September 2011 - Michigan Energy Forum - S. Lee Johnson


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Regulatory Drivers For CleanTech and Green Jobs: When people think of CleanTech, they usually think of wind turbines and solar panels, but there may be a burgeoning opportunity in energy efficiency. Many states, including Michigan, have adopted Renewable Portfolio Standards that requires utilities to generate a portion of their electricity from renewable sources. The U.S. Environmental Protection Agency recently promulgated a regulation (the GHG BACT) that will require utilities to reduce their carbon emissions, primarily through energy efficiency. However, several members of Congress are trying to cut back on GHG regulations arguing that these regulations are job killers. Come to the Michigan Energy Forum on September 8th to learn about the latest regulatory developments, what they have meant from green jobs in Michigan, and what the future might hold.

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September 2011 - Michigan Energy Forum - S. Lee Johnson

  1. 1. REGULATORY DRIVERS FOR CLEAN TECH,ALTERNATIVE ENERGY AND GREEN JOBS UNDER THE CLEAN AIR ACT Michigan Energy Forum September 2011 Meeting September 8, 2011 S. Lee Johnson Honigman Miller Schwartz and Cohn, LLP 2290 First National Building Detroit, Michigan 48226 (313) 465-7432 Copyright 2011. All rights reserved. 1
  2. 2. I. How Did We Get Here?A. Massachusetts v EPA (549 US 497(2007)) The United States Supreme Court held: (1) GHGs “fit well within the [CAA’s] capacious definition of ‘air pollutant.’” (2) In response to the ICTA petition, EPA must make one of three findings: (a) there is an endangerment and mobile sources cause or contribute; (b) there is not an endangerment or mobile sources do not cause or contribute; or (c) there is insufficient scientific information to make a decision on endangerment/contribution. (3) Regulation of GHGs from mobile sources under the CAA is mandatory following a finding of endangerment and that mobile sources cause or contribute. 2
  3. 3. C. EPA’s Endangerment Finding And Mobile Source Rule o On December 15, 2009, EPA published a final rule under Section 202 of the CAA finding that GHGs “endanger both the public health and welfare of current and future generations” and that GHGs from new motor vehicles contribute to the endangerment of the public health and welfare. o On May 7, 2010, EPA and the Department of Transportation National Highway Traffic Safety Administration (“NHTSA”) jointly issued a rule to limit GHG emissions from light duty vehicles in response to the “endangerment” and “cause or contribute” findings. The emission standards include standards for carbon dioxide, nitrous oxide and methane. 3
  4. 4. A. PSD Program Statutory And Regulatory Definitions 1. Under the CAA, the PSD program applies to a “major emitting facility,” which is defined in CAA § 169(1) as “any of the following stationary sources of air pollutants which emit, or have the potential to emit” either 100 tpy or more of any air pollutant or 250 tpy or more of any air pollutant, depending on source category. 2. Note that the statute uses the term “air pollutant,” which the U.S. Supreme Court has ruled includes GHGs. The requirement to apply “best available control technology,” however, applies to “each pollutant subject to regulation” under the CAA. The phrase “subject to regulation” is not defined in the CAA. 3. The PSD implementing regulations, apply only to major sources of “regulated NSR pollutants” which were defined to include: (i) criteria pollutants (and precursors); (ii) pollutants subject to a standard under Section 111 (NSPS and Emission Guidelines) of the CAA; (iii) Class I and II CFC regulated under Title VI of the CAA and (iv) “Any pollutant that otherwise is subject to regulation under the Act” (with an exception for hazardous air pollutants that are not criteria pollutants or precursors). 4. Similar defined terms were used in the ROP program. 4
  5. 5. II. The Tailoring RuleAs noted above, PSD applies to “major stationary sources” – sources thathave the potential to emit 250 tpy (or 100 tpy) of any “regulated NSRpollutant.” “Major modifications” at “major stationary sources” whichinvolve emission increases ranging from 0 to 100 tpy are also subject toPSD review.In the Tailoring Rule (June 3, 2010), EPA amended the definition of“regulated NSR pollutant” by adding a new definition of “subject toregulation” so that the threshold for GHGs is a potential to emit 100,000tpy CO2e. An emission increase of 75,000 tpy CO2e is a “majormodification.” The Tailoring Rule also includes the first two steps of aphased schedule for applying PSD to GHG sources.Under a March 2011 proposed rule, the CO2 emissions from combustionor decomposition of nonfossilized and biodegradable organic materialwould not be included in GHG emissions for at least 3 years. 5
  6. 6. CO2 Equivalent C02 1 Methane 21 Nitrous Oxide 310 HFCs 12 to 11,700 Sulfur Hexafluoride 23,900 Perfluorcarbons 11 to 17,000 6
  7. 7. What Difference Does It Make?Tons Per Year Regulatory Program Approximate Comparison CO2 Btu/hr Natural Gas Burning Capacity 100 ROP 190,000 Residential furnace 150,000 PSD for Some Industries Btu and residential water heater 60,000 Btu 250 PSD for All Other Industries 475,000 Duplex with two 100,000 Btu furnace, two 40,000 Btu water heaters and two 100,000 Btu cooktops 75,000 Tailoring Rule Threshold for 140 Million Modification of Existing Major Source 100,000 Tailoring Rule Threshold for 190 Million Major Source (PSD & ROP) 7
