Electricity
The Affordable Clean Energy (ACE) Rule
Section 111(b) of the Clean Air Act, 42 U.S.C. § 7411, directs EPA to develop “a list of categories of stationary sources” whose “air pollution ... may reasonably be anticipated to endanger public health or welfare,” and then publish emissions standards for new sources in those categories. For existing sources in those categories, EPA takes a different approach. As the U.S. Supreme Court explained in American Electric Power Co., Inc. v. Connecticut, 564 U.S. 410 (2011), EPA “issues emissions guidelines,” which states must follow to develop “performance standards for stationary sources within their jurisdiction.” Yet both New Source Performance Standards (NSPS) and existing source emissions guidelines must be based on the “best system of emission reduction” that EPA “determines has been adequately demonstrated,” taking into account cost “and any nonair quality health and environmental impact and energy requirements … .” The breadth of the phrase “best system of emission reduction,” and the degree of flexibility it provides EPA in developing emissions guidelines for existing fossil-fuel-fired power plants, was the subject of the United States Supreme Court’s June 30th opinion in West Virginia v. EPA.
On the day before President Biden took office in 2021, in American Lung Association v. EPA, the U.S. Court of Appeals for the D.C. Circuit had vacated the Trump Administration’s greenhouse gas standards for existing coal-fired power plants, the Affordable Clean Energy (ACE) Rule. In the ACE Rule, the Trump Administration concluded that “system of emission reduction” means something that can be applied to (or undertaken at) a particular source – i.e., “inside the fenceline” – such as control equipment. The D.C. Circuit rejected that interpretation, holding that EPA could also consider “systems of emission reduction” for the industry as a whole, such as shifting generation from coal-fired electric generating units to cleaner, natural gas-fired or renewable generation. That was the interpretation that the Obama Administration had followed in its Clean Power Plan, which the ACE Rule repealed and replaced.
On June 30th, in a 6-3 majority opinion written by Chief Justice Roberts, the Court declared the Clean Power Plan’s generation-shifting approach unlawful. The majority relied upon the “major questions” doctrine, which presumes that Congress is unlikely to delegate broad authority to an agency using vague or “modest” words. This presumption, the Court held, leads the Court to respond with skepticism to “agencies asserting highly consequential power” in the absence of “‘clear congressional authorization[,]’” even if “th[o]se regulatory assertions ha[ve] a colorable textual basis.” In the case of the Clean Power Plan, the majority held that EPA had chosen to “dictat[e] the optimal mix of energy sources nationwide,” and in doing so “balanc[e] the many vital considerations of national policy implicated in deciding how Americans will get their energy[,]” based solely on “a vague statutory grant” (specifically, the word “system”).
Importantly, the majority did not hold that BSER “refers exclusively to measures that improve the pollution performance of individual sources … .” Accordingly, the majority opinion does not necessarily limit the Biden Administration to considering efficiency improvements as the basis for its replacement to the ACE Rule. The majority also distinguished the use of generation shifting or emission trading as a means to achieve a level of emission reduction otherwise found to be achievable and cost-justified from the use of generation shifting as a means to determine the level of emission reduction required. Under the Court’s decision, the former will still be permissible under Section 111.
Coal Combustion Residuals Rule
In April 2015, EPA promulgated its Coal Combustion Residuals rule under Subtitle D of the Resource Conservation and Recovery Act (RCRA). The rule established numerous requirements for the disposal of coal combustion residuals (CCR) in landfills and surface impoundments, including structural integrity design criteria and safety assessment requirements; liner requirements for new and expanded impoundments and landfills; site restrictions for new landfills and surface impoundments; groundwater monitoring requirements; requirements for closing CCR units; and more.
