CHAPTER 4 FEDERAL REGULATION OF CLIMATE CHANGE UNDER THE CLEAN AIR ACT
| Jurisdiction | United States |
(Jan 2015)
FEDERAL REGULATION OF CLIMATE CHANGE UNDER THE CLEAN AIR ACT
Partner
Dorsey & Whitney LLP, Washington, D.C. formerly Assistant Chief
U.S. Department of Justice
Environment and Natural Resources Division
Washington, DC
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THOMAS A. LORENZEN is a Partner with Dorsey & Whitney LLP in Washington, D.C. in the firm's Regulatory Affairs Group. His practice focuses on environmental law and the federal rulemaking process. He represents clients in environmental compliance counseling, due diligence, and other transactional work, and in trial and appellate litigation, administrative actions, enforcement proceedings, and complex negotiations relating to environmental review, major facility permitting, air and water quality, hazardous and solid waste, and environmental cleanup. From 2004 until joining Dorsey in 2013, Mr. Lorenzen was an Assistant Chief in the U.S. Department of Justice's Environment and Natural Resources Division (ENRD). During that time, he supervised the federal government's legal defense of all Environmental Protection Agency rules, regulations, and other final actions judicially reviewable under the various federal pollution control statutes. Over his 16-year career at the Justice Department, Mr. Lorenzen managed or personally litigated dozens of seminal environmental cases under the Clean Air Act, Clean Water Act, Safe Drinking Water Act, Federal Food, Drug and Cosmetic Act, and other federal pollution control statutes. Notable recent cases for which he was responsible include Massachusetts v. EPA and Coalition for Responsible Regulation v. EPA (in which the U.S. Supreme Court upheld the EPA's authority to regulate greenhouse gas emissions under the Clean Air Act and the D.C. Circuit subsequently upheld its suite of greenhouse gas regulations), and Entergy Corp. v. Riverkeeper (in which the U.S. Supreme Court affirmed the EPA's authority to weigh costs against benefits in determining how to regulate cooling water intake structures under the Clean Water Act). Mr. Lorenzen has worked closely over the years with the White House, EPA, and other federal agencies to develop many of the rules that he and his team later defended. He is a recipient of numerous Department of Justice awards, including the John Marshall Award for Providing Legal Advice, awarded by the Attorney General in 2010 for his work with the White House, EPA, and the Department of Transportation in developing the Light-Duty Motor Vehicle Greenhouse Gas Rule. For 12 years before joining the Department of Justice in 1997, Mr. Lorenzen was in private practice, where he developed expertise in environmental compliance counseling and due diligence, trial court and appellate litigation, and corporate transactional practice. He received his JD from Harvard Law School (1985), and his BA in Psychology from the University of California, Los Angeles (UCLA) (1982) summa cum laude.
Federal Regulation of Climate Change under the Clean Air Act: Potential Limitations on EPA's Section 111 Authority
1. Introduction
The Obama Administration and the U.S. Environmental Protection Agency ("EPA") are embarked on an ambitious but perilous journey: an attempt to reduce domestic greenhouse gas ("GHG") emissions by 30 percent from 2005 levels by 2030 using nothing more than EPA's authority under Section 111 of the Clean Air Act1 ("CAA") to establish standards of performance for new, modified and reconstructed, and existing fossil fuel-fired power plants. Other federal tools for obtaining such reductions in GHG emissions - such as a statutory federal cap-and-trade program for GHG emissions or a tax imposed on activities that generate carbon emissions - are not likely to materialize anytime soon, given the present make-up of the U.S. Congress.
As a consequence, much rests on the nature and extent of EPA's authority under Section 111 - not only whether the Administration can realistically reach its ambitious emission reduction goal, but also whether other nations will be more or less likely to follow the United States' lead in adopting their own emission reduction goals. For instance, in November 2014, President Obama and Chinese President Xi Jinping announced the outlines of an agreement between the United States and the People's Republic of China under which, in exchange for the United States' commitment to reduce domestic carbon dioxide ("CO2") emissions by 26 to 28 percent from 2005 levels by 2025, China will agree to cap its emissions of CO2 starting in 2030, or earlier if possible.2 This agreement by the two countries responsible for 40 percent of global GHG emissions is expected to kick-start negotiations with other countries in the lead-up to the finalization in December 2015 of the next global GHG treaty - the Paris Protocol.
