Will litigants and courts “enact” two, three, many Kyotos?

Marlo Lewis, Senior FellowCompetitive Enterprise Institute202-669-6693; mlewis@cei.orgHeartland Institute ConferenceNYC, March 4, 2008

Outline

Cap and trade isn’t the only game in town ESA Polar Bear listing--will it endanger fossil energy

use? Mass v EPA -- a spectre haunting the U.S. economy PSD -- Regulatory Limbo, Regulatory Hell NAAQS for CO2? Does EPA have to make an endangerment finding? What should we do? A legislative fix? Policy terrorism alert!

Cap-and-trade ain’t the only game in town

In climate politics, cap-and-trade bills and Kyoto negotiations occupy center stage

However, the chief threat to affordable energy may come from “left field”--litigation under federal common law, NEPA, Endangered Species Act, Clean Water Act, and, especially, the Clean Air Act (CAA)

Some Pending CAA Cases (Sierra Club alone involved in 25 lawsuits against coal power plants)

New York v. EPA, No. 06-1322 (D.C. Cir. 2006) (remand from Court case seeking to review EPA’s refusal to set new source performance standards for GHGs from electric generating units and other large stationary sources)

Petition for Rulemaking under the Clean Air Act to Reduce the Emission of Air Pollutants from Marine Shipping Vessels that Contribute to Global Climate Change (Oct. 3, 2007), brought by Oceana, Friends of the Earth, Center for Biological Diversity and Earth Justice

Petition for Rulemaking Seeking the Regulation of Greenhouse Gas Emissions from Ocean-Going Vessels (Oct. 3, 2007), brought by the State of California

Petition for Rulemaking Seeking the Regulation of Greenhouse Gas Emissions from Nonroad Vehicles and Engines (Jan. 29, 2008), brought by the States of California, Connecticut, Massachusetts, New Jersey and Oregon

Petition for Rulemaking under the Clean Air Act to reduce the Emission of Air Pollutants from Aircraft that Contribute to Global Climate Change (Dec. 31, 2007), brought by Friends of the Earth, Oceana, NRDC and Earth Justice

Petition to require BACT (best available control technology) limits on CO2 emissions from Bonanza coal electric plant in Utah under the CAA’s Prevention of Significant Deterioration (PSD) program (Oct. 1, 2007), brought by Sierra Club.

Other CO2 litigation

Filed Complaint against Exxon-Mobil, BP, Conoco, Chevron, Duke, etc. for damages from

global warming (Feb. 26, 2008), brought by Native Village of Kivlanina, Alaska. Petition for Revised pH Water Quality Criteria under Section 304 of the Clean Water

Act (Dec. 18, 2007), brought by the Center for Biological Diversity Open Space Institute, et al. v. American Electric Power; Connecticut et al. V. AEP

(July 6, 2007), litigation under federal common law to require 3% annual CO2 reductions from nation’s five largest coal-burning utilities

Petition to require OPIC and Ex-Im Bank to conduct NEPA environmental assessments of CO2 emissions from projects they fund (August 22, 2002), brought by Friends of the Earth, Greenpeace, Boulder, Co., Oakland, Santa Monica, and Arcata, CA.

In Development Inuit Circumpolar Confererence v Bush Administration (ICC claims U.S. failure to

ratify Kyoto violates their fundamental human rights and jeopardizes their very existence).

Litigation under World Heritage Convention (GW allegedly destroys natural heritage areas--reefs, glaciers, Everglades)

ESA Polar Bear listing -- Will it endanger fossil energy use?

Kyoto Day (Feb. 16, 2005), Center for Biological Diversity (CBD) petitioned FWS to list polar bear as threatened species under ESA.

“Whether GHG emissions can be halted to protect polar bears will be a test of the statute’s continuing relevance in the 21st century.” -- Brendan Cummings & Kassie Siegel (CBD)

“There is no reason GHG emissions, which jeopardize polar bears, should be treated any differently than pesticides that harm salmon or logging that harms owls.” -- Cummings & Siegel

Section 7 prohibits agencies from taking actions that “appreciably” reduce species’ survival prospects. Agency actions potentially subject to Sec 7:

Setting of fuel economy standards Off shore oil and gas leasing Approval of new coal plants, and “dozens, perhaps hundreds of other [federally-permitted] projects are individually

and cumulatively having an appreciable effect” on GHG levels and, hence, polar bear habitat

“Any legally adequate recovery plan must…include mandates to reduce such emissions.” -- Cummings & Siegel

A Spectre is haunting the U.S. economy--ever since Mass v EPA

The specter of an EPA empowered by courts and litigants to “enact” Al Gore’s climate agenda, on George Bush’s watch, but without any of Gore’s allies on the Hill having to vote for it or take responsibility for the costs.

