motor vehicles and certain new or modified major stationary sources.  Four such rules are currently being challenged in the D.C. Circuit – the “endangerment finding” declaring that GHG emissions may endanger public health or welfare; the “tailpipe” rule regulating car and light truck GHG emissions; and the consolidated “timing” and “tailoring” rules that began phasing in stationary source GHG limits as of January 2010, while increasing emissions thresholds to limit the number of facilities covered.

Briefing in those cases is underway, and the D.C. Circuit recently announced that all of the GHG-related challenges would be heard by Judges David Tatel, David Sentelle and Judith Rogers, with oral arguments scheduled for February 28-29, 2012.  Tatel is well known for his defense of EPA’s regulatory authority in the D.C. Circuit’s consideration of Massachusetts v. EPA, a dissenting opinion whose reasoning was subsequently adopted by the Supreme Court.  Sentelle wrote the D.C. Circuit’s plurality opinion in Mass. v. EPA, holding that states lacked standing to challenge EPA’s inaction on climate change.  Rogers was not on the Mass. v. EPA panel, though she joined Tatel in dissenting from the denial of a rehearing en banc.

Rogers also authored a 2008 opinion overturning EPA’s weakening of power plant mercury rules, which criticized the agency for “deploy[ing] the logic of the Queen of Hearts, substituting EPA’s desires for the plain text of [the Clean Air Act].”  While celebrated by environmental organizations at the time, such textual analysis could pose problems for EPA’s tailoring rule, which departs from the emissions thresholds enumerated in the statute.

Even as its legal authority is being challenged in the courts and Congress, EPA continues to move forward with new GHG regulations.  Pursuant to a settlement with several environmental groups and states, includingNew York, EPA recently submitted proposed New Source Performance Standards (“NSPS”) for power plant GHG emissions for OMB review – generally the final step before the proposal is published.  The NSPS rule is likely to expand GHG limits for new and existing power plants, most of which are not covered under existing EPA regulations.

The “heart of the Clean Air Act,” NAAQS set maximum levels for six “criteria” pollutants at levels necessary to protect public health and welfare, implemented through State Implementation Plans covering a broad range of sources.  The ozone NAAQS were last revised in 2008, when the Bush Administration set a primary standard of .075 parts-per-million (“ppm”) – more lenient than the .06-.07 ppm range recommended by EPA’s Clean Air Scientific Advisory Committee.

In response to a lawsuit filed against the 2008 standards, the Obama administration agreed to reconsider the ozone NAAQS in September 2009 and proposed adopting a standard with the .06-.07 ppm range shortly thereafter.  EPA held three public hearings on its proposal, and as recently as July 26, 2011, EPA stated that it “look[ed] forward to finalizing this standard shortly.”

As the last step before finalization, EPA submitted the rule to the White House Office of Information and Regulatory Affairs (“OIRA”) for review.  Last week, in a surprising turn of events, OIRA returned the rule to EPA, explaining, “The President … has made it clear that he does not support finalizing the rule at this time.”  The return letter, OIRA’s first since January 6, 2009, stated that, in the interest of regulatory consistency, EPA should hold any proposed ozone revisions until 2013 – when the standards are once again due to be revisited under the Clean Air Act.

While the letter did not mention economic considerations, and the Supreme Court has held that EPA cannot consider compliance costs in setting NAAQS, the ozone proposal had attracted substantial attention due to its projected compliance costs exceeding $19 billion.  According to EPA’s Regulatory Impact Analysis, the benefits of the standards were projected to outweigh the costs.  Nonetheless, the NAAQS proposal topped a list of the most expensive proposed regulations that the White House released on August 30, 2011.

The second, third, and fourth rules of that list are also pending EPA proposals, including forthcoming rules governing hazardous air pollution from commercial and industrial boilers and coal ash disposal.  While the White House plans to move forward with those rules, they too must ultimately pass through OIRA – opening the door to potential revisions or delay.

On July 28, 2011, EPA proposed a suite of new Clean Air Act rules governing the emission of volatile organic compounds (“VOCs”), sulfur dioxide, and air toxics from oil and gas extraction and transmission activities, including the first federal air standards for hydraulically fractured wells.  During fracking, VOC emissions are often elevated during “flowback” periods, when fluids injected into wells return to the surface carrying contaminants that can evaporate into the air.  EPA’s proposed rules would require wells to separate and capture natural gas and hydrocarbons during flowback, reducing emissions of VOCs by an estimated 95 percent.