  8. 8. III. Everything Is In Litigation Endangerment Finding – 17 petitions consolidated as Coalition for Responsible Regulation v. EPA (09-1132) Mobile Source GHG Rule – 17 petitions consolidated as Coalition for Responsible Regulation v. EPA (10-1092) Johnson Memo/Determination that Mobile Source GHG Rule makes GHG’s “subject to regulation” under the CAA – 18 petitions consolidated as Coalition for Responsible Regulation v. EPA (10-1073) Tailoring Rule – 26 petitions consolidated as Southeastern Legal Foundation v. EPA (10-1131) EPA’s refusal to reconsider the foregoing regulations – 4 petitions consolidated as Coalition for Responsible Regulation v. EPA (10-1234) All litigation is in the early stages and subject to further appeals. It is impossible to predict whether and how courts might intervene. 8
  9. 9. IV. Other Regulatory Actions On The Horizon?A. NAAQS Under 42 USC 7408(a)(1), EPA: shall from time to time . . . revis[e] a list which includes each air pollutant— (A) emissions of which, in his judgment, cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare; (B) the presence of which in the ambient air results from numerous or diverse mobile or stationary sources; and (C) for which air quality criteria had not been issued before December 31, 1970 but for which he plans to issue air quality criteria under this section. 9
  10. 10. A. GHGs are emitted from “numerous or diverse stationary sources” and EPA has made a formal finding that GHGs in the atmosphere present a current and ongoing threat to human health and welfare and that GHG emissions from mobile sources cause or contribute to these impacts. Based on the statutory criteria above and in 42 USC 7408(b), the endangerment and cause or contribute findings under Section 202 may lead to a NAAQS for GHGs.B. In December 2009, two environmental organizations (The Center for Biological Diversity and petitioned EPA to set a NAAQS for CO2 at 350 ppm. Current ambient levels are about 385 ppm. If EPA were to adopt a NAAQS of 350 ppm, eventually the entire United States would presumably be designated nonattainment for CO2.C. Nonattainment designation requires SIP revisions (with perhaps onerous and costly emission limitations on GHG emission sources) and new and modified major sources must obtain offsets and install Lowest Achievable Emissions Rate (“LAER”) technology. 10
  11. 11. 1) CAA Section 111 – NSPS 1. The Statute 42 USC 7411(b)(1)(A): [The EPA Administrator] shall include a category of sources in such list if in [the Administrator’s] judgment it causes, or contributes significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare. Requires a finding that a “category or sources . . . causes or contributes significantly” to air pollution that endangers public health or welfare. “Contributes significantly” is a higher standard than “contributes” under Section 202. 11
  12. 12. On November 8, 2010, Sierra Club filed a lawsuit challengingEPA’s September 9, 2010 Portland Cement NSPS on thegrounds that the new rule did not include standards forGHGs.EPA has announced it intends to propose NSPS for electricitygenerators and petroleum refiners in 2011. 12
  13. 13. 2. NSPS Regulations NSPS applies to new sources. Can also apply to existing sources if there is no NAAQS. Applies on a source category (industry) basis. EPA could regulate some source categories sooner and leave other categories for later regulation (or never). EPA has greater flexibility for determining the size of emitters that should be regulated under NSPS compared to PSD program (250 tpy threshold). Although a limited emissions trading program exists in the municipal waste combustor NSPS, the scope of EPA’s authority to employ emission trading under Section 111 is uncertain. 13
  14. 14. i) Other Regulations Affecting CoalA. On June 21, 2010, EPA published a proposed rule (75 Fed. Reg. 33128) to regulate the disposal of coal combustion residuals (CCR) generated from the combustion of coal at electric utilities and independent power producers.B. On April 20, 2011, EPA published a proposed rule (76 Fed. Reg. 22174) under Section 316(b) of the Clean Water Act amending regulations for cooling water intake structures in order to reduce injury to fish and other aquatic life. Final action by EPA is expected no later than July 27, 2012. 14
  15. 15. 1. On May 3, 2011, EPA published a proposed rule (76 Fed. Reg. 24976) to reduce emissions of toxic air pollutants from new and existing coal- and oil- fired electric utility steam generating units. The proposed rule sets emission standards for mercury, PM and hydrogen chloride for coal-fired units; it also sets alternative standards for SO2 and non- mercury metal air toxics for certain power plants. The proposal also revises NSPS for PM, SO2 and NOx for those units. 15
  16. 16. (i) Finally, on August 8, 2011, EPA published final rules known as the “Cross-State Air Pollution Rule” (the Transport Rule) (76 Fed. Reg. 48208) that replaces the former Clean Air Interstate Rule (CAIR). The new rule requires 27 states in the eastern U.S. (including Michigan) to reduce power plant emissions that cross state lines, contributing to ground-level ozone and fine particulate pollution in other states. 16
  17. 17. VI. Prospects For Legislation There were several attempts during 2010 to pass measures in the Senate to strip EPA of some or all of its authority to regulate GHGs under the CAA or to delay implementation. None were successful. President Obama has said he would veto any such measure. 17
  18. 18. VI. Prospects For Legislation However, one bill that passed the House in April that was sent to the Senate was introduced by Rep. Fred Upton from Michigan as the Energy Tax Prevention Act of 2011 (H.R. 910). This bill seeks to amend the CAA by prohibiting the EPA from promulgating any regulation with respect to GHG to address climate change, with certain exceptions. The bill also repeals a number of rules relating to GHG emissions, and voids any requirements for states to regulate GHG under their PSD and Title V operating permit programs. 18