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Greenhouse Gas Regulations: Advising Clients in an Uncertain

Legal Environment

  Dave Scriven-YoungPeckar & Abramson, P.C.

Illinois Environmental Law Blog

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"Lurking behind Defendants' arguments is this salient question: What exactly is U.S. 'policy' on greenhouse gas emissions?  At one point in their briefs, Defendants acknowledge that this country's official policy and Congress's strategy is to reduce the generation of greenhouse gases.  Elsewhere, they point to a policy of research as a prelude to formulating a coordinated, national policy.  They also assert that U.S. policy is 'not to engage in unilateral reduction of domestic emissions' (relating, in particular, to the international arena).  These variegated pronouncements underscore the point that there really is no unified policy on greenhouse gas emissions."

Connecticut v. American Electric Power Co., 582 F.3d 309, 331-32 (2d Cir. 2009)

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Greenhouse Gas Regulations on Four Fronts in 2009-2010

1.    Congressional Efforts 2.    International Efforts 3.    Efforts by Federal Agencies 4.    Court Rulings

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1.  Congressional Efforts

a.  American Clean Energy and Security Act, H.R. 2454 (Waxman-Markey Bill) (Passed House 6/6/09)    

• Establish a cap-and trade program to reduce GHG emissions to 97% of 2005 levels by 2012, 83% by 2020, 58% by 2030, and 17% by 2050.

• EPA to establish a specific quantity of emission allowances starting in 2012.

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1.  Congressional Efforts

a.  American Clean Energy and Security Act, H.R. 2454 (Waxman-Markey Bill) (Passed House 6/6/09) • Large GHG emitters, suppliers of petroleum-based

fuels, and certain other parties would have been required to have a sufficient number of allowances or GHG offset credits each year to cover their activities.  Offsets are issued for activities that reduce or sequester GHGs by parties not covered by the emissions cap.

 

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1.  Congressional Efforts

a.  American Clean Energy and Security Act, H.R. 2454 (Waxman-Markey Bill) (Passed House 6/6/09)    

• Initially distributed free allowances to electric and gas utilities, to energy intensive and trade-exposed industries, small refiners and state governments.  Some allowances would have been auctioned to provide funds to reduce the impact of any energy price increases on low income tax payers.

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1.  Congressional Effortsb.  Clean Energy Jobs and American Power Act, S. 1773 (Kerry-Boxer Bill) (Passed Senate Committee 11/5/09)  • Required EPA to

• Promulgate regulations to cap and reduce GHG emissions so that GHG emissions from capped sources are reduced to 97% of 2005 levels by 2012, 80% by 2020, 58% by 2030, and 17% by 2050.

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1.  Congressional Effortsb.  Clean Energy Jobs and American Power Act, S. 1773 (Kerry-Boxer Bill) (Passed Senate Committee 11/5/09)  • Required EPA to

• Set aside a specified percentage of emission allowances to be used to achieve an additional 10% reduction from 2005 U.S. emission levels in 2020 by providing incentives to reduce emissions from international deforestation.

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1.  Congressional Effortsc.  Kerry-Graham-Lieberman Framework (Released 12/10/09)  "It is our belief that a market-based system, rather than a labyrinth of command-and-control regulations, will allow us to reduce pollution economically and avoid the worst impacts of global climate change. . . . We believe a near term pollution reduction target in the range of 17 percent below 2005 emissions levels is achievable and reasonable, as is a long term target of approximately 80 percent below 2005 levels.” 

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1.  Congressional Effortsc.  Kerry-Graham-Lieberman Framework (Released 12/10/09)  "Finally, we believe a robust investment in the development and deployment of clean energy technologies will ensure that as pollution reduction targets become more rigorous, companies will be better equipped to meet their obligations in a cost effective manner."

 

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1.  Congressional EffortsWinds of Change Make Passing a Climate Change Bill More Difficult:  • Loss of Democratic supermajority in Senate.

 • Loss of some corporate support as

ConocoPhillips, BP America, and Caterpillar leave U.S. Climate Action Partnership.

 • Change in priorities as Congress looks to

continue efforts to stimulate economic recovery, health care agenda.