Additional EPA rules may be forthcoming in response to a petition filed last week by Earthjustice on behalf of over 100 non-profit groups.  The petition asks EPA to issue regulations under TSCA requiring manufacturers and processors of “chemical substances and mixtures used in oil and gas exploration or production,” including fracking fluids, to conduct testing on the toxicity and environmental and health impacts of their products and disclose the results to EPA.  If the petition is denied, Earthjustice has suggested it would challenge EPA’s determination in court.

Fracking regulation is also moving forward on the state and regional level, with the Delaware River Basin Commission (“DRBC”) – a regional body consisting of four states and the Army Corps of Engineers – proposing rules governing hydraulic fracturing siting and operations in New York, New Jersey, Pennsylvania, and Delaware.  New York Attorney General Eric Schneiderman has filed suit in federal court seeking to enjoin the finalization of those rules pending the preparation of an Environmental Impact Statement under the National Environmental Policy Act (“NEPA”).  On August 4, the Delaware Riverkeeper Network, Hudson Riverkeeper, and National Parks Conservation Association brought a similar suit in the same court.  Unlike New York, however, the environmental groups named DRBC as a defendant.   

The U.S. Department of Justice (“DOJ”), on behalf the Army Corps of Engineers and other federal defendants, recently announced its plans to move to dismiss New York’s lawsuit on sovereign immunity, standing and ripeness grounds.  There are also questions as to whether the proposal of a regional body is a “major federal action” governed by NEPA – an argument that DOJ reserved the right to raise at a later date as an additional ground for dismissal.  A pre-motion conference on DOJ’s request for dismiss is scheduled for Wednesday, August 10.

At oral argument, the Supreme Court justices focused largely on whether legislative and regulatory action on climate change had displaced federal common law remedies and whether the federal courts were competent to make the policy determinations required for the states’ desired injunction, lines of questioning that could present obstacles for the state plaintiffs.  Justice Ginsburg, who joined a prior Supreme Court decision holding that the Environmental Protection Agency (EPA) could regulate GHGs under the Clean Air Act, noted skeptically that “the relief [the states are] seeking seems … to set up a district judge, who does not have the resources, the expertise, as a kind of super EPA.”

In what may be a silver lining for the plaintiffs, the industry defendants acknowledged that a decision under Article III standing or displacement grounds could allow future plaintiffs to pursue similar relief in state courts under state common law theories.  Of course, any such challenges would be subject to potential standing and preemption constraints.  As explained in a prior post, the Obama Administration also argued for reversal of the Second Circuit decision on behalf of defendant Tennessee Valley Authority, albeit on different grounds than the other defendants.

New York Solicitor General Barbara D. Underwood argued the case on behalf of the states and land trusts.  Justice Sotomayor, who sat on the Second Circuit panel that originally heard the case but was nominated to the Supreme Court before the appellate court’s decision, has recused herself from the Supreme Court’s review and did not participate in the oral argument.

• Read more on climate change law

EPA’s latest rule would establish the first nationwide standards for power plant emissions of mercury, arsenic and other HAPs, with numeric limits based upon “maximum available control technology” as required under the 1990 CAA Amendments.  The George W. Bush administration attempted to create a cap-and-trade program for power plant mercury emissions, which the D.C. Circuit Court of Appeals struck down in 2008.  EPA’s new proposal would reduce mercury from approximately 525 coal and oil-fired power plants by 91 percent once fully implemented, and it covers a range of other pollutants that were not regulated under the Bush-era mercury rule.

Last month, under the pressure of a court deadline, EPA also finalized new emissions regulations for more than 200,000 industrial, commercial, and institutional boilers, covering sources ranging from power plants and refineries to apartment buildings and hospitals.  Owners of smaller boilers with a heat input capacity of less than 10 million Btu per hour will not need to install new pollution controls, but are instead required to perform and document biennial boiler “tune-ups.”  Moreover, while EPA released its boiler regulations pursuant to its judicially-imposed deadline, it simultaneously announced that it is formally reconsidering parts of those rules and that further changes may be forthcoming.

Finally, under a settlement with New York and other states, cities and non-profit organizations, EPA committed to proposing New Source Performance Standards (“NSPS”) for power plant greenhouse gas emissions (“GHG”) by July 26, 2011.  The EPA is currently holding listening sessions to solicit input for that proposal, although legislation recently passed by the House Energy and Commerce Committee would preempt this and other EPA efforts to regulate GHG emissions under the CAA.

