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IPI claims that EPA’s response is mandatory under Massachusetts v. EPA, in which the Supreme Court held that 1) greenhouse gases are “air pollutants”; 2) in responding to a petition, EPA responses must have “reasoned justification” or must “conform to the authorizing statute”; and 3) “The harms associated with climate change are serious and well recognized.”

In its petition, IPI requests that the EPA first, make a positive endangerment finding, and second, propose and finalize regulations, pursuant to its “ample authority” under the Clean Air Act, in particular Sections 211 (motor vehicles) and 231 (aircraft). Notably, the EPA recently proposed such a finding for emissions from new motor vehicles.

The IPI espouses a system that creates market-based incentives that allow the market to naturally find the most cost-efficient way to reduce emissions. Because a command-and-control system would prescribe the particular conduct for many actors, IPI claims that this would impose costly requirements on the transportation sector. However, cap-and-trade would allow businesses to adhere to the Clean Air Act, while finding ways to comply at the lowest possible cost. IPI also notes the transparency of this system, and the possible benefits for international trade. A key feature of the proposed system is that allowances are auctioned off, as opposed to a permit give-away system. In short, the emissions cap will raise the cost of fuel, which will send a price signal to conserve and switch to cleaner fuels. According to IPI, the revenues from auctions will offset the price increase, prevent harm to the middle class, and avoid windfall corporate profits.

IPI emphasizes that this comprehensive approach will prevent the EPA from addressing individual petitions piecemeal. Also, IPI warns of a “collision course” with Congress, noting that Congress will likely pass broad cap-and-trade legislation that would supersede any command-and-control mechanisms that EPA creates. In fact, on June 26, the House passed the American Clean Energy and Security Act of 2009 (ACES), which establishes a cap-and-trade system for stationary sources. The IPI therefore claims that its proposed regulations would prevent EPA from wasting time and resources on new command-and-control regulatory measures.

In a written statement, Calpine’s president and CEO states that “The combined-cycle technology allows us to commit to lower emissions while increasing efficiency – meaning we use less natural gas and emit fewer greenhouse gases while delivering more power to our customers and ultimately the American consumer.” This may well reflect Calpine’s “long-term commitment to environmental stewardship,” but a strong case can also be made that Calpine simply made a smart business decision by recognizing that the Environmental Appeals Board will no longer pass on any power plant permit that fails to limit greenhouse gas emissions.

The permitting of a power plant has for decades been an expensive, time-consuming, and extremely uncertain endeavor. Recent developments in administrative law, legislative proposals, growing public concerns about global climate issues, and a new administration have combined to create a sea of change. This may well explain why a large, sophisticated power generator would voluntarily assume unprecedented regulatory obligations.

New power plants must obtain a Clean Air Act permit under the EPA’s “prevention of significant deterioration” (PSD) rulemaking. PSD requires that “best available control technology” (BACT) be applied to control emission of air pollutants. In recent years the environmental community has attempted to require permitting authorities to limit greenhouse gas emissions under PSD permits. As part of this effort, in November 2008, the Environmental Appeals Board (EAB) reviewed the appeal of a PSD permit issued by the EPA, Region 8 in In re: Deseret Power Electric Cooperative. In Deseret, the Sierra Club argued that Region 8 had erred by failing to apply BACT to CO₂ emissions from the permit granted for a waste-coal-fired electric generating unit proposed for a power plant near Bonanza, Utah. Asserting that the US Supreme Court had determined that CO₂ was an “air pollutant” within the meaning of the Clean Air Act in Massachusetts v. EPA, the Sierra Club argued that the power plant permit violated the requirement to include a BACT emissions limit for “each pollutant subject to regulation under the Clean Air Act.” In a dense decision, the EAB determined that Region 8 was not bound by prior agency interpretations of PSD regulations, and on that basis remanded the permit so that Region 8 could develop a record for the decision to not apply BACT requirements to CO₂ emissions. The EAB suggested, however, that it would be best if the EPA provided overarching guidance, rather than require each PSD permitting authority to consider anew the question whether greenhouse gas emissions required regulation in the context of discrete PSD applications.

In response to Deseret, a month before President Obama’s inauguration, the EPA issued a memorandum entitled “Interpretation of Regulations that Determine Pollutants Covered by Federal Prevention of Significant Deterioration (PSD) Permit Program” (the “PSD Memo”). In the PSD Memo, the outgoing Administrator of the EPA determined that air pollutants, like CO₂, that had only been subject to monitoring and reporting requirements should not be considered in the PSD program. Moreover, although noting the substantial public interest in global climate issues, by framing the PSD Memo as an “interpretation,” the Administrator avoided the public participation process that rulemaking requires.

The environmental community promptly sought reconsideration of the PSD Memo and, shortly after President Obama’s inauguration, the EPA’s new Administrator granted reconsideration and opened the issue to public comment. At the same time, however, the EPA “decline[d] to take action to stay the effectiveness of the [PSD Memo] at this time.” In doing so, Lisa Jackson, the Obama administration’s new head of EPA, emphasized that the PSD Memo did not bind any state permitting authorities that issue permits under State Implementation Plans and that, in light of the grant of reconsideration, “other PSD permitting authorities should not assume that the [PSD Memo] is the final word on the appropriate interpretation of Clean Air Act requirements.”

