By Roy Belden

Global Warming

The attorneys general from eight states and New York City filed suit in a federal district court in New York in July against five power companies alleging that their power plants emit large quantities of carbon dioxide, or CO2, that contributes to global warming.The lawsuit names American Electric Power Company, Inc., Southern Company, the Tennessee Valley Authority, Xcel Energy Inc., and Cinergy Corporation as  defendants.The suit is a new twist in the efforts by states to force companies to reduce greenhouse gas emissions in the absence of mandatory, nationwide requirements. 

California, Connecticut, Iowa, New Jersey, New York, Rhode Island, Vermont and Wisconsin joined in filing the lawsuit, and two environmental groups — the Audubon Society of New Hampshire and New York-based Open Space Institute — filed a similar lawsuit in the same court in July. The lawsuits may be consolidated. A decision on the merits of the case is not expected until 2005.

The states and environmental groups argue that the companies are the five largest stationary-source CO2
emitters in the US accounting for about 650 million tons of CO2.They charge this amounts to about 25% of the US power sector’s CO2 emissions and approximately 10% of all CO2 emissions from human activities in the US.The companies own or operate 174 fossil-fuel fired power plants in 20 states. 

The case is based on a legal theory that has not seen much use in an environmental context over the past 30 years. Prior to the 1970s, a number of common law public nuisance suits were filed to address alleged environmental harms, but as more comprehensive environmental statutes were enacted by Congress, some courts recognized that these statutes created a new regulatory regime that superseded the use of the public nuisance doctrine to address the same type of environmental harms. In general, a public
nuisance allegation claims an unreasonable interference with a right common to the general public.

The states are not seeking monetary damages, but have asked instead for an injunction that would require the power companies to cap their CO2 emissions immediately and then reduce them by a specified percentage each year over the next 10 years. According to trade press reports, the they want a reduction of 3% a year.

The suit faces some significant hurdles. The states will have to demonstrate that the emissions of the particular companies were more than a minor contributing cause of the alleged environmental harm. The court might be reluctant to hold individual companies accountable for a problem that is global in scope. CO2 emissions from a power plant in China would have the same impact on global warming as CO2 emitted from a power plant in the US. The court will also have to address whether the Clean Air Act preempts a public nuisance lawsuit against the five companies. The US Environmental Protection Agency has concluded that it has no authority from Congress to force reductions in CO2 emissions, although the monitoring of CO2 emissions from certain power plants is required under an acid rain program.

In related news, 12 states and 14 environmental groups are arguing in a US appeals court in Washington that the Environmental Protection Agency should set motor vehicle emission standards for CO2 and other greenhouse gases. EPA has refused. The states and environmental groups argue that CO2 and other greenhouse gases, including methane, nitrous oxide, and hydrofluorocarbons, emitted by motor 
vehicles qualify as “air pollutants” that may adversely affect “public heath or welfare” under the Clean Air Act. EPA has decided that it lacks authority to address climate change problems under the Clean Air Act and that CO2 is not an “air pollutant” under the Act. Ten states and several industry groups have intervened on the side of EPA. A decision in this case is expected later this year or early next year.

New Source Review 

In response to petitions from several states and environmental groups, the Environmental Protection Agency is reconsidering what types of “routine maintenance, repair, and replacement” of equipment can be done at existing power plants and other major emission sources without having to get a new air permit. The agency issued regulations addressing this issue in October 2003. 

The EPA regulations are being challenged in court by 14 states and 29 local jurisdictions, including California, New York, Illinois, Washington, DC and most of the northeastern and mid-Atlantic states. A number of environmental and public interest groups have also filed suits. The rule was put on hold indefinitely by a US appeals court in Washington last December two days before the rule was scheduled to take effect. Enforcement has been suspended until the court makes a decision later this year or early next year on the merits. 

In the meantime, EPA has set a 60-day period for public comment as it reconsiders the rules. The comment period closes on August 30, 2004. 

The agency is reconsidering three aspects of the rule. They are the legal basis for the rule, the basis for selecting the 20% cost threshold for determining that the equipment replacement is automatically considered routine, and the procedure for incorporating the rule into state regulations where a state implements the federal rule and has not otherwise adopted its own EPA-approved version of the rule.

EPA had hoped the rule it adopted last year would head off further controversy on the scope of an existing “routine maintenance, repair, and replacement” exemption under its new source review air permit program. Under this exemption, a power plant or other industrial facility does not need to apply for an air permit modification if it is replacing equipment at the plant in the course of “routine maintenance, repair or replacement.” If the replacement does not fit within this definition, then a modified air permit is usually required. Opponents of the definition for routine maintenance that EPA adopted last year charge that the
new definition is a radical departure from 25 years of prior agency and judicial interpretations and the agency lacks authority under the Clean Air Act to make the change. 

