Environmental Update

Environmental Update - February 2003 | Norton Rose Fulbright

February 01, 2003

By Roy Belden

Clean Air Act Revisions

The Bush administration found a key ally in Congress for its “clear skies initiative.” Senator James Inhofe (R.-Oklahoma), the new chairman of the Senate environment committee, said in early February that he will work to enact the clear skies plan.  The plan is the top environmental priority for the Bush administration this year.  The legislative language is expected to be introduced soon in Congress by Inhofe and others.

The clear skies initiative calls for substantial reductions in nitrogen oxides, or “NOx,” sulfur dioxide, or “SO2,” and mercury emissions from power plants in a two-phase process with specific reduction targets set for years 2010 and 2018.  The proposal does not cover carbon dioxide, or “CO2,” emissions.  The president’s proposal would create a mandatory “cap and trade” emission allocation program similar to the federal acid rain program for the three pollutants.  As a quid pro quo for having to meet new stringent emission reductions targets, the initiative would exempt power plants from having to comply with certain existing Clean Air Act programs that would be duplicative of the new legislation, such as the “new source review” permitting program and certain air toxics standards.

While the Republicans now control both houses of Congress, it is far from certain that Bush will be able to get the clear skies plan through Congress.  He faces possible problems in the Senate.  Republicans enjoy only a 51-49 vote majority.  The Democrats have already gone on the offensive against the clear skies plan.  The administration cannot afford to lose any Republican votes.

Global Warming

Three different high-profile bills were introduced in the US Senate in January to curb greenhouse gas emissions.  The Bush administration remains opposed to mandatory greenhouse gas emission caps and favors only voluntary reductions.

It seems unlikely that the Republican leaders in Congress will let the greenhouse gas bills on the agenda.  However, the issue may force itself onto center stage if several Democratic senators who are running for president make it an issue in the primary elections.

Two well-known senators — John McCain (R.-Arizona) and Joseph Lieberman (D.-Connecticut) — introduced a bill that would require reductions in greenhouse gases from four major sectors of the US economy — the electricity generation, transportation, industrial, and commercial sectors.  These sectors cover approximately 85% of the greenhouse gas emissions in the United States.  Their bill would create a greenhouse gas emission allowance system tied to mandatory reduction targets starting in 2010, with a second target commencing in 2016.  By 2010, the greenhouse gases in the affected sectors would have to match the year 2000 levels of all greenhouse gas emissions in the US.  The 2016 target would be set lower — at the 1990 US levels.  The bill specifically excludes the agricultural and residential sectors.

The McCain-Lieberman bill would also establish a national greenhouse gas database that would have in it a registry to record greenhouse gas emissions by company and track greenhouse gas emission trades.  An allowance-trading program would be created, and the US Commerce Department would be responsible for allocating allowances to existing sources and determining the amount of allowances that would be auctioned.  Under the bill, up to 15% of a company’s emission reduction requirements may be meet by obtaining allowances from another nation’s greenhouse gas market, carbon sequestration credits (like reforestation to create “carbon sinks”), or US allowances from a non-covered company.  Failure to meet a company’s emission limits would potentially result in fines of up to three times the market value of the greenhouse gas tonnage shortfall.

Another Senate bill also calls for creation of a national greenhouse gas emissions inventory and registry.  The bill — introduced James Jeffords (I.-Vermont) and Tom Daschle (D.-South Dakota) — would require greenhouse gas emitters to submit reports to the inventory, and they would have the option of also reporting emission reductions and emission trades with other companies.  The bill would also require the federal government — not private sector companies — to reduce its greenhouse gas emissions to 1990 levels by 2013 and develop a plan to reduce the federal government’s net greenhouse gas emissions to zero by 2025.

Finally, Jon Corzine (D.-New Jersey) reintroduced his proposal from the last Congress to create a mandatory greenhouse gas emissions inventory and registry of emission reductions.

None of the bills can make it to the Senate floor without going through the Senate environment committee.  James Inhofe (R.-Oklahoma), a Bush ally, controls that committee.

NSR Challenge

The new US Environmental Protection Agency rules for the “new source review” air permitting program sparked controversy both in Congress and in the courts, as Senate Democrats tried unsuccessfully to delay implementation and states and municipalities raced to file lawsuits to challenge them. (See related article.)