Brief Chronology – How we got here

Tom Delay asks Carol Browner for legal opinion about EPA’s CAA authority with respect to CO2. (March 1998)

EPA Gen. Council Joseph Z. Cannon memorandum: Several regulatory provisions “potentially applicable,” though EPA has not made an endangerment finding and has no plans to regulate CO2 “at this time.” (April 10, 1998)

CTA + 18 other groups petition EPA, under CAA §202, to set GHG emission standards for new motor vehicles (Oct 20, 1999)

EPA issues request for information (Jan 12, 2001) EPA denies petition for rulemaking (Aug 23, 2003) CTA + 12 other groups; Mass. + 11 other states, 3 cities, and

American Samoa petition for review of EPA denial (Oct 23, 2003) D.C. Appeals Court 2-1 finds denial within EPA’s lawful discretion but

does not address key issue: Does CAA authorize GHG regulation? Supreme Court 5-4 overturns, finds CO2 is air pollutant under CAA.

EPA must determine whether GHGs endanger public health and welfare, or explain why the science is too uncertain to make such determination. EPA must ground its action or inaction in the statute (April 2, 2007).

Chronology since Mass v EPA

Admin saw endangerment finding as only way to obtain statutory authority for 20-10 program (Corn is King!)

Reports (rumors?) that EPA sent an endangerment finding to OMB along with drafts of proposed regulations. (Dec 08)

Congress passes, Bush signs, energy bill. CAA authority no longer needed to implement new fuel economy, renewable fuel standards. (Dec 08)

Warning from U.S. Chamber-led business groups and conservative non-profit groups: Endangerment will create regulatory chaos. (Dec 08)

Sen. Feinstein’s requests EPA “timeline” with “deadlines” for responding to Mass v EPA (Jan 25, 08)

Conservative non-profits respond to Feinstein letter (Feb 20, 08)

PSD -- Regulatory Cascade

§202 applies only to new motor vehicles. But, an endangerment finding would also

make CO2 a pollutant “subject to regulation” under other provisions.

First and foremost, §165: Prevention of Significant Deterioration (PSD) program.

PSD is a pre-construction permitting program for “major” stationary sources.

No company may build a new “major” stationary source of a regulated pollutant (or modify an existing source if this increases emissions) unless the source first obtains a PSD permit.

PSD – Regulatory Thresholds

A source is defined as “major” if it is in one of 28 listed categories and emits at least 100 tons per year of an air pollutant, or is any other type of establishment and emits at least 250 tons (§169).

250 tons may be a reasonable regulatory threshold for smog- and soot-forming emissions.

It is a miniscule amount of CO2--roughly the amount emitted by two dozen average homes.

Regulatory Sprawl under 250 TPY threshold

Buildings of ~100,000 square feet, if heated by fossil fuel, including many office and apartment buildings; hotels; enclosed malls; large retail stores and warehouses; colleges, hospitals and large assisted living facilities; large houses of worship; product pipelines; food processing facilities; large heated agricultural facilities; indoor sports arenas and other large public assembly buildings; commercial kitchens that use natural gas to cook food; and many others.

None of these types of sources has ever been subject to PSD permitting requirements before because they emit so little traditional air pollution; but they would be now if CO2 is deemed to be a regulated CAA pollutant.

PSD administrative burden on regulated entities

PSD permit can take years to obtain. The paperwork alone can cost hundreds of thousands to millions of dollars.

To obtain a permit, a “major” source must install “best available control technology” (BACT)--additional costs.

