Download Mass v. EPA

BEIJING BRUSSELS CHICAGO DALLAS FRANKFURT GENEVA HONG KONG LONDON LOS ANGELES NEW YORK SAN FRANCISCO SHANGHAI SINGAPORE SYDNEY TOKYO WASHINGTON, D.C.
Preparing Multinational Companies for
Mandatory Greenhouse Gas Controls in the U.S.
OFII General Counsel Conference
Roger R. Martella, Jr.
[email protected]
(202) 736-8097
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U.S. Climate Change Controls
The relevance for multinational corporations
•
Multinational companies will be required to comply with domestic GHG controls
for operations in the United States; some groups may argue extraterritorial
application on mobile sources and supply chains.
•
U.S. approach could differ from other climate regimes such as in European
Union. U.S. regulators are proposing “command and control” approach to
reduce GHGs, mandating both specific technology and operational changes to
improve energy efficiency across all sectors.
•
While the United States lags some other nations currently, ultimate climate
change approach could become model for other nations given depth and
specificity of approaches.
•
Some actions, such as biofuels and carbon sequestration, will create
opportunities and risks at a global level.
•
Beyond those directly regulated, U.S. climate regulation will have upstream
and downstream ramifications across the world.
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Climate Change Regulation
The Way It Should Work
Global Consensus
Federal Legislation
Federal Regulation
Regional and Local Implementation
Litigation
3
Climate Change Regulation
The Way It Is Working in the United States
Global Consensus
Federal Legislation
Federal Regulation
Regional and Local Implementation
Litigation
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A trend that may continue
• Jason Grumet, policy aide to Obama campaign:
– EPA will initiate GHG rulemakings in January, 2009.
– “In the absence of Congressional action,” EPA would
enact GHG regulations in 18 months.
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Climate Change Regulation
The Way It Is Working in the United States
Global Consensus
Federal Legislation
Federal Regulation
Regional and Local Implementation
Litigation
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United States Supreme Court
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April 2, 2007 -- Mass v. EPA: Two Key Holdings
• Greenhouse gases are “air pollutants”
– “Because greenhouse gases fit well within the Clean Air Act’s
capacious definition of ‘air pollutant,’ we hold that EPA has the
statutory authority to regulate the emission of such gases
from new motor vehicles.”
• Agency must consider “endangerment”
– On remand, the Agency must pursuant to CAA Section 202(a):
(1) Make a positive endangerment finding; (2) Make a
negative endangerment finding; or (3) offer a “reasonable
explanation as to why it cannot or will not exercise its
discretion to determine whether they do.”
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Massachusetts v. EPA Remand
Mass v. EPA:
Remanded ICTA petition
to regulate GHGs from
mobile sources under
CAA 202(a)
Clean Air Act Title II
(Motor Vehicles)
•
20 in 10 regulations/
Executive Order
•
202(a) motor vehicles
•
211(c) and (o) fuels
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The Aftermath of Massachusetts v. EPA
Mass v. EPA:
Remanded ICTA petition
to regulate GHGs from
mobile sources under
CAA 202(a)
Clean Air Act Title II
(Motor Vehicles)
Natural Resource Issues
•
NEPA
20 in 10 regulations/
Executive Order
Clean Air Act Title I
•
Endangered Species Act
(Stationary Sources)
•
202(a) motor vehicles
•
EPA Water Strategy
•
NSPS rulemakings
•
211(c) and (o) fuels
•
Permits
•
2007 Energy (EISA) Act
•
•
California waiver petition
Authorities for potential
regulation
•
•
108 NAAQS?
•
111 NSPS?
Clean Air Act Title II
•
112 HAP?
(Other Mobile Sources)
•
Others?
•
213 marine shipping
vessels
•
•
231 aircraft
•
213 nonroad
Other Stationary Source
Issues
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PSD/NSR
•
Mandatory reporting
•
CO2 sequestration
Other issues
•
Legislative initiatives/
EPA Review
•
International discussions
•
Enterprise sustainability
Notice of Intent to Sue/Petitions
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Key litigation issues pending in courts
• Whether GHGs are “regulated pollutants” such that EPA
already must impose GHG controls on all sources even
absent endangerment finding (Deseret appeal before EAB).
• Whether EPA must regulate GHGs from stationary sources
(petroleum refinery NSPS)
• Timing of EPA’s endangerment determination (Mass v. EPA
request for mandamus).
• California’s authority to enact greenhouse gas controls for
cars and light duty trucks (D.C. Circuit and Ninth Circuit
litigation).
• NEPA/ESA issues (arguments raised in comments to
various permits and projects).