In July 2018, EPA finalized amendments to the 2015 CCR Rule. The amendments permitted EPA (or states with approved programs) to “[s]uspend groundwater monitoring requirements if there is evidence that there is no potential for migration of hazardous constituents to the uppermost aquifer during the active life of the unit and post-closure care … .” They allowed permitting authorities, and not professional engineers, to certify that facilities are complying with the CCR Rule’s requirements. They established risk-based groundwater protection standards (GWPS) for the four constituents in 40 CFR Part 257, Appendix IV, without maximum contaminant levels (MCLs) under the Safe Drinking Water Act. And they extended to October 31, 2020, the deadline by which surface impoundments were required to stop accepting CCR and close if they could not comply with the requirement in 40 C.F.R. § 257.60 to place facilities at least five feet above the upper limit of the uppermost aquifer, or are unlined and leaking, causing a statistically significant increase over the GWPS. The 2018 rule was challenged in the D.C. Circuit, and ultimately remanded without vacatur for reconsideration.
In August 2018, the D.C. Circuit issued Utility Solid Waste Activities Group v. EPA, 901 F.3d 414 (D.C. Cir. 2018), which granted in part certain environmental organizations’ challenges to the 2015 CCR Rule and remanded certain provisions of the rule at EPA’s request. The court found that the rule’s provisions allowing “existing, unlined surface impoundments to continue operating until they cause groundwater contamination” were “arbitrary and contrary to RCRA” because groundwater contamination would not be “promptly detected,” “promptly stopped,” or able to be remedied “once it occurs.” The court struck down provisions treating clay-lined impoundments as if they were lined with geomembranes, finding those provisions “failed to ensure ‘no reasonable probability’ of adverse effects to the environment, as RCRA requires.” It also struck down the rule’s exemption of “legacy ponds” (“inactive impoundments at inactive facilities”) from its preventative regulations.
The “Part A” Rules
On August 28, 2020, EPA finalized a rule (referred to as “Part A”) to respond to the D.C. Circuit’s ruling in Utility Solid Waste Activities Group. Among other changes, the rule reclassified clay-lined impoundments as “unlined” impoundments, and extended the deadlines in 40 C.F.R. § 257.101(a)(1) and (b)(1)(i) by which unlined impoundments (and those that cannot comply with the aquifer location requirement) must stop accepting waste and begin closure to “as soon as technically feasible, but not later than April 11, 2021.” The “Part A” rule also revised the alternative closure standards in 40 C.F.R. § 257.103 to allow impoundments to continue to receive both CCR and non-CCR waste if the impoundment’s owner or operator demonstrates that there is no alternative disposal capacity on- or off-site and either: (1) “it was technically infeasible to complete the measures necessary to obtain alternative disposal capacity … by April 11, 2021”; or (2) the facility is permanently closing a coal-fired boiler. Impoundments qualifying under option (1) could continue to operate until October 2023 or, for impoundments closing as a result of the Utility Solid Waste Activities Group ruling, October 2024. Impoundments qualifying under option (2) could continue to operate until October 2023 (if 40 acres or smaller) or October 2028 (if larger than 40 acres). In November 2020, several environmental organizations filed a petition for review of the “Part A” rules in the D.C. Circuit. That case, Labadie Environmental Organization v. EPA (Case No. 20-1467), is still being held in abeyance by agreement of all of the parties, while the petitioners review EPA’s decisions on the demonstrations submitted under options (1) and (2).
EPA’s website lists the 57 facilities that submitted demonstrations under options (1) and (2). On January 11th, EPA announced that it was proposing to determine that four of the extension applications were incomplete; to determine that one facility (Greenidge in Dresden, NY) was ineligible for an extension under option (2) (because its boilers were natural gas-fired, not coal-fired); to deny the extensions required by Clifty Creek Power Station (Madison, Indiana), Gavin Power Plant (Cheshire, Ohio), and Ottumwa Generating Station (Ottumwa, Iowa); and to grant the extension request from H.L. Spurlock Power Station (Maysville, Kentucky) with conditions. EPA has not finalized any of these proposed determinations. Various affected facilities and the Utility Solid Waste Activities Group filed petitions in the D.C. Circuit for review of EPA’s actions, which have been consolidated as Electric Energy, Inc. v. EPA (Case No. 22-1056). On July 12th, EPA proposed to conditionally approve alternative closure deadlines for Calaveras Power Station (San Antonio, Texas) for its sludge recycling holding pond, and Mountaineer Power Plant (Letart, West Virginia) for its bottom ash ponds. Among the facilities submitting complete demonstrations, 4 facilities withdrew their extension applications because they had stopped receiving waste.