Administrative burden alone – putting aside any BACT requirements – would create an overwhelming and unprecedented roadblock to new investment for a host of previously unregulated buildings and facilities:

“No small business requiring a moderate-sized building or facility heated with fossil fuel could operate subject to the PSD permit administrative burden.” – Peter Glaser and John Cline, Nov 8, 07 testimony before House Gov Oversight and Reform Committee

PSD for CO2—Regulatory Limbo

Nobody knows what BACT means for CO2. BACT determinations are made case-by-case, mostly

by state agencies. Before states can make CO2 BACT determinations,

they’ll have to modify their SIPs to adopt new BACT requirements. That could take years.

“Since BACT determinations for CO2 have no regulatory history at this time, and can vary by type of facility and from state to state, businesses wishing to construct new sources or modify existing ones would have no basis for planning what the regulatory requirements will be.” This will create “considerable, and perhaps fatal, uncertainty for businesses.”– Glaser and Cline

Or Regulatory Hell?

Once a source is classified as “major” for one pollutant, it is considered a major source for all other regulated pollutants under the CAA.

Potentially hundreds of thousands of small to mid-size entities would have to install BACT not only for CO2 but also for NOX, PM, lead, mercury, SO2, and other pollutants prior to construction. “The regulatory burden is so enormous, and the

number of required PSD permits so staggering, that construction in cities across the country will literally stop the minute CO2 is ‘regulated’ under the Act.” – U.S. Chamber and 18 business groups, Dec 12, 2007 letter to Congress.

Environmental Consequences: Equally Unsavory

EPA and its state level counterparts would be flooded with permit applications from myriads of new “major” sources.

These permitting agencies would be forced to squander administrative resources pursuing inconsequential CO2 reductions to the neglect of more critical, statutorily required CAA responsibilities.

NAAQS for CO2? An endangerment finding under §202 could also compel

EPA to set NAAQS for CO2 under §108 (both provisions have the same endangerment language).

NAAQS specifies allowable atmospheric pollution concentrations

Mass v EPA plaintiffs claimed current levels harm public health and welfare.

In 2003, three plaintiffs, including AG Mass, filed notice of intent to sue EPA for “failing” to initiate a NAAQS rulemaking for CO2. We know their end-game.

What would it take to reduce CO2 levels? Kyoto would barely slow the increase. Even outright de-industrialization might not be enough. EPA must take compliance costs into account when setting

tailpipe standards under §202, but is forbidden to consider costs when setting NAAQS.

In principle, there is no limit to the economic sacrifices that could be required of the American people.

Does EPA have to make an endangerment finding?

“We need not and do not reach the question whether on remand EPA must make an endangerment finding, or whether policy concerns can inform EPA’s actions in the event that it makes such a finding….We hold only that EPA must ground its reasons for action or inaction in the statute.” -- Mass v. EPA

On what scientific grounds could EPA decline to make an endangerment finding?

EPA could find that GHG emissions from new motor vehicles do not “cause or contribute to air pollution that may reasonably be anticipated to endanger public health or welfare.” Unlikely. EPA would have to disavow a

decade or more of alarmist statements and publications.

EPA could say the science is too uncertain to make an endangerment finding. Also unlikely. EPA would have to break

with the IPCC “consensus.”

On what statutory grounds might EPA decline to make an endangerment finding?

Congress never intended for §2O2, which deals solely with motor vehicle emissions, to instigate a massive expansion of stationary source regulation.

Never intended for §202 to spawn an administratively crippling paperwork nightmare for EPA and its state-level counterparts.

EPA has considerable discretion how to allocate its own administrative resources.

Never intended §202, which requires EPA to consider compliance costs when setting tailpipe standards, to leverage money-is-no-object regulation under the NAAQs program.

Above all, Congress never intended for §202 to allow litigants and courts to set climate policy for the nation.

Yet an endangerment finding could trigger a regulatory cascade many times more costly than Kyoto or Lieberman-Warner without Congress ever voting on it!

If EPA is sued again...

Mass v. EPA probably not a good predictor of outcome CO2 emission standards for motor vehicles are

fuel economy standards by another name It’s one thing to get 5-4 majority to make EPA

play in NHTSA’s fuel economy sandbox; another to impose PSD Hell, CO2 NAAQS, Kyoto-Plus as a requirement of §202, a cost-constrained provision dealing solely with emissions from new motor vehicles, enacted in 1970.

What will EPA do?

Nobody knows at this point how or when EPA will respond to the Court. The Admin is still weighing its options.

What should we do now?

