Energy & Environmental Law Blog

Energy & Environmental Law Blog

Analyzing the critical energy and environmental issues of the day

US Supreme Court Nixes EPA Regulations on Mercury Emissions – Must Consider Costs Early!

Posted in EPA, Rulemakings, Sustainability

In Michigan v. EPA, the U. S. Supreme Court invalidated EPA’s rules limiting emissions of mercury and other pollutants from power plants, ruling that EPA inappropriately ignored the costs of regulation – particularly compliance costs – when it decided it should regulate these emissions from power plants.  The June 29, 5-4 decision chastises EPA for deeming costs “irrelevant” early on in its analysis.  The immediate result sends the 2011 Mercury and Air Toxics Standards (MATS) back to the D.C. Circuit Court but the regulated power plants have already made decisions and implemented steps pursuant to MATS.  The longer term impact is less physical – EPA must be faster and more detailed in its cost/benefit analysis of regulations and those opposing EPA action may use the lack of cost estimates as an argument to slow imposition of new regulations.

See the full decision here:  http://www.supremecourt.gov/opinions/14pdf/14-46_10n2.pdf.

Under the Clean Air Act, EPA may regulate power plants’ emissions of hazardous air pollutants, including mercury, if, after further studies, the agency finds that regulation is “appropriate and necessary.” Here, EPA finished its studies in 2000 and determined that regulating power plants was “appropriate and necessary” because of the mercury emissions posed risks to human health and environment that could not be otherwise eliminated, and because there were controls available to reduce those emissions. EPA concluded that it did not need to study costs at that juncture, in determining whether to regulate power plants.  Rather, EPA could consider costs in detail later, when determining how much to regulate power plants’ emissions.  It reaffirmed these “appropriate and necessary” determinations and promulgated the MATS rule in 2011.

Michigan, and 23 other states, filed suit challenging MATS, claiming that EPA should have considered costs when making the initial determination of whether to regulate power plants.  The majority of the Court agreed with the petitioners and found that EPA acted unreasonably when it deemed cost irrelevant to the decision to regulate power plants.  The decision rests heavily on a common understanding of the words “appropriate and necessary” – “[r]ead naturally in the present context, the phrase ‘appropriate and necessary’ requires at least some attention to cost.”  While EPA has some flexibility in interpreting “appropriate and necessary,” the majority ruled it cannot “entirely fail to consider an important aspect” of the problem.  The Court criticizes EPA for deeming cost “irrelevant” and giving cost “no thought at all”.

The estimated cost of complying with MATS, once EPA did do the cost/benefit analysis, is striking:   EPA estimated that it would cost power plants $9.6 billion per year to achieve and maintain compliance with its regulations.  In contrast, it estimated that compliance would create benefits worth $4 to $6 million per year (although when ‘ancillary benefits are included the comparison is not as one-sided.)  Additionally, one of the studies EPA performed before its 2000 determination of whether to regulate mercury emissions from power plants included an examination of “technologies which are available to control such emission and the costs of such technologies.”  While EPA asserted that it would prepare a detailed cost/benefit analysis later, this study certainly opened the door for the consideration of costs at an earlier stage of the rulemaking process.

While utilities have already implemented technology or decided to cease certain operations due to MATS requirements, the longer terms impact of this decision is that it will likely be used as a weapon in the arsenal of those challenging other EPA regulations.  Clearly, the Court is giving less deference to EPA’s interpretation of its statutory authority, and admonishing it to provide a detailed cost-benefit analysis early in the process of developing environmental regulations.  This judicial benchmark may delay EPA’s release of its final rule on carbon emissions under section 111(d) of the Clean Air Act (previously anticipated to be in August).  In addition, those opposing the 111(d) regulations will likely feel emboldened by the prospect that EPA may be given less deference when those regulations reach the Supreme Court.

