Will litigants and courts enact two, three, many Kyotos

1
Will litigants and courts enact two, three,
many Kyotos?

• Marlo Lewis, Senior Fellow
• Competitive Enterprise Institute
• 202-669-6693 mlewis_at_cei.org
• Heartland Institute Conference
• NYC, March 4, 2008

2
Outline

• Cap and trade isnt the only game in town
• ESA Polar Bear listing--will it endanger fossil
  energy use?
• Mass v EPA -- a spectre haunting the U.S. economy
• PSD -- Regulatory Limbo, Regulatory Hell
• NAAQS for CO2?
• Does EPA have to make an endangerment finding?
• What should we do?
• A legislative fix?
• Policy terrorism alert!

3
Cap-and-trade aint the only game in town

• In climate politics, cap-and-trade bills and
  Kyoto negotiations occupy center stage
• However, the chief threat to affordable energy
  may come from left field--litigation under
  federal common law, NEPA, Endangered Species Act,
  Clean Water Act, and, especially, the Clean Air
  Act (CAA)

4
Some Pending CAA Cases (Sierra Club alone
involved in 25 lawsuits against coal power plants)

• New York v. EPA, No. 06-1322 (D.C. Cir. 2006)
  (remand from Court case seeking to review EPAs
  refusal to set new source performance standards
  for GHGs from electric generating units and other
  large stationary sources)
• Petition for Rulemaking under the Clean Air Act
  to Reduce the Emission of Air Pollutants from
  Marine Shipping Vessels that Contribute to Global
  Climate Change (Oct. 3, 2007), brought by Oceana,
  Friends of the Earth, Center for Biological
  Diversity and Earth Justice
• Petition for Rulemaking Seeking the Regulation of
  Greenhouse Gas Emissions from Ocean-Going Vessels
  (Oct. 3, 2007), brought by the State of
  California
• Petition for Rulemaking Seeking the Regulation of
  Greenhouse Gas Emissions from Nonroad Vehicles
  and Engines (Jan. 29, 2008), brought by the
  States of California, Connecticut, Massachusetts,
  New Jersey and Oregon
• Petition for Rulemaking under the Clean Air Act
  to reduce the Emission of Air Pollutants from
  Aircraft that Contribute to Global Climate Change
  (Dec. 31, 2007), brought by Friends of the Earth,
  Oceana, NRDC and Earth Justice
• Petition to require BACT (best available control
  technology) limits on CO2 emissions from Bonanza
  coal electric plant in Utah under the CAAs
  Prevention of Significant Deterioration (PSD)
  program (Oct. 1, 2007), brought by Sierra Club.

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Other CO2 litigation

• Filed
• Complaint against Exxon-Mobil, BP, Conoco,
  Chevron, Duke, etc. for damages from global
  warming (Feb. 26, 2008), brought by Native
  Village of Kivlanina, Alaska.
• Petition for Revised pH Water Quality Criteria
  under Section 304 of the Clean Water Act (Dec.
  18, 2007), brought by the Center for Biological
  Diversity
• Open Space Institute, et al. v. American Electric
  Power Connecticut et al. V. AEP (July 6, 2007),
  litigation under federal common law to require 3
  annual CO2 reductions from nations five largest
  coal-burning utilities
• Petition to require OPIC and Ex-Im Bank to
  conduct NEPA environmental assessments of CO2
  emissions from projects they fund (August 22,
  2002), brought by Friends of the Earth,
  Greenpeace, Boulder, Co., Oakland, Santa Monica,
  and Arcata, CA.
• In Development
• Inuit Circumpolar Confererence v Bush
  Administration (ICC claims U.S. failure to ratify
  Kyoto violates their fundamental human rights and
  jeopardizes their very existence).
• Litigation under World Heritage Convention (GW
  allegedly destroys natural heritage areas--reefs,
  glaciers, Everglades)

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ESA Polar Bear listing -- Will it endanger fossil
energy use?

• Kyoto Day (Feb. 16, 2005), Center for Biological
  Diversity (CBD) petitioned FWS to list polar bear
  as threatened species under ESA.
• Whether GHG emissions can be halted to protect
  polar bears will be a test of the statutes
  continuing relevance in the 21st century. --
  Brendan Cummings Kassie Siegel (CBD)
• There is no reason GHG emissions, which
  jeopardize polar bears, should be treated any
  differently than pesticides that harm salmon or
  logging that harms owls. -- Cummings Siegel
• Section 7 prohibits agencies from taking actions
  that appreciably reduce species survival
  prospects. Agency actions potentially subject to
  Sec 7
• Setting of fuel economy standards
• Off shore oil and gas leasing
• Approval of new coal plants, and
• dozens, perhaps hundreds of other
  federally-permitted projects are individually
  and cumulatively having an appreciable effect on
  GHG levels and, hence, polar bear habitat
• Any legally adequate recovery plan mustinclude
  mandates to reduce such emissions. -- Cummings
  Siegel

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A Spectre is haunting the U.S. economy--ever
since Mass v EPA

• The specter of an EPA empowered by courts and
  litigants to enact Al Gores climate agenda, on
  George Bushs watch, but without any of Gores
  allies on the Hill having to vote for it or take
  responsibility for the costs.

