Playing Chicken with GHG Emissions Rules

There is a simmering feud between the US Environmental Protection Agency and the States over the implementation of a flood of impending new regulations over greenhouse gas emissions.  It threatens to boil over into an open battle over national environmental policy.

What is happening is that the Administration is using Federal regulations to achieve the policy objectives it could not achieve in Congress because of the rejection of the Waxman-Markey Bill. Democrats see this as the last best hope to achieve their environmental goals.  Republicans see it as the last gasp of a cap and trade strategy the voters do not accept.  The States are caught in the middle as the feud plays out.

On December 2, 2010 the U.S. Court of Appeals for the District of Columbia Circuit voted 4-3 to deny a petition for a review by the full court, after a three-judge panel ruled in July the Environmental Protection Agency acted properly in rejecting a plea by 12 U.S. states to require reductions in gases linked to global warming.   The Appeals Court told the US EPA it did have the authority to enforce its newly proposed greenhouse gas emissions rules even while those rules are being challenged in court.  Massachusetts v. EPA, 03-1361.

This is a game of ‘chicken’ that the courts do not want to play. If the appeal had been upheld it would have forced the courts to set the greenhouse emissions standards thus allowing the appellants to end run the US-EPA.  This is a game often played in the past by environmental interests who seduced the courts to take on environmental issues and force the Government to act.  It has caused much grief as the courts were accused of ‘legislating from the bench’ and, in the gas of greenhouse gas emissions where the science is uncertain and the politics are fierce the courts have decided to let US-EPA adopt its rules and then own its own burden in court to defend them.

For the states there is no sitting on the sidelines on this because failure to act means the Federal government will take over the traditional state responsibility and almost no state wants that to happen. But acting to bring the State Implementation Plans (SIP) into compliance under the Clean Air Act forces the states to accept proposed changes in greenhouse gas regulations that hurt the state’s economy and jobs when they can least afford it.

The USEPA Regulations published new rules in 2009 requiring reporting of greenhouse gas emissions beginning in January 2010.  The purpose of reporting was to gather information for use in setting emissions rules.  What has come to be known as the “Tailoring Rule” was published in May 2010 setting permit levels for greenhouse gas emissions in two stages for power plants and other large stationary emitters. It is called the tailoring rule because it was designed to go after big emitters like power plants and factories but not sweep up smaller sources of greenhouse gases like apartment buildings, restaurants and farms in rules that cover carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluorides.

Best Available Control Technology. The first phase of these new rules begins in January 2011, requires large industrial facilities that must get permits under the federal Clean Air Act to address their greenhouse gas emissions if they make any plant modifications that will increase emissions levels by more than 75,000 tons per year (tpy). If the anyway sources themselves increase emissions, then best available control technology (BACT) must be used to reduce emission levels to meet the requirements of the rule. Existing facilities that emit more than 100,000 tpy are required to comply with the new BACT rules when they renew their air permits or make any changes to the power plant after January 2011. After July 2011, the second phase of the new rule kicks in requiring pre-construction permits using BACT for new projects or existing projects that make major modifications and that emit more than 100,000/tpy.

But here’s the kicker: EPA said it will provide guidance on what constitutes best available technology but it has yet to do so.  Dozens of states have complained saying the new rule will overwhelm them with paperwork, delay new project construction and cause the states to spend more money than they have available.  The states also point out EPA has offered no guidance on approving permits filed with the states and the EPA’s legal authority to raise emissions thresholds when federal statutes have already established GHG levels.

Officials in other states say the EPA has not given them enough time to revise their rules, which generally set lower emissions levels. If the proposed rule is implemented as proposed then state agencies would have to issue thousands of new air-quality permits over the next 18 months. Officials say that could delay the process for many new facilities.

But US EPA says it make take up to two years before it can complete its rulemaking to provide definitive guidance sufficient to approve new pre-construction permit applications thus delaying effectively new power plant construction from fossil fuel sources to pressure Congress into passing the cap and trade legislation as the lesser of two evils.

December 3 2010, USEPA said thirteen states need to make additional modifications to their clean air rules to allow EPA to certify them to issue permits starting in January.  The states are Arizona, Arkansas, California, Connecticut, Florida, Idaho, Kansas, Kentucky, Nebraska, Nevada, Oregon, Texas and Wyoming.  EPA then gave the states’ just 30 days to respond upping the ante in the game of chicken.

But is looks like US-EPA is going to blink first. The agency said it needs until July 2011 to further analyze scientific and health studies of the smog rules and until April 2012 on the boiler regulation.  As you can imagine, this delay infuriates the environmental advocates who sense victory in imposing new greenhouse gas emissions rules is slipping away from them.

Why the delay?  Well, besides the pure politics of the ‘elections have consequences’ theory, US-EPA is simply not ready to enforce rules that have such profound impacts on the economy.

The bottom line is that 37 states and many more parties have sued US-EPA over these rules.  A Federal appeals court panel has consolidated the many lawsuits challenging the authority of the Federal Government to issue them in the absence of specific Congressional approval and the reasonableness of the rules given the benefits.  The US Court of Appeals refused to be sucked into the regulatory determination and told US-EPA to take its chances in court.  But now US EPA, despite being on a mission to get these new rules as fully embedded as it can before some either Congress or the Courts order it to stop, has decided it needs more time to develop the rules guidance and enforcement or risk a complete breakdown or defeat in the middle of the 2012 election process.

Whether this is ‘check’ or ‘checkmate’ against US-EPA is not yet clear, but the Federal regulatory process is grinding to a slow crawl risking the death of a thousand cuts by opponents of the new rules.

Stay tuned.