Because of the present inability or unwillingness of Congress to pass legislation to reduce GHG emissions, the emission reductions to which the United States commits itself in that deal with China will almost certainly come from power plants pursuant to the rules that EPA is developing under Section 111. The 26- to 28-percent reduction by 2025 announced as part of the deal with China in fact tracks almost precisely with the interim emission reduction targets in EPA's proposed rule governing CO2 emissions from existing power plants. If that rule is invalidated by a court, or if EPA's authority is constrained by a court ruling in such a way as to limit significantly its ability to achieve the reductions to which it committed, China may be less willing to fulfill its own commitments to cap and eventually reduce its domestic GHG emissions. Other countries will then have little incentive to agree to their own emission reduction goals. Thus, much rests on the validity of EPA's proposed Section 111 rules. Moreover, these rules will
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likely significantly inform the development of future standards of performance for other source categories of GHG emissions, such as mining and oil and gas operations.
EPA's rules, however, face a number of significant legal challenges. In this paper, I will provide a brief overview of the statute and the three rules EPA has proposed: its new source performance standards, existing source emission guidelines, and modified/reconstructed source standards. I will also outline the most significant challenges to the rules and discuss their implications for the mining and oil and gas industries.
2. The Statute
As noted, EPA's authority to issue these rules derives from CAA Section 111. That section requires EPA and, in some instances, the States to develop "standards of performance" governing three groups of stationary sources: new sources, modified sources, and existing sources. Understanding these terms is vital to an understanding of what EPA proposes in its carbon rules, as well as to an understanding of the legal risks the rules face.
"Standards of performance" are essentially EPA- or state-established emission targets applicable to sources in an EPA-identified source category, such as the category of coal- and natural gas-fired power plants. These standards do not mandate the use of any particular technology or means for obtaining reductions by a regulated source, but rather reflect the "degree of emission limitation achievable" from the sources in a category through use of the "best system of emission reduction," or "BSER," that the EPA Administrator "determines has been adequately demonstrated."3 In the 1990 Amendments to the Clean Air Act, Congress removed language indicating that at least some of these standards were limited to "the best technological system of continuous emission reduction."4 This means that BSER is broader than simply technological means of obtaining emission reductions; it can, for instance, also include changes in the manner in which a source is operated that lead to emission reductions. Ultimately, a standard of performance is issued in the form of a mandated maximum emission rate - the permissible amount of a pollutant that may be emitted for a given quantity of a produced product, for instance the number of pounds of CO2 that may be emitted per megawatt-hour (MWh) of electricity produced. Regulated sources may achieve that rate through whatever means they choose.
The statute specifies that at least two, and possibly three or more, standards of performance shall be established for each category of sources. One standard must be established for all "new sources" in the source category - that is, for "any stationary source, the construction or modification of which is commenced after the publication" of a proposed standard of performance applicable to new sources.5 These are known as new source performance standards ("NSPS").
Note that "new sources," under the statute, include not only newly-constructed sources, but also sources that "modify" - that is, sources that make a physical change in, or a change in
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the method of, their operation that increases emissions of any air pollutant.6 By regulation, EPA has interpreted the term "modification" to include "reconstruction" - those modifications for which the fixed capital cost of new components exceeds 50 percent of the fixed capital cost that would be required to construct a comparable new facility.7 EPA can promulgate a single standard for new and modified or reconstructed sources, or it can issue separate ones, as it has proposed to do for power plants' carbon emissions.
Finally, once EPA has promulgated NSPS for a category, it is obligated by statute to begin the process of developing standards for "existing sources" in the same category - that is, for "any stationary source other than a new source."8
The processes for developing the two types of standards - NSPS and existing source standards - are different, as are the standards themselves...
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