In a long expected finding, the U.S. Environmental Protection Agency (EPA) issued a regulatory decision that lays the foundation for EPA to regulate greenhouse gas emissions under the federal Clean Air Act (CAA). The decision announced on Friday, April 17, 2009 is entitled Proposed Endangerment Finding and Cause or Contribute Findings for Greenhouse Gases and was published in the Federal Register. This is a major step by the Obama Administration to attempt to force Congress to pass a climate change bill regulating greenhouse gases. Time magazine may have said it best in an article entitle EPA's CO2 Finding: Putting a Gun to Congress's Head. Whilee it was known that EPA was working on and would announce the finding, the actual announcement has gained enormous coverage in the media and serves as the Administration's opening salvo in its ultimate work to try to convince enough senators to vote for a bill to get beyond the 60 votes need to bypass a filibuster.
The EPA regulatory decision follows a U.S. Supreme Court decision two years ago that concluded the EPA under the Bush Administration had failed to articulate why greenhouse gases should not be regulated as emissions from automobiles. In so doing, the Court indicated that greenhouse gases were pollutants under the Clean Air Act. Now that EPA is going to issue a final regulatory decision after 60 days of public comment and several public hearings, it is clear that EPA can, and will, take action absent Congressional action.
Regulation under the Clean Air Act is messy and may not include a cap and trade program, but simple command and control in the form of emission reductions without the ability to trade for other facility allowances or domestic or international offsets. This would not be good for industry.
Certain industry groups have already begun to work to promote their version of a cap and trade program. The group USCAP, which stands for United States Climate Action Partnership, has issued a document entitled A Blueprint for Legislative Action, providing a general outline of a climate change program based on cap and trade.
The one question that will likely play out is how the world will look if Congress does not pass a bill or passes late next year or even later. Permits for coal=fired power plants and other greenhouse gas-emitting facilities are already being challenged, and environmental groups and other plaintiffs are challenging the permits in court as not meeting CAA requirements to address all pollutants including greenhouse gases. If EPA issues a final decision that greenhouse gases are an air pollutant, do these cases then have a much greater change of success? Will EPA and the states be required to address greenhouse gas emissions in federal Title V permits? These are the types of questions that will come to the fore relatively quickly.
What about cement kilns, lime plants, refineries, natural gas processing plants, manufacturing plants, will they be challenged as well? Coal-fired power plants may not be the only plants whose permits are challenged.
One need not look beyond the administrative case of In re Deseret Power Cooperative. This was a case in which the permit for a power plant in Utah that was challenged because the plant permit did not address CO2 emissions under the Prevention of Significant Deterioration program under the CAA. the challengers argued the plant should implement the Best Available Control Technology or "BACT" to achieve greenhouse gas, largely CO2 emissions.
The EPA Appeals Board remanded the issue back to the EPA, then under the Bush Administration, not to require such technology or reductions as the Appeals Board concluded that the decision was not supported by the administrative record. The Appeals Board called on EPA to address the issue of CO2 and other greenhouse gases being pollutants governed by the CAA.
Other cases have been brought against various sources and several petitions have been filed with the EPA to regulate mobile sources and stationary sources.
With the finding by EPA, all such permits, petitions, and proceedings could be affected. Could this be a snowball effect with EPA and states finding themselves forced to regulate greenhouse gas emissions before Congress makes any final decisions whether to regulate greenhouse gas emissions? The next year promises to be a challenging time for industry as they face a great deal of uncertainty as to how greenhouse gases will be regulated and how individual facilities and companies will be affected. It appears more likely that some form of greenhouse gas regulation will be required. For those companies that may be affected, it is time to develop a corporate strategy to address the risks and any opportunities that greenhouse gas regulation may bring.