A proposal to delay implementation was defeated on January 22 in the Senate by a vote of 50 to 46.  The proposal — offered by Senator John Edwards (D.-North Carolina) as an amendment to a omnibus appropriations bill — would have delayed the effective date of the new rules from March 3, 2003 to September 15, 2003 to allow time for the National Academy of Sciences to prepare a report analyzing their effect.  Edwards is running for president.  Five Republican senators from the New England states and Senator John McCain (R.-Arizona) voted for the amendment.  Five southern Democrats voted against it.

The Senate adopted a compromise proposed by Senator James Inhofe (R.-Oklahoma).  It calls for a National Academy of Sciences study of the rules, but does not delay the implementation schedule.  Senator Edwards vowed to press on in his efforts to delay or kill the new NSR rules.  He may try to amend other bills that are moving through the Senate.

In addition to the flurry of legislative activity, nine northeastern and mid-Atlantic states filed a lawsuit challenging the new NSR rules on the last day of December.  Several environmental groups and other state and local entities are also expected to file their own lawsuits.  Under the Clean Air Act, petitions to review a final agency rule must be filed with the US appeals court in Washington, DC within sixty days after publication of the final rule in the Federal Register.  The new NSR rules were published in the Federal Register on December 31.  Twelve Connecticut municipalities announced on January 16 that they would join the lawsuit filed by the northeastern and mid-Atlantic states.  The South Coast Air Quality Management District in southern California also recently announced that it would file its own lawsuit.  All the lawsuits will probably be consolidated by the courts.  A decision on the merits is not expected until 2004.

Air Toxics

EPA recently released proposals for three new air toxic rules that may affect electric generating facilities and other industrial pollution sources using industrial boilers or reciprocating internal combustion engines.

These proposed rules will set new maximum achievable control technology, or “MACT,” standards for stationary combustion turbines, industrial boilers, and reciprocating internal combustion engines.  The standards will apply only at major sources of hazardous air pollutants, or “HAPs.” A source is a major HAP source if it has the potential to emit 10 tons or more of any one HAP or 25 tons or more of any combination of HAPs.  The Clean Air Act has a list of 188 HAPs.

Under the Clean Air Act, the HAP emissions from all equipment at a plant are evaluated — not just the emissions from a particular piece of equipment — to determine whether the facility as a whole is a major source.  For example, a plant may include utility boilers and stationary combustion turbines, and the HAP emissions from the boilers may make the entire plant a major source.  In this scenario, even though the HAP emissions from the combustion turbines might be relatively minor, the plant would still potentially be subject to the stationary combustion turbine MACT standards.

EPA believes that its proposed MACT standards for stationary combustion turbines will affect about 160 existing sources and 155 new sources.  The proposed standards are in the Federal Register for January 14.  They focus on reductions of acetaldehyde, benzene, formaldehyde and toluene.  Under the proposed rule, affected sources may install carbon monoxide catalytic oxidation systems or reduce formaldehyde emissions to 43 parts per billion.  By reducing formaldehyde, EPA expects that other HAP emissions will be reduced to similar levels.  Comments on the proposed rule are due by February 13.

EPA’s proposed MACT standards for industrial boilers are expected to affect more than 58,000 industrial sources and potentially impose significant capital costs.  The proposed rule calls for significant reductions in emissions of arsenic, cadmium, chromium, hydrogen chloride, lead, and other heavy metals.  EPA believes that emission controls will be required at approximately 2,800 large industrial boilers generating more than 100 mmBTUs of energy and using solid fuels such as coal or wood.  These sources will probably have to install scrubbers or fabric filters to remove heavy metals.  The remaining affected sources will probably face new monitoring and reporting obligations under the rule.  Comments on the proposed industrial boiler MACT standard are due by March 14.

The industrial boiler MACT standard has generated a fair amount of controversy, and the proposed rule will affect a substantially larger group of sources than the MACT standard for stationary combustion turbines.  As a result, EPA is giving the regulated community 60 days to submit comments instead of the more customary 30 day comment period.

