Climate, Energy, & Air Weekly Update - February 27 - March 2, 2012

A three-judge panel of the D.C. Circuit heard oral argument on EPA’s GHG regulations.  The judges appeared disinclined to significant disturb the Endangerment Finding or the Tailpipe Rule – but they seemed troubled by EPA’s arguments that regulation under the latter inexorably leads to GHG permitting requirements for stationary sources . . . EPA filed its brief in the CSAPR litigation . . . A Virginia Supreme Court denied the state attorney general’s effort to obtain emails and other documents from climatologist and former UVA professor Michael Mann . . . Shell seeks to get ahead of environmental challenges to its Arctic drilling permits by filing for a declaratory judgment of the validity of permits in federal court . . . Sen. Jeff Bingaman introduces a Clean Energy Standard bill.  

Executive Branch

• EPA’s Air Chief Provides Preliminary Details of Forthcoming “Tier 3” Fuel Standards.  In a letter responding to an inquiry by Rep. Ed Whitfield (R-KY) and 67 other Congressmen, Assistant Administrator for Air and Radiation Gina McCarthy provided some basic details regarding the Environmental Protection Agency’s (EPA) forthcoming “Tier 3” emission standards for fuels and light-duty vehicles.  McCarthy clarified that EPA’s only planned change to gasoline standards is a potential reduction in maximum sulfur levels to 10 parts per million (ppm).  According to McCarthy, the more stringent sulfur standard would increase the cost of gasoline by approximately one penny per gallon by 2017.  She also noted that at least seventeen refineries around the country are currently capable of meeting the 10 ppm standard, and are already exporting such fuel to Europe.  The proposed Tier 3 standards are expected to be released later this month.  The letter is available online, here.
• OMB Reviewing Updated Air Quality Standards for NO₂ and SO₂.  EPA has completed a final rule setting secondary National Ambient Air Quality Standards (NAAQS) for nitrogen dioxide (NO₂) and sulfur dioxide (SO₂), and has submitted it to the White House Office of Management and Budget (OMB) for review.  Secondary standards are designed to protect public welfare, in contrast to primary NAAQS, which are principally designed to protect public health.  The proposed form of the rule, which was released for public comment in August of last year, would have established secondary NAAQS for both pollutants at a level identical to the primary standards. 