Electronic Disclosure of Violations Coming This Fall

Posted in EPA, Rulemakings

Under EPA’s Audit Policy, those who discover,  promptly disclose and correct environmental violations may have penalties reduced or eliminated. 60 Fed Reg 66, 705 et seq. (1995);  65 Fed Reg 19, 617, et seq.  (2000)

EPA recently hosted a webinar on its proposed “eDisclosure” portal for reporting Emergency Planning and Community Right-to-Know Act (EPCRA) and non-EPCRA violations under EPA’s Audit Policy.

http://www2.epa.gov/sites/production/files/2015-06/documents/edisclosurewebinarpresentation_0.pdf

It plans to activate the portal in the Fall of 2015. Although it would not change any of the Audit Policy criteria, it would alter how it is used.

A regulated entity will be required to first register on the portal, and then disclose violations  and, when corrected, certify correction and compliance online. If the time limits are met for certain EPCRA violations, the system will  automatically generate an electronic Notice of Determination, or “eNOD”, conditionally confirming that the violations are resolved without civil penalties. For other EPCRA and all non-EPCRA violations, there is an opportunity for an extension of the correction deadlines and only an Acknowledgement Letter confirming EPA’s receipt of the report is issued automatically. EPA will then determine eligibility for penalty reductions if and when it decides to take  enforcement action. Obviously, the entities reporting will not receive quick feedback or assurances regarding penalties. Also, information disclosed on the portal will be more easily available to the public.

July 1 Deadline for General Industrial Stormwater Permits in California

Posted in California, Rulemakings, Water Law

Beginning July 1 of this year, there’s a new program in town!  A new general industrial stormwater permit kicks in in California. Companies with an existing stormwater permit will have to apply for a new permit, and prepare a new management plan—there is no grace period.

Link to General Permit For Storm Water Discharges Associated With Industrial Activities Document

The most significant change is that the new permit includes numeric action limits that require a permittee to implement certain best management practices if its stormwater exceeds target levels for contaminants, like oil and grease, pH, and Total Suspended Solids.  Permit documents (applications, plans, maps, some sampling data) will be available on a publicly accessible and searchable database, which could lead to increased public scrutiny and possible citizen suit litigation in the event of noncompliance.  The new approach suggests your companies may want to elevate their attention to stormwater compliance to avoid problems.

No extensions have been imposed, so July 1 is the deadline!

Possible Renewable Identification Number Price Spike Due to Proposed EPA Compliance Deadline Causes Biofuel Industry Concern

Posted in EPA, Oil & Gas, Renewables, Rulemakings

The Environmental Protection Agency (EPA) sets the annual percentage standards for ethanol, cellulosic biofuel, biomass-based diesel, advanced biofuel, and total renewable fuels that apply to all gasoline and diesel produced or imported each year.   EPA blending requirements for the Renewable Fuel Standard (RFS) to date have been reduced to address the “blend wall” – the fact that most of the American automobile fleet can only tolerate fuels with a maximum of 10 percent ethanol before fuel system corrosion becomes an issue.

Certain industry participants are required under the Energy Policy Act (EPAct) of 2005 and the Energy Independence and Security Act (EISA) of 2007 to comply with these standards which require production of a minimum amount of renewable fuels or face stiff financial penalties.  The primary businesses subject to these requirements are refineries and importers of petroleum products.  If a refinery or importer fails to produce sufficient volumes of renewable fuels, they are permitted to purchase credits, known as Renewable Identification Numbers or RINs, on the open market to make up any deficit.  RINs represent actual biofuels produced by other businesses.

On April 10, 2015, EPA announced that it intends to propose January 31, 2016 as the compliance deadline for both the 2013 and 2014 RFS blending requirements.  These new deadlines are largely the result of a proposed consent decree spurred by litigation initiated by the American Petrochemical Institute and American Fuel and Petrochemical Manufacturers.