Two subsequent events are worth noting: On April 17, 2009, the EPA released for public comment the Proposed Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act, in which it proposed finding that greenhouse gases are air pollutants subject to regulation under the provisions that govern motor vehicle emissions. The EPA emphasized, however, that its endangerment finding proposal, “as well as any final action in the future, would not itself impose any requirements on industry or other entities. An endangerment finding under one provision of the Clean Air Act would not by itself automatically trigger regulation under the entire Act.” In other words, simply because the EPA intends to regulate vehicle emissions of greenhouse gases does not mean that stationary source emissions of greenhouse gases will be regulated under the Clean Air Act. Nevertheless, several weeks later the EPA voluntarily asked the EAB to remand a permit for the Desert Rock Energy Facility in New Mexico so that it could apply BACT to greenhouse gas emissions.

Against this rather complicated background, Calpine’s decision to voluntarily agree to limit greenhouse gas emissions makes sense, as it had already decided to employ the most energy efficient, commercially available generating technology that would meet the power generating needs of the project. Doing so, however, is apparently unprecedented: According to BAAQMD, “no facility the Air District is aware of has ever been subject to an enforceable BACT limit on its emissions of greenhouse gases; nor has any facility, to the Air District’s knowledge, been subject to an enforceable limitation on its efficiency (heat rate per kW-hr of power output).”

One might expect such environmental gains to moderate the opposition of the environmental community. Not so: Opposition to the proposed Russell City Energy Center remains undeterred. According to Brian Bateman, BAAQMD’s Director of Engineering, the Air District expects the final permit will be appealed to the EAB. For environmentalists, one major remaining concern is the level of NOX emissions. Even if an EAB appeal failed to remand a final permit for NOX emissions limits, the delay could be enough to ensure that pending legislation – which in its present form requires major stationary sources of NOX to obtain offsets – would apply. In such an uncertain regulatory and economic climate, the one certainty that seems to exist is opposition to new power plants.

California had first asked for a waiver to impose its own, more stringent limits on greenhouse gas emissions in December 2005. The EPA at that time took the position that it did not have the authority to regulate those emissions under the terms of the Clean Air Act. That argument was rejected by the Supreme Court in 2007 in the case of Massachuetts v EPA, in which the Supreme Court ruled that EPA has the authority to regulate GHGs under the Clean Air Act if they cause or contribute to air pollution that may reasonably be anticipated to endanger public health or welfare. In that case, twelve states and several cities had brought suit against the EPA to force the agency to regulate carbon dioxide and other greenhouse gases as "pollutants" under the Clean Air Act. EPA had taken the position that it did not have the authority to regulate carbon dioxide and green house gases under the CAA because they were not "pollutants" pursuant to the terms of the Act. The Supreme Court disagreed, and required EPA to evaluate whether greenhouse gas emissions from cars – as "pollutants" under the Act – should be regulated.

After the Supreme Court's ruling, EPA reconsidered the issue and again refused to regulate carbon dioxide and greenhouse gas emissions. It also denied at that time California's petition for a waiver to set its own tailpipe emission standards.

In May 2009, the Obama Administration announced new national auto emissions standards that will require automakers to boost the average fuel efficiency of cars sold in the US from their current level of 25.1 miles per gallon to 35.5 miles per gallon starting in 2012. California's new auto emission standards, which are effective immediately, will apply for car models for the years 2009 to 2011. Subsequently, from 2012 to 2016, all carmakers that comply with the new national program will be considered to be in compliance with California's requirements. After 2016, California may again be able to set more stringent limits than the national limits existing at that time.

In April 2007, the Supreme Court concluded in Massachusetts v. EPA that EPA has the authority to regulate GHGs under the Clean Air Act if they cause or contribute to air pollution that may reasonably be anticipated to endanger public health or welfare. According to a representative of the US Chamber of Commerce, regulation of CO2 would enlarge the regulated community from about 15,000 entities to 1.5 million entities.

The internal EPA document suggests that EPA Administrator Lisa Jackson will sign the proposal on April 16, which will be followed by a 60-day public comment period and two public hearings.

The Supreme Court opened the door to such regulation with its 2007 ruling in Massachusetts v. EPA. In that decision, the Court held that the Clean Air Act could be used to limit carbon dioxide and other greenhouse gas emissions. The Court noted that any refusal by the EPA to regulate greenhouse gases had to be based on science and a “reasoned justification.”

The Bush administration ignored the opinion, insisting the Clean Air Act was not the proper mechanism for addressing global warming. In announcing the EPA’s intent to make findings on greenhouse gases, Jackson dismissed the stance of the Bush-era EPA as a “deafening silence,” and stated that the American people deserve an opinion on the dangers of greenhouse gases.

In making findings the EPA could improve the United States’ international standing on climate change issues. With negotiations on a global treaty set for December 2009 in Copenhagen, the United States faces increasing pressure to take decisive action on global warming.
 