In related news, the National Academy of Sciences is working on a report for release next year on the effects that the EPA new source review rule changes in this area will have on air pollution nationwide. Congress directed it to prepare such a report. The report will address not only the change in what is considered routine equipment replacement, but also the effects of a December 2002 rule that revised the way industrial facilities calculate emission increases under the new source review program. Jeffrey 
Holmstead, EPA assistant administrator for air, appeared before the academy at the end of May to give the government’s view.

Indiana is on track to be the first state to adopt its own version of the December 2002 new source review rule changes. The Indiana version of the rule is expected to be approved by the governor later this year. EPA will also need to approve the Indiana rule as part of the state’s implementation plan for regulating air emissions. One environmental group has already indicated that it may challenge Indiana’s new source review rule changes in court. 

Cooling Water

A group of six northeastern states and a coalition of 15 environmental groups is challenging another EPA rule that imposes new requirements on cooling water intake structures for large existing power plants. The  regulations were published in the Federal Register on July 9 and will become effective on September 7, 2004.

Section 316(b) of the Clean Water Act requires EPA to determine the “best technology available” to protect
aquatic organisms from being pinned against water intake screens or drawn into cooling water systems. Plants that withdraw 50 million gallons or more of water a day from rivers, streams, lakes, oceans or other waters of the US and that use at least 25% of the water for cooling purposes are potentially affected by the new requirements. 

The attorneys general of Connecticut, Delaware, Massachusetts, New Jersey, New York and Rhode Island
have asked a US appeals court in New England for a “stay” against enforcement. Environmental groups are seeking the same relief from a US appeals court in New York. The northeastern states and the environmental groups claim that the rule does not adequately protect the fish population because it fails to require use of the best technology available regardless of cost. The states wants closed-cycle cooling systems — such as dry cooling towers that use minimal water — to be used as the “best technology available.” In a similar case involving a section 316(b) rule for new facilities, the US appeals court in New York rejected arguments from environmental groups that the Clean Water Act requires use of closed-cooling systems.

The environmental groups also assert that the rule improperly allows power plants to use voluntary restoration measures, such as restocking fish and creating habitat, as a means to comply with the performance standards in the rule. The US appeals court in New York struck down a similar provision in the section 316(b) rule for new facilities, concluding that the provision was inconsistent with the Clean Water Act. EPA estimates that more than 550 existing power plants are subject to the rule and many plants will have to make significant upgrades to existing cooling water intake systems, particularly plants that draw water from water bodies with sensitive aquatic habitats and species.

Particulate Matter

EPA has identified all or part of 243 counties in 22 states that fail to meet the fine particulate matter, or PM2.5, national ambient air quality standard. This is almost double the number of counties that had been expected. EPA issued the new PM2.5 standard in July 1997, and the agency anticipates that it will issue final PM2.5 nonattainment area designations by November 2004.

Particulate matter consists of particles found in the air, including dust, dirt, soot, smoke and liquid droplets. Fine particulates are believed to pose the greatest health risk because of their ability to lodge deeply in the lungs due to their small size (less than one-seventh the average width of a human hair).

Once the PM2.5 nonattainment areas are finalized, states will have three years, until February 2008, to propose rules designed to achieve reductions in fine particulates. States with PM2.5 nonattainment areas will have until February 2010 to comply, with the possibility of an extension to as late as 2015. EPA is also in the process of developing a menu of “options” from which states can choose for achieving PM2.5 emission reductions. In addition to specific emission standards, EPA is expected to encourage states to
consider emissions trading and pollution fees as other mechanisms for achieving needed reductions.
Many of these new PM2.5 nonattainment areas will face significant PM2.5 emission reduction requirements for the first time. States may require existing power plants and industrial facilities to upgrade or install additional pollution control technology to reduce fine particulate emissions.

Ozone

Newly-issued EPA air regulations are once again under fire in the courts. In late June, six northeastern states and the District of Columbia sued to stop enforcement of new rules adopted in April to implement an 8-hour ozone national ambient air quality standard and to designate ozone nonattainment areas. Several environmental groups filed similar lawsuits challenging the two rules. The suits are in the US
appeals court in Washington. 

