House Agriculture Committee contributes to a bumper crop of proposed climate change legislation
On March 12, 2009, House Agriculture Committee Chairman Collin C. Peterson (D-Minn.) announced that the committee, which has jurisdiction over the Commodity Futures Trading Commission ("CFTC"), is seeking comments from agricultural, environmental and other groups and members of the public on priorities for future climate change legislation. The committee has prepared an instruction letter and a questionnaire, with responses due by April 10, 2009.
Rep. Peterson’s announcement follows the committee’s February 12, 2009, passage of H.R. 977, The Derivatives Markets Transparency and Accountability Act of 2009 (“DMTAA”). Although the DMTAA has received attention primarily for its provisions addressing financial derivatives – including authorizing the CFTC to suspend U.S. trading of so-called “naked” credit default swaps under certain circumstances and requiring that most over-the-counter derivatives be cleared through central clearinghouses – the bill would also require carbon offsets and emissions allowances to be traded on a designated contract market under CFTC oversight.
The DMTAA finds itself in the midst of a Congressional turf battle on both the financial derivatives and carbon emissions fronts. Introduced by Rep. Peterson, the DMTAA has been sent for review to the House Financial Services Committee, whose chairman, Rep. Barney Frank (D-Mass.), has reportedly expressed displeasure that the Agriculture Committee jumped ahead on derivatives reform without input from the Financial Services Committee and has said that he plans to tackle legislation for a new systemic risk regulator first, with hearings scheduled for mid-to-late March 2009.
The bill’s future in the carbon emissions arena is equally hazy. Edward Rosen, testifying on behalf of the Securities Industry and Financial Markets Association, argued that the prohibition of off-exchange trading in carbon offsets and emission allowances would create an exchange monopoly and thus impede the successful development of cap-and-trade programs. Paul N. Cicio, President of Industrial Energy Consumers of America, expressed his concern that adoption of the DMTAA would prejudice the outcome of the debate on how to control GHG emissions and recommended that Congress consider regulatory options other than a cap-and-trade system.
Meanwhile, Congress is awash in competing legislative efforts, among them:
- February 4, 2009: Rep. Edward J. Markey (D-Mass.) introduced H.R. 889, the Save American Energy Act, which would create a federal energy efficiency resource standard for retail electricity and natural gas distributors.
- February 4, 2009: Rep. Markey joined Rep. Todd Platts (R-Pa.) to introduce H.R. 890, the American Renewable Energy Act, which would create an electricity standard requiring that by 2025, 25% of electricity be generated from renewable sources like wind, solar and geothermal.
- March 5, 2009: Rep. John B. Larson (D-Conn.) introduced H.R. 1337, America's Energy Security Trust Fund Act of 2009, intended to reduce carbon dioxide emissions by imposing a tax on “taxable carbon substances,” which the bill defines to include coal, petroleum and petroleum products and natural gas.
- March 5, 2009: Sen. John Thune (D-S.D.) and Sen. Charles E. Schumer (D-N.Y.) introduced S. 527, which would amend the Clean Air Act to prohibit requiring farmers to purchase permits “for any carbon dioxide, nitrogen oxide, water vapor, or methane emissions resulting from biological processes associated with livestock production.” According to a press release from Sen. Thune’s office, the bill “will once and for all prevent the government from imposing an onerous ‘cow tax’ on farmers across the country.” S. 527 has been referred to the Committee on Environment and Public Works.
- March 11, 2009: Rep. Jeff Fortenberry (D-Neb.) introduced a similar bill, H.R. 1438, with the announced goal of “prohibit[ing] any Federal agency or official, in carrying out any Act or program to reduce the effects of greenhouse gas emissions on climate change, from imposing a fee or tax on gaseous emissions emitted directly by livestock.” A press release from Rep. Fortenberry’s office quotes the Congressman as observing that “As climate change issues are debated, the consideration of a tax on natural livestock emissions is unreasonable and peculiar.”
- March 12, 2009: In response to reports that the administration was considering using budget reconciliation rules to shield a cap-and-trade bill from a threatened Republican filibuster, twenty-eight Senators wrote a letter to the leaders of the Senate Budget Committee, Chairman Kent Conrad (D-N.D.) and ranking member Judd Gregg (R-N.H.), voicing their opposition to “using the budget reconciliation process to expedite passage of climate legislation.” The group explained:
Enactment of a cap-and-trade regime is likely to influence nearly every feature of the US economy. Legislation so far-reaching should be fully vetted and given appropriate time for debate, something the budget reconciliation process does not allow. Using this procedure would circumvent normal Senate practice and would be inconsistent with the Administration’s stated goals of bipartisanship, cooperation, and openness.
