Aviation and Airport Development Law : Aviation Lawyer & Attorney : Dr. Barbara E. Lichman : Airport Development, Environmental Law

Essentially, the cap-and-trade program began with the establishment of maximum emissions benchmarks or “caps” for each category of major emitting industry sector, derived from a three year study of emissions data from the largest industry sectors. Businesses will be allowed to emit up to 90% of those benchmarks (“Carbon Allowance”) in the first year. If a company operates efficiently, and below the “cap,” it may sell its excess as a Carbon Allowance on the market to industries unable to reduce their own carbon emissions.

While it sounds relatively simple, there will be additional government regulations involved, as well as private businesses who will benefit from the new system. While CARB will operate the market, it will have to retain auction hosts and monitors to operate the system which could handle as much as $10 billion in Carbon Allowances by the year 2016.

Moreover, there are perceived to be significant downsides to the system. Emitting industries are not overly enthusiastic, because of the increased regulation and higher emissions standards in the form of caps, which may make it more expensive for them to operate in California. According to the Legislative Analyst’s Office independent review, some industries will likely leave the State, and jobs be lost, as a result of the new “cap-and-trade” program.

Environmentalists are not wild about the system either, because they believe it does not reduce emissions, but merely transfers the right to emit. What is certain is that California is once more in the forefront of environmental regulation, for good or ill, in the nationwide effort to limit emissions of greenhouse gases.
 

Specifically, CAA is a state/federal partnership, see, e.g., CAA section 7402. The United States Environmental Protection Agency (“EPA”) develops and approves National Ambient Air Quality Standards (“NAAQS”), CAA section 7409(n). States enforce the NAAQS through State Implementation Plans (“SIP”), which must be approved by the EPA and become Federal law after they are approved. CAA section 7410(a), (k).

In regions that have not been found to attain the NAAQS (“nonattainment regions”), SIPs must require permits for construction and operation of new or modified major stationary emission sources. In addition, CAA section 7503(a)(1)(A) (“Section 173”) requires that new emission sources obtain “offsetting emissions reductions.” Section 173(c) also requires that such “offsets” be “in effect and enforceable” when a new source comes on line, as well as “offset by an equal or greater reduction” that was not “otherwise required.” Id.

The SIP for the Southern California Air Basin, developed by SCAQMD, sets forth its new source review program in regulation XIII, which has been substantially approved by EPA. Rule 1303(b)(2) of Regulation XIII establishes guidelines for acceptable offsets. The first mechanism is Emission Reduction Credits (“ERC”), Rule 1309(b)(d)(e), which contains five specific validity requirements: offsets must be (1) real; (2) quantifiable; (3) enforceable; (4) permanent; and (5) surplus beyond existing requirements. The second mechanism is allocation from a priority reserve maintained by SCAQMD, pursuant to Rule 1309.1, which serves to compensate for certain priority sources and exemptions allowed under SCAQMD Rule 1304.

In this case, NRDC claims that SCAQMD violates CAA Section 173(c) by depositing and distributing credits that do not meet the requirements of Rule 1309(b)(d) or (e) from its priority reserve accounts. In its holding, the Court first reasoned that exclusive jurisdiction lies in the Federal Courts of Appeals because, in 2006, EPA had promulgated a rule approving revisions to the SIP for the South Coast Air Basin, 71 Fed.Reg. 35,157 (June 19, 2006) and “determining that SCAQMD’s internal credits complied with section 173(c).” Id. The Court went on to find that the promulgation of the above rule constituted a “final action of the administration,” constituting “consummation of the agency’s decisionmaking process such that legal consequences will flow from it.” The Court found that, because EPA approved both the SIP and the integrity of SCAQMD’s priority reserve accounts with respect to compliance with Section 173(c), NRDC was “effectively seeking review of the EPA’s decision,” which may only be brought in the Federal Courts of Appeals. CAA section 7607.

The Court then went to the substance of NRDC’s claim of invalidity of SCAQMD’s internal offsets. There, it held that Rule XIII distinguishes between ERCs, to which the five enumerated validity requirements apply, and internal offsets such as those in SCAQMD’s priority reserve to which they do not. In doing so, the Court opined: “Applying the ERC validity requirements to the internal offsets would require collapsing this distinction between ERCs and the priority reserve. Doing so would be inconsistent with the disjunctive ‘either/or’ language of Rule 1303(b)(2).”

