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New Climate Change Guidance for NEPA Reviews

by | Aug 3, 2016 | ,

In the United States, federal agencies that license, permit or finance energy and infrastructure projects must, with some limited exceptions, analyze the environmental impacts of those projects before they approve them, pursuant to the National Environmental Policy Act of 1969 (NEPA).  But to what extent must those agencies consider climate change impacts as part of their NEPA reviews? The President’s Council on Environmental Quality (CEQ) has just issued a guidance document that addresses that question.

CEQ’s guidance document—an August 1 memorandum addressed to the heads of all federal departments and agencies—urges federal agencies to consider two climate change-related topics when conducting NEPA reviews.

The first topic is the impact of a proposed project on climate change, and the memorandum urges federal agencies to approach that topic by focusing on the project’s direct, and indirect, greenhouse gas (GHG) emissions. Agencies are encouraged to calculate a project’s anticipated emissions using existing government resources and calculators, and to draw upon existing government literature on the impacts of such emissions. The memorandum acknowledges that “the totality of climate change impacts is not attributable to any single action,” but concludes that climate-related impacts are exacerbated by some government actions and encourages agencies to compare the level of emissions expected from a proposed project to the level expected under alternative project scenarios. The memorandum provides scant details on how to calculate “indirect” GHG emissions but does suggest that for projects involving fossil fuel extraction, the indirect impacts turn, at least in part, on the anticipated ultimate use of the extracted fuel.

The second topic is the impact of climate change on the project, and on the project’s impacts.Here, CEQ’s memorandum encourages federal agencies to consider a proposed project’s impacts not simply on environmental conditions as they currently exist but as they will exist in the future and reflecting any changes that are expected as a result of climate change. Thus, if a project will draw water from a river that is already being, or that will be, diminished because of changing snowfall or rainfall patterns, that is an impact that should be acknowledged. The memorandum also encourages agencies to incorporate climate change resiliency and adaptation planning into their NEPA reviews, especially when analyzing project alternatives and potential mitigation measures. The memorandum suggests, for example, that agencies consider whether a proposed project’s design makes it more vulnerable to changing climate conditions (such as, in some areas of the country, increased risk of wildfires) than alternative projects.

CEQ’s memorandum applies to all new NEPA reviews and states that agencies “should exercise judgment” when considering whether to apply the guidance to currently ongoing reviews. CEQ states in the memorandum that it “does not expect agencies to apply” the guidance to projects for which a final environmental impact statement or environmental assessment has already been issued.



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EPA Raises Statutory Civil Monetary Penalty Amounts

by and | Jul 25, 2016 |

On July 1, 2016, the US Environmental Protection Agency (EPA) issued an interim final rule that modifies statutory civil monetary penalty amounts for statutes administered by the agency. EPA’s interim final rule, which becomes effective on August 1, 2016, implements requirements of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the 2015 Act) and, according to EPA, is designed to increase EPA’s statutory civil monetary penalties to reflect inflation – significantly, in some cases – and to ensure civil penalties maintain their deterrent effects. EPA has stated that its adjusted civil penalty amounts will not necessarily affect the process it uses to assess penalties or the amounts it will ultimately assess, but EPA’s adjusted statutory penalty amounts could result in significant penalties in some enforcement cases. In some cases, EPA now has authority to impose penalties of hundreds of thousands of dollars per day per violation.

Since 1990, the EPA, like other federal agencies, has been required to review and, as appropriate, to revise its statutory monetary penalty amounts every four years to account for inflation. In practice, however, certain agencies did not follow this quadrennial requirement. The 2015 Act provides that, beginning on January 15, 2017, federal agencies, including the EPA, will be required to provide for annual cost-of-living adjustments to their statutory penalty amounts to reflect inflation.

In the interim, however, the 2015 Act requires agencies to provide for initial “catch-up” cost-of-living adjustments for civil penalty amounts through their interim final rulemakings. The “catch-up” amounts may not, by statute, exceed 150 percent of the penalty amounts in effect on November 2, 2015.