According to the Society of Independent Gasoline Marketers of America (SIGMA):

“Industry groups are concerned that the deadline will create a sudden price spike for RINs because refiners and importers will require a significant number of credits—for both 2013 and 2014—all on one day. Renewable fuel producers further fear that such a spike could renew calls by the petroleum industry to repeal the RFS program as it did in 2013 during a similar RIN price spike.”

In proposed requirements released today, the standard for 2014 was adjusted to reflect the volumes of renewable fuels that were actually used in 2014. However, because the compliance deadline for 2013 has been extended to match the 2014 deadline, refiners may be scrambling to ensure they have sufficient RINs to meet their obligations under the EPAct and EISA.

The standards released today are as follows:

Proposed Percentage Standards

2014

2015

2016

Cellulosic biofuel

0.019%

0.059% 0.114%

Biomass-based diesel

1.42%

1.41%

1.49%

Advanced biofuel

1.52%

1.61%

1.88%

Total renewable fuels 9.02% 9.04%

9.63%

These standards are lower than those set out in the EPAct and EISA, reflecting the continuing limitations of the American automobile fleet and the limited ability of the industry to produce renewable fuels.  However, following what it interprets as the “ambitious” spirit of the legislation, the proposed volumes require substantial year-over-year increases for 2015 and 2016, leaving significant market uncertainty about the technical feasibility of reaching these targets.

BLM Requests Comments on Upcoming Lease Sale in Nation’s Largest Federal Land Unit

Posted in Land Use

The BLM is asking interested parties to comment on tracts available for oil and gas leasing in the National Petroleum Reserve Alaska (NPR-A) by June 29, 2015.  The NPR-A encompasses 22.8 million acres on Alaska’s North Slope and is estimated to contain 896 million barrels of recoverable oil and 52.8 trillion cubic feet of natural gas.  As part of its annual lease-sale process, the BLM requests comments from the public on what tracts should be included in the lease sale.

The 2015 lease sale follows President Obama’s 2011 instruction to BLM to hold annual lease sales in NPR-A and BLM’s adoption of a new land use plan governing NPR-A in 2013.  Before President Obama’s 2011 instructions, the first lease sale for NPR-A was held in 1999 and approximately every two years thereafter.

BLM’s lease-sale practice is to request comments from interested parties on what tracts should be made available for leasing in May or June.  BLM then publishes a notice of the tracts being offered for lease and the date of the lease sale in late summer or fall.  Sealed bids are accepted up to the time of the sale and opened on the day of the sale.  Winning bidders are then contacted by BLM and asked to fill out a lease form and complete other administrative requirements.

Oil and gas producers looking for new development prospects in NPR-A should comment on BLM’s upcoming sale to ensure BLM offers the best development prospects possible in the upcoming sale.  Even producers not considering projects in the near term in NPR-A would benefit from providing BLM information and analysis regarding available tracts.  BLM’s long term leasing and other management decisions for NPR-A are influenced by industry interest and providing BLM information and analysis during its leasing process will make for better BLM management decisions in the long term.

EPA/Corps Adopt “Waters of the U.S.” Rule: What’s Next?

Posted in EPA, Rulemakings

Today EPA and the Army Corps of Engineers released a prepublication version of the final rule defining “waters of the United States,” the jurisdictional trigger under the Clean Water Act.  The term needs defining because the Act extends to navigable waters and adjacent wetlands, but it is often not clear how some streams or wetlands relate to a navigable waterway, and the Supreme Court has provided conflicting guidance.

So, the agencies have attempted to clarify.  With the new definition they hope to reduce the number of case-by-case jurisdictional determinations and litigation, but they understand full well the controversial nature of the rule, having received over a million comments on the draft published on April 21, 2014.  In response, EPA and the Corps today also released a battery of public relations offerings—press release, fact sheets, blogs, op-ed pieces—to explain and defend the rule.  The controversy will not end here.