Congress

• Issa Sends letter to White House Counsel on Fuel Economy.  On Wednesday, House Oversight and Government Reform Committee Chairman Darrell Issa (R-CA) sent a letter to White House Counsel Kathryn Ruemmler requesting information on the role of the Executive Office of the President (EOP) in developing the joint EPA and National Highway Traffic Safety Administration (NHTSA) greenhouse gas and fuel economy standards for Model Year 2012-2016 light-duty vehicles, Model Year 2017-2025 light-duty vehicles, and Model Year 2014-2018 heavy-duty trucks.  Issa’s letter expresses concern that the standards were based on political motives and not on “sound science or objectivity.”  The letter requests answers to nine questions about the role of specific offices, including the Domestic Policy Council, the National Economic Council and the Council on Environmental Quality.  The letter further requests that “all documents and communications between and among EOP employees that may reasonably be considered relevant to this investigation be preserved.”  The letter is available at http://oversight.house.gov/images/stories/Letters/2012-02-29_DEI_to_Ruemmler-WH_-_CAFE_standards_due_3-14.pdf. 
• Chu, Jackson, Salazar Testify Before Committees to Defend Energy and Environment Programs in the FY 2013 Budget Request.  Cabinet members have been testifying before relevant House and Senate committees to defend the programs and projects they are looking to fund in Fiscal Year (FY) 2013 since the President sent his Budget Request to Congress in February.  These committees turned their focus to the energy and natural resources programs in the budget as Energy Secretary Steven Chu testified before the House Science and Technology Committee, EPA Administrator Lisa Jackson testified before the House Energy and Commerce Committee, and Interior Secretary Ken Salazar testified before the Senate Energy and Natural Resources Committee.  All three also testified, or are slated to testify, before the Appropriations Subcommittee that has jurisdiction over their agency.   These hearings are an opportunity for Members to ask witnesses about current and future programs.  As expected, topics discussed ranged from the future of the Yucca Mountain nuclear waste repository to the current price of gasoline and even the necessity for EPA to continue to exist.  All formal testimony is available at the committees’ websites.
• House Natural Resources Committee Holds Mark-up.  On Wednesday, the House Natural Resources Committee passed 21 bills, including H.R. 3409, the “Coal Miner Employment and Domestic Energy Infrastructure Protection Act,” which would block the Interior Department from issuing new regulations on coal mining.  H.R. 3409 passed 26-18 with bipartisan support.  Energy and Mineral Resources Subcommittee Chairman Doug Lamborn (R-CO) stated that enactment of H.R. 3409 would “stop the recklessly rushed rulemaking by the Office of Surface Mining.”  Additional information on the bills passed by the Committee is available at http://naturalresources.house.gov/Calendar/EventSingle.aspx?EventID=282020
• Four Senior House Democrats Send Letter to CFTC on Gasoline Prices.  Natural Resources Committee Ranking Democrat Ed Markey (D-MA), Financial Services Committee Ranking Democrat Barney Frank (D-MA), Energy and Commerce Committee Ranking Democrat Henry Waxman (D-CA) and Oversight and Government Reform Committee Ranking Democrat Elijah Cummings (D-MD) sent a letter to Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler on Wednesday.  The foursome urged the CFTC to follow through on rules to establish position limits for speculators in energy markets – particularly in light of the recent increases in gasoline prices.  The legislators expressed concern that the CFTC has become timid in the face of litigation and pressure from Republican lawmakers.  The letter is available at http://markey.house.gov/press-release/key-house-democrats-assail-attacks-regulation-oil-speculation. 
• Bingaman Introduces Clean Energy Standard Bill.  Senate Energy and Natural Resources Chairman Jeff Bingaman (D-NM) introduced S. 2146, the “Clean Energy Standard Act of 2012.”   S. 2146, amongst other things, would set a national goal for generation of “clean” energy as defined in the bill.  Bingaman acknowledged that the prospects for passage before the close of the current Congressional session are slim, but hopes to hold hearings on the legislation and eventually gauging whether the measure has enough support to move to the Senate floor.  The text of the bill and summary is available at http://energy.senate.gov/public/index.cfm/democratic-news?ID=67e21415-e501-42c3-a1fb-c0768242a2aa. 
• Senate Begins Debate on Surface Transportation Reauthorization Bill.  On Friday, Senate Majority Leader Harry Reid (D-NV) released new text for S. 1813, the “Moving Ahead for Progress in the 21st Century Act” (MAP-21), which would reauthorize Federal highway and highway safety construction programs.  The current version of S. 1813 includes 37 amendments consistent with an agreement with key lawmakers that limited the total number of amendments that could be offered.   Several of the amendments affect the allocation and scope of the Congestion Mitigation and Air Quality funds.  Without action, current programs will expire on March 31.
• Congressman Norm Dicks (D-WA) Announces Retirement.  On Friday, House Appropriations Committee Ranking Member Norm Dicks (D-WA) announced that he will not seek reelection in November.  Dicks has been engaged in funding programs related to the environment, natural resources, energy and defense issues in each one of his 36 years of service.  The official statement released by Dicks’ office is available at http://www.house.gov/apps/list/speech/wa06_dicks/morenews1/march2.shtml. 