Consistent with the 2015 Act and the Office of Management and Budget’s (OMB) February 24, 2016 guidance, EPA calculated “catch-up” amounts for over 66 statutory penalties and announced the adjusted penalties in Table 2 of the interim final rule. EPA’s new, adjusted statutory civil penalty amounts vary by penalty. For example, the interim final rule increases the previous maximum $37,500 per-day penalty for violating requirements of implementation plans or permits for affected sources, major emitting facilities, or major stationary sources under the Clean Air Act (CAA) to a maximum of $93,750 per day per violation. Similarly, the interim final rule increases EPA’s civil monetary penalty under the Clean Water Act (CWA) for oil or hazardous substance discharges – previously set at a maximum of $37,500 per day per violation – to $44,539 per day per violation.

The ranges of statutory civil penalties under Table 2 of the interim final rule are, by statute:

EPA-Administered Statute Range of Statutory Civil Penalties for Violations that Occurred After November 2, 2015 and Assessed on or After August 1, 2016 Clean Air Act $8,908 – $356,312 Clean Water Act $1,782 – $257,848 Comprehensive Environmental Response, Compensation, and Liability Act $53,907 – $161,721 Resource Conservation and Recovery Act $14,023 – $93,750 Safe Drinking Water Act $9,375 – $1,311,850 Toxic Substances Control Act $8,908 – $37,500

EPA can assess its adjusted [...]

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Energy Tax Extenders in FAA Bill Unlikely

by , , and | Jun 30, 2016 | , , , ,

As discussed in our post on April 7, US Congress extended the Production Tax Credit (PTC) under Internal Revenue Code (IRC) Section 45 and the Investment Tax Credit (ITC) under IRC Section 48 in December 2015, but failed to include extensions for certain types of renewable energy property, including fuel cell power plants, stationary microturbine power plants, small wind energy property, combined heat and power system property, and geothermal heat pump property. Some congressional leaders had stated that the omission was an oversight that would be addressed in 2016.

In March, President Barack Obama signed an extension of certain Federal Aviation Administration (FAA) programs and revenue provisions through July 15, 2016. This legislation was apparently crafted with an intentionally short timeframe to allow inclusion of the omitted PTC and ITC provisions in long-term FAA reauthorization legislation.  However, Senate Finance Committee members have indicated that the long-term FAA legislation will not include energy tax incentives. According to Tax Analysts, Senate Finance Committee member John Thune (R-SD) recently indicated that the extenders will not make it into the FAA reauthorization bill. Senator Richard Burr (R-NC) also said that the most likely vehicle for energy tax incentives would be an end-of-the-year tax bill.



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Key Energy-Related Tax Provisions in the 2017 Budget Proposal

by , and | Feb 23, 2016 | , , , ,

President Obama’s recently released budget proposal for the 2017 fiscal year repeats many of his past energy-related tax proposals, including a permanent extension of the renewable energy production tax credit and a provision making it refundable. Making the production tax credit permanent and refundable signals the administration’s continued strong support for renewable energy. This On the Subject summarizes the key energy-related tax provisions contained in the budget proposal and detailed further in the US Department of the Treasury’s general explanation of the proposal.

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Implications of the Clean Power Plan Stay

by | Feb 12, 2016 |

Late in the day on Tuesday, February 9, the U.S. Supreme Court stayed, for at least a year and possibly longer, the implementation of the Clean Power Plan (CPP), the US Environmental Protection Agency’s (EPA’s) widely-publicized regulations governing greenhouse gas emissions from existing coal-, oil- and gas-fired power plants.  The stay means that the CPP’s requirements and deadlines are on hold, at least until resolution of the pending legal challenges to the CPP.  But what are the broader implications of the Court’s decision?

First, the stay decision bodes poorly for the ultimate fate of the CPP, even though the Supreme Court did not opine as to the CPP’s legality.  The stay decision signals, at a minimum, that a majority of the Supreme Court is sympathetic to the challengers’ claims that the CPP is unlawful.  Indeed, it signals more than that—a distrust of EPA’s assertions about the minimal burdens imposed by the CPP.  That said, the CPP may yet survive judicial review and, even if it does not survive, EPA may be able to promulgate a replacement regulation that achieves similar results, although such a replacement would surely take several years to develop.