- March 22, 2009: Asked about the idea of folding cap-and-trade legislation into a budget reconciliation bill, Sen. Conrad said on ABC’s “This Week”:
I'll put it this way: It is not included in the budget that I will present to my colleagues . . . . I have said for weeks, I don't think it is the right way to write substantive legislation, because if you get into the details – and we won't do that here – it just doesn't work very well.
- Rep. Markey – who chairs both the House Select Committee on Energy Independence and Global Warming and the Energy and Environment Subcommittee of the House Energy and Commerce Committee – is leading the effort on the House version of climate change legislation and has said that he hopes to complete that legislation by Memorial Day.
- Senate Majority Leader Harry Reid (D-Nev.) has indicated that he will combine measures on a nationwide renewable electricity standard, a modernized electrical grid and GHG cap-and-trade into a single bill. Commenting on the respective Senate and House legislative strategies, Sen. Reid told a reporter, “The House has decided to take them all up together. That’s probably where we’re headed,” adding, “We're not going to be able to get this [Senate package cleared] until sometime in the summer at the earliest.”
There has also been activity on the regulatory front:
- On March 10, 2009, the Environmental Protection Agency announced its proposal for “the first comprehensive national system for reporting emissions of carbon dioxide and other greenhouse gases produced by major sources in the United States.” The EPA’s proposed rule would require mandatory annual GHG emissions reports from suppliers of fossil fuel and industrial chemicals, manufacturers of motor vehicles and engines, and industrial facilities that emit 25,000 metric tons or more of GHG emissions per year.
- Last Friday, the EPA reportedly sent a proposal to the White House finding that global warming is endangering the public’s health and welfare. Greenwire had reported earlier this month that according to a leaked internal EPA PowerPoint, the EPA was moving quickly toward an endangerment finding but would not propose immediate GHG regulations.
A rather active year so far, and we’re still in March . . . .
EAB ruling in In re Deseret Power Electric Cooperative opens door to a new regulatory era on climate change
The USEPA Environmental Appeals Board (EAB) issued a potentially groundbreaking decision in In re Deseret Power Electric Cooperative (PSD Appeal No. 0703) by ruling that EPA Region 8 was incorrect when it exempted a new coal fired unit at an existing Utah power plant from limiting carbon dioxide emissions and remanded the permit decision to the Region to reopen the record and reconsider its refusal to impose limits on carbon-dioxide emissions. In its November 13 decision the EAB rejected the Region 8 contention that it was not required to regulate carbon dioxide because the greenhouse gas, while a “pollutant” under the Clean Air Act, was not subject to current regulatory standards. (“We hold that this conclusion is clearly erroneous because the region’s permitting authority is not constrained in this matter by authoritative agency interpretation.”)
Under EPA’s existing Prevention of Significant Deterioration (PSD) rules, new and modified projects in areas that have acceptable air quality must install costly best available control technologies or “BACT” if the construction could cause an increase in the emissions of “pollutants.” The decision does not mandate industry to install BACT to meet greenhouse gas emission limits. Relying on the recent U.S. Supreme Court ruling in Massachusetts v. EPA, the ruling only requires the Region to develop and adequate record for its decision that does not rely on the “historical agency interpretations” regarding the regulation of CO2.
The EAB decision prominently recognizes the national importance of the climate change issue. The EAB ruling cautions that EPA “would be better served by the Agency addressing the interpretation [of CO2 regulation] in the context of an action of nationwide scope, rather than through this specific permitting proceeding.” Nevertheless, the decision clears the way for the Obama administration to impose new limits on CO2 emissions through the administrative process and permitting decisions. The Obama administration might use this decision and its administrative authority under the Clean Air Act as leverage to obtain sensible climate change legislation. The enormous cost and delay of applying PSD permitting and BACT with regard to CO2 emissions to existing facilities on construction projects of all sorts involving energy, infrastructure, and general industrial expansion would be disastrous in this sharply down economy. Nearly every large facility construction project would trip the 250 ton per year major source category if CO2 is regulated under the current Clean Air Act, causing years of delay in permitting and huge costs of retrofitting existing facilities. If Congress does not quickly address climate change through legislation, the EAB has shown through the Deseret decision that the EPA will.