The importance of this decision should not be underestimated. First, in finding that any challenge to a SIP approved by the EPA constitutes a challenge to the EPA which may only be brought in the Federal Courts of Appeals constrains access to the district courts for potential litigants; eliminates the mediation of the appellate courts which is normally available in the Federal system between the district courts and largely inaccessible United States Supreme Court, and requires potentially greater expenditure of funds to access the higher courts. Moreover, the Court’s substantive holding, that offsets from the priority reserve under the South Coast Air Basin SIP need not be subject to stringent validity requirements, leaves the way open for a loosening of offset requirements on certain categories of new stationary sources of emissions in the South Coast Air Basin, one of the most impacted in the nation, which can hardly afford a loosening of restriction. The good news, however, is that with the loosening of restriction, comes the potential for increased economic activity that might otherwise have been delayed or permanently foreclosed.
 

Currently, to escape from these requirements, the project proponent must perform a “Conformity Applicability Analysis” to determine if the project’s emissions will fall below the de minimis emissions levels established in Environmental Protection Agency (“EPA”) regulation 93.153(c).

The FAA Reauthorization, if enacted, will allow FAA to avoid all of its Clean Air Act responsibilities, and implement airspace redesign procedures that, even if they meet the state goal of reducing delay and thereby reducing aircraft emissions alone, will also increase airport capacity. Increased capacity, or increased number of operations passing through the airport, will potentially give rise to increased emissions impacts not offset by the initial calculation of emissions savings from delay reduction permitted by the Amendment.

In short, FAA is determined to avoid the same legal hurdle it faced in implementing the massive East Coast Airspace Redesign (which is currently being partially redesigned as ineffective). In a challenge to that action, County of Rockland, New York, et al. v. Federal Aviation Administration, et al., United States Court of Appeals for the District of Columbia Circuit, Case No. 07-1363, numerous public and private entities, including Delaware County, Pennsylvania and the State of Connecticut contested, among other deficiencies, FAA’s total absence of compliance with the Clean Air Act’s conformity provision. The District of Columbia Circuit Court of Appeals confirmed the absence of compliance, but found it to be a “nonprejudicial error,” because FAA had, in the Final EIS, performed an analysis of purported emissions reductions resulting from alleged delay reductions from the project.

FAA does not want to take the chance that another court may view complete failure to comply with Congress’ detailed enactment in the Clean Air Act as nonprejudicial error, and may require, instead, scrupulous compliance. The most effective avenue at this point is to contact your Senatorial representative and ask them to delete the onerous earmark from the House version of the Reauthorization.
 

To the surprise of all parties, and, no doubt, the glee of defendants, one of which is the Tennessee Valley Authority (TVA) (both a government agency and a private corporation), the United States Solicitor General joined with defendants in petitioning the United States Supreme Court for review of the Second Circuit’s decision in AEP v. Connecticut, et al., 582 F.3d 309 (2nd Cir. 2009). In that case, the governmental and environmental plaintiffs (plaintiffs include the States of Connecticut, New York, California, Iowa, New Jersey, Rhode Island, Vermont, Wisconsin, the City of New York, The Open Space Institute, The Open Space Conservancy, and the Audubon Society of New Hampshire) had claimed, in two consolidated actions brought originally in the Southern District of New York that defendants’ (American Electric Power Company, American Electric Power Service Company, The Southern Company, XCel Energy, Inc., Synergy Corp. and TVA) combined annual emissions of 650 million tons per year of carbon dioxide contribute to global warming, and, thus, constitute a public nuisance. The District Court dismissed both lawsuits on the principal ground that the case presents a non-justiciable question of governmental policy.

The Second Circuit, however, overturned the District Court’s decision on, among other grounds: (1) plaintiffs’ claims were not preempted by statute or regulation; (2) in the absence of a statute and/or regulation completely occupying the field of climate change, the Federal common law of nuisance governs and plaintiffs had adequately stated a claim under it; and (3) the case did not present a non-justiciable Federal question.

One of the threshold questions for the Supreme Court must be whether the Congress or the Environmental Protection Agency (EPA) has, in fact, so completely occupied the field of climate change that there is no room left for the common law. Preemption exists where Congress has expressed its intent to occupy the entire field through specific statutes and/or regulations, or, over time, Congress or the agency granted authority to regulate in a specific area have so completely legislated and regulated the field that there is no room for state or local regulation. City of Burbank v. Lockheed Air Terminal, 411 U.S. 624, 638-639 (1973).