• Are GHG emitters for common law nuisance claims (four
separate actions)
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Climate Change Regulation
The Way It Is Working in the United States
Global Consensus
Federal Legislation
Federal Regulation
Regional and Local Implementation
Litigation
14
Regulatory Developments
Now to January, 2009
• Advance Notice of Proposed Rulemaking for Greenhouse
Gases
• Greenhouse gas inventory rule proposal
• Renewable fuels rule proposal
• Carbon sequestration proposal
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EPA’S Advance Notice of Proposed Rulemaking
Mass v. EPA:
Remanded ICTA petition
to regulate GHGs from
mobile sources under
CAA 202(a)
Clean Air Act Title II
(Motor Vehicles)
Natural Resource Issues
•
NEPA
20 in 10 regulations/
Executive Order
Clean Air Act Title I
•
Endangered Species Act
(Stationary Sources)
•
202(a) motor vehicles
•
EPA Water Strategy
•
NSPS rulemakings
•
211(c) and (o) fuels
•
Permits
•
2007 Energy (EISA) Act
•
•
California waiver petition
Authorities for potential
regulation
•
•
108 NAAQS?
•
111 NSPS?
Clean Air Act Title II
•
112 HAP?
(Other Mobile Sources)
•
Others?
•
213 marine shipping
vessels
•
•
231 aircraft
•
213 nonroad
Other Stationary Source
Issues
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PSD/NSR
•
Mandatory reporting
•
CO2 sequestration
Other issues
•
Legislative initiatives/
EPA Review
•
International discussions
•
Enterprise sustainability
GHG Regulation as Economic Regulation
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Mobile Source Approach: Aircraft Example
•
EPA proposes to regulate the aircraft industry in new and specific
ways for decades to come.
– EPA would seek to mandate both new technology and operational
practices affecting the aircraft industry. For example:
• more efficient aircraft design to reduce weight through new materials;
• reducing aerodynamic drag through installing film surface grooves, hybrid
laminar flow technology, blended winglets, and spiroid tips;
• using alternative fuels; and
• operational changes, including potential air traffic controls.
– EPA proposes two approaches to regulating aircraft GHG emissions:
engine emission standards or fleet average standard.
– EPA seeks industry’s comment on the feasibility of these options.
•
EPA has incorporated the states’ and NGO petitions for public
comment.
– Petitions argue for technological controls, operational measures,
emission fees, and cap-and-trade systems tailored to aircraft industry.
– Groups already have announced their intent to sue this year to force
EPA regulation.
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Stationary Source Pathways
Provision
Summary
Preclusive effect
Comments
108/109
NAAQS
Would set ambient GHG standards
for nation, thus entire nation would
be in or out of attainment; primary
standard goes to health concerns,
secondary standard goes to welfare;
costs cannot be considered in
setting standard
Precludes listing
under 112 and
111 for existing
sources (but not
new and modified
sources)
ANPR proposes four NAAQS
scenarios; likely would take
10 years before any
regulatory effect; 10 year
horizon to achieve NAAQS “ill
suited to GHGs”
111 New
Source
Performance
Standards
Sets performance standards for
certain listed “source categories”;
provides for consideration of costs
and discretion in type and size of
facilities regulated; standard is BDT
(Best Demonstrated Technology)
Would trigger PSD
and Title V
permitting
Stationary source TSD
addresses specifics for
industrial and utility boilers,
petroleum refineries, and
portland cement facilities;
arguably strongest authority
for trading programs; likely
would combine efficiency
and workplace standards
112
Hazardous
Air Pollutants
Provides little discretion to
distinguish between sizes and
categories; costs largely irrelevant;
standard is MACT (Maximum
Achievable Control Technology)
GHGs would be
exempt from PSD
program; would
preclude 111
standards for
existing sources
(but not new or
modified sources)
10/25 ton threshold for
regulation (includes large
single family home)
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Stationary Source Approach:
Manufacturing Example
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NSPS Proposals for Manufacturing
From the ANPR stationary source TSD.
• GHG Control Measures
– “There are numerous demonstrated efficiency improvements that
exist, including boiler and steam system optimization, heat exchanger
fouling mitigation and optimization, efficiency improvements in
process heaters and motors, waste gas and power recovery, and
process optimization and process technology improvements.” Thermal
efficiency improvements
– Process improvements to reduce steam and electricity usage
– Biomass firing/co-firing
– Waste gas recovery
• Approaches under 111 NSPS
– Work practices, equipment standards, numerical efficiency standards.
– Provide flexibility to make improvements and demonstrate they have
received reductions through reporting.
– “Significant” GHG reductions available from new and existing sources.
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PSD/NSR and Title V
PSD/NSR permits are pre-construction permits
Title V permits are operating permits.
