Supreme Court Rolls Back EPA's Regulation of Greenhouse Gases in Utility Air Regulatory Group Decision
The U.S. Supreme Court has delivered a stunner with its decision this morning in Utility Air Regulatory Group v. Environmental Protection Agency. The Supreme Court has curtailed the U.S. Environmental Protection Agency’s (EPA) regulation of stationary source greenhouse gas (GHG) emissions under two Clean Air Act permitting programs - New Source Review Prevention of Significant Deterioration (PSD) and Title V. EPA can no longer require PSD or Title V permits for stationary sources based on a source’s GHG emissions, unless a source is already subject to the permitting programs. However, if a source triggers PSD permitting for another pollutant, the Court has left the door open for EPA to require the source to undergo a Best Available Control Technology determination for GHGs. Today’s decision in Utility Air Regulatory Group has significant ramifications for industrial source permitting. See our alert for more details.
My colleague, Daniel Lee, followed oral argument yesterday in the U.S. Supreme Court's consideration of federal greenhouse gas (GHG) regulation in Utility Air Regulatory Group v. EPA, and provides this analysis:
During oral argument for Utility Air Regulatory Group v. EPA this Monday, the Supreme Court conflicted over a number of issues including the application of Chevron deference, the scope of the Court’s holding in Massachusetts v. EPA, and the nature of the Prevention of Significant Deterioration (PSD) program under the Clean Air Act (CAA). At the broadest level, the Court will decide whether the EPA’s PSD program regulating emissions from stationary sources will apply to greenhouse gas emissions. Much of the Justices’ questioning focused on whether EPA’s interpretation, that the PSD statute required regulation of GHGs, was reasonable and would receive Chevron deference. Pointing out that the parties had advanced four separate interpretations of the statute, Justice Sotomayor suggested the statute’s “quintessential ambiguity” implicated Chevron. Justice Kagan went further to suggest that EPA’s interpretation was “most reasonable” in light of its longstanding adherence to the position and that there is “nothing that gets more deference than this Agency with respect to this complicated a statute.”
To overcome the Chevron hurdle, petitioners emphasized the incongruence between the local focus of the PSD program and the broader, global effects of GHGs. However, Justice Ginsburg countered that GHGs had “severe effects at the local level” according to EPA’s endangerment finding. In contrast, Justice Alito emphasized that GHGs are nevertheless distinguishable from other substances regulated under the PSD program because of the large quantity of GHGs emitted.
Less aggressive was the questioning from Justice Kennedy, whose vote has often been the deciding factor for the Court. Justice Kennedy reaffirmed that the Court must abide by Massachusetts v. EPA, but nevertheless indicated that he “couldn’t find a single precedent that strongly supports” the EPA’s position. Yet he also opined that Brown & Williamson, a case relied on by the industry petitioners, was also distinguishable.
If EPA’s interpretation is upheld, PSD and Title V permitting programs will continue to apply broadly to industrial emitters of GHGs. If EPA’s interpretation is not upheld EPA could continue to regulate GHGs through the New Source Performance Standards program but would presumably need to withdraw the PSD and Title V permits issued for GHGs and many sources currently undergoing PSD and/or Title V permitting would see their permitting burdens greatly reduced. Additionally, Utility Air Regulatory Group v. EPA will likely add further contour to the sprawling case law on Chevron deference in the context of environmental regulation.
See our previous report on the Supreme Court's grant of certiorari in Utility Air Regulatory Group and its related cases for additional background on the controversy's road to the Supreme Court.
Nebraska filed suit against the U.S. Environmental Protection Agency (EPA) in federal court on Wednesday, challenging the agency’s newly proposed standards for greenhouse gas emissions from new power plants. Nebraska argues that EPA’s proposed regulation, officially released last week, violates the Energy Policy Act of 2005. The Act prohibits EPA from considering new technology or a level of emissions reduction to be “adequately demonstrated” under the Clean Air Act where the emissions reduction is achieved ‘solely by reason of the use of the technology’ by one or more facilities receiving funding under the Act. Under the Clean Air Act, any new source performance standard (NSPS) must be based on the “best system of emissions reduction” that EPA determines has been “adequately demonstrated.”