8
Brief Chronology How we got here

• Tom Delay asks Carol Browner for legal opinion
  about EPAs CAA authority with respect to CO2.
  (March 1998)
• EPA Gen. Council Joseph Z. Cannon memorandum
  Several regulatory provisions potentially
  applicable, though EPA has not made an
  endangerment finding and has no plans to regulate
  CO2 at this time. (April 10, 1998)
• CTA 18 other groups petition EPA, under CAA
  202, to set GHG emission standards for new motor
  vehicles (Oct 20, 1999)
• EPA issues request for information (Jan 12, 2001)
• EPA denies petition for rulemaking (Aug 23, 2003)
• CTA 12 other groups Mass. 11 other states, 3
  cities, and American Samoa petition for review of
  EPA denial (Oct 23, 2003)
• D.C. Appeals Court 2-1 finds denial within EPAs
  lawful discretion but does not address key issue
  Does CAA authorize GHG regulation?
• Supreme Court 5-4 overturns, finds CO2 is air
  pollutant under CAA. EPA must determine whether
  GHGs endanger public health and welfare, or
  explain why the science is too uncertain to make
  such determination. EPA must ground its action or
  inaction in the statute (April 2, 2007).

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Chronology since Mass v EPA

• Admin saw endangerment finding as only way to
  obtain statutory authority for 20-10 program
  (Corn is King!)
• Reports (rumors?) that EPA sent an endangerment
  finding to OMB along with drafts of proposed
  regulations. (Dec 08)
• Congress passes, Bush signs, energy bill. CAA
  authority no longer needed to implement new fuel
  economy, renewable fuel standards. (Dec 08)
• Warning from U.S. Chamber-led business groups and
  conservative non-profit groups Endangerment will
  create regulatory chaos. (Dec 08)
• Sen. Feinsteins requests EPA timeline with
  deadlines for responding to Mass v EPA (Jan 25,
  08)
• Conservative non-profits respond to Feinstein
  letter (Feb 20, 08)

10
PSD -- Regulatory Cascade

• 202 applies only to new motor vehicles.
• But, an endangerment finding would also make CO2
  a pollutant subject to regulation under other
  provisions.
• First and foremost, 165 Prevention of
  Significant Deterioration (PSD) program.
• PSD is a pre-construction permitting program for
  major stationary sources.
• No company may build a new major stationary
  source of a regulated pollutant (or modify an
  existing source if this increases emissions)
  unless the source first obtains a PSD permit.

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PSD Regulatory Thresholds

• A source is defined as major if it is in one of
  28 listed categories and emits at least 100 tons
  per year of an air pollutant, or is any other
  type of establishment and emits at least 250 tons
  (169).
• 250 tons may be a reasonable regulatory threshold
  for smog- and soot-forming emissions.
• It is a miniscule amount of CO2--roughly the
  amount emitted by two dozen average homes.

12
Regulatory Sprawl under 250 TPY threshold

• Buildings of 100,000 square feet, if heated by
  fossil fuel, including many office and apartment
  buildings hotels enclosed malls large retail
  stores and warehouses colleges, hospitals and
  large assisted living facilities large houses of
  worship product pipelines food processing
  facilities large heated agricultural facilities
  indoor sports arenas and other large public
  assembly buildings commercial kitchens that use
  natural gas to cook food and many others.
• None of these types of sources has ever been
  subject to PSD permitting requirements before
  because they emit so little traditional air
  pollution but they would be now if CO2 is deemed
  to be a regulated CAA pollutant.

