CHAPTER 9 SCATTERSHOT: THE REGULATION OF GREENHOUSE GAS EMISSIONS FROM OIL AND GAS AND MINING OPERATIONS

• Jurisdiction: United States

Air Quality Issues Affecting Oil, Gas, and Mining Development in the West
(Feb 2013)
CHAPTER 9
SCATTERSHOT: THE REGULATION OF GREENHOUSE GAS EMISSIONS FROM OIL AND GAS AND MINING OPERATIONS
Alex Ritchie ^*
University of New Mexico School of Law
Albuquerque, NM
Jacy T. Rock ^*
Suncor Energy (U.S.A.) Inc.
Denver, Colorado

ALEX RITCHIE is an Assistant Professor of Law at the University of New Mexico School of Law in Albuquerque, New Mexico, where he teaches oil and gas law, advanced oil and gas law, property, natural resources law, and business associations. Before joining the UNM law faculty, Alex was the Senior Corporate Counsel for Suncor Energy (U.S.A.) Inc., based in Denver, Colorado. Alex joined Suncor in September, 2009, after almost 10 years in the Energy and Natural Resources and Corporate Transactions practice groups at Bryan Cave LLP (formerly Holme Roberts & Owen LLP), where he became a partner in 2006. While at Suncor, Alex focused on oil and gas acquisition and divestiture transactions, Clean Air Act and other environmental matters, and real estate and commercial contract transactions and litigation. At Holme Roberts & Owen, Alex represented oil and gas, mining, and renewable energy companies in mergers, acquisitions, divestitures, joint ventures, and financing transactions as well as operational and securities matters. Alex has taught and written on a number of topics, including oil and gas, mining, and limited liability company issues, and is the lead drafter on the drafting committee for the new RMMLF Form 5 LLC forms. While in Denver, Alex was actively involved in non-profits that provide services to the homeless, serving for a number of years on the Board of Directors of Urban Peak.

JACY T. ROCK joined Suncor Energy Services, Inc. as Legal Counsel in 2011. She is the legal team lead for all environmental matters affecting Suncor's U.S. business operations, as well as all issues related to Suncor's U.S. pipeline assets, fuels quality compliance, gasoline credit trading programs, and renewable energy presence. She is also responsible for a variety of litigation matters and for electronic discovery with respect to all litigation. Prior to joining Suncor, Jacy was an associate at Faegre Baker Daniels LLP, where she focused on environmental and natural resources litigation, as well as eminent domain litigation. She was named a Colorado SuperLawyers "Rising Star" in 2010 and 2011, received the Faculty of Federal Advocates Counsel/Co-Counsel Pro Bono Award in 2006, and served as the President of the Colorado Hazardous Waste Management Society for 2009-2010. Jacy graduated from the University of Minnesota Law School, Order of the Coif, magna cum laude, in 2005; she graduated from the University of North Dakota, summa cum laude, in 2002. She currently serves on the Board of Directors for Great Outdoors Colorado.

I. Introduction

II. Greenhouse Gas As Air Pollutant Regulated Under PSD

A. Massachusetts v. EPA

B. The Endangerment Finding

C. The Tailpipe Rule, the Timing Rule and the PSD Trigger

D. PSD and Tailoring Rule: Avoiding the Great Train Wreck

E. Coalition of Responsible Citizens v. EPA

1. Challenge to Endangerment Finding - Denied Based on Massachusetts v. EPA

2. Challenge to Tailpipe Rule - Denied Based on Narrow Requirement to Consider Only the Costs to the Auto Industry

3. Challenge to Extension of GHG Regulation to PSD Based on Endangerment Finding - Denied Based on Expansive Interpretation of "Any Air Pollutant"

4. Challenge to Timing and Tailoring Rules - Denied Based on Standing

5. Conclusions on Coalition

6. Postscript on Coalition

F. Implications of Coalition for Future Regulation Under the CAA

1. GHG As NAAQS Criteria Pollutant?

2. Lowering of GHG Emissions Thresholds - Adding Sources

3. Regulation of Other Pollutants Under Varying Thresholds

III. The Regulation of GHG Under the PSD Program

A. Source Categories Brought Into PSD Review Because of GHG Emissions

B. Administration of PSD for GHG

1. Permitting and Review

2. Permit Avoidance

3. BACT

a. General Guidance

b. Specific Guidance

4. Potential Streamlining Approaches

IV. NSPS Regulation of GHG

A. Introduction

B. Power Plant GHG NSPS

C. Refinery GHG NSPS

D. Future Regulation of Midstream and Upstream Oil and Gas and Other Industries Under NSPS

E. Regulation of Existing Sources Under NSPS?

V. Greenhouse Gas Reporting Rule

A. Introduction

B. General Requirements

C. Refineries and Importers of Petroleum Products - Subparts Y and MM

D. Petroleum and Natural Gas Systems - Subpart W

E. Underground Coal Mines - Subpart FF

VI. Renewable Fuels

VII. Cap and Trade and Other Market Based Standards

A. California

B. Northeastern United States - RGGI

C. Western Climate Initiative and the New Mexico Experiment

1. The Western Climate Initiative

2. The New Mexico Experiment

D. The Future of National Cap and Trade or a Carbon Tax

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VIII. Other Climate Change Litigation