As previously reported in this space, the impetus for the rule is uncertainty created by a 2006 Supreme Court decision in Rapanos.  In that case, a 5-4 split Court held that the government had overstepped its authority, but failed to issue a majority opinion.  Instead, four justices, led by Justice Scalia, proposed a rule in essence requiring that the subject waters or wetlands be free flowing and obviously wet.  The concurring opinion by Justice Kennedy would instead look for a “signficant nexus” between a wetland and a navigable waterway.  The lower courts have struggled ever since to discern a clear jurisdictional definition.

At first glance, the final rule does not veer much from the draft.  For a comprehensive analysis of the draft rule, including the cases leading up to the rule, see the American College of Environmental Lawyers report for the Environmental Council of the States.  Although EPA and the Corps have declared that the rule does not represent a major policy shift, a diverse ACOEL writing team—made up of experts in academia, non-profit organizations, and private practice—had differing opinions.  Some saw a sea change in federal policy, while others believed the draft rule was simply a restatement of existing policy.

Congress has been fulminating about government overreach since the draft rule was published.  On May 12, 2015 the House passed HR 1732, the Regulatory Integrity Protection Act, in an effort to block the final rule.  If the Senate passes the bill, Congress will need to muster the votes to override a certain presidential veto.

Although the purpose of the final rule is to provide some certainty as to the scope of Clean Water Act jurisdiction, it is highly likely to be challenged by industry groups in the courts.  That means years of litigation and appellate review across the country, ultimately landing once again before the Supreme Court.  Whether we get clarity this time from the Court remains to be seen.

USFWS Launches New Regulatory Program Under the Migratory Bird Treaty Act

Posted in Environmental Quality, Renewables

The US Fish and Wildlife Service issued a Notice of Intent to prepare a Programmatic Environmental Impact Statement (PEIS) to evaluate the potential environmental impacts of an incidental take program under the Migratory Bird Treaty Act (MBTA).

The agency anticipates the development of general authorizations for particular industry sectors, focusing first on oil and gas production, communication towers, and electric transmission.  However, the agency stated it may develop additional general authorizations for other sectors, identifying specifically wind energy generation, a step that the American Bird Conservatory had petitioned the agency for earlier this year.

The notice of intent indicates the agency will also address the possibility of issuing individual permits and the expansion of existing efforts to work with industrial sectors to develop non-binding “best practices,” without providing protection for incidental take.

The MBTA is a criminal statute with extremely broad coverage – over 1000 bird species – and a very low bar for liability – essentially strict liability for misdemeanor violations.  In the past, the FWS has used its enforcement discretion to limit its actions to parties who have ignored efforts to reduce bird mortality, usually after warnings from the agency, and has only very recently applied the statute to wind farms.

This program, if implemented, would provide facility operators in these sectors with assurance against prosecution, but would also greatly expand the agency’s ability to obtain mitigation for the mortalities that occur. Given the potential impact, it is strongly in the interest of the affected industrial sectors to participate actively in the evaluation and development of the programs to assure that the operational and mitigation requirements are both effective and reasonable.

Court at the Fox River Site Opens Door to Superfund Divisibility

Posted in Natural Resources, Rulemakings

On May 19, a district court ruled that a company had established divisibility for its liability at a major downstream segment of the Fox River mega-site in Wisconsin, capping its liability for that segment at 28%. This same court had initially held that the company, NCR, was jointly and severally liable for PCB contamination at the site. This decision and the appellate court’s earlier reversal of the initial rejection of the divisibility argument signal that courts may be increasingly receptive to divisibility claims in Superfund actions.

In its prior ruling, the district court had applied a binary measure of harm based on remediation costs, and denied NCR’s motion seeking divisibility.  The 7th Circuit Court of Appeals upheld that ruling on an interim appeal, but later reversed itself and held that “harm” was a continuous measure of the resulting risk to health and the environment, which would vary with the amount of PCBs present, and not on the cost of remediation.

In the remand, noting that the appellate court had held that remediation costs would also be continuous, with costs higher in areas that were more toxic, the district court then held that it was reasonable to apply the harm percentages to the costs of remediation: “It requires no stretch of logic to conclude that NCR would also be responsible for a similar amount of the cleanup costs.”