Judicial

• D.C. Circuit Judges Appear Skeptical About EPA Tailoring of GHG Permitting. On February 28 and 29, a three judge panel of the Court of Appeals for the District of Columbia Circuit (D.C. Circuit) heard oral argument on legal challenges to a set of linked EPA GHG regulations.  On the first day, the court heard from lawyers on: (1) EPA's finding that emissions of six GHGs endanger public health and welfare (the "Endangerment Finding"); and (2) EPA's GHG emission standards for new motor vehicles (the "Tailpipe Rule"), which resulted from the Endangerment Finding.  Though the judges appeared troubled by some elements of the Endangerment Finding, their comments suggested that the challenges were mostly foreclosed by the Supreme Court's decision in Massachusetts v. EPA.  On the second day, the court heard arguments related to EPA's long-standing interpretation that regulation of "any pollutant" under any section of the Clean Air Act (including the vehicle regulation sections) triggers permitting requirements for certain stationary sources of that pollutant under the Act's Prevention of Significant Deterioration and Title V provisions (the "Historical Regulations" issue).  The arguments also focused on EPA's efforts to phase in these permitting requirements in order to avoid the "absurd results" that otherwise would result from application at the emission thresholds set forth in the statute (the "Timing Rule" and "Tailoring Rule").  In the Day Two arguments, at least two of the judges on the panel - Sentelle and Tatel - seemed not completely persuaded that EPA was barred from revisiting its interpretation of the "any pollutant" interpretation, particularly if plausible alternative interpretations would avoid either "absurd results" or EPA's legally suspect means of avoiding those results.  The timing of decisions by the panel on the four legal challenges is unknown, but could occur as early as summer. 
• Lawsuit Filed to Force EPA to Require Action to Achieve Ozone Standard for San Joaquin Valley.  On February 28, Earthjustice, on behalf of the Sierra Club and Medical Associates for Healthy Air, filed a lawsuit against EPA in the U.S. Court of Appeals for the Ninth Circuit to force the agency to take action to ensure that the San Joaquin Valley in California attains the 1-hour ozone NAAQS.  The precise remedy sought by petitioners is not yet clear.  The Ninth Circuit recently rejected EPA’s 1-hour ozone standard for the valley as arbitrary and capricious because the agency used outdated data in setting the standard.  The petition for review requests that the agency review the final ozone rule, under which  the agency found the San Joaquin Valley was out of attainment with the NAAQS for ozone but did not promulgate a new standard.
• Opening EPA CSAPR Brief Filed with D.C. Circuit. On March 1, the United States filed its opening brief in litigation over the Cross State Air Pollution Rule (CSAPR), EME Homer City Generation LP v. EPA, at the D.C. Circuit. The case consolidates a number of challenges to the CSAPR rule, which sets state “budgets” for power plant emissions of sulfur dioxide and nitrogen oxides in order to address their significant contribution to downwind nonattainment of NAAQS for ozone and fine particulate matter.  The Department of Justice, which authored the brief on behalf of the EPA, argues that the methods used to create the state emissions budgets are rational. The government also argued that EPA’s methods for  regulating emissions that “contribute significantly” to the inability of other states to meet the requirements of the Clean Air Act is consistent with the requirements of the statute and court precedent and that the agency followed proper notice and comment procedures prior to finalizing the rule.  Oral argument is set for April 13.
• Shell Files for Declaratory Judgment Supporting Permits for Arctic Drilling. On February 29, Shell Oil filed a lawsuit in federal court requesting that the court determine whether its Alaska Arctic oil spill response plan and other permits complied with federal law.  The goal of the suit is to preempt lawsuits challenging the plan that the company assumes will be filed by environmental groups immediately prior to drilling, which is set to commence this summer in the Beaufort and Chukchi Seas off the coast of Alaska.  Shell has already received regulatory approval for the drilling plan from the Interior Department, but wants the federal court to second the approval.  The suit for declaratory judgment was filed against 13 environmental groups, many of whom had previously challenged other drilling projects that Shell had undertaken.
• Virginia Supreme Court Denies Attorney General’s Request for Climate Documents. On March 2, the Virginia Supreme Court denied state Attorney General Ken Cuccinelli’s (R) request to obtain documents, including e-mails, related to scientist Michael Mann’s research on climate change while Mann was a professor at the University of Virginia.  The court held that the Attorney General’s request to obtain such information though a civil investigative demand was improper because the university is not a “person” as defined under Virginia’s Fraud Against Taxpayers Act.  Mann has been subject to a number of investigations concerning his work, including one by the National Science Foundation, all of which have failed to discredit his results.

