Power plants in 28 US states, mostly east of the Mississippi River, received a reprieve in late August from a US appeals court.

The court struck down a federal cross-state air pollution rule also known as CSAPR that would have required certain power plants to reduce sulfur dioxide and nitrogen oxide emissions. The US  Environmental Protection Agency estimated that CSAPR would have helped reduce SO2 emissions by 73% and NOx emissions by 54% percent by 2014 as compared to 2005 emissions.

The court ordered the government to continue administering a clean air interstate rule in the meantime that, according to government estimates, would reduce SO2 emissions by 57% and NOx emissions by 61% below 2003 emissions. The clean air interstate rule has been on the books since 2005, but in December 2008, a court found fault with it as well and sent it back to EPA with instructions for the agency to find a replacement. CSAPR was to be the replacement.

EPA has 45 days to seek a rehearing in the US appeals court or appeal to the US Supreme Court. An appeal to the US appeals court would not be surprising given the scathing dissenting opinion written by one of the three US appeals court judges who heard the case. The court struck down CSAPR on a 2-1 vote.

CSAPR was an attempt by the federal government to address complaints by eastern states that are downwind from large power plants in the coal belt in the Midwest. It set emissions caps that would have required reductions in SO2 and NOx emissions from existing power plants in 28 states, mostly east of the Mississippi River, but as far west as Texas. CSAPR was originally scheduled to take effect January 1, 2012, but was delayed by the court pending resolution of the legal challenges. In the meantime, a predecessor rule, the clean air interstate rule, remained in effect. 

Prior to the court ruling, EPA expressed confidence that CSAPR would be upheld; however, the court found that the agency exceeded its statutory authority and held that the rule might have  required some states to reduce emissions by more than their significant contribution to downwind states’ nonattainment with national ambient air quality standards and that EPA impermissibly issued federal plans to implement the rule without allowing states the opportunity first to issue state plans to implement the rule. 

The court ordered EPA to continue administering the prior clean air interstate rule until EPA provides a replacement, which could take years. 

In the meantime, there may be ramifications to already-approved state implementation plans and other EPA rules that assumed they were building on pollutant reductions anticipated under CSAPR. This will take a while to sort out, but will need to be monitored. 

Greenhouse Gases

The same US appeals court upheld a number of Environmental Protection Agency rules in late June for limiting the emission of six greenhouse gases from vehicles and stationary sources like power plants. 

In a broad, but not entirely unexpected win for EPA, the court held that the agency’s finding that greenhouse gases endanger public health and welfare and its regulation of greenhouse gases emitted from cars and light trucks are neither arbitrary nor capricious. The court then upheld various long-standing EPA interpretations of the Clean Air Act that require power plants and other stationary sources of greenhouse gases to obtain permits. Finally, the court rejected challenges to the EPA regulations that narrow application of greenhouse gas permit obligations based on the petitioners’ lack of standing to challenge them. 

The US Supreme Court held in 2007 in Massachusetts v. EPA that EPA has the authority to regulate greenhouse gases as pollutants and ordered it to determine whether greenhouse gases  endanger public health and welfare. After the agency concluded there is such endangerment, industry and various states challenged the finding based largely on arguments that EPA lacked sufficient scientific support and failed to conduct a cost analysis.

The appeals court rejected these arguments, holding that EPA met its threshold burden to regulate greenhouse gases because EPA “compiled a substantial scientific record” that greenhouse gases “very likely caused warming of the climate over the last several decades” and increased the risk of extreme weather events, changes in air quality, increases in pathogens and other dangers to human health and welfare.

Once EPA determined that greenhouse gases endanger human health and welfare, EPA had a “non-discretionary” duty to regulate emissions of greenhouse gases from motor vehicles. Accordingly, the court dismissed the petitioners’ challenges to the regulation limiting emissions from tailpipes of cars and light trucks. Of note, the auto industry intervened in the case to support the tailpipe rule during this litigation because of that industry’s preference for uniform federal regulation as opposed to a state-by-state approach. Under EPA’s longstanding interpretation of the Clean Air Act, once the agency began regulating vehicles, the agency was also required to regulate greenhouse gases from stationary sources under two permitting programs called “prevention of significant deterioration,” or “PSD,” and “title V.” The court agreed the application of these permit programs to stationary sources such as power plants were “statutorily compelled: a source must obtain a permit if it emits a major amount of a regulated pollutant.” 

To ease the regulatory burden of the new permitting obligations, EPA issued two additional rules that limited the scope of when and to whom such permitting obligations apply. First, EPA concluded that an air pollutant becomes subject to regulation under the Clean Air Act only when a regulation requiring control of that pollutant takes effect. Therefore, it delayed the effective date of the greenhouse gas permitting programs’ application to stationary sources until the tailpipe rule takes effect. 

Second, EPA limited the application of the PSD and title V permitting programs to only the largest industrial sources, raising permitting thresholds for greenhouse gases above that of other  regulated air pollutants. Specifically, in what is known as the “tailoring rule,” EPA set the greenhouse gas permitting threshold at 100,000 tons per year of greenhouses gases because it determined the 100/250 tons-per-year threshold in the Clean Air Act would have resulted in “absurd results” by triggering permits for millions of sources. The court declined to reach the merits of either rule on
grounds that the petitioners failed to demonstrate standing to challenge the rules in court. The court said neither the industry nor the state litigants could prove they were injured by rules designed to reduce the number of sources subject to permits. The delay in when the new restrictions take effect and the decision to limit them to larger emitters of greenhouse gases “actually mitigate  petitioners’ purported injuries,” the court said.