13
PSD administrative burden on regulated entities

• PSD permit can take years to obtain. The
  paperwork alone can cost hundreds of thousands to
  millions of dollars.
• To obtain a permit, a major source must install
  best available control technology
  (BACT)--additional costs.
• Administrative burden alone putting aside any
  BACT requirements would create an overwhelming
  and unprecedented roadblock to new investment for
  a host of previously unregulated buildings and
  facilities
• No small business requiring a moderate-sized
  building or facility heated with fossil fuel
  could operate subject to the PSD permit
  administrative burden. Peter Glaser and John
  Cline, Nov 8, 07 testimony before House Gov
  Oversight and Reform Committee

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PSD for CO2Regulatory Limbo

• Nobody knows what BACT means for CO2.
• BACT determinations are made case-by-case, mostly
  by state agencies.
• Before states can make CO2 BACT determinations,
  theyll have to modify their SIPs to adopt new
  BACT requirements. That could take years.
• Since BACT determinations for CO2 have no
  regulatory history at this time, and can vary by
  type of facility and from state to state,
  businesses wishing to construct new sources or
  modify existing ones would have no basis for
  planning what the regulatory requirements will
  be. This will create considerable, and perhaps
  fatal, uncertainty for businesses. Glaser and
  Cline

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Or Regulatory Hell?

• Once a source is classified as major for one
  pollutant, it is considered a major source for
  all other regulated pollutants under the CAA.
• Potentially hundreds of thousands of small to
  mid-size entities would have to install BACT not
  only for CO2 but also for NOX, PM, lead, mercury,
  SO2, and other pollutants prior to construction.
• The regulatory burden is so enormous, and the
  number of required PSD permits so staggering,
  that construction in cities across the country
  will literally stop the minute CO2 is regulated
  under the Act. U.S. Chamber and 18 business
  groups, Dec 12, 2007 letter to Congress.

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Environmental Consequences Equally Unsavory

• EPA and its state level counterparts would be
  flooded with permit applications from myriads of
  new major sources.
• These permitting agencies would be forced to
  squander administrative resources pursuing
  inconsequential CO2 reductions to the neglect of
  more critical, statutorily required CAA
  responsibilities.

17
NAAQS for CO2?

• An endangerment finding under 202 could also
  compel EPA to set NAAQS for CO2 under 108 (both
  provisions have the same endangerment language).
• NAAQS specifies allowable atmospheric pollution
  concentrations
• Mass v EPA plaintiffs claimed current levels harm
  public health and welfare.
• In 2003, three plaintiffs, including AG Mass,
  filed notice of intent to sue EPA for failing
  to initiate a NAAQS rulemaking for CO2. We know
  their end-game.
• What would it take to reduce CO2 levels?
• Kyoto would barely slow the increase.
• Even outright de-industrialization might not be
  enough.
• EPA must take compliance costs into account when
  setting tailpipe standards under 202, but is
  forbidden to consider costs when setting NAAQS.
• In principle, there is no limit to the economic
  sacrifices that could be required of the American
  people.

18
Does EPA have to make an endangerment finding?

• We need not and do not reach the question
  whether on remand EPA must make an endangerment
  finding, or whether policy concerns can inform
  EPAs actions in the event that it makes such a
  finding.We hold only that EPA must ground its
  reasons for action or inaction in the statute.
  -- Mass v. EPA

19
On what scientific grounds could EPA decline to
make an endangerment finding?

• EPA could find that GHG emissions from new motor
  vehicles do not cause or contribute to air
  pollution that may reasonably be anticipated to
  endanger public health or welfare.
• Unlikely. EPA would have to disavow a decade or
  more of alarmist statements and publications.
• EPA could say the science is too uncertain to
  make an endangerment finding.
• Also unlikely. EPA would have to break with the
  IPCC consensus.

20
On what statutory grounds might EPA decline to
make an endangerment finding?

• Congress never intended for 2O2, which deals
  solely with motor vehicle emissions, to instigate
  a massive expansion of stationary source
  regulation.
• Never intended for 202 to spawn an
  administratively crippling paperwork nightmare
  for EPA and its state-level counterparts.
• EPA has considerable discretion how to allocate
  its own administrative resources.
• Never intended 202, which requires EPA to
  consider compliance costs when setting tailpipe
  standards, to leverage money-is-no-object
  regulation under the NAAQs program.
• Above all, Congress never intended for 202 to
  allow litigants and courts to set climate policy
  for the nation.
• Yet an endangerment finding could trigger a
  regulatory cascade many times more costly than
  Kyoto or Lieberman-Warner without Congress ever
  voting on it!

21
If EPA is sued again...

• Mass v. EPA probably not a good predictor of
  outcome
• CO2 emission standards for motor vehicles are
  fuel economy standards by another name
• Its one thing to get 5-4 majority to make EPA
  play in NHTSAs fuel economy sandbox another to
  impose PSD Hell, CO2 NAAQS, Kyoto-Plus as a
  requirement of 202, a cost-constrained provision
  dealing solely with emissions from new motor
  vehicles, enacted in 1970.

22
What will EPA do?

• Nobody knows at this point how or when EPA will
  respond to the Court. The Admin is still weighing
  its options.