Interstate Transport of Air Pollution
Clean Air Act § 110(a)(2)(d) (42 U.S.C. § 7410(a)(2)(D)) requires state implementation plans (SIPs) to contain “adequate provisions” to prevent any State’s sources or other emissions activities from contributing significantly to nonattainment with, or interfering with maintenance of, a NAAQS in another state, or interfering with another state’s prevention of significant deterioration (PSD) measures.
On April 6th, EPA issued a proposed rule stating its intention to issue Federal Implementation Plans (“FIPs”) for twenty-five states that EPA believes are “significantly contributing to downwind nonattainment or [significantly] interfering with maintenance of the 2015 ozone NAAQS in other states based on projected nitrogen oxides (NOx) emissions in the 2023 ozone season.” As with prior CSAPR rulemakings, states were considered to “significantly contribute” to downwind nonattainment or maintenance issues if their contributions “equaled or exceeded 1 percent of the NAAQS.”
On August 26th, EPA issued a final rule revising certain deadlines under its CSAPR trading programs, per its April proposal. The final rule amends the deadline for EPA to record advance allowance allocations for 2023 and 2024 under the CSAPR NOX Ozone Season Group 3 Trading Program to September 1, 2023; amends the deadline under every CSAPR trading program and Texas’s SO2 Trading Program for EPA to record advance allowance allocations for 2025 and beyond to July 1 in the year before each control period; and amends the deadline for states to submit state-determined advance allowance allocations for 2025 and beyond to June 1 of the year before each control period.
Infrastructure Generally
The Infrastructure Investment and Jobs Act of 2021
On November 15, 2021, President Biden signed H.R. 3684, the Infrastructure Investment and Jobs Act (IIJA), into law. The bill is massive – over 1,000 pages in length – and includes funding for hundreds of initiatives relating to highways, rail, motor vehicle safety, public transit, electric grid infrastructure, clean power generation, energy efficiency, broadband deployment, manufacturing, and much more. A White House overview of the IIJA can be found here.
Of particular interest to this Section and this Committee, the IIJA appropriates billions of dollars to EPA to fund drinking water and wastewater infrastructure, and millions of dollars for carbon sequestration. As summarized by EPA, the IIJA includes $11.7 billion in funding for the Drinking Water State Revolving Fund, $11.7 billion for the Clean Water State Revolving Fund, and $10 billion (through various programs) to address emerging contaminants in drinking water (such as PFAS). The IIJA also provides $25 million for EPA to permit Class VI wells for carbon sequestration programs, and $50 million for EPA to award in grants to states that set up their own, EPA-approved underground injection control programs for permitting Class VI wells.
Inflation Reduction Act
On August 16th, President Biden signed H.R. 5376, the Inflation Reduction Act (IRA), into law. As with the IIJA, the IRA covers a wide variety of areas, including (per the CRS bill summary) corporate tax reform; funding for the Internal Revenue Service; prescription drug pricing reform; Affordable Care Act subsidies; tax credits for renewable resources, clean fuels (including sustainable aviation fuels), energy efficiency projects, and plug-in electric vehicles; and much, much more. A White House overview of the IRA can be found here.
Of particular interest, the IRA appropriates $3 billion to EPA for grants and rebates to reduce emissions of greenhouse gas and other air pollutants at ports; $7 billion to EPA for grants “to enable low-income and disadvantaged communities to deploy or benefit from zero-emission technologies,” such as roof-top solar; $87 million for a new “low emissions electricity program” that would include “education, [outreach,] technical assistance, and partnerships … with respect to reductions in greenhouse gas emissions that result from domestic electricity generation and use”; $5 million to “support … enhanced standardization and transparency of corporate climate action commitments and plans to reduce greenhouse gas emissions”; and $250 million “to develop and carry out a program to support the development, enhanced standardization and transparency, and reporting criteria for environmental product declarations that include measurements of the embodied greenhouse gas emissions of the material or product associated with all relevant stages of production, use, and disposal … .”