The Solicitor General argued in his brief that just such an occupation of the field had taken place since the District Court’s decision, where EPA has: (1) found that greenhouse gas emissions for motor vehicles “endanger the public health and welfare” and should be regulated under the Clean Air Act [endangerment finding], endangerment and cause or contribute findings for greenhouse gases under section 202(a) of the Clean Air Act, 74 Fed.Reg. 66,496 (December 15, 2009); (2) issued a final rule establishing CO2 emissions standards for automobiles, Light Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards, 75 Fed.Reg. 25,324 (May 7, 2010); and (3) promulgated rules establishing emissions standards for stationary sources which have not yet been finalized, prevention of significant deterioration and Title V Greenhouse Gas Tailoring Rule, 75 Fed.Reg. 31,514 (June 3, 2010).

If it accepts certiorari, the Supreme Court will most likely be looking at the somewhat inconsistent decisions of the Second and Fourth Circuits in this area. In a ruling in August, 2010, the Fourth Circuit in North Carolina v. Tennessee Valley Authority, ____ F.3d ___, 2010 W.L. 2891572 (4th Cir. July 26, 2010), considered the argument of plaintiffs in that case that emissions of the seven criteria pollutants (including VOC or NOx, Ozone, Sulfur Dioxide, Nitrogen Dioxide, Carbon Monoxide, PM10, PM2.5 ) from TVA installations, currently regulated by the EPA under the conformity provision of the Clean Air Act, 42 U.S.C. section 7506, and 40 C.F.R. section 93.150, et seq., constitutes a public nuisance. Predictably, the Fourth Circuit found, among other things, that substantial regulation had already been promulgated at the Federal level for the control of criteria pollutants from Federal projects, and that to allow public nuisance doctrine to supercede the comprehensive regulatory regimen would lead to a “Balkanization of clean air regulations and a confused patchwork of standards.” North Carolina, supra, 2010 W.L. 2891572 at 1. The Fourth Circuit case did not implicate greenhouse gas emissions, either from Federal or private sources.

If the defendants/petitioners in AEP are looking to the Fourth Circuit decision for the “conflict among Circuits” threshold to Supreme Court review, their reliance may be misplaced, because a gap in Federal regulations, and thus preemption, persists with respect to the regulation of greenhouse gases emitted by Federal projects such as TVA. As greenhouse gases are defined to include pollutants other than the seven criteria pollutants, greenhouse gas regulation may not be fully preempted by the conformity provision. Therefore, the decisions of the Second Circuit in AEP and of the Fourth Circuit in North Carolina may, in fact, be consistent, because while EPA has fully regulated criteria pollutants, it has not yet regulated greenhouse gases in the context of conformity.

In short, a window appears to remain open to bring challenges to greenhouse gas impacts from Federal projects under the Federal common law of nuisance. The window will remain open until EPA supplements its conformity regulation, 40 C.F.R. section 93.150, et seq., for greenhouse gases. This opportunity is, of course, cold comfort to the State of Connecticut and its co-petitioners who are hoping to obtain an avenue of relief from private as well as public emissions sources.

Despite Sen. Murkowski’s widely publicized claims that the EPA’s “tailoring rule” “would be an unprecedented - unprecedented - power grab” and claiming that “millions of residential buildings, schools and businesses found in every town in America would shoulder the new costs from cutting carbon,” the EPA was very careful to exclude small sources of greenhouse gas emissions by setting the threshold for reporting at 25,000 tons per year.

Some pundits are now arguing that the vote signals support for the Kerry-Lieberman-Graham energy-climate bill, although that support might be in the form of a compromise. This vote may allow “green-leaning” Republicans to get back into the game and negotiate even greater provisions on behalf of their constituents in return for offering the decisive votes needed to support passage.

Also on the agenda is Sen. Jay Rockefeller’s (one of the six Democratic defectors) bill that would postpone the EPA’s authority under the Clean Air Act for two years. Presumably, this would give the Congress enough to time to work out a legislative fix for greenhouse gas emissions. This compromise measure has much broader support than the Murkowski resolution. Sen. James Webb, a Democratic Senator from Virginia who voted against the Murkowski resolution, said that he would support the Rockefeller legislation: “I do not believe that Congress should cede its authority over an issue as important as climate change to unelected officials of the Executive Branch.”

While the dust may be settling on the Murkowski resolution, EPA’s authority to regulate greenhouse gas emissions is still in up in the air.