States

• Ohio and DOE Launch Innovative Pilot EPA Compliance Plan for Power Plants.  The Public Utility Commission of Ohio announced a pilot program that will retrofit coal-fired power plants with combined heat and power (CHP) technology.  The pilot will begin with a workshop on March 9.  The Department of Energy will also test a technical assistance program in the state before a national rollout, which will occur after the release of EPA’s final standards for hazardous air pollutant emissions from industrial boilers (commonly referred to as the Boiler MACT Rule).
• California Regulators Issue Proposed Order on Cap-and-Trade Compliance Instruments.  The California Public Utilities Commission (CPUC) issued a proposed order that covers how the State’s three public utilities (Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison), can procure compliance instruments under the State’s cap-and-trade program, which is scheduled to launch in January 2013.  The proposed order says that utilities can purchase allowances through forward contracts or through futures executed on CPUC-approved exchanges, but would prohibit utilities from purchasing offset credits through forward contracts or futures.  Utilities would also be prohibited from entering into options, swaps, or other derivatives for allowances and offset credits.   The order further states that utilities must ensure that sellers assume the risk of later invalidation of offset credits.  The proposed order rejects a request by the Sierra Club to disallow any purchase of offset credits and also rejects their request for a California Environmental Quality Act review before allowing such offset purchases.  Written comments from the parties on the proposed order are due March 12.  The proposed order is located online, here.

Industry and NGOs

• GenOn Will Close Eight Power Plants by May 2015 Due to EPA Regulations.  GenOn, a Houston-based electricity generator, will close eight plants located in Ohio, New Jersey, and Pennsylvania.  The eight plants, seven of which are coal-fired, represent a generating capacity of 3,140 megawatts.   GenOn blames the plant closures on market conditions and high compliance costs associated with EPA’s mercury and air toxic rules, which were finalized in December 2011.
• C2ES Releases Report on the Benefits of CO₂ Enhanced Oil Recovery.  The Center for Climate Energy Solutions (“C2ES”), the National Enhanced Oil Recovery Initiative, and the Great Plains Institute released a report titled “Carbon Dioxide Enhanced Oil Recovery: A Critical Domestic Energy, Economic and Environmental Opportunity.” Carbon Dioxide Enhanced Oil Recovery (“CO₂-EOR”) is a process that increases oil field production through the injection of CO₂ in to rock formations, which can release otherwise trapped crude oil.  The report outlines “recommendations for targeted federal and state incentives to expand CO₂-EOR … [which] would significantly increase U.S. domestic oil production while generating net new tax revenues for the federal government and states struggling to fill budget gaps and jumpstart our nation’s economy.”  The report is available at http://www.c2es.org/docUploads/EOR-Report.pdf.
• API Says White House Should Lead Federal Review on Hydraulic Fracturing.  Kyle Isakower, American Petroleum Institute (“API”) Vice President for Regulatory and Economic Policy, issued a statement urging the White House to better coordinate federal review of hydraulic fracturing.  Isakower’s statement to the press said “there are currently ten federal agencies reviewing, studying, or proposing regulation of this technology to affordably develop America’s natural gas. The fact is that there is a strong state regulatory system in place, and adding potentially redundant and duplicative federal regulation would be unnecessary, costly, and could stifle investment.  We need leadership by the White House to reign in these uncoordinated activities and streamline the process for more efficient reviews.” 

Studies & Reports

• EPA Releases Draft Annual GHG Inventory.  EPA has issued a draft version of its annual Inventory of U.S. Greenhouse Gas Emissions and Sinks.  Covering the period 1990 to 2010, the draft report finds that total U.S. emissions of greenhouse gases (GHG) have increased by 11% over the study period.  Emissions in 2010, the most recent year covered in the report, increased by 4% relative to the previous year – due primarily to economic growth, and in part to increased electricity consumption during the high summer temperatures of that year.  EPA will accept public comment on the report through March 28.  The report is available at http://epa.gov/climatechange/emissions/usinventoryreport.html. 
• New Report Collects Research on Designing Buildings to Resist Climate Change Impacts.  A comprehensive new report by the U.S. Green Building Council and University of Michigan's Taubman College of Architecture and Urban Planning evaluates research on the likely impacts of climate change on the built environment, and identifies strategies for adapting to those impacts while upholding sustainable design principles.  Among other things, the report notes that most buildings are designed to withstand historical patterns of precipitation and temperature that may alter dramatically over the lifetime of the structure as a result of climate change.  Adapting to these impacts may require changes in the selection of building materials and the design of critical building systems, such as climate control and stormwater management.    The report provides recommendations relating to building envelopes; siting and landscaping; heating, cooling, and lighting systems; water and waste systems; equipment; and building operations.  The report is available at http://www.usgbc.org/ShowFile.aspx?DocumentID=18538.