EPA’s upcoming NSPS proposal may also factor into a pending case before the Supreme Court, which will determine whether a coalition of states and land trusts may sue power plants to compel GHG reductions under a public nuisance theory.  Responding to arguments that recent EPA climate regulations had displaced federal common law remedies, this week the state plaintiffs conceded that implementation of NSPS covering power plants GHG emissions would bar their suit, but argued that until such rules were finalized the case should be returned to the lower court and stayed pending EPA’s regulatory decision.  Oral arguments in American Electric Power v. Connecticut are scheduled for April 19, 2011.

• Read more on Climate Law and the Clean Air Act

EPA’s GHG Reporting Program arose out of a provision in the Consolidated Appropriations Act of 2008, requiring “mandatory reporting of greenhouse gas emissions above appropriate thresholds in all sectors of the economy of the United States.”  EPA first proposed reporting requirements in March 2009 and finalized its initial regulations six months later, on October 30, 2009.  Since then, the agency has issued a series of regulations expanding and clarifying the scope of reporting for various industries and activities, such as the mandatory disclosure of reporting facilities’ co-generation power units.

The GHG Reporting Program primarily covers GHG-emitting facilities, fossil fuel suppliers, and industrial gas suppliers whose aggregate GHG emissions exceed 25,000 metric tons carbon-dioxide equivalent (CO₂e) per year, though facilities in certain emissions intensive source categories (e.g., cement manufacturing and petroleum refining) are universally covered.  EPA has projected that the rule would cover approximately 10,000 sources, which are collectively responsible for 85-90 percent of total U.S. GHG emissions.

Covered facilities were required to begin monitoring their GHG emissions on January 1, 2010, and the deadline for their first annual reports was set to be March 31, 2011.  EPA plans to make much of the data it collects publicly available, and the reported information is expected to inform recent and forthcoming efforts to regulate stationary source GHG emissions under the Clean Air Act.  Earlier this year, EPA began phasing in the first GHG permitting requirements for certain new and modified major stationary sources, and the agency is legally obligated to propose GHG New Source Performance Standards (“NSPS”) for power plants by July 26, 2011.

EPA still plans to publish data submitted under the GHG Reporting Program “later this year,” though it is not clear when facilities will have to report their 2010 emissions.  Instead, the agency promised to provide additional information on its deadline changes over the coming weeks.

EPA’s recent announcement comes on the heels of a Congressional vote which cast further uncertainty over the future of the agency’s suite of GHG regulations.  On February 18, 2011, the House of Representatives passed a seven-month budget “continuing resolution” that would largely de-fund EPA’s GHG reporting registry and prevent EPA from spending any funds to implement its stationary source GHG regulations.  The Senate has not taken up that bill, however, and the House has since passed a two week stop-gap resolution without the GHG provisions.

For more information on EPA’s GHG Reporting Rule and other climate-related initiatives, contact Jeffrey Gracer.

The guidance is directed at regulated entities and state agencies, which have been delegated authority to implement the permitting provisions of the Clean Air Act.  Next year, New York and most other states will begin to phase in GHG regulations for certain new and modified stationary sources.  The EPA plans to take over GHG permitting in those states that refuse to adopt the GHG rules or are not prepared to do so.

A “tailoring” regulation finalized by EPA last June raised the emissions threshold for the new GHG limits.  From January 2 through June 30, 2011, the regulations only cover stationary sources whose construction or modification would increase annual GHG emissions by at least 75,000 tons of carbon-dioxide equivalent and would also trigger the Clean Air Act’s Prevention of Significant Deterioration provisions for other pollutants.  Starting in July, construction or modification that increases annual GHG emissions by at least 100,000 tons of carbon-dioxide equivalent could also trigger GHG control requirements.

EPA’s new guidance adopts a flexible interpretation of the “best available control technology” requirements for GHGs.  While supporting the consideration of add-on technologies like carbon capture and sequestration systems, the agency acknowledges that such technologies present “significant logistical hurdles” that may render them inappropriate at the present time (GHG Guidance, p. 38).  Control technologies are also most commonly selected based on the permit applicant’s primary purpose or objective, so the Clean Air Act would typically not require an applicant for a coal-fired power plant to switch to a less carbon-intensive fuel (e.g. natural gas or renewable energy) (id. at 29).

