Update On Recent Climate Change Developments And Initiatives

Tuesday, January 5, 2010 - 01:00

Reflecting the highly visible national, as well as international, debate on climate change, legislative, regulatory and judicial developments in the United States regarding climate change are occurring at a quickening pace. The Obama administration played a key role in the recently concluded global climate change negotiations, the Senate is deliberating national climate change legislation, the EPA continues to move forward with proposed and final rules aimed at regulating greenhouse gas ("GHG") emissions, and the federal courts are fashioning a body of law on complex climate change issues. Provided below is a summary of recent significant developments in each of these areas.

International Developments

COP15: The 15th United Nations Climate Change Conference

From December 7 through December 18, 2009, the UN held its 15th Climate Change Conference in Copenhagen, Denmark (COP15) with 193 nations participating in the conference. It was an effort to forge a comprehensive international climate change agreement. The talks ended with a framework in place to address certain climate change issues, including global emissions reduction targets and emissions verifications. The non-binding Copenhagen accord lays the groundwork for a binding global change treaty in the future.

National Legislative Developments

Hearings Commence on Senate Climate Change Bill

Efforts to pass national climate change legislation advanced in both the House and Senate in 2009, although prospects for enactment in 2010 remain uncertain. In June, the House passed the American Clean Energy and Security Act (the "House bill"), the first comprehensive climate change legislation passed by either branch of Congress. In November, the Senate Environment and Public Works Committee voted out of committee the Clean Energy Jobs and American Power Act of 2009 (the "Senate bill").

Both bills seek to reduce GHG emissions by establishing a national cap and trade program. The Senate bill is similar in many ways to the House bill, but they do differ in several significant respects. For example, the House bill pre-empts the EPA's authority to regulate GHGs under the Clean Air Act, while the Senate bill is silent on the pre-emption issue. Another difference is in the area of near-term GHG cap levels. The House version seeks a 17 percent reduction in GHGs over the next decade, while the Senate bill currently targets a 20 percent reduction over the same period. The Senate bill claims to be deficit neutral. Under the Senate bill, 10 percent of the allowances will be auctioned off annually from 2012 to 2029, with the proceeds earmarked for deficit reduction, increasing to 22 percent from 2030 to 2039 and 25 percent from 2040 to 2050. In contrast, the House bill does not contain auction allowances for deficit reduction after 2023.

Despite the action taken by the Senate Environment and Public Works Committee, passage of the Senate bill is far from assured. Deliberations by the Senate Environment and Public Works Committee were the subject of a boycott by Republican members, with the measure ultimately garnering no Republican support.

Efforts at a Senate consensus produced two compromise proposals in December. A proposal sponsored by Senators John Kerry, Joseph Lieberman and Lindsay Graham aims to reduce GHG emissions by 17 percent over 2005 levels by 2020, rather than by 20 percent as currently called for in the Senate bill. In an effort to win bipartisan support, the proposal includes incentives for nuclear power plant construction and offshore oil and gas drilling. An alternative proposal announced by Senators Maria Cantwell and Susan Collins proposes an auction with 75 percent of the revenue rebated directly to consumers. The remaining 25 percent would be used to support initiatives such as clean energy development and energy efficiency programs. Like the Senate bill, the Cantwell/Collins proposal seeks to reduce GHG emissions by 20 percent by 2020.

Given anticipated deliberations over the next several months, a floor vote on the Senate bill or a compromise version is not likely to take place before the spring of 2010. Even assuming a favorable vote at that time, the House and Senate will presumably still need to reconcile differences between the two bills before any final legislation makes its way to the White House.

House Passes Solar Road Map Bill

The House, by a vote of 310 to 106, passed legislation October 22 authorizing more than $2 billion in federal funding for solar research and development over the next five years. The legislation authorizes $350 million in funding for fiscal year ("FY") 2011, $400 million for FY 2012, $450 million for FY 2013, $500 million for FY 2014 and $500 million for FY 2015.

Through the development of a comprehensive solar technology strategic plan by an 11-member strategic committee comprised of public and private sector experts, the legislation seeks to create a national "road map" for solar research. The plan will be provided to the Department of Energy (DOE) for implementation, with the steering committee retaining significant input as to how federal funding would be allocated. The legislation calls for 30 percent of FY 2011 funding to be based on the steering committee's recommendations, increasing to 75 percent in FY 2015.

The legislation now awaits action by the Senate.