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1.  Congressional EffortsA Climate Change Bill as a Priority: State of the Union Address 2010  "But to create more of these clean energy jobs, we need more production, more efficiency, more incentives. . . . And, yes, it means passing a comprehensive energy and climate bill with incentives that will finally make clean energy the profitable kind of energy in America.

"I am grateful to the House for passing such a bill last year.  And this year I'm eager to help advance the bipartisan effort in the Senate.

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1.  Congressional Efforts

A Climate Change Bill as a Priority: State of the Union Address 2010

"I know there have been questions about whether we can afford such changes in a tough economy. I know that there are those who disagree with the overwhelming scientific evidence on climate change. But here's the thing—even if you doubt the evidence, providing incentives for energy-efficiency and clean energy are the right thing to do for our future—because the nation that leads the clean energy economy will be the nation that leads the global economy. And America must be that nation."

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2.  International EffortsConference of the Parties to the UN Framework Convention on Climate Change, Copenhagen (12/18/09)  • Recognized the need to limit global temperatures

rising no more than 2 degrees Celsius above pre-industrial levels.

• Countries to spell out by 2/2010 their pledges for curbing carbon emissions by 2020.

• $30 billion for developing nations over next 3 years; goal of $100 billion a year by 2020.

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2.  International Efforts

U.S. Pledge Under Copenhagen Accord (1/28/10):  • U.S. officially pledged that it would cut its

greenhouse gas emissions in the range of 17 percent below 2005 levels by 2020.

 • Commitment states that the U.S. will cut its

emissions "in the range of 17 percent, in conformity with anticipated U.S. energy and climate legislation, recognizing that the final target will be reported to the Secretariat in light of enacted legislation."

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3.    Efforts by Federal Agencies

Final Regulations  a. Endangerment and Cause or Contribute Findings for Greenhouse Gases Under the Clean Air Act b.     Mandatory Reporting of Greenhouse Gases Rule     c.    SEC Guidance Regarding Disclosure

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3.    Efforts by Federal AgenciesFinal Regulations  a.    Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Clean Air Act (74 Fed. Reg. 66,496-66,546) • Endangerment Finding: The current and projected

concentrations of the six key well-mixed GHGs—carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride—in the atmosphere threaten the public health and welfare of current and future generations.

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3.    Efforts by Federal AgenciesFinal Regulations  a.    Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Clean Air Act (74 Fed. Reg. 66,496-66,546)

• Cause or Contribute Finding: The Administrator finds that the combined emissions of these well-mixed GHGs from new motor vehicles and new motor vehicle engines contribute to GHG pollution, which threatens public health and welfare.

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3.    Efforts by Federal AgenciesFinal Regulations  b.    Mandatory Reporting of Greenhouse Gases Rule (74 Fed. Reg. 56,260-56,519 )  • Suppliers of fossil fuels or industrial GHGs, manufacturers of vehicles and engines, and

facilities that emit 25,000 metric tons or more per year of GHG emissions must submit reports.

 • Gases covered are carbon dioxide, methane,

nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, and other fluorinated gases including nitrogen trifluoride and hydrofluorinated ethers.

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3.    Efforts by Federal Agencies

Final Regulations  c.   SEC Guidance Regarding Disclosure (75 Fed. Reg. 6,289-6,297)  • Guidance to public companies on what climate-

change related matters must be disclosed to the public under existing disclosure requirements.

 • SEC’s disclosure rules may be triggered by climate

change matters, including:

• The impact of federal and state legislation and regulations, including legislation and regulations that are "pending";

   

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3.    Efforts by Federal Agencies

Final Regulations  c.   SEC Guidance Regarding Disclosure (75 Fed. Reg. 6,289-6,297)

• The impact of international treaties or accords;

• The impact of indirect consequences of regulation or business trends, such as a decreased (or increased) demand for certain goods and services; and

• Physical impacts of climate change, weather severity, sea levels, the arability of farmland, and water availability and quality.

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3.    Efforts by Federal Agencies

Proposed Regulations  a. Light-Duty Vehicle Greenhouse Gas Emission Standards b. Tailoring Rule

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3.    Efforts by Federal Agencies

Proposed Regulations  a.    Light-Duty Vehicle GHG Emission Standards (74 Fed. Reg. 49,454-49,789)  • EPA and National Highway Traffic Safety

Administration joint proposal to establish new standards for model year 2012 through 2016 light-duty vehicles to reduce GHG emissions and improve fuel economy.