The IRA also amends the Clean Air Act to create a new Methane Emissions Reduction Program for the petroleum and natural gas industries. Under this program, EPA will begin collecting a “waste emissions charge” on “methane emissions that exceed an applicable waste emissions threshold … from an owner or operator of an applicable facility that reports more than 25,000 metric tons of carbon dioxide equivalent of greenhouse gases emitted per year … for calendar year 2024 and … thereafter.” “Applicable facilities” are offshore and onshore petroleum and natural gas production facilities; onshore natural gas processing and transmission compression facilities; underground and liquefied natural gas storage facilities; liquefied natural gas import and export equipment; onshore petroleum and natural gas gathering and boosting facilities; and onshore natural gas transmission pipelines. The “applicable waste emissions threshold” varies for the different categories of applicable facilities – for example, it is “0.05 percent of the natural gas sent to sale from or through [the] facility” for a nonproduction petroleum or natural gas system and “0.11 percent of the natural gas sent to sale from or through [the] facility” for a natural gas transmission facility. And the charge per metric ton for excess methane emissions would be $900 for emissions in calendar year 2024, $1,200 for emissions in calendar year 2025, and $1,500 for emissions starting in calendar year 2026. Importantly, an facility that is “subject to and in compliance with” New Source Performance Standards (NSPS) or existing source performance standards that are “in effect in all States” for that type of facility will be exempt from paying waste emissions charges, but only if those standards “result in equivalent or greater [greenhouse gas] emissions reductions” than the oil and natural gas sector NSPS and emissions guidelines that EPA proposed in November 2021. Moreover, the IRA appropriates $850 million to EPA for “grants, rebates, contracts, loans, and other activities” to help applicable facilities prepare greenhouse gas reports, conduct “methane emissions monitoring,” and undertake efforts “to reduce [their] methane and other greenhouse gas emissions” or “mitigate legacy air pollution” from such systems.
In total, the IRA appropriates $41.5 billion (as summarized by EPA) to reduce greenhouse gas pollutant emissions and address other air pollution. And the White House touted a “preliminary assessment” from the U.S. Department of Energy that the IRA “will help drive 2030 economy-wide greenhouse gas (GHG) emissions to 40% below 2005 levels.”
National Environmental Policy Act
Amendments to the NEPA Rules
The National Environmental Policy Act (42 U.S.C. § 4321 et seq.) declares, at § 4331, that “it is the continuing policy of the Federal Government ... to use all practicable means and measures ... to create and maintain conditions under which man and nature can exist in productive harmony, and fulfill the social, economic, and other requirements of present and future generations of Americans.” It instructs “the Federal Government to use all practicable means, consistent with other essential considerations of national policy, to improve and coordinate Federal plans ... to the end that the Nation may ... fulfill the responsibilities of each generation as trustee of the environment for succeeding generations ... .” And, at § 4332, it requires all federal agencies to “insure that presently unquantified environmental amenities and values may be given appropriate consideration in decisionmaking along with economic and technical considerations,” and to take into account environmental impacts and possible alternatives when recommending or commenting on legislative proposals or “other major Federal actions significantly affecting the quality of the human environment ... .”
In July 2020, under the Trump Administration, the Council on Environmental Quality (CEQ) finalized extensive changes to the NEPA rules that CEQ said would “simplify[ ] and clarify[ ] the requirements” and reduce “excessive paperwork, litigation, and delays.” In October 2021, under the Biden Administration, the CEQ proposed to begin “restor[ing] [the] regulatory provisions that were in effect for decades before being modified in 2020.” CEQ finalized that “Phase I” rulemaking on April 20th. The “Phase 1” rulemaking, which went into effect on May 20th, focuses on three specific changes.
The first change relates to the “purpose and need” section of the environmental impact statements (EISs) that federal agencies prepare for major federal actions. Before the 2020 amendments, 40 C.F.R. § 1502.13 stated that an EIS “shall briefly specify the underlying purpose and need to which the agency is responding in proposing the alternatives including the proposed action.” The Trump CEQ amended the rule and added a sentence that stated, “When an agency's statutory duty is to review an application for authorization, the agency shall base the purpose and need on the goals of the applicant and the agency's authority.” The “Phase 1” amendments revert to the prior language. The Biden CEQ explained that it believes the Trump amendment could be misconstrued “to require agencies to prioritize an applicant’s goals over other relevant factors, including effectively carrying out the agency’s policies and programs or the public interest.” Instead, the CEQ stated, “agencies should have discretion to base the purpose and need for their actions on a variety of factors, which include the goals of the applicant, but not to the exclusion of other factors.”
