While it is unlikely that the 113th Congress will take any action on climate change (especially not in advance of the November 2014 elections),  many major public companies aren’t waiting for Congressional action and are instead proactively beginning to factor internal carbon pricing into their business decisions.  According to a new report issued by the CDP, 29 major companies in the United States already incorporate a carbon price into their business planning and risk management strategies. Of the 2,100 companies surveyed throughout the world, 638 companies have disclosed that regulations related to carbon pricing (cap-and-trade & carbon taxes) present opportunities for their businesses (although companies in heavy emitting countries and industries continue to report that they feel competitively disadvantaged by carbon pricing). Moreover, 500 of these surveyed companies reported that they are already regulated and price carbon through global carbon markets.  Nearly a fifth of these are U.S.-based companies.    

Another interesting observation that can be gleaned from the CDP report is the significant variability in the price that companies are setting per ton of carbon.  For example, in North America, the price per ton ranges from $8-$80; in Europe, the price per ton ranges between $15-$324. The variability can be explained, at least in part, on the regulatory regime where those companies are operating.  For example, companies operating in California are estimating carbon prices on the basis of California’s cap and trade program which prices carbon at between $14-$15 per metric ton. Companies that primarily operate in Europe rely more upon Europe’s Emissions Trading Scheme, although the current price per metric ton under the EU ETS (£6 per metric ton) is significantly lower than the above-referenced range so these companies are obviously projecting a higher price per ton in the future.  

During last week’s United Nations Climate Summit, many governments and  companies also expressed support for establishing a price for carbon emissions. The World Bank identified many countries, states, provinces and cities, as well as over 1,000 businesses and investors that were in favor of carbon pricing.  The CDP report  noted that “[c]ompanies in the US and worldwide are already advanced in their use of carbon pricing.  They are ahead of their governments in planning for climate change risks, costs and opportunities. These companies want, and are calling for, clear pricing and regulatory certainty to help them plan their climate-related investments, and they want to see more certain, internationally linked carbon markets.”  

Regardless of what side of the climate change debate one embraces, what is clear is that the business community has already made a decision to incorporate climate change related risks into its business strategy decision making.  For those of us that represent the business community, it probably would be a good idea to get on the train or be left at the station.    

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On June 23, 2014, the United States Supreme Court issued its widely anticipated decision in Utility Air Regulatory Group v. EPA concerning the U.S. Environmental Protection Agency’s regulation of greenhouse gas emissions (GHGs) from stationary sources. In a divided decision with a majority opinion written by Justice Antonin Scalia, the Court rejected EPA’s regulation of sources that would become newly subject to federal Clean Air Act permitting based only on their potential to emit GHGs.  The Court’s decision to remove a wide range of sources from EPA’s permitting jurisdiction raises the question of whether those sources are now more vulnerable to common law claims.

In the Court’s landmark 2007 decision in Massachusetts v. EPA—widely known as the “single largest expansion in the scope of the Clean Air Act in its history”—the Court rejected EPA’s position at that time that the Clean Air Act could not encompass GHGs. EPA then began the regulatory process mandated by the Court, resulting in the rules at issue in UARG.  In the same time frame, plaintiffs sought to obtain injunctive relief or damages under nuisance and other common law theories.  In American Elec. Power Co. v. Connecticut, 131 S.Ct. 2527 (2011), one of those common law suits, the Court held that the Clean Air Act’s authorization of EPA regulation displaced any federal common law right to seek reduction of GHG emissions under common law theories.  Id. at 2537.

In the rulemaking at issue in UARG, EPA interpreted the Act and its rules to mean that once GHGs were regulated under any part of the Clean Air Act, Title V and PSD permitting requirements would automatically apply to any stationary source with the potential to emit GHGs in excess of the respective 100- or 250-ton statutory air pollutant thresholds.  Recognizing the regulatory burden this interpretation would impose on smaller sources never before subject to PSD or Title V requirements—such as malls, apartment buildings, and schools—EPA attempted to “tailor” its program for those “new” sources by redefining the statutory threshold for GHGs to 100,000 tons per year, as opposed to the statutorily-required 100 or 250 tons.  