Talk this up (op-eds, blog posts, talk radio)! Get prepared to submit public comment, file amicus

briefs Force the other team to take ownership of the

regulatory morass: Why didn’t you mention PSD Hell when you

litigated Mass v EPA? When were you going to tell us about endangerment setting the predicate for NAAQS? Were you ignorant of how the CAA works, or did you hide your agenda from the Court?

If you pressure EPA to do this, we will hold you responsible for the consequences!

A Legislative Fix?

If EPA makes an endangerment finding, we will need a legislative fix.

Plaintiffs said Mass v EPA dealt just with EPA’s authority to regulate emissions of new motor vehicles under §202. Hence, CAA should be amended to clarify that

any endangerment finding and associated regulation of motor vehicle emissions “shall not be construed to require pollution control requirements for CO2 and other GHGs under any other provision of this Act.”

Policy Terrorism Alert!

What if they say, okay, we’ll agree to a legislative fix--but only as part of a comprehensive cap-and-trade bill?

This is the legislative equivalent of hijacking and hostage taking, to wit: “We’ll let EPA blow up the economy unless you come

along quietly and endorse Kyoto II, Lieberman-Warner, etc.”

Denounce this as “policy terrorism.” PSD Hell should be rejected on its own merits. Cap-and-trade should stand or fall on its own merits.

Remember, no elected official or judge wants to take ownership of PSD Hell or CO2 NAAQS. It seems like a neat idea only if you can make George Bush take the rap for it.

APPENDIX A: Thoughts on Mass v EPA -- What’s in a name?

Plaintiffs’ whole case rested on a selective reading of the CAA’s most abstract provision—the definition of air pollutant.

“The term ‘air pollutant’ means any air pollution agent or combination of such agents, including any physical, chemical, biological, radiative…substance or matter which is emitted into or otherwise enters the ambient air. Such term includes any precursors to the formation of any air pollutant…”

Following plaintiffs, the Court treated “air pollution agent” as synonymous with “air pollutant” rather than as a criterion for distinguishing pollutants from non-pollutants. On this reading, anything in the air--”from frisbees to flatulence” (Scalia)--is ipso facto an air pollutant for regulatory purposes.

To reach this conclusion, the majority had to: Ignore a key term of the first sentence (making the definition

circular—’an air pollutant is an air pollutant’); and Ignore all of the second sentence. If anything emitted is

automatically an air pollutant, Congress would not have had to specify that precursors are also air pollutants.

CAA authority to regulate CO2: Conspicuously Absent

No climate protection title, section, or subsection in the CAA.

Words “greenhouse effect” and “greenhouse gas” do not occur.

Global warming and CO2 occur only once, each time in non-regulatory provisions (§§ 103g and 602e), which conclude by admonishing EPA not to infer authority for pollution control requirements or additional regulation.

These caveats would be pointless if, as plaintiffs argued, the definition of “air pollutant” already authorizes EPA to regulate CO2 for global warming purposes.

Ignoring legislative and regulatory history

In 20 years of debate, Congress has never enacted CO2 control legislation.

When CAA amended in 1990, Congress considered and rejected:

a new title on stratospheric ozone and climate protection; provisions to regulate motor vehicle CO2 emissions.

The Court said such “post-enactment legislative history” cannot repeal EPA’s pre-existing authority. Nobody ever suggested it did.

The point: It is unreasonable to believe that when Congress enacted and amended §202 in 1970 and 1977, it implicitly adopted the Kyoto Protocol, or Lieberman-Warner, but just forgot to tell anybody!

For ~ 30 years, EPA regulation under §202 has aimed to make auto engines so clean burning that, ultimately, nothing comes out of the tailpipe except two greenhouse gases—CO2 and H2O!

Ignoring the Big Picture

Congress never intended for §2O2, which deals solely with motor vehicle emissions, to instigate a massive expansion of stationary source regulation.

Never intended §202 to spawn an administratively crippling paperwork nightmare for EPA and its state counterparts.

Never intended §202, which requires EPA to consider compliance costs, to leverage money-is-no-object regulation under the NAAQs program.

Above all, Congress never intended for §202 to allow litigants and courts to set climate policy for the nation.

Yet those are likely consequences of regulating CO2 under §202.

Conclusion: When Congress enacted and amended §202 in 1970 and 1977, it did not delegate to EPA the power to regulate CO2.