 • Apply to passenger cars, light-duty trucks, and

medium-duty passenger vehicles. 

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3.    Efforts by Federal Agencies

Proposed Regulations  a.    Light-Duty Vehicle GHG Emission Standards (74 Fed. Reg. 49,454-49,789)  • Require these vehicles to meet an estimated

combined average emissions level of 250 grams of carbon dioxide per mile in model year 2016, equivalent to 35.5 miles per gallon if the automotive industry were to meet this CO2 level all through fuel economy improvements.

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3.    Efforts by Federal Agencies

Proposed Regulations  b.    Tailoring Rule (74 Fed. Reg. 55,292-55,365)  • New thresholds for GHG emissions define when

Clean Air Act permits are required. • Facilities that emit 25,000 tons of GHGs a year

must obtain construction and operating permits.  • Must demonstrate the use of best available control

technologies and energy efficiency measures to minimize GHG emissions when facilities are constructed or significantly modified.

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3.    Efforts by Federal Agencies

Proposed Regulations  b.    Tailoring Rule (74 Fed. Reg. 55,292-55,365)  • Addresses six GHGs: carbon dioxide, methane,

nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.

 • Carbon dioxide equivalent is the preferred metric

for determining GHG emissions rates for any combination of these six GHGs.

 • Focuses on the facilities responsible for nearly

70% of U.S. stationary source GHG emissions.

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3.    Efforts by Federal Agencies

Proposed Regulations  b.    Tailoring Rule (74 Fed. Reg. 55,292-55,365)  • EPA estimates that 400 new sources and

modifications to existing sources would be subject to review each year for GHG emissions.  In total, approximately 14,000 large sources would need to obtain operating permits that include GHG emissions.  Most of these sources are already subject to clean air permitting requirements because they emit other pollutants.

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3.    Efforts by Federal Agencies

Attempts to thwart these efforts:  a. S.J. Res. 26: Introduced by Sen. Murkowski (R-Alaska) with 39 co-sponsorsincluding Sen. Nelson (D-Nebraska and Sen. Landrieu (D-Louisiana)

"Resolved . . . That Congress disapproves the rule submitted by the Environmental Protection Agency relating to the endangerment finding and the cause or contribute findings for greenhouse gases under section 202(a) of the Clean Air Act . . . and such rule shall have no force or effect."

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3.    Efforts by Federal Agencies

Attempts to thwart these efforts:  b. H. R. 4572: Introduced by Rep. Skelton (D-Missouri); co-sponsored by Reps. Emerson (R-Missouri) and Peterson (D-Minnesota).

 "Section 302(g) of the Clean Air Act . . . is amended by adding the following at the end thereof: `The term `air pollutant' shall not include any of the following solely on the basis of its effect on global climate change: (1) Carbon dioxide. (2) Methane. (3) Nitrous oxide. (4) Hydrofluorocarbons. (5) Perfluorocarbons. (6) Sulfur hexafluoride.'"

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3.    Efforts by Federal Agencies

Attempts to thwart these efforts:  c. Lawsuits

• 16 court challenges to EPA's endangerment finding filed by industry groups, conservative think tanks, lawmakers, and three states (Texas, Alabama, and Virginia).

• A coalition of 16 states and New York City has asked to intervene on behalf of EPA.

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3.    Efforts by Federal Agencies

EPA Will Push Forward: 2011 Budget

• $4.1 million increase for a total of $20.8 million to support the GHG Reporting Rule.

• $2.0 million increase to support the promulgation of GHG standards for passenger cars, light-duty trucks, and medium-duty passenger vehicles.

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3.    Efforts by Federal Agencies

EPA Will Push Forward: 2011 Budget

• $4.0 million increase to support analysis and potential development of standards for other mobile-source categories in order to respond to rulemaking petitions.

• In response to legal obligations regarding NSPS, $7.5 million in new funding to support assessment and potential development of GHG limits for categories of major stationary sources of GHG.

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4.    Court Rulings  Denying Motions to Dismiss

  a. Connecticut v. Am. Elec. Power Co. (2d Cir.