Second, environmentally, the stay is unlikely to have any immediate effect on emissions levels, primarily because the CPP itself does not require any immediate emissions reductions.  But that does not mean the stay has no environmental consequences.  The stay fosters uncertainty about the fate of the CPP, and one potential consequence of that uncertainty is that EPA will feel compelled to devote additional resources to reducing greenhouse gas emissions from other sources, especially the oil and gas sector.

The Obama administration has limited time to pursue such alternatives, but the next administration, if it shares President Obama’s commitment to addressing climate change, may focus much more intensively on addressing the carbon content of fuels, to make up for the delays and uncertainties created by the CPP stay decision.

The stay also raises questions about the fate of the recently secured Paris agreement, since some parties to that agreement may now be wondering whether the US is capable of meeting its commitment to reduce domestic greenhouse gas emissions 26 to 28 percent from 2005 levels by 2025.  If other countries doubt the reliability of the US commitment, they may be less bold about seeking emissions reductions themselves.  Indeed, it is precisely such doubts that may drive EPA to pursue more oil and gas regulations.

Finally, lurking in the Supreme Court’s action may be a deeper signal about the fate of the Chevron doctrine, a topic that should be of interest to all entities subject to regulation in the United States, not just to those subject to the Clean Air Act.  A recurring theme in the legal challenges to the CPP is that the CPP raises questions of such extreme economic and political significance that EPA is not entitled to deference as to how those questions should be resolved.  It is not clear what role that theme played in the Supreme Court’s [...]

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Extension of Renewable Energy Tax Incentives

by , , and | Jan 14, 2016 | , ,

On December 18, 2015, President Barack Obama signed into law the Consolidated Appropriations Act, 2016 (H.R. 2029) (the Act), which included welcomed extensions to a number of energy tax incentives. The legislation includes multi-year extensions of the Section 45 Production Tax Credit (the PTC) and the Section 48 Investment Tax Credit (the ITC) for wind and solar projects tempered by a gradual phase out of the total credit available.

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EPA’s New Refinery Rule—Next Generation Compliance in Action

by | Oct 19, 2015 |

The U.S. Environmental Protection Agency (EPA) signed a new air pollution rule in September that illustrates how EPA is implementing its next generation compliance ideas.  The rule governs hazardous air emissions from petroleum refineries, but features several “next gen” tools that are relevant to other types of facilities, especially chemical plants and oil and gas storage facilities.

Next Gen Tools Found in the New Refinery Rule

EPA’s next generation compliance initiative seeks to modernize the agency’s regulations and enforcement efforts.  The initiative encourages the use of new technologies for detecting air emissions, aims to incentivize compliance and emissions reductions, rather than relying primarily on the threat of enforcement, and also encourages greater public disclosure of environmental data.  Many of these ideas are on display in the new refinery rule.

First, the rule requires “fenceline monitoring” of benzene concentrations and corrective action if benzene levels are detected above a baseline level.  This is the first time EPA has required fenceline monitoring and related corrective action measures on such a large scale.

Second, the rule requires electronic reporting of the fenceline monitoring data.  That is important not simply because it will enhance EPA’s ability to bring timely enforcement actions, but also because it is a prelude to public disclosure of the monitoring data.  EPA has explained that it intends to develop a publically accessible database of the fenceline monitoring results.

Third, the rule illustrates EPA’s evolving approach toward so-called “upset” or “malfunction” events.  Historically, many EPA air regulations excused compliance during periods of equipment malfunction.  EPA has begun rolling back those malfunction exceptions and, in the new refinery rule, the agency adopts an approach to malfunction events that it will likely seek to apply to other industrial facilities going forward, especially those that use flares and pressure relief devices (PRDs).  The new rule aims to minimize the use of flares and PRDs, in part because of recent studies suggesting that flares and PRDs can themselves be large sources of air pollution.  The rule limits the number of flaring and PRD events that are permitted, requires refinery operators to develop flare management plans (to reduce flare use) and requires certain corrective actions to be taken after each flaring or PRD event.

Fenceline Monitoring Issues

The rule’s fenceline monitoring and corrective action requirements deserve special attention.  Those features of the rule are intended to improve the control of so-called “fugitive” emissions, emissions that, generally speaking, leak out of industrial equipment rather than being expelled out an exhaust stack where they can be more easily subjected to pollution control devices.  Many other types of facilities experience fugitive emissions, including chemical plants, distilleries, oil and gas storage terminals, and wastewater treatment plants.  Thus, the new refinery rule provides a glimpse of a possible regulatory future for many other industrial activities.