In its decision, the Court saw EPA’s attempt to “tailor” a clear 100- or 250-ton statutory threshold to 100,000 tons as an overstep in the Agency’s authority and an impermissible attempt to “tailor legislation to bureaucratic policy goals by rewriting unambiguous statutory terms.”  However, the Court supported EPA’s interpretation that sources already subject to PSD and Title V for conventional pollutants may be required to limit emissions of GHGs through conditions in their federal air permits.  As a result of these two primary holdings, federal air permitting controls on GHGs apply only to large sources, such as power plants, refineries and heavy manufacturing facilities, and not to a wide range of other sources.

Does this mean that displacement of federal common law no longer applies for those other sources?  For at least two reasons, the answer should be no.

First, the issues before the Court in UARG concerned certain federal permitting programs, not the entire Clean Air Act.  Other sections of the Act, particularly section 111, provide alternate pathways for regulating greenhouse gas emissions.  And the Court explicitly stated that its ruling on the permitting programs did not undercut EPA’s authority under section 111 to issue performance standards.  See UARG, slip op. at 14-15 n. 5.  Section 111 regulates by category, not by size.  Indeed, EPA recently issued its first set of performance standards for GHG emissions, which will cover fossil fuel-fired power plants.  Standards for other categories will very likely follow.  Consequently, sources excluded by UARG from PSD and Title V regulation could nonetheless be included in section 111 performance standards and be required to reduce GHGs at some point in the future.    

Second, even if EPA declines to issue performance standards for every category of sources, the displacement of federal common law remains intact.  

The critical point is that Congress delegated to EPA the decision whether and how to regulate carbon-dioxide emissions from power plants; the delegation is what displaces federal common law. Indeed, were EPA to decline to regulate carbon-dioxide emissions altogether at the conclusion of its ongoing § 7411 rulemaking, the federal courts would have no warrant to employ the federal common law of nuisance to upset the agency's expert determination.

AEP, 131 S. Ct. at 2538-39.  Thus, the regulatory process remains the exclusive avenue for federal limits on GHG emissions.

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Throughout his three terms as Mayor of New York City, Mayor Michael Bloomberg has kept policies designed to fight climate change at the forefront of his agenda.  Most recently, nearly one year following the devastation of Hurricane Sandy in New York City and the Mid-Atlantic coast, Bloomberg renewed his calls for mayors of the world’s largest cities to join him in combating climate change.  

According to Bloomberg, nearly half of the world’s population resides in large cities, which combined generate approximately 70% of the world’s global greenhouse gas emissions.   Therefore, influenced by this statistic, Bloomberg recently stressed that cities should not rely upon state and federal legislation to combat climate change. Instead, he maintains that the leaders of these cities can and should take their own action to reduce greenhouse gas emissions around the world.

On the global stage, Bloomberg serves as chair of the C40 Cities Climate Leadership Group, a collaboration of cities and research institutions from around the world.  According to Bloomberg, this group, has “taken more than 4,700 actions to reduce greenhouse gas emissions and adapt to the possible effects of climate change,” and “has the potential to reduce emissions by more than one billion tons a year by 2030 — which is equivalent to making both Canada and Mexico entirely carbon-neutral.”  

Specific to New York City, Bloomberg has overseen the planting of over 500,000 new trees and spearheaded a major bike sharing initiative.   He also implemented a ban on the most-polluting form of heating oil, which according to Bloomberg, has “the potential to reduce [New York City’s] greenhouse gas emissions by at least five percent and save New Yorkers more than $750 million per year in energy costs.”

Although Bloomberg will be exiting the political stage in January 2014 when he completes his final term as Mayor of New York City, we can be sure that his framework for addressing climate change at the city level—rather than at the state and federal levels—will continue to shape the national and international climate change debate for years to come.

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On June 25, 2013, in a speech at Georgetown University, President Obama unveiled his Climate Action Plan (CAP) which sidesteps Congress and instead focuses on executive branch action, and more specifically, U