2009)  b. Comer v. Murphy Oil USA (5th Cir. 2009)  Granting Motions to Dismiss  a. California v. Gen. Motors Corp. (N.D. Cal. 2007)

  b. Native Vill. of Kivalina v. ExxonMobil Corp., (N.D. Cal. 2009)

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4.    Court RulingsDenying Motions to Dismiss  a. Connecticut v. Am. Elec. Power Co., 582 F.3d 309 (2d Cir. 2009)  • Two Groups of Plaintiffs: (1) Eight states and

New York City and (2) Three Land Trusts • Defendants: Six electric power corporations

 • Causes of Action: Based on public nuisance

 • Requested Remedy: Mandatory injunction to

abate nuisance by capping carbon dioxide emissions and reducing emissions by a specified percentage each year for at least ten years.

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4.    Court Rulings4.    Court RulingsDenying Motions to Dismiss  a. Connecticut v. Am. Elec. Power Co., 582 F.3d

309 (2d Cir. 2009)  Court's Ruling: • The complaints should not be dismissed on

political question grounds. • All of the plaintiffs have standing.

 • Plaintiffs have properly stated claims under the

federal common law of nuisance.    

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4.    Court RulingsDenying Motions to Dismiss  b.  Comer v. Murphy Oil USA, 585 F.3d 855 (5th Cir. 2009)  • Plaintiffs: Residents and owners of property along

Mississippi Gulf coast; putative class action. • Defendants: Oil, energy, and chemical companies.

 • Causes of Action: Public and private nuisance,

trespass, negligence, unjust enrichment, fraudulent misrepresentation, and civil conspiracy.

 • Requested Remedy: Compensatory and punitive

damages.

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4.    Court RulingsDenying Motions to Dismiss  b.  Comer v. Murphy Oil USA, 585 F.3d 855 (5th Cir. 2009)  Court's Ruling: • Plaintiffs have standing to assert public and private

nuisance, trespass, and negligence claims. • Nuisance, trespass, and negligence claims do not

present nonjusticiable political questions. • Unjust enrichment, fraudulent misrepresentation,

and civil conspiracy claims are dismissed for prudential standing reasons.

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4.    Court Rulings4.    Court RulingsGranting Motions to Dismiss  a. California v. Gen. Motors Corp., 2007 WL

2726871 (N.D. Cal. Sept. 17, 2007)  • Plaintiff: State of California

 • Defendants: Automakers

 • Causes of Action: Public nuisance

 • Requested Remedy: Monetary damages,

attorney's fees, and declaratory judgment for future monetary expenses and damages incurred by the State.

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4.    Court Rulings

Granting Motions to Dismiss  a. California v. Gen. Motors Corp., 2007 WL

2726871 (N.D. Cal. Sept. 17, 2007)    

Court's Ruling: • Nuisance claim based on federal common law

presents a nonjusticiable political question and must be dismissed.

 • Court declined to exercise supplemental

jurisdiction over nuisance claim based on California law.

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4.    Court RulingsGranting Motions to Dismiss  b. Native Vill. of Kivalina v. ExxonMobil Corp., 2009 WL 3326113 (N.D. Cal. Sept. 30, 2009)  • Plaintiff: City of Kivalina, Alaska and governing

body of an Eskimo village of 400 people who reside in the city

 • Defendants: Oil, energy, and utility companies

 • Causes of Action: Public nuisance under federal

common law, nuisance under state law, civil conspiracy, and concert of action

 • Requested Remedy: Damages

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4.    Court RulingsGranting Motions to Dismiss  b. Native Vill. of Kivalina v. ExxonMobil Corp., 2009 WL 3326113 (N.D. Cal. Sept. 30, 2009)  Court's Ruling: • Plaintiffs' federal claims are barred by the political

question doctrine. • Plaintiffs' federal claims are barred for lack of

standing. • Court declines to exercise supplemental

jurisdiction over state-law claims.

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ConclusionRecommendations in this Uncertain Legal Environment:

• Be informed

• Comply

• Be proactive

• Ensure that climate change policies are aligned with mission and business goals (Corporate Social Responsibility)

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Thank You!

Dave Scriven-YoungPeckar & Abramson, P.C.

208 S. LaSalle St., Suite 1660Chicago, IL 60604

(312) 239-9722dscriven-young@pecklaw.com

Illinois Environmental Law Bloghttp://illinoisenvironmentallaw.blogspot.com