A critical issue in this context is how the fenceline monitoring data will be used.  Do high levels of a hazardous air pollutant, standing alone, establish a violation, or is something more required?  In the [...]

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What Comes Next for Mercury Emissions from Power Plants?

by | Jun 29, 2015 |

The U.S. Supreme Court held this morning that the U.S. Environmental Protection Agency (EPA) acted unreasonably when it determined in 2000, and again in 2012, that it was “appropriate and necessary” to regulate mercury emissions from coal-fired power plants.  The central flaw in EPA’s reasoning, the Court held, is that the agency failed to consider the cost of regulation when making the threshold determination that regulation was “appropriate.”  Under Section 112 of the federal Clean Air Act, EPA must conclude that it is “appropriate” to regulate power plant mercury emissions before it can actually regulate those emissions.

The immediate effect of today’s decision is that the ongoing challenge to EPA’s mercury regulations will be remanded to the U.S. Court of Appeals for the D.C. Circuit, which previously upheld those regulations.  The D.C. Circuit will then face a choice:  Should it vacate the regulations, or should it leave them in place while giving EPA additional time to attempt to justify the agency’s threshold conclusion that the regulations are “appropriate.”

In the past, the D.C. Circuit has sometimes vacated environmental regulations that it found to suffer from threshold flaws, but it has also occasionally left those regulations in place pending agency revisions.  For example, several years ago the D.C. Circuit found that EPA’s Clean Air Interstate Rule (CAIR) was fatally flawed but it nevertheless declined to vacate CAIR.  Instead, it left CAIR in place pending promulgation of a replacement rule.  It remains to be seen whether the D.C. Circuit will take such an approach here.

If the mercury regulations are vacated, today’s decision may have the ironic effect of helping EPA defend its forthcoming greenhouse gas (GHG) regulations for existing power plants.  One of the principal legal objections to the forthcoming GHG regulations is that EPA allegedly lacks authority to issue them because power plants are regulated for mercury emissions.  Thus, if the mercury regulations go away, one of the principal objections to the GHG regulations will be eliminated.

Nevertheless, today’s decision has to be considered a loss for EPA.  The power plant mercury regulations took over two decades to promulgate and were anticipated to have significant environmental benefits, primarily in the form of reductions of particulate matter and sulfur dioxide emissions.  Today’s decision creates some uncertainty about the future of those regulations.  Equally important, today’s decision is another reminder that a majority of the Supreme Court remains deeply skeptical of EPA’s claims about the agency’s statutory authority.

If there is a silver lining for EPA in today’s decision, it is that the Supreme Court did not go so far as to dictate exactly how EPA is to consider costs.  Instead, the Court concluded:  “It will be up to the Agency to decide (as always, within the limits of reasonable interpretation) how to account for cost.”



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Hazardous Waste Recycling Regulations – the Latest Chapter

by | Dec 17, 2014 |

“A long time ago in a [May 19, 1980 Federal Register] far, far away [or so it seems],” the U.S. Environmental Protection Agency (EPA) declared its authority to regulate all hazardous secondary material, whether discarded or reused, under the Resource Conservation and Recovery Act (RCRA), and that it would exercise its authority to promote properly conducted waste reclamation.  Ever since then, a kind of Empire/Rebellion struggle has played out over the scope and extent of broad-based recycling exclusions to the RCRA’s solid waste definition.

Over the years, recycling exclusions generally focused on particular industries.  However, EPA’s last final rule, issued in the October 30, 2008 Federal Register during the Bush administration, contained several much broader exclusions.  Those exclusions covered a waste generator’s onsite recycling, offsite recycling in the United States, and transfers of hazardous secondary materials for recycling conducted outside the United States.

The 2008 rule prompted litigation from both industry and the Sierra Club.  The Sierra Club also filed an administrative petition seeking EPA repeal of the final rule.  On September 7, 2010, EPA reached a settlement agreement with the Sierra Club under which EPA agreed to issue a notice of proposed rulemaking and a final rule that addressed the Sierra Club’s concerns.  EPA’s final rule announced on December 10 is the latest chapter in the ongoing saga.