Instead, sources that trigger the GHG permitting requirements are more likely to be required to implement energy efficiency improvements, which are promoted throughout EPA’s guidance.  For instance, EPA notes that “an applicant proposing to build a new facility that will generate its own energy with a boiler could also consider ways to optimize the thermal efficiency of a new heat exchanger that uses the steam from the new boiler” (id. at 32).  Other options for GHG reductions include the use of certain types of biomass or implementation of a source-wide Environmental Management System.

The new guidance may impact sources not directly covered by the new GHG controls.  With respect to permitting decisions for other pollutants, EPA instructs applicants and authorities to “consider how the control strategies under consideration may affect GHG emissions,” and certain control technologies may be rejected in part based on their projected contribution to climate change (id. at 42).

As implementation of its GHG regulations draws closer, however, EPA’s efforts are facing serious legal and legislative challenges.  Suits pending in the D.C. Circuit seek to overturn several EPA rules regulating GHGs under the Clean Air Act, including the tailoring rule.  In the Senate, meanwhile, a legislative proposal would delay EPA’s stationary source regulations for another two years.

Key issues raised in the petition to the U.S. Supreme Court by the power companies include:

• The national importance of resolving whether greenhouse gases can or should be regulated by the courts on a case-by-case basis;
• Whether court decisions are precluded by new federal regulations governing greenhouse gas emissions that were not in place at the time of the Second Circuit’s decision, such as EPA/NHTSA’s joint emissions standards for vehicles and EPA’s greenhouse gas Tailoring Rule for stationary sources;
• The prospect of a proliferation of cases seeking damages for alleged injuries caused by multiple defendants’ contribution to climate change;
• Whether plaintiffs have legal standing to sue;
• Whether the Second Circuit was justified in deviating from other recent federal court decisions in which common law claims against greenhouse gas emitters have been dismissed, such as California v. General Motors Corp., 2007 WL 2726871 (N.D. Cal. 2007); Native Village of Kivalina v. ExxonMobil Corp., 663 F.Supp.2d 863 (N.D. Cal. 2009) (appeal pending); Comer v. Murphy Oil USA, 2007 WL 6942285 (S.D. Miss. 2007), appeal dismissed for technical reasons, 585 F.3d 855 (5^th Cir. 2009);
• Whether a court-imposed emissions cap requires policy decisions that are not within the proper province of the courts; and
• Whether the Second Circuit’s decision represents an unwarranted extension of the Supreme Court’s decision in Massachusetts v. EPA, 549 U.S. 497 (2007).

We will provide an update when the papers opposing Supreme Court review have been filed.

For more information on emerging climate change law and policy, contact Jeff Gracer.

[2] The named plaintiffs were American Electric Power Company, Inc., its subsidiary American Electric Power Service Corporation, Cinergy Corporation (since merged into Duke Energy), Southern Company, Xcel Energy, and the Tennessee Valley Authority.

The Fourth Circuit rejected the use of “vague public nuisance standards” to address activities that are expressly permitted and extensively regulated under the Clean Air Act.  It stressed the potential for chaos among states resulting from a patchwork of nuisance injunctions and for disruption of expectations and reliance interests of those actors that have complied with the Act’s requirements.  However, the Court refrained from completely preempting the field of air emissions regulation, noting that the Clean Air Act’s savings clause may allow for certain common law nuisance claims.

Citing principles of federalism, the Fourth Circuit also criticized the district court’s decision for its application of North Carolina law extraterritorially to TVA plants located in Alabama and Tennessee by crafting an injunction that relied on the emissions standards of a North Carolina state law.  The three-judge panel highlighted the remedies that remain available to North Carolina, including the Clean Air Act’s Section 126 petition process, the comment period for State Implementation Plans, judicial review of EPA actions, as well as citizen suit remedies under the Clean Air Act.

While the precedential impact of the opinion is yet unclear, the participation of the attorneys general of sixteen other states, including New York’s Andrew Cuomo, in an amicus brief supporting the authority of states to bring public nuisance actions to abate interstate pollution signals the importance of the issue.  Although the Fourth Circuit’s decision did not involve claims relating to greenhouse gas emissions, a recent petition for certiorari challenging the Second Circuit’s common law nuisance findings with respect to greenhouse gas emissions cited North Carolina v. TVA as evidence that comprehensive regulation under the Clean Air Act can displace federal common law nuisance claims.  Connecticut v. American Electric Power Co., 582 F.3d 309 (2d Cir. 2009), petition for cert. filed, No. 10- (U.S. Aug. 2, 2010).  This issue will continue to percolate in the courts unless and until it is resolved by the Supreme Court.