Federal Loan Guarantees For Commercial Technology Renewable Energy Generation Projects

The DOE issued an announcement on October 7, 2009 designed to provide a total of up to $750 million in loan guarantee funding under the American Recovery and Reinvestment Act of 2009 to support $4 billion to $8 billion in loans for conventional commercial technology renewable energy generation projects.

Applications under this solicitation are divided into two parts: Part I and, subsequently, a more detailed Part II. The Part I submission is expected to provide the DOE with a summary level description of the project, project eligibility, financing strategy, and project schedule. The Part II submission will consist of the complete, detailed application. Part I applications must be submitted before filing a Part II submission. Part II submissions will be reviewed on a continuous basis. The next Part II application due date is January 7. Eight subsequent Part II application due dates are scheduled, with the last round scheduled for January 6, 2011.

EPA Regulatory Developments

Moving Closer to Greenhouse Gas Regulation: EPA Finds GHGs Threaten Public Health and Welfare

The EPA has cleared the way for further climate change related regulatory initiatives. In December, coincident with the opening of the Climate Change Conference in Copenhagen, the EPA announced its findings that greenhouse gases ("GHGs") threaten the public health and the environment and that cars and light trucks cause or contribute to this threat. The EPA published its endangerment findings, " Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act ," as a final rule in the Federal Register on December 15, 2009, 74, Fed. Reg. 66,495 ("Endangerment Findings").

The Endangerment Findings may lead to greater regulation of GHG emissions by the EPA, may trigger more climate-based claims for damages, and may result in longer agency review time for development projects to determine the extent of climate change impacts.

Background

In 2005, the United States Court of Appeals for the District of Columbia Circuit upheld the EPA's denial of a 1999 rulemaking petition asking the EPA to regulate GHG emissions from new motor vehicles under § 202 of the Clean Air Act ("CAA"). The court found "that the EPA Administrator properly exercised his discretion under § 202(a)(1) [of the CAA] in denying the petition for rule making." Massachusetts v. EPA , 415 F.3d 50, 58 (D.C. Cir. 2005). The petitioners - 19 environmental organizations joined by several states, including Connecticut, Maine, Massachusetts, New Jersey, New York, Rhode Island and Vermont - appealed this denial to the United States Supreme Court.

On April 2, 2007, in Massachusetts v. EPA , 549 U.S. 497 (2007), the Supreme Court reversed the D.C. Circuit Court, concluding that GHGs are air pollutants under the CAA. The Court further held that the EPA must determine whether or not GHG emissions from new motor vehicles cause or contribute to air pollution and whether that air pollution may reasonably be anticipated to endanger public health or welfare.

On April 24, 2009, the EPA published its proposed findings on GHGs in the Federal Register. During the 60-day public comment period, the EPA received more than 380,000 public comments.

Endangerment Finding

The EPA gathered and evaluated the scientific evidence and then specifically found that current and projected levels of six GHGs in the atmosphere - carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride - "endanger both the public health and the public welfare of current and future generations." The EPA further declared that the combined emissions of these GHGs "from new motor vehicles and new motor vehicle engines contribute to the greenhouse gas air pollution that endangers public health and welfare under CAA section 202(a)."

Although the EPA's two findings are not standards and do not impose requirements for GHG reductions, they allow the EPA to move ahead with the GHG standards proposed in September 2009 for new light-duty vehicles (passenger cars, light-duty trucks and SUVs) as part of a joint rulemaking with the federal Department of Transportation's National Highway Traffic Safety Administration ("NHTSA"). Further, the Endangerment Findings, which in addition to judicial review may face challenges such as efforts in Congress to rescind the EPA's findings, provide the EPA with the legal underpinning for efforts to regulate GHGs from other sources, including power plants, manufacturing facilities, refineries, and other stationary sources.

Judicial review of the EPA's Endangerment Findings occurs with the filing of a petition for review in the U.S. Court of Appeals for the District of Columbia Circuit by February 16, 2009.

Mandatory Greenhouse Gas Reporting Rule

The EPA's Mandatory Greenhouse Gas Reporting Rule is in effect. This rule, which became effective on December 29, 2009, and was published as a final rule in the Federal Register on October 30, 2009, establishes for the first time annual federal mandatory GHG reporting requirements for owners and operators of certain facilities, fossil fuel suppliers and industrial GHG suppliers. According to the EPA, the rule will apply to approximately 10,000 facilities that account for 85 percent of the nation's total GHG emissions.