23
What should we do now?

• Talk this up (op-eds, blog posts, talk radio)!
• Get prepared to submit public comment, file
  amicus briefs
• Force the other team to take ownership of the
  regulatory morass
• Why didnt you mention PSD Hell when you
  litigated Mass v EPA? When were you going to tell
  us about endangerment setting the predicate for
  NAAQS? Were you ignorant of how the CAA works, or
  did you hide your agenda from the Court?
• If you pressure EPA to do this, we will hold you
  responsible for the consequences!

24
A Legislative Fix?

• If EPA makes an endangerment finding, we will
  need a legislative fix.
• Plaintiffs said Mass v EPA dealt just with EPAs
  authority to regulate emissions of new motor
  vehicles under 202.
• Hence, CAA should be amended to clarify that any
  endangerment finding and associated regulation of
  motor vehicle emissions shall not be construed
  to require pollution control requirements for CO2
  and other GHGs under any other provision of this
  Act.

25
Policy Terrorism Alert!

• What if they say, okay, well agree to a
  legislative fix--but only as part of a
  comprehensive cap-and-trade bill?
• This is the legislative equivalent of hijacking
  and hostage taking, to wit
• Well let EPA blow up the economy unless you
  come along quietly and endorse Kyoto II,
  Lieberman-Warner, etc.
• Denounce this as policy terrorism. PSD Hell
  should be rejected on its own merits.
  Cap-and-trade should stand or fall on its own
  merits.
• Remember, no elected official or judge wants to
  take ownership of PSD Hell or CO2 NAAQS. It seems
  like a neat idea only if you can make George Bush
  take the rap for it.

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APPENDIX A Thoughts on Mass v EPA -- Whats in
a name?

• Plaintiffs whole case rested on a selective
  reading of the CAAs most abstract provisionthe
  definition of air pollutant.
• The term air pollutant means any air pollution
  agent or combination of such agents, including
  any physical, chemical, biological,
  radiativesubstance or matter which is emitted
  into or otherwise enters the ambient air. Such
  term includes any precursors to the formation of
  any air pollutant
• Following plaintiffs, the Court treated air
  pollution agent as synonymous with air
  pollutant rather than as a criterion for
  distinguishing pollutants from non-pollutants. On
  this reading, anything in the air--from frisbees
  to flatulence (Scalia)--is ipso facto an air
  pollutant for regulatory purposes.
• To reach this conclusion, the majority had to
• Ignore a key term of the first sentence (making
  the definition circularan air pollutant is an
  air pollutant) and
• Ignore all of the second sentence. If anything
  emitted is automatically an air pollutant,
  Congress would not have had to specify that
  precursors are also air pollutants.

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CAA authority to regulate CO2 Conspicuously
Absent

• No climate protection title, section, or
  subsection in the CAA.
• Words greenhouse effect and greenhouse gas do
  not occur.
• Global warming and CO2 occur only once, each time
  in non-regulatory provisions ( 103g and 602e),
  which conclude by admonishing EPA not to infer
  authority for pollution control requirements or
  additional regulation.
• These caveats would be pointless if, as
  plaintiffs argued, the definition of air
  pollutant already authorizes EPA to regulate CO2
  for global warming purposes.

28
Ignoring legislative and regulatory history

• In 20 years of debate, Congress has never enacted
  CO2 control legislation.
• When CAA amended in 1990, Congress considered and
  rejected
• a new title on stratospheric ozone and climate
  protection
• provisions to regulate motor vehicle CO2
  emissions.
• The Court said such post-enactment legislative
  history cannot repeal EPAs pre-existing
  authority. Nobody ever suggested it did.
• The point It is unreasonable to believe that
  when Congress enacted and amended 202 in 1970
  and 1977, it implicitly adopted the Kyoto
  Protocol, or Lieberman-Warner, but just forgot to
  tell anybody!
• For 30 years, EPA regulation under 202 has
  aimed to make auto engines so clean burning that,
  ultimately, nothing comes out of the tailpipe
  except two greenhouse gasesCO2 and H2O!

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Ignoring the Big Picture

• Congress never intended for 2O2, which deals
  solely with motor vehicle emissions, to instigate
  a massive expansion of stationary source
  regulation.
• Never intended 202 to spawn an administratively
  crippling paperwork nightmare for EPA and its
  state counterparts.
• Never intended 202, which requires EPA to
  consider compliance costs, to leverage
  money-is-no-object regulation under the NAAQs
  program.
• Above all, Congress never intended for 202 to
  allow litigants and courts to set climate policy
  for the nation.
• Yet those are likely consequences of regulating
  CO2 under 202.
• Conclusion When Congress enacted and amended
  202 in 1970 and 1977, it did not delegate to EPA
  the power to regulate CO2.