A. Public Trust Doctrine Cases

B. Common Law/Public Nuisance Cases

IX. Conclusion

I. Introduction

If the predictions of the International Energy Agency (IEA) come to pass, the United States will become the world's top producer of oil by 2020, a net exporter of oil by 2030, and almost energy self-sufficient by 2035, all spurred by U.S. domestic energy production, with much of the gains attributable to the more prolific use of hydraulic fracturing.¹ Amidst such potential increases in U.S. production, environmental groups are poised for a fight with an industry it describes as "dirty, dangerous and run amok."² With the nation's political attention focused on the prospects of a national carbon tax or cap and trade system as our potential savior from climate Armageddon, the Environmental Protection Agency (EPA) has steadily produced a massive regulatory regime to control greenhouse gas (GHG)³ emissions of the U.S. extractive and related refining industries at a cost to both industry and consumers. States, too, have entered the GHG regulation game, creating or participating in trading regimes with potentially significant impacts on industry and their customers. Whether the IEA predictions actually come true greatly depend on the future of climate change legislation and the expansion of existing GHG regulation of the energy industry.

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This paper begins with a discussion of the origin of existing and pending federal climate change regulation of the oil and gas and mining industries. The paper also explains some of the complex legal arguments constructed by EPA--and to date accepted by the courts--in defense of those regulations, notwithstanding the unnatural relationship between those regulations and the governing statutes. It then discusses market-based legislative initiatives in the U.S., and their potential impacts on the oil and gas and mining industries. The paper concludes with a discussion of some recent climate change litigation. To avoid overlap with other topics presented at the Special Institute, the paper does not address the implications of GHG emissions in connection with permitting and related litigation under the National Environmental Policy Act.⁴

II. Greenhouse Gas As Air Pollutant Regulated Under PSD

A. Massachusetts v. EPA.

Under Clean Air Act § 202(a)(1), the EPA Administrator "shall" regulate emissions of any air pollutant from new motor vehicles, "which in his judgment cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare."⁵

Armed with that statutory language, the path of GHG regulation under the Clean Air Act began in 1999, when a group of private organizations filed a rulemaking petition asking EPA to regulate greenhouse gas emissions from new motor vehicles.⁶ EPA denied the rulemaking petition in 2003,⁷ relying on an unremitted report by the National Research Council opining that while evidence points to a warming of global surface air temperatures, uncertainties in understanding natural variability in temperatures meant that an unequivocal link between the buildup of greenhouse gases in the atmosphere and observed climate changes could not be established.⁸ EPA concluded in denying the petition that (1) the Clean Air Act did not authorize EPA to issue mandatory regulations to

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address global climate change,⁹ and (2) even if EPA had such authority, it would be unwise to do so at that time.¹⁰

Undeterred, the Petitioners sought review of EPA's petition denial by the D.C. Circuit Court of Appeals joined by Massachusetts and other state and local governments.¹¹ In a 2-1 decision, the court denied the petition, holding that EPA's decision to forego rulemaking of GHG emissions was not unreasonable until more was understood about the causes, extent, and significance of climate change.¹² One year later, the Supreme Court in the seminal case of Massachusetts v. EPA¹³ reversed the D.C. Circuit, holding in a 5-4 decision that EPA failed to offer a reasoned explanation for its refusal to decide whether GHG caused or contributed to climate change.¹⁴

Writing for the majority, Justice Stevens referred to the broad Clean Air Act § 202(a)(1) definition of "air pollutant" as including "any air pollution agent or combination of such agents, including any physical, chemical . . . substance or matter which is emitted into or otherwise enters the ambient air . . . ."¹⁵ Having concluded that GHG was an air pollutant, the majority then concluded that the EPA Administrator's only discretion related to his "judgment" about whether GHG emissions "cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare."¹⁶ According to the majority, the reasons offered by EPA not to regulate GHG were impermissible policy considerations, not based on scientific judgment.¹⁷ Therefore, EPA's refusal to

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regulate GHG emissions from motor...