The proposed MACT standard for reciprocating internal combustion engines was published in the Federal Register on December 19.  The standards will apply to combustion units above 500 horsepower that are located at major HAP sources.  Approximately 37,000 reciprocating internal combustion engines are in use at power plants and other industrial facilities, and EPA believes that approximately 10,000 new and exiting engines will be affected by the proposed rule.  The rule is intended to reduce emissions of acetaldehyde, acrolein, formaldehyde and methanol.  Under the proposal, spark ignition four-stroke engines would be required to install non-selective catalytic reduction systems or reduce formaldehyde emissions to 350 parts per billion.  New two-stroke and four-stroke engines would be required to install catalytic oxidation systems.  EPA is accepting comments on the reciprocating internal combustion engines proposed rule until February 18.

Water Quality Trading

The US government wants states, multistate agencies and Indian tribes to consider implementing water quality trading programs.

The Environmental Protection Agency announced a new policy for voluntary programs to facilitate the trading of credits that would be generated by installing treatment technologies or implementing other mechanisms to “over control” so that discharges of nutrients, sediments, and other pollutant discharges into a water body are reduced below required levels.  The pollutant trading concept is based on previously successful air emission trading programs such as the federal acid rain program.  Connecticut also implemented a successful nitrogen trading program among publicly-owned treatment works discharging into Long Island Sound.  The Long Island Sound program achieved required nitrogen reduction levels while saving more than $200 million in control costs.

Acceptable state and tribal programs will need to comply with the applicable Clean Water Act requirements, and the baseline for establishing tradeable water quality credits will be derived from the water quality standards that apply to the particular water body.  The trading provisions may be implemented in individual wastewater discharge permits, watershed plans, or other water quality management programs.  The trading of water quality credits is relatively untested, but it is based on the principle of providing incentives to entities that can achieve wastewater pollutant reductions most efficiently and cost-effectively.

Brief Updates

Canada and Poland became the latest countries to ratify the Kyoto protocol.  Canada, which ratified on December 16, emits approximately 3.3%, and Poland, which ratified on December 13, emits approximately 3.0% of the carbon dioxide emissions released by industrial countries.  The Kyoto protocol will enter into effect after it is ratified by 55 or more countries whose emissions represent at least 55% of the carbon dioxide emissions from so-called “Annex I” developed countries in 1990.  Canada was the 100th country to ratify the Kyoto protocol, and the total emissions represented now stands at 43.7%.  Russia — with 17.4% of the carbon dioxide emissions — is the key country that must still ratify in order for the Kyoto protocol to take effect.  The Russian government has indicated that it expects to ratify the Kyoto protocol sometime in 2003.  Once in effect, the Kyoto protocol will require the Annex I countries to achieve approximately a 5.2% reduction in greenhouse gas emissions during the first commitment period — 2008 to 2012 — compared to 1990 emission levels.

On January 16, 13 major corporations and Chicago announced the creation of the Chicago Climate Exchange market to which the members have each committed to reduce their greenhouse gas emissions by 4% by 2006 from baseline emission levels set during 1998 to 2001.  The initial exchange members include DuPont, American Electric Power, Motorola, Ford Motor Company and the International Paper Company.  Members may buy and sell verifiable reductions in greenhouse gases, and the exchange is expected to impose sanctions against members that do not meet the 4% reduction commitment.

Five large US utilities are facing shareholder resolutions seeking the disclosure of information on financial and environmental risks that may result from the failure to take action to reduce greenhouse gas emissions.  The Connecticut state pension fund and two corporate responsibility organizations have filed the shareholder resolutions with American Electric Power, Cinergy, Southern Company, Xcel and TXU Energy.

Senator Tom Daschle (D.-South Dakota) and several other Senate Democrats have introduced a bill that would require certain industrial plants to implement enhanced security measures, including the preparation of vulnerability assessments and response plans.  The provision is similar to the chemical security measure that was introduced by Senator Jon Corzine (D.-New Jersey) and defeated in the last Congress.  Senator Corzine’s bill would potentially affect about 15,000 facilities.

EPA announced on December 20 that it will withdraw the Clinton-era water quality rule that revised the total maximum daily loads, or “TMDL,” program.  The program limits the amount of pollutants that can be discharged into rivers, lakes, streams, and other water bodies.  The Clinton TMDL rule was strongly criticized by agricultural interests, states and environmental groups, and Congress voted to bar implementation.  In response, EPA undertook an 18-month review of the rule and must withdraw the rule by April 2003 or else the rule will take effect.  EPA is currently working on an alternative “watershed rule” that would address the amount of total pollutant discharges into US water bodies.

— contributed by Roy Belden, in New York.