Supreme Court Dismisses Common Law GHG Case Against Energy Producers
On June 20, 2011, the U.S. Supreme Court issued an opinion on American Electric Power Co., Inc., et al. v. Connecticut, et al.
This case is significant because it dismissed a lawsuit in which several states and environmental groups sought court orders requiring large electrical utilities (alleged to be “the five largest emitters of carbon dioxide in the United States”) to reduce their greenhouse gas emissions because the emissions were alleged to be a public nuisance. Plaintiffs alleged that the emissions violated federal common law (nuisance) or state tort law. The plaintiffs were thereby requesting a court decree setting a cap for C02 emissions to be reduced annually.
The Supreme Court in a fairly short opinion touched upon a number of significant issues. The Court first dealt with the issue of jurisdiction and then with the issue of whether there is a federal common law cause of action of nuisance. The Court split on the issue of whether the plaintiffs had Article III standing, i.e., whether there was sufficient specific injury to the plaintiffs such that the Article III Claims and Controversies requirement would be met, allowing the plaintiffs to avail themselves of the jurisdiction of the federal court system. Half of the Court believes that there was no standing, the other believes (assuming the prior cases are an indication) that some of the plaintiffs (the states) had sufficient standing that the case could be brought. This issue was addressed in the Massachusetts v. EPA case in which the Court held that greenhouse gases were regulated under the Clean Air Act. In that case the state of Massachusetts was found to have had sufficient standing to allow the case to be heard.
The Court held that the federal common law nuisance which had been recognized in several interstate environmental cases was displaced by the statute even absent the setting of emission standards (EPA’s CO2 regulations are due in May 2012.) The Court also indicated that the agency should be allowed to act first, before the judiciary, as the expert agency is better equipped to do the job then the judiciary who typically lack the economic technological resources to cope with these issues. Plaintiffs’ proposal to have federal judges determine these emission limits in the first instance could not be reconciled with the statute.
Finally, the Court did not reach the issue of the viability of the state nuisance claims because they had been dropped by the lower courts when they held that the federal common law governed over state law. Because there was no briefing on the state law preemption issue, the issue was left for consideration on remand. The Court did indicate that the issue of whether there was preemption of the federal common law by federal legislation, as in this case, did not require “the same sort of evidence of a clear and manifest (congressional) purpose” required for preemption of state law. (Citing City Milwaukee II 451 U.S. at 304, 317 (1981)).
This decision, while sending the case back to the lower courts, raises several unresolved issues. Will the courts continue to allow plaintiffs, particularly non-states such as the industry groups in the Massachusetts case, and the environmental groups in this case, Article III standing where there is an argument that no specific injuries have been pled? Will the courts find that state common law claims are also pre-empted by the federal Clean Air Act? Will this theory of agency primacy be applied at other levels? What happens if the EPA or Congress decides not to issue greenhouse gas regulations? We’ll be continuing to monitor the case as it works its way back through the lower courts—stay tuned for updates.
Injunction on California Cap & Trade Rules Stayed by Appeal
At the prompting of the Petitioners, on June 6, 2011, the San Francisco Superior Court delivered an order criticizing the California Air Resources Board for continuing to work on AB 32, Greenhouse Gas regulations, despite the injunction issued in the CEQA case and ordered them to appear to discuss the issue. However, late last week the Appeals Court hearing the appeal in the case issued a stay of that same injunction pending the appeal of that case. The question of whether the stay will he re-imposed, will be the subject the parties will need to argue in June 2011. For additional information see our blog entitled, "Cap & Trade Injunction Stayed by Appeal of Lower Court Decision."
California Cap & Trade Challenge Final Order Issued
On Friday, May 20, 2011, Judge Goldsmith of San Francisco Supreme Court issued a final order (PDF) with respect to a lawsuit challenging the environmental review of the Cap and Trade regulations created under California’s AB 32 Greenhouse Gas statute and the associated Scoping Plan. In its order, the Court enjoined the Cap and Trade portion of the Scoping Plan.
