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

With respect to organizational standing, the Court opined that “NAHB must ‘demonstrate that it has suffered injury in fact including such concrete and demonstrable injury to the organization’s activities – with a consequent drain on the organization’s resources – constituting more than simply a set back to the organization’s abstract social interests.” Homebuilders, supra, at * 2. The Court found that NAHB’s allegations of expended staff time and monetary resources on legal services and lobbying did not establish the requisite allegation that the action “perceptibly impaired” a non-abstract interest, Id. quoting Havens Realty Corp. v. Coleman, 455 U.S. 363, 379 (1982). The Court did not, however, explain what would have been a sufficient allegation.

With respect to representational standing, the Court reiterated the test for establishing representational standing in which “an association must demonstrate that (a) its members would otherwise have standing to sue in their own right; (b) the interest it seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.” Id. at * 3. The Court went on to find that NAHB had not met this burden because it had not sufficiently alleged any threat of injury in fact to any of its members traceable to the TNW Determination. This was in spite of several declarations submitted by third parties purporting to have knowledge of the possible adverse impacts of the TNW Determination on owners and developers on the banks of the river. Apparently, however, none of the declarations were from those owners or operators, nor were any directly affected parties also parties to the lawsuit.

Finally, the Court denied NAHB’s claim of procedural standing as well, even though “a litigant to whom Congress has accorded a procedural right to protect his concrete interests – here the right to challenge agency action unlawfully withheld, § 7607(b)(1) – can assert that right without meeting all the normal standards for redressability and immediacy.” Massachusetts, supra, 549 U.S. at 517. “When a litigant is vested with a procedural right that litigant has standing if there is some possibility that the requested relief will prompt the injury causing party to reconsider the decision that allegedly harmed the litigant.” Id. at 518. However, in Homebuilders, the Court found that NAHB had failed to meet the same standard it had failed to meet with respect to either organizational or representational standing, i.e., it had failed to allege any concrete interest of any of its members affected by the deprivation of the procedure, without which Article III standing could not be maintained.

Based on the above analysis, it appears that NAHB required only one short additional step toward the goal of establishing standing. As “only one of the petitioners needs to have standing to permit [the Court] to consider the petition for review,” Massachusetts, supra, 549 U.S. at 517, NAHB could potentially have established standing if one of its members, directly affected by the TNW Determination, had become a party and supplied a declaration setting forth the “injury in fact” that was, or would be, caused by the implementation of the TNW Determination. With an individual allegation of “concrete and particularized injury” that is “imminent” “fairly traceable” to the TNW Determination, and remediable by a favorable decision of the Court, the case could have gone forward without the necessity for the complex analysis in which the Court ultimately engaged, and potentially without the adverse outcome to NAHB.
 

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.
 

When the light-duty vehicle rule is finalized, the GHGs subject to regulation under that rule (i.e., the six greenhouse gases identified in the Endangerment Finding) would become immediately subject to regulation under the PSD program, meaning that from that point forward, prior to constructing any new major source or major modifications that would increase GHGs, a source owner would need to apply for, and a permitting authority would need to issue, a permit under the PSD program that addresses these increases. Similarly, for the Title V operating permit program, it would mean that any new or existing source exceeding the major source applicability level for those regulated GHGs, if it did not have a title V permit already, would have 1 year to submit a title V permit application.

Recognizing this incidental effect, the EPA proposed a “tailoring rule” on September 30, 2009.  In the Tailoring Rule, EPA proposed to set a new threshold of 25,000 metric tons of GHG emissions to define when Clean Air Act permits under the New Source Review and Title V operating permits programs would be required.  The proposed thresholds would “tailor” these permit programs to limit which facilities would be required to obtain permits and would cover nearly 70 percent of the nation’s largest stationary source GHG emitters—including power plants, refineries, and cement production facilities, while shielding small businesses and farms from permitting requirements. Thus, businesses that emit less than 25,000 metric tons of GHG and businesses that currently have a Title V operating permit will not, for the most part, be covered by the Tailoring Rule.

Should Businesses Make Voluntary Reductions in Greenhouse Gas Emissions?

So what should companies do in the meantime?

Many businesses have been evaluating their carbon footprint over the past few years (particularly since the Massachusetts v. EPA decision) and have been looking at ways to reduce GHG emissions. For many companies energy is a cost, and in some cases, greenhouse gases may be a lost resource.  By increasing efficiency, costs are reduced and the business operates better.  For example, the aviation industry loves to trumpet how it is getting “greener,” because it is reducing GHG emissions.  However, that greening has come about by reducing fuel consumption, which became a necessity when fuel prices spiked because fuel costs represent a huge percentage of the aviation industry’s costs.  The result?  Increased fuel efficiency=fewer emissions=reduction in emissions of GHG, with a reduction in fuel costs to top it off.  Moreover, there are ways that would reduce GHG emissions and accrue tax benefits, such as cogeneration or combined heating power.  These types of programs that reduce GHG emissions and accrue a direct benefit to the company’s bottom line should be pursued regardless of the regulatory environment.  The caveat would be that businesses should check in with their environmental law attorney to see if there are any carbon banks or carbon credit systems set up that they could participate in order to get “credit” for any reduction in GHG emissions.

Outside of those programs, however, caution should be taken with respect to taking on projects that would reduce GHG emissions, but represent a net cost to the business.  Many businesses are taking a “wait and see” attitude, relying on their environmental law attorneys to monitor developments, report to them about those developments and assist them in develop strategies and manage the risk.  It is only when the regulatory regime is in place that businesses can assess what changes need to be made to their processes and to their equipment in order to comply with the regulations.  Particularly when the costs to comply are substantial, businesses are going to want to wait until the requirements become fixed before they undertake a far-reaching GHG emission reduction program.

Congressional Outlook:  Who Knows What They Are Up To?

The progress in Congress on new Climate Change legislation is an additional reason for businesses to sit tight.  Since Monday’s Endangerment Finding, most business and industry groups have stated that they would much prefer either one of the bills currently being considered in Congress to regulation by the EPA.  The primary reason for this is the fact that both the Boxer-Kerry bill and the Waxman-Markey bill have “cap-and-trade” provisions, which, although excoriated by the Republicans, are much better for businesses than an EPA-centric “command-and-control” regulatory regime.  A good example of this change of heart is Sen. Mark Pryor (D.Ark.), who was reported as being more willing to consider a cap-and-trade proposal now that the EPA has issued its endangerment finding.

At the same time, the failure to come up with a bill for the President’s approval prior to the Copenhagen Climate Change Conference, the release of the hacked e-mails from East Anglia University’s Climate Research Unit, and the inexorable march of time have led to the Senate going back to the beginning.  Indeed, Sens. Kerry, Lieberman and Graham have put forth a new outline for Climate Change legislation. Thus, it is unlikely that Congress will have anything to offer until after the EPA has finalized the light-duty vehicle regulations, and perhaps after the Tailoring Rule is finalized.

Conclusion: Now Is The Time for Self-Assessment

The upshot of the Endangerment Finding and, for that matter, EPA’s regulation of GHG emissions, is that now would be a good time for businesses to assess just how much GHG emissions they produce.  The potential impact of EPA’s regulation of GHG emissions will be felt by companies that have not been traditionally required to examine their exposure to Clean Air Act regulation.  To state that there is not much clarity as which companies will be affected by the EPA’s Tailoring Rule, for example, is an understatement.  Even the EPA recognizes in its rule that it will need to fine tune it over the years so that does what it is supposed to do.  Thus, the more businesses know about their operations and the amount of GHG they emit, they better they will be able to assess their place in just about any scenario that may come up.