The rule applies to three broad categories of sources that emit more than 25,000 metric tons of carbon dioxide ("CO2") or other GHGs per year: (i) downstream sources: owners and operators of facilities that generate and emit GHGs directly into the atmosphere; (ii) upstream sources: suppliers of fossil fuels or industrial GHGs; and (iii) mobile sources: manufacturers and importers of heavy-duty vehicles and engines. The rule also applies to municipal solid waste landfills that generate methane and manure management systems with combined methane and nitrous oxide emissions.

The rule identifies specific sources that must report GHG emissions regardless of whether they reach the 25,000 metric ton threshold. These sources include electricity generating facilities subject to the acid rain program, aluminum producers, ammonia manufacturers, cement producers, lime manufacturers, nitric acid producers, petrochemical producers, and petroleum refineries.

Regulated entities must begin tracking their GHG emissions on January 1, 2010 and submit their first annual report to the EPA by March 31, 2011. Annual reports and corresponding certifications must be submitted in an electronic format as specified in the rule.

Proposed Rule to Require Use of Best Technologies to Minimize Greenhouse Gases from Large Facilities

On October 27, 2009, the EPA published a proposed rule that subjects facilities emitting more than 25,000 tons of GHGs annually to construction and operating permitting requirements under the Clean Air Act. The Prevention of Significant Deterioration and Title V Gas Tailoring Rule (the "Proposed Rule") applies to new facilities and existing facilities proposing major emissions modifications. Facilities subject to the Proposed Rule will be required to minimize GHG emissions through installation of controls based on Best Available Control Technology ("BACT"), which would be determined during the permitting process.

The EPA accepted comments on the proposal through December 28, 2009; a final rule is expected to be issued in the spring.

The EPA Agrees to Issue Toxic Air Emissions Rules

The EPA has agreed to the issuance of final rules regulating the emissions of mercury and other toxic substances from coal and oil fired power plants by the end of November 2011.

According to the terms of a consent decree lodged with the United States District Court for the District of Columbia on October 22, 2009 (in American Nurses Association v. EPA, No. 1:08-cv-02198), the EPA will publish a proposed rule by March 26, 2011, and issue a final rule by November 16, 2011, establishing Maximum Achievable Control Technology ("MACT") for hazardous air pollutants, including mercury, from fossil plants.

The consent decree was published in the Federal Register on October 28, 2009. The comment period ended on November 27, 2009.

The consent decree, once approved by the court, resolves litigation brought in 2008 by public interest groups contending the EPA had failed to timely promulgate national emissions standards for hazardous air pollutants as required under Section 112 of the Clean Air Act.

Proposed Rulemaking On First Greenhouse Gas Emissions Standards Continues

The EPA and the NHTSA concluded three rounds of public hearings on the first national greenhouse gas emissions limits for passenger vehicles on October 27, 2009. The EPA and NHTSA propose establishing a "national program" consisting of new vehicle standards to reduce GHG emissions and improve fuel economy. The standards proposed will apply to passenger cars, light-duty trucks and SUVs beginning with model years 2012 through 2016. With the issuance of EPA's Endangerment Findings, the EPA and the NHTSA can now finalize GHG emissions standards for such vehicles.

Judicial GHG-Related Developments

In late September, the United States Court of Appeals for the Second Circuit ruled in Connecticut, et al. v. American Electric Power Company Inc., et al., Nos. 05-5104-cv, 05-5119-cv (2d Cir. N.Y. Sept 21, 2009) that two 2004 lawsuits alleging that GHG emissions create a public nuisance under federal common law can proceed against five of the nation's largest energy and utility companies.

In the wake of the Second Circuit's decision, two federal court decisions on similar issues have been handed down with differing results. The United States Court of Appeals for the Fifth Circuit reversed the dismissal of a tort action based on climate change, while a California federal district court dismissed a lawsuit with similar claims. Petitions seeking rehearing are before both federal appellate courts, while defendants in the California action are appealing the district court's decision. All three decisions underscore the complex legal issues emerging as the federal courts are being looked to to address potential liability resulting from global warming.

Elizabeth C. "Beth" Barton and Harold M. Blinderman are Partners in the Real Estate, Environmental and Land Use Department at Day Pitney in the firm's Hartford office. Both have extensive experience representing clients in the areas of public utility, environmental and land use law.

Please email the authors at ecbarton@daypitney.com or hmblinderman@daypitney.com with questions about this article.