The second change relates to the requirements for agency NEPA procedures in 40 C.F.R. § 1507.3. The Trump CEQ amended that rule to state that the NEPA implementing regulations would generally control if there were inconsistencies between the amended NEPA regulations and agencies’ existing NEPA procedures, and that agencies would have until September 2023 to revise their procedures to make them consistent with the revised NEPA implementing regulations. The Biden CEQ removed this language to give agencies “flexibility to develop or revise procedures to implement NEPA specific to their programs and functions that may go beyond the CEQ regulatory requirements.” Agencies will still have until September 14, 2023, “to propose changes to their existing agency-specific NEPA procedures to make them consistent with the current CEQ regulations.”
The third change relates to the definitions of “effects or impacts” in 40 C.F.R. § 1508.1(g). The Trump CEQ removed the definition of “cumulative impact” from the rules, along with references to “direct” and “indirect” effects. Instead, the amended rule directed agencies to focus on “changes … that are reasonably foreseeable and have a reasonably close causal relationship to the proposed action or alternatives.” It stated that “[a] ‘but for’ causal relationship is insufficient to make an agency responsible for a particular effect under NEPA.” And it also generally directed agencies to disregard effects that were “remote in time, geographically remote, … the product of a lengthy causal chain[,]” or “that the agency has no ability to prevent due to its limited statutory authority or [that] would occur regardless of the proposed action.” The “Phase 1” rulemaking reversed most of those changes, making clear that the terms “effects” and “impacts” include “direct effects,” “indirect effects,” and “cumulative effects” and adding definitions of all three terms. The CEQ opined that including indirect and cumulative effects “will not result in consideration of a limitless universe of effects[,]” because “[t]he consideration of effects has always been bounded by a reasonableness standard.” However, unlike the proposed rule, the final rule retained the portion of the definition that limited “effects or impacts” to “changes to the human environment from the proposed action or alternatives that are reasonably foreseeable … .” The CEQ explained that comments on the proposed rule convinced it that keeping the phrase would “enhance[ ] clarify in line with longstanding agency practice and NEPA case law.”
EPA had indicated its intent to propose a “Phase 2” rulemaking with more comprehensive changes in August, but has yet to issue that proposed rule.
Delaware Riverkeeper Network v. FERC
On August 2nd, the D.C. Circuit issued Delaware Riverkeeper Network v. FERC, 45 F.4th 104 (D.C. Cir. 2022), which (among other holdings) rejected challenges under NEPA to an environmental assessment undertaken by the Federal Energy Regulatory Commission in conjunction with the acquisition and construction of extensions for a natural gas pipeline system in Pennsylvania and Delaware.
Adelphia Gateway, LLC, had applied to FERC for a certificate of public convenience and necessity for the project. FERC conducted an environmental assessment under NEPA and concluded that, with certain recommended mitigation measures, “the project would have ‘no significant impact’ on the environment.” It then issued the certificate. FERC later rejected requests for rehearing. The petitioners, which included the Delaware Riverkeeper Network, sought review in the D.C. Circuit on several grounds, including that FERC’s environmental assessment was insufficient. The court rejected the petitioners’ NEPA arguments, concluding that FERC had “thoroughly considered the environmental impacts of the Project and reasonably concluded that [it] … was not likely to have a significant impact on the environment.”