EPA has proposed a greenhouse gas NSPS for new fossil fuel-fired boilers, including coal-fired power plants, based on the partial implementation of carbon capture and storage (CCS). EPA’s notice of the proposed NSPS cites to various facilities that have successfully implemented CCS, adequately demonstrating the commercial viability of the technology as a basis for the stringent greenhouse gas emissions standard of 1,000 to 1,100 lb CO2/MWh. The flaw, Nebraska argues, is that the very CCS projects that support EPA’s determination have all received significant funding under the Energy Policy Act, which prohibits EPA from considering such technology as “adequately demonstrated.” Nebraska, and other critics of the proposed standard, argue that the proposed NSPS would severely limit the construction of any new coal-fired plants in the U.S.
Nebraska’s lawsuit may be more of a political statement than anything, however. The suit challenges the proposed rule under the Administrative Procedure Act as a “final” action of EPA. The “proposed” NSPS was just released, however. The proposed rule is open for public comment until March 10, 2014 and may not be finalized by EPA until mid-2015. The Nebraska suit is wide open to challenge on the basis that the case is not ripe for judicial review until a final NSPS has been issued by EPA.
For more details on the proposed NSPS, including the standards proposed for natural gas-fired facilities,Continue Reading...
Assembly Bill (AB) 327 took effect in California at the first of the year, giving the California Public Utilities Commission (CPUC) authority to expand the State’s 33% Renewable Portfolio Standard (RPS). This week, the CPUC extended its RPS proceeding to determine, before February 2015, how to implement the new law. AB 327 provides that the CPUC may require the State’s investor-owned utilities to procure renewable energy in excess of 33%, but the law does not mandate an expansion of the RPS. As the utilities have almost filled their procurement needs to meet the 33% requirement, the market for utility-scale renewable projects in California will likely continue to shrink without an expanded RPS. The CPUC’s ruling left the scheduling of the work to implement AB 327 to the assigned ALJs and Commissioner. We will be alert for opportunities to participate in the CPUC’s further proceedings to implement AB 327. In the short term, there is an opportunity to comment on the CPUC’s consideration of the Renewable Auction Mechanism (RAM) program. Any comments are due January 30th. The fifth, and presently last-scheduled, RAM auction is to occur no later than June 2014. Expect a Proposed Decision from the CPUC on the fate of the RAM in 2Q 2014.
The California Public Utilities Commission has unanimously approved a 1,325 MW energy storage procurement target for the state’s largest utilities in Decision 13-10-040. PG&E, SDG&E, and SCE must collectively procure 1,325 MW of energy storage resources by 2020, for installation no later than 2024. The first of at least four competitive solicitations for energy storage projects will take place on December 1, 2014. While the press has hailed the 1.3 GW procurement target as the first of its kind in the nation, the Commission actually first authorized energy storage procurement in California last February, ordering SCE to procure at least 50 MW of energy storage in Decision 13-02-015. The amount of capacity up for grabs in the biennial RFOs is set by Decision 13-10-040, but storage projects already in the pipeline and contracts for storage approved by the Commission in other proceedings will likely eat into the capacity available. There is also a potential off-ramp, if proposed projects are not reasonable in cost or the utilities do not receive enough bids for operationally viable projects, each can defer up to 80% of its procurement target. As the utilities’ cost and fit evaluation methodologies will be developed over the coming year, what would constitute unreasonable cost has yet to be determined.
This week the California Air Resources Board (ARB) released a draft of its AB 32 Climate Change Scoping Plan Update. The original Scoping Plan was adopted in 2008 and must be updated every five years. The Scoping Plan serves as a blueprint for achieving AB 32’s goal of reducing greenhouse gas (GHG) emissions to 1990 levels by 2020.
The draft Update summarizes programs implemented over the last five years under AB 32 and outlines actions necessary to continue California’s progress toward the 2020 emissions reduction goal. The draft Update shows that California is on track to meet the 2020 emissions reduction goal and inventories the progress made across different economic sectors and programs like cap and trade. With the Update, ARB continues its strategy of achieving AB 32 goals through a mix of emissions reduction measures, including regulatory programs, incentives, and market-based approaches.Continue Reading...
A tentative ruling was issued yesterday in the related cases California Chamber of Commerce v. California Air Resources Board (ARB) and Morning Star Packing Co. v. ARB, pending before the Sacramento County Superior Court. The cases challenge the legality of ARB's cap and trade auctions under two theories: (1) the cap and trade auctions exceed ARB's authority under AB 32, and (2) the auctions amount to an illegal tax adopted without the requisite two-thirds approval of the California Legislature. The Court tentatively ruled in ARB's favor that the agency's implementation of a cap and trade auction system is within the scope of AB 32, which delegated ARB authority to design the distribution of emissions allowances. The Court did not rule on whether the allowance auctions constitute an illegal tax. The tentative ruling outlined questions on this topic for oral argument, which was heard yesterday. A ruling on the tax challenge is expected in the next 90 days.