Over the objections of the US, the district court defined “harm” as the volume of PCBs present in that segment of the Site, with NCR’s share limited to an estimate of the percentage of those PCBs that originated with NCR.  In accepting the percentage proposed by NCR, the court relied upon estimates offered in the earlier trial by an expert for another party that were admittedly inexact “ballpark” numbers, but were likely an overestimate of the actual NCR contribution.  Rejecting US arguments about the imprecision of the estimates, the court held that the numbers represented the expert’s “best estimate” and that the use of averages in determining the NCR contribution was appropriate, finding that the facts indicated that the NCR contribution in some areas was likely lower than average and in others may have been higher.  Describing the Supreme Court decision in Burlington Northern as seeming to “lower the bar” for the kinds of evidence needed for apportionment, the court held “It is reasonableness, not precision, that governs apportionment analysis.”

In the period since the Supreme Court issued its Burlington Northern decision, the United States has been steadfastly arguing that the law on apportionment had not changed, and it regularly pointed to favorable district court decisions, including the initial decisions adverse to NCR, to support that view.  With the appellate reversal and this decision on remand, that argument now has lost much of its force.  We can expect that responsible parties at Superfund sites will push courts and allocation mediators to walk through the door opened by the Supreme Court and seek fair apportionment.

Free Webinar: Bird Mortality and Renewable Energy Facilities

Posted in Natural Resources, Renewables
bird

 

 

 

 

You see the headlines regularly –wind farms and solar arrays kill birds and companies pay major fines. Bird mortality is an increasingly sensitive topic for energy companies and their facilities, with complex and widespread legal implications.

On June 2, Davis Wright Tremaine partner Gerald George  and Adrian Delnevo, PhD., CEO and Principal Scientist of Applied Ecological Solutions Inc. will be presenting a free webinar that will help you understand and manage the risks and problems, as well identify and evaluate the potential solutions. 1 Hour CLE Credit is pending.

To register, please click here.

For any questions, please contact Barrie Handy.

California State Water Resources Control Board Finalizes Rules for Desalination Plants

Posted in California, Natural Resources, Rulemakings, Water Law

As the drought continues across California, the State Water Resources Control Board (“SWRCB”) has adopted its first-ever requirements for desalination plants in the state. Desalination – a process of removing minerals from ocean water to produce fresh water for municipal uses – has not been widely used in California because it is expensive, energy-intensive, and the state traditionally has had access to great water resources such as the Colorado River and the Sierra Nevada snowpack.  But with recent improvements in desalination technology and rapidly declining water resources, coastal communities are looking at desalination plants as way to improve the stability and reliability of their future water supply.

On May 6, 2015, after five years of development, the SWRCB adopted an amendment to its Water Quality Control Plan for Ocean Waters focused specifically on desalination plants.  The amendments require the use of certain technology standards with respect to the intake of ocean water and the discharge of the leftover brine.  The rules require all new or expanded seawater desalination plants to use “the best available site, design, technology, and mitigation measures feasible to minimize intake and mortality of all forms of marine life.”

The new rules recommend, where feasible, the use of subsurface intake technology, which rely on pipes that are buried in the sea floor.  While surface-level intake pipes could potentially have a detrimental impact on marine life, subsurface intake appears to reduce this potential impact to near zero levels.  The SWRCB’s new rules allow the regional water boards to determine during the permitting process whether subsurface intake technology is feasible at a particular plant location.  Existing plants and plants that are already permitted, such as the massive desalination plant under construction in Carlsbad, California, are exempt from the subsurface intake requirements.

If the drought continues and the energy efficiency of desalination technology continues to improve, many Californian coastal communities could soon be getting much of their freshwater from the ocean.  Hopefully the SWRCB’s new rules help provide regulatory clarity to foster the development of such projects.