First, the petitioners argued that FERC had failed to consider the project’s upstream effects – specifically, that the increased pipeline capacity would lead to the drilling of new natural gas wells. The court found that the petitioners had failed to demonstrate that the project would lead to the drilling of wells that would not otherwise be drilled. Second, the petitioners argued that FERC had failed to consider the project’s downstream effects – namely, the greenhouse gas emissions resulting from the increased consumption of natural gas transported by the project. FERC had considered the emissions resulting from four existing transportation agreements for the pipelines, but found that “other downstream greenhouse gas emissions … were not reasonably foreseeable because the Commission was unable to identify the end users of that natural gas.” The court held that FERC’s “reasoning was sound” and rejected the petitioners’ argument, not raised below, that FERC should have made additional efforts to gather information about “the destination and end use of the gas” for one transportation agreement. Third, the petitioners argued that FERC had failed to consider “the effects on climate change resulting from downstream greenhouse-gas emissions … .” FERC had concluded that it could not “‘correlate specific amounts of [greenhouse-gas] emissions to discrete change in’ the human environment,” but the petitioners argued that 40 C.F.R. § 1502.21(c)(4) required FERC to use the Social Cost of Carbon (see below) to quantify those impacts. The court found that the petitioners had waived that argument by failing to raise it below with sufficient specificity. Fourth, the petitioners argued that FERC had failed to consider “the cumulative impact of the Project together with another pipeline project … .” But the petitioners conceded the that other project had since been canceled and its certificates vacated. And fifth, the petitioners argued that FERC had failed to consider “the environmental effects of the Quakertown Compressor Station as compared to [larger] alternatives.” But the court found that FERC had taken the required “‘hard look’” at the petitioners’ arguments and “addressed these concerns in a reasonable manner.” The court further found that the petitioners’ safety arguments regarding the site selected were “undeveloped and unsupported.” The court issued its mandate on September 26th.
Social Cost of Greenhouse Gases
On his first day in office, President Biden issued an Executive Order establishing an Interagency Working Group on the Social Cost of Greenhouse Gases to help “agencies to accurately determine the social benefits of reducing greenhouse gas emissions when conducting cost-benefit analyses of regulatory and other actions.” The executive order directed the Interagency Working Group to publish an interim Social Cost of Carbon (SCC), Social Cost of Nitrous Oxide (SCN), and Social Cost of Methane (SCM) within 30 days and final SCC, SCN, and SCMs by January 2022. And on February of 2021, the Group announced that it would “replac[e] the previous Administration’s estimates with the estimates developed prior to 2017, adjusted for inflation,” and posted a Technical Supporting Document identifying the new interim estimates.
Several states filed suit in the U.S. District Court for the Eastern District of Missouri (Case No. 4:21-cv-00287), arguing that developing a social cost of greenhouse gases is a policy decision that the Executive Branch lacks the authority to make and that the estimates were arbitrary and capricious. The court dismissed that complaint for lack of subject matter jurisdiction, holding that the states “lack[ed] standing and that their claims are not ripe for adjudication.” The court held that the states were required to wait until a federal agency actually relied on the new social costs in a rulemaking, and then challenge that rulemaking. The states appealed to the U.S. Court of Appeals for the Eighth Circuit (Case No. 21-3013). Oral argument was held on June 16th.
A second, more successful challenge to the interim social costs was filed by ten states in the U.S. District Court for the Western District of Louisiana (Case No. 2:21-cv-01074). There, the states filed a motion asking the court to enjoin the federal government from relying on the interim SCC, SCN, and SCM until their legality could be determined. On February 11th, that court issued a memorandum ruling that the states had standing to challenge the draft social costs of greenhouse gases and also found that the states’ challenges were likely to succeed on the merits. Accordingly, the court enjoined the entire federal government from relying on the “the work product of the Interagency Working Group” in rulemakings or other actions. The United States moved to stay the preliminary injunction, and the district court denied that motion on March 9th. However, the United States also appealed the court’s ruling to the U.S. Court of Appeals for the Fifth Circuit (Case No. 22-30087) and moved there for a stay of the district court’s injunction. On March 16th, the Fifth Circuit granted that motion. The states that had challenged the interim social costs of greenhouse gases filed a motion for rehearing of the Fifth Circuit en banc, but the court denied the motion on April 14th, noting that “no member of the panel or judge in regular active service” had indicated support for the rehearing. Then on April 27th, the states filed an application asking the United States Supreme Court to stay the Fifth Circuit order, but the Supreme Court denied the application without comment on May 26th. The appeal to the Fifth Circuit has now been fully briefed and is tentatively set for argument in December.
Despite the January 2022 deadline that President Biden set in the Executive Order establishing the Interagency Working Group on the Social Cost of Greenhouse Gases, the Working Group has not yet finalized its SCC, SCN, and SCMs.