This revised final order is narrower than the draft order previously circulated in March. The order applies only to the Board Regulation O8-47 and Executive Order G-09-001 (approving the climate change scoping plan) as they relate to Cap and Trade; and the Cap and Trade regulations themselves Regulation 10-42. The Executive order enjoins the California Air Resources Board (CARB) from:
“[e]ngaging in any cap and trade-related Project activity that could result in an adverse change to the physical environment until ARB has comes into complete compliance with ARB’s obligations under its certified regulatory program and CEQA, consistent with the Court’s Order. This includes any further rulemaking and implementation of cap and trade especially but not limited to any action in furtherance of California Cap and Trade Program Resolution 10-42.”
Keep in mind, this lawsuit was filed challenging a CEQA type document which is procedural in nature. Thus, once CARB revises the environmental document in the manner required by the court and it is determined to be sufficient at the time the writ is returned, the project may go forward. Additionally, in the interim, those portions of AB 32 that are not related to Cap and Trade, such as mandatory reporting, are still in effect pursuant to the Implementation Schedule.
In the interim, it will be interesting to see whether various interests will attempt to make changes to the Cap and Trade program. The Sierra Club has already come out in favor of changes related to emissions levels and environmental justice issues.
SEC Posts Climate Change Interpretive Release
Earlier today, the Securities Exchange Commission (SEC) posted its climate change interpretive release, which can be found at http://www.sec.gov/rules/interp/2010/33-9106.pdf. Our prior Blog on the subject is here, and our alert on the topic can be found here. Stoel Rives corporate securities partners Ron McFall and CJ Voss will be posting a follow up alert shortly.
If you'd like to sign up for our Energy Law Alerts, click here.
EPA Announces "Endangerment" and "Cause or Contribute" Findings
Stoel Rives partner Tom Wood reports:
Minutes ago EPA announced its long awaited “endangerment” and “cause or contribute” findings in relation to six key greenhouse gases – carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride. While technically this announcement is of limited significance (applying only to motor vehicle emissions), the policy import of these determinations is tremendous.
In 2007, the U.S. Supreme Court held that greenhouse gases are air pollutants covered by the Clean Air Act in the Massachusetts v. EPA decision. This case arose in relation to EPA’s choice not to regulate carbon dioxide emissions from new motor vehicles. The Court held that EPA must determine whether or not emissions of greenhouse gases from new motor vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare, or whether the science is too uncertain to make a reasoned decision.
Earlier this year EPA proposed to issue the two part finding required to commence regulation of greenhouse gas emissions from new motor vehicles. This required first a finding that greenhouse gas emissions endanger public health and welfare and a second finding that emissions from new motor vehicle engines cause or contribute to greenhouse gas air pollution. The comment period for these proposed findings ended June 23, 2009 and EPA received over 380,000 public comments. Today, Lisa Jackson (EPA Administrator) signed final findings that greenhouse gases endanger both the public health and the public welfare of current and future generations and that the combined emissions of these greenhouse gases from new motor vehicles and new motor vehicle engines contribute to the greenhouse gas air pollution that endangers public health and welfare.
As a legal matter, today’s findings relate only to vehicle emissions. However, the precedent that they create will almost certainly result in substantial regulation for other source categories. It is no coincidence that this finding was announced on the first day of the Copenhagen talks on climate change. The Obama administration both wanted to show that some progress was being made in the U.S. and it wants to leverage this progress into further statutory or regulatory requirements.
Towards this goal, one of the more interesting things to come out of the determinations is the formal establishment of the new pollutant: “Well-Mixed Greenhouse Gases.” This term is now officially entered into EPA’s regulatory lexicon as a pollutant to be regulated. Well-Mixed Greenhouse Gases consists of the 6 Kyoto gases (carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride) but introduces the grouping now as a regulatory unit. It is noteworthy that vehicles are not material sources of all of these greenhouse gases and so the use of this term should be seen as setting the stage for future regulation.
Also of interest is an EPA restatement in a footnote that at this time it does not consider greenhouse gases to be a regulated air pollutant. This is of tremendous significance to stationary sources of greenhouse gases as the moment that greenhouse gases become regulated, there is the potential argument that they are subject to Title V and major new source review permitting. At the risk of understating the issue, that would be a mess of biblical proportions.
For those wishing to read all 284 pages of the findings document, it can be found at: http://www.epa.gov/climatechange/endangerment/downloads/FinalFindings.pdf
The findings are not valid until 30 days after they are published in the Federal Register. Expect publication to occur later this month.