Nearly a hundred lawsuits were consolidated into Coalition for Responsible Regulation. et. al. v. EPA, the name of the case before the US appeals court. The case was heard by a three-judge panel; all three agreed with the decision. Opponents of the rules asked the full court in August for a rehearing.

Mercury

The US Senate rejected a move in June by Senator James Inhofe (R-Oklahoma) to bar implementation of a new rule that will require certain coal- and oil-fired power plants to reduce mercury emissions starting in 2015. The rule also revises “new source” performance standards for new coal and oil-fired power plants that limit emissions of particulate matter, SO2 and NOx. The vote was 53 to 46 and proceeded largely along party lines, with five Democrats joining 41 Republicans in voting to override the Environmental Protection Agency. Two independents, five Republicans and 46 Democrats voted to let the EPA proceed. 

The rule is called “Utility MACT” by the environmental community. EPA issued the Utility MACT rule in December 2011 in response to a court-ordered deadline to which EPA agreed in a settlement with environmental and health advocacy groups in American Nurses Association v. Jackson. The rule does not apply to natural gas-fired power plants unless the gas is produced by gasifying coal or oil. 

The rule limits the amounts of not only mercury, but also arsenic, chromium, dioxins, lead, formaldehyde and other substances that may be emitted from power plants and requires use of  maximum achievable control technology” or MACT to control such emissions at power plants larger than 25 megawatts in size that burn coal or oil.

The rule offers some flexibility to utilities that need more than the three years that the Clean Air Act allows for installing the required air emissions control technology. The first year of compliance is 2015, but a presidential memorandum clarifies that regulators can invoke existing authority under the Clean Air Act to provide a one-year extension if companies can demonstrate that extra time is needed. EPA can also use its enforcement discretion to grant a fifth year to comply by issuing an administrative order or entering into a consent decree with a particular facility. The office of enforcement and compliance assurance at EPA released a memorandum outlining how utilities can obtain compliance extensions.

Critics of the rule argued that more time would reduce the cost of compliance by allowing retirements and retrofits to take place in a more sequential manner and providing time to address potential grid reliability issues while still achieving the EPA’s objectives. Critics also argued against consent decrees and administrative orders as a means of obtaining extensions to comply both because companies issued them might be seen as being in violation of the Clean Air Act and because entering into consent decrees could put them at risk of citizen suits for noncompliance. 

Since the vote, the EPA agreed to reconsider portions of the rule. The agency has until November 2, 2012 to complete its reconsideration. 

Eagles

The US Fish and Wildlife Service is weighing changes to its regulations on programmatic permits to “take” bald and golden eagles. The agency collected comments through midJuly. A  “programmatic” permit is a permit allowing multiple takings over a long period or in locations that cannot be specifically identified, like a wind farm with turbines. 

The Bald and Golden Eagle Protection Act makes it illegal to “take” bald and golden eagles unless otherwise authorized. The word “take” means to “pursue, shoot, shoot at, poison, wound, kill, capture, trap, collect, destroy, molest or disturb.” The term “disturb” is defined in turn under the US Fish and Wildlife Service regulations as any action “to agitate or bother a bald or golden eagle to a degree that causes, or is likely to cause, based on the best scientific information available, (1) injury to an eagle, (2) a decrease in its productivity, by substantially interfering with normal breeding, feeding, or sheltering behavior, or (3) nest abandonment, by substantially interfering with normal breeding, feeding, or sheltering behavior.”

Violators risk civil penalties and jail time of up to one year for the first conviction. Felony convictions could result in significantly higher fines and up to two years of jail time. Having a programmatic take permit can shield the holder from enforcement provided that any take is within the permitted limits.

The US Fish and Wildlife Service was authorized to issue programmatic take permits starting in 2009 where the take is associated with, but not the purpose of, an activity. The permits are effective for up to five years at a time. Obtaining this type of permit triggers the National Environmental Policy Act, which requires a review of the environmental effects of a particular project. This means that many projects that normally would not trigger National Environmental Policy Act in the past — for example, because they are on private land with no federal nexus — need to go through the National Environmental Policy Act environmental review process. This process can be time consuming. So far, only one wind energy project has obtained such a permit. 

The proposed changes to the permit process include the following. The government is considering extending the permit term from five years to 30 years. It is considering letting permits be transferred where a project is sold to a new owner rather than requiring a new permit.

The fees associated with programmatic permits are expected to increase substantially. A wind farm seeking a programmatic permit with a 30-year term would have to pay an upfront fee of $51,600 ($36,000 for the permit application and $15,600 for administration of the permit over its term), $1,000 for a permit amendment and $1,000 for a permit transfer. In the past, a permit with a 5-year term required fees of $1,000 for the application, no administration fee and $500 for a permit amendment. 

So far, lenders appear in no rush to require projects to obtain programmatic permits, although a longer permit term may make this option more attractive to lenders concerned about potential enforcement risk.