PSD
Title V
Threshold is 100 or 250 tons per year
Threshold is 100 tons per year
Standard is BACT (Best Available
Control Technology) (can consider
costs); ANPR suggests could require
carbon capture and sequestration (486)
Requires a permit contain “all applicable
requirements” under the Clean Air Act;
EPA anticipates improved energy
efficiency and operational changes
Would encompass small industrial
sources, “large office and residential
buildings, hotels, large retail
establishments, and similar facilities”
EPA estimates 550,000 additional
sources (compared to 15,000-16,000
current Title V sources
Would be effective immediately at time
GHGs are “regulated pollutants”
Must apply for permit within 1 year of
being subjected to Title V
EPA proposes several suggestions
include Congressional fix, “tailoring
approaches,” legal arguments to craft
relief from strict language; streamlined
regulatory approaches; general
permits; higher thresholds; EnergyStar
22as “presumptive BACT”
EPA proposes several suggestions
including legal arguments to craft relief;
higher GHG cutoffs; deferral approach;
general permits; adjusted fee structure
Alternative Designs for Market-Oriented
Regulatory Mechanisms
(1)
Cap and trade
(2)
Rate-based emission credit program (tradable
performance standard)
(3)
Emissions fee
(4)
Hybrid option
Issue: Does EPA have legal and policy authority to
implement, or is this debate for Congress?
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Sidley Austin Sector Summaries
• Stationary sources
• Aircraft
• Cars and light duty trucks
• Marine vessels
• Locomotives
• Nonroad vehicles
• Heavy duty trucks
• Market based approaches
Available at www.sidley.com/climatechange
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The ANPR
Opportunities for Multinational Corporations
•
Identify multinational corporations as necessary stakeholders that both
are impacted by and bring solutions to climate change mandates and thus
should be consulted in both regulatory and legislative dialogues.
•
Ensure that EPA is taking into account the ramifications on multinationals
operating in the United States and is giving credit for early action
solutions already put in place to reduce greenhouse gas emissions.
•
Address the need to promote conformity between EU and US standards on
issues such as renewable fuels and technology mandates, as well as
international panels that also promote GHG controls.
•
Discuss the trade aspects of climate change regulation to ensure that EPA
is taking into account global issues in fashioning domestic regulations.
•
Identify upstream and downstream impacts on multinational corporations
from domestic climate change regulation, including possibility of leakage.
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Mandatory GHG Inventory Reporting
• The omnibus appropriations bill appropriated $3.5M to EPA
to draft a rule requiring the mandatory reporting of GHG
emissions above appropriate thresholds in all sectors of the
U.S. economy. EPA is to use its existing authority under
the CAA to propose a rule within 9 months of the date of
enactment and issue a final rule within 18 months of
enactment.
• State laws also may require reporting, such as in NY, where
NY Attorney General charged Xcel Energy for failing to
disclose to shareholders the "increased financial,
regulatory, and litigation risks" that are likely to be
triggered by construction of coal-fired plants.
• Could provide first instances of federal enforcement of
climate change rules.
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Renewable and Alternative Fuels
Energy Independence Security Act (Dec. 2007)
• Fuel Efficiency Standards (DOT)
– In April, DOT proposed 25 percent increase in fuel efficiency
for cars and light trucks ending in 2015 (4.5 percent per
year), increasing CAFE from 27.5 mpg to 35.7 mpg by 2015
for cars.
– Comment period closes in late June.
– Scoping for CAFE EIS currently ongoing.
• Renewable Fuel Standards (EPA)
– Provides for 36 billion gallons of renewable fuels by 2022.
– EPA has indicated publicly it is working on regulations to
implement renewable fuel mandates in the EISA.
– Regulations presumably will include several significant
definitions, including “Lifecycle Greenhouse Gas Emissions”
and accounting for “indirect impacts”
– Pursuant to savings clause in EISA, EPA regulation will not
trigger GHG regulation under other Clean Air Act provisions.
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Carbon Sequestration
Proposed EPA Rule
July 2008
Public comment period
Through November
Final Rule
2010 (?)
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Carbon Dioxide Capture and Storage
CO2 Capture
and Transport
Geologic
Sequestration
UIC Program
29 Scope
Geologic Sequestration of CO2
WRE450: 2020
WRE450: 2035
WRE450: 2050
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WRE550: 2020
U.S. electric utility sectoral
deployment of carbon
dioxide capture and storage
(CCS)-enabled generation
systems
WRE550: 2035
WRE550: 2050
Carbon Sequestration
Potential liability for:
Harm to aquifer under Safe Drinking Water Act.
Injection of a hazardous waste under CERCLA, RCRA.
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Thank you.
For more information, please contact:
Sidley Austin LLP
Roger R. Martella, Jr.
[email protected]
(202) 736-8097
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