CBD filed its 2007 petition with the Administrator of the US EPA and the Secretaries for the US Departments of the Interior, Commerce, Agriculture, Transportation, Energy and Defense. In the petition, CBD noted that “Human-induced global warming is already playing a significant role in habitat loss and the spread of invasive species and has contributed to the extinction of numerous species.” To address this issue, the CBD-recommended modifications would broadly require, in part, that federal agencies:

1. include global climate change analysis in all federal decision-making which could potentially affect endangered species recovery;
2. enhance data support for recovery plans and specify all data gaps inhibiting recovery plan completion and adoption;
3. adhere to a three-year time frame for recovery plan adoption following endangered species listings;
4. adopt all backlogged recovery plans within ten years; and
5. adopt a schedule for listing all species warranting Endangered Species Act protection.

CBD cited Massachusetts v. EPA in arguing that the US Supreme Court “recognized the urgent threat to human well-being and the environment as a result of climate change, and permitted advocacy groups to petition and sue federal agencies that do not dispense of their statutory duties as they relate to global warming.” CBD seeks, in part, a court order requiring the federal agencies to, within sixty days, either identify a time frame within which they would have to substantively respond to the petition or issue a denial.

The CBD complaint appears novel in at least one respect – it is “outcome-neutral.” CBD neither argues that the federal agencies’ collective failure to respond was a constructive denial nor that a denial of the petition would be unlawful. CBD’s omission of the Energy Department (the only agency which actually denied the petition) from the list of defendants demonstrates this outcome-neutral approach. In light of the complaint’s structure and relief requested, the lawsuit would end after the federal agencies respond, regardless of whether the agencies granted or denied the CBD Petition.

CBD’s outcome-neutral complaint is at least partially attributable to the prospect of Obama administration modifications to federal climate change policy. The CBD press release that accompanied the complaint contained the following statement:

We filed the [Petition] in 2007 to jump-start the reinvention of federal conservation policy. The Bush administration ignored the petition. With this lawsuit, we provide the Obama administration with a legal platform to develop integrated, government-wide policies to speed the recovery of endangered species and limit the impact of global warming. We look forward to working with the new administration to resolve the suit and begin the hard work of turning the ship of state … around after eight years of stalling.

An unnamed CBD attorney also stated to Inside EPA (“Activists May Defer Suits in Favor of Climate Talks with Obama EPA,” Vol. 30, No. 3, Jan. 23, 2009) that the lawsuit “allows us to formally ‘queue up’ and make sure, legally, that global warming impacts … are not forgotten or swept under the rug with the new administration.”

The Presidential Memorandum regarding the California Waiver Request directed the new Administrator of EPA to assess whether EPA properly denied a waiver of federal preemption for California’s motor vehicle standards concerning greenhouse gas emissions. The Memorandum notes that “For decades, the EPA has granted the State of California such waivers.” The Memorandum directed the EPA Administrator to “assess whether the EPA's decision to deny a waiver based on California's application was appropriate in light of the Clean Air Act” and, “based on that assessment,” to “initiate any appropriate action.” The Memorandum comes on the heels of a January 21, 2009, letter from Mary Nichols, Chair of the California Air Resources Board (CARB), asking EPA to reconsider the denial of CARB’s waiver request.

Professor Heinzerling’s commentary encouraged the EPA to reverse course on the California waiver and return to its “decades-long policy, supported by explicit statutory language, of looking at California’s standards ‘in the aggregate’ when deciding whether the conditions for a waiver are met.”

Professor Heinzerling also offered a roadmap for administrative u-turns, noting that “an agency proposing a change in policy must explain its decision and draw a rational connection between the facts it has found and the decision it has made.” The Presidential Memorandum concerning EISA, in which the President encouraged the Administrator of NHTSA to speed the development of higher fuel economy standards, appears designed to develop support for a change of course. The Memorandum states:

(a) in order to comply with the EISA requirement that fuel economy increases begin with model year 2011, you take all measures consistent with law, and in coordination with the Environmental Protection Agency, to publish in the Federal Register by March 30, 2009, a final rule prescribing increased fuel economy for model year 2011;

(b) before promulgating a final rule concerning model years after model year 2011, you consider the appropriate legal factors under the EISA, the comments filed in response to the Notice of Proposed Rulemaking, the relevant technological and scientific considerations, and to the extent feasible, the forthcoming report by the National Academy of Sciences mandated under section 107 of EISA; and

(c) in adopting the final rules in paragraphs (a) and (b) above, you consider whether any provisions regarding preemption are consistent with the EISA, the Supreme Court's decision in Massachusetts v. EPA and other relevant provisions of law and the policies underlying them.

In deciding whether this a case of a prescient professor, or simply an administration that shares a similar focus on climate and the administrative path to new climate policies, consider that Professor Heinzerling doesn’t just write commentaries for a living. She was the lead author of Massachusetts’ and other petitioners’ winning briefs in Massachusetts v. EPA, in which the Supreme Court recognized that the Clean Air Act gives EPA the authority to regulate greenhouse gases.