EPA issued the new 8-hour ozone standard in 1997, but implementation of the rule has been delayed by protracted legal challenges.The new 8-hour standard is 0.08 parts per million averaged over an 8-hour period.The old standard was 0.12 parts per million averaged over one hour.The first EPA rule addresses implementation of the 8-hour standard and identifies various classifications of ozone nonattainment 
areas based on the severity of the ozone pollution. Areas meeting the old 1-hour ozone standard, but not the new 8-hour standard, are classified as “basic” nonattainment areas, and states have a greater degree of flexibility in determining the reduction measures that will apply in those areas.The second rule identifies all or part of 474 counties in 32 states that currently fail to meet the 8-hour ozone standard. 

Ozone, or ground-level smog, is caused by the chemical reaction of NOx and volatile organic compounds, or VOCs, in the presence of sunlight. 

The northeastern states and environmental groups claim that EPA’s new 8-hour ozone rules are too weak and fail to comport with a US Supreme Court decision in 1997. Ohio has also filed a separate challenge to the EPA rule. It wants more flexibility in how the 8-hour ozone standard is carried out. Even though the 8-hour designation rule added 253 new counties into EPA’s ozone nonattainment regulatory regime, the northeastern states and environmental groups charge that the rule allows several areas to be reclassified to less stringent ozone classifications. The Washington, DC area, for example, will now be classified as a “moderate” area under the new standard compared to being classified as a “severe” area under the old 1-hour standard. The emission reduction requirements necessary to comply in a moderate nonattainment area are typically not as stringent as those in a severe nonattainment area.

EPA anticipates that its rule will go into effect over the period 2007 to 2021, thereby giving states that have not yet met the 1-hour standard in certain ozone nonattainment areas some more time to achieve compliance. It is unclear whether the court challenge will delay enforcement. The new requirements for 8-hour nonattainment areas may require existing power plants and industrial facilities to install or upgrade pollution control equipment in order to achieve required NOx and VOC emission reductions. 

The cases filed by the northeastern states, Ohio and the environmental groups are expected to be consolidated. A decision is not expected until 2005.

Brief Updates

Massachusetts is requiring the four coalfired plants in the state to reduce mercury emissions in two stages.The plants must achieve an 85% reduction in mercury emissions by January 1, 2008,
and a 95% reduction by October 1, 2012. 

In June, EPA published a final rule establishing air toxics standards for existing and new stationary reciprocating internal combustion engines. The rule takes effect in mid-August and requires reductions in either carbon monoxide or formaldehyde as surrogates for reducing air toxics. Approximately 1,800 existing engines used at power plants, pipeline compressor stations, and chemical and other manufacturing facilities will be subject to the new rule.

In late May, a New York state trial court held that the New York State Department of Environmental
Conservation failed to comply with procedural requirements when it adopted regulations requiring significant reductions in NOx and SO2 emissions from in-state power plants. New York is appealing the decision. The regulations impose a market-based trading program that will require SO2 emissions to be reduced by 50% below current federal standards. Under the new rules, the current ozone season NOx reduction requirements will also be imposed year round. The SO2 regulations were scheduled to take effect on January 1, 2005, and the NOx reduction were to take effect on October 1, 2004.

The timing of the implementation schedule is now in flux. A decision by the Federal Energy Regulatory Commission concluding that a power purchase agreement between a qualifying facility, or “QF,” and a utility will not convey to the utility any renewable energy certificates or RECs unless the contract specifically says so was appealed to a US appeals court in Washington in June. At issue in Xcel
Energy Services Inc. v. FERC is whether utilities that buy electricity from QF plants also buy the RECs or whether they have to contract separately for them. A decision is expected next year. 

The US Export-Import Bank revised its “environmental procedures and guidelines” on July 1, 2004 to make them conform to principles adopted by the Organization for Economic Cooperation and Development.The Export-Import Bank uses the guidelines in an effort to weigh the environmental consequences
of projects it is helping finance.The revised guidelines call for projects to be evaluated against host country laws and international environmental guidelines, including the World Bank standards and environmental standards of regional development banks, such as the Asian Development Bank and Inter-American
Development Bank. 

The member states of the Ozone Transport Commission, which consists of the northeastern and mid-Atlantic states, agreed in June to impose a regional cap on NOx, SO2 and mercury emissions from power plants that would be between a third and two-thirds lower than the limits the federal government is proposing.The commission is working in a memorandum of understanding that will cap NOx at 1.28 million tons a year, SO2 at 2 million tons, and mercury at 10 tons from power plants in the OTC states by 2012.The mercury cap would be reduced to 5 tons in 2015.