ARB held its most recent quarterly auction on August 4, 2013. 2013 vintage allowances sold for $12.22. In the advance auction of 2016 vintage allowances, held concurrently, allowances sold for $11.10.
Today President Obama released his Climate Action Plan and highlighted the key components of the Plan at a speech at Georgetown University. The Plan has three primary goals: (i) cutting greenhouse gas (GHG) emissions in the U.S., (ii) preparing the United States for the effects of climate change, and (iii) leading international efforts to mitigate climate change. During his speech, President Obama listed three measures to address the first two goals: use more clean energy, waste less energy, and cut carbon emissions. The Plan includes some important new directives from the President, it incorporates some initiatives that are already underway and outlines some of the Administration’s intentions, without providing hard timelines or goals.
The Climate Action Plan is limited to initiatives that the President can implement without Congressional approval. Nevertheless, it has the potential to significantly affect a broad range of energy sector interests. A summary of the Plan's key components follows.
Using more clean energy:
- The Interior Department is directed to support deployment of 10,000 MW of renewable energy on public lands by 2020.
- The Department of Defense (DoD) is directed to build 3,000 MW of renewable energy at military installations by 2025.
- Federal agencies will aim to install 100 MW of rooftop solar on federally-subsidized housing by 2020.
- The federal government commits to obtain 20% of its electricity from renewable sources by 2020.
- The Red Rock Hydroelectric Plant, on the Des Moines River in Iowa, will be placed on the federal Infrastructure "Permitting Dashboard" for high-priority projects.
- Federal agencies will streamline the siting, permitting, and review process for transmission projects.
- The U.S. will seek a global agreement in the World Trade Organization modeled after the 2011 agreement among 21 Asia-Pacific Economic Cooperation economies to reduce tariffs to 5% or less by 2015 on 54 environmental goods, including solar panels and wind turbines.
- The FY2014 budget will include $7.9 billion for clean energy research and development.
- The Department of Agriculture’s Rural Energy for America program will provide renewable energy and energy efficiency grants and loan guarantees directly to agricultural producers and rural small business.
- Natural gas will continue to be relied upon as a “transition fuel” while America works to develop an “even cleaner” energy economy.
See my colleague Wayne Rosenbaum's recent post on the question of how failed solar panels could be treated under federal and California waste laws:
Recently the New York Times published an article highlighting the high rate of solar panel failures well before their expected life times. While the article focused on the question of product liability, it raises another question. How does the law, particularly waste laws, define a solar panel that is no longer fit for its original intended use or purpose?
Under current federal and California law, the manufacturer of a non-functioning solar panel does not have an obligation to take back panels at the end of life as it does under the EU WEEE Directive. However, it is likely that this will change as the US PV market matures and more arrays approach end of life or fail. Panel manufactures are encouraged to monitor this issue and potentially to participate in contingency planning or rulemaking.
Regarding the disposal of defective panels, once an entity takes title to the panel it becomes the owner of that panel. This includes lenders who take title through foreclosure. As such, the owner becomes responsible for the panel's proper handling and disposal. This requirement raises the question: Once the owner takes possession what will it do with the panel or its components at the end of their useful life?
The California Public Utilities Commission has adopted Decision 13-05-034, approving PG&E, SCE, and SDG&E’s joint standard contract for California’s expanded feed-in tariff (FiT) program. D.13-05-034 also revises several provisions of the FiT tariff and addresses two petitions to modify D.12-05-035, the Commission’s previous decision implementing the expanded FiT. The most recent legislation affecting the FiT, SB 1122 (2012), directing the utilities to procure 250 MW from bioenergy projects, is not addressed in D.13-05-034, but will be implemented in a later decision.
Barring any delays in finalizing the contract and tariff revisions ordered in D.13-05-034, the utilities will begin accepting Program Participation Requests for the new FiT on October 1, 2013 and the first bi-monthly FiT program period will commence November 1, 2013.
For details on changes to the FiT approved in D.13-05-034, and requests for modification rejected by the Commission, read on.Continue Reading...