The new final rule rolls back many of the Bush-era provisions that minimized agency filings and involvement.  It contains revisions to the onsite generator recycling exclusion, replaces the exclusion for offsite recycling in the United States, eliminates the exclusion covering recycling outside the United States, and introduces a new exclusion for recycling of certain solvents.  It also contains some new requirements applicable to all recycling activities, and to new variances and non-waste determinations for recycled materials.

EPA’s new final rule is intended to provide greater safeguards against sloppy and sham recycling.  These provisions address accumulation of hazardous secondary materials when there is no near-term prospect for recycling, and require an up-front demonstration that the recycling process will generate a valuable product suitable for reuse.  They also require offsite recycling by a facility with a Part B permit or interim status under the RCRA regulations, or by facility that has obtained a variance after meeting the same types of requirements imposed upon permitted and interim status facilities.

Offsite recyclers and waste generators engaged in onsite recycling must adopt new procedures that include notification and periodic updates of recycling activity, demonstration that the recycling is legitimate, documentation of when accumulation has commenced for the material being recycled, and compliance with recordkeeping requirements and with emergency response and preparedness procedures like those imposed on hazardous waste generators.  In addition, the new rule provides a definition of “contained” that is intended to ensure proper storage of hazardous secondary materials.

Beside adding safeguards to two of the three exclusions instituted in 2008 and eliminating the third one, the new rule introduces an exclusion to cover the recycling of 18 commercial grade solvents.  Under that [...]

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An Update on EPA’s Approach to Methane Emissions from the Oil & Gas Sector – Including a Summary of the Agency’s Proposed New Reporting Rule

by | Dec 4, 2014 |

The U.S. Environmental Protection Agency (EPA) is expected to announce between now and December 31, 2014 its plan for pursuing methane reductions from the oil and gas sector – including whether it will propose new emission reduction regulations.  Additionally, the agency recently modified its greenhouse gas (GHG) reporting rules for oil and gas systems and also proposed expanding those rules so that they would cover many additional oil- and gas-related sources.  This blog post briefly summarizes these recent developments.

Where is EPA Headed with Respect to New Emission Reduction Requirements?

In his March 2014 Methane Reduction Strategy, President Obama directed EPA to study opportunities for reducing methane emissions from the oil and gas sector and to make a determination by this fall as to how best to pursue further reductions.  EPA has yet to announce its “determination” but it is widely anticipated that EPA will not propose new methane capture or leak detection and repair (LDAR) regulations; instead, EPA is generally expected to continue promoting voluntary emission reduction efforts.  But the agency remains under pressure from environmental organizations to actually require emission reduction measures, such as new mandatory LDAR requirements.  For example a recent report by a coalition of environmental organizations asserts that new LDAR regulations focused on methane, coupled with other mandatory methane reduction measures, could “reduce the sector’s methane pollution in half in just a few years.”

New GHG Reporting Requirements Take Effect January 1, 2015, and EPA has also Proposed a Significant Expansion of the Reporting Rules

Although EPA may not propose new methane emission reduction regulations, it is clearly interested in improving the range and quality of methane emission data that it receives – and that it makes available to the public.  Thus, on November 13, 2014, EPA signed a final rule (published in the Federal Register on November 25, 2014) modifying the existing GHG reporting requirements for the oil and gas sector to clarify the exact equipment covered by the regulations and the precise methods that can be used to calculate emissions from that equipment.  The modifications take effect on January 1, 2015 and apply to emissions occurring in 2015.

EPA also just signed a proposed rule that would expand the oil and gas sector GHG reporting requirements to several additional categories of equipment and activities.  The proposed rule has not yet been published in the Federal Register, but it would expand the reporting requirements to include, among other sources, gathering and boosting facilities, completions of fractured oil wells (currently, the rules cover fractured gas wells) and natural gas transmission pipeline blowdowns.  The proposed rule also discusses emission calculation methodologies and the confidentiality of data reported to EPA.  Indeed, the proposed rule lists several categories of emission and equipment-related data and proposes to designate much of that information as not confidential.  That feature of the proposal reflects the agency’s ongoing emphasis on “next generation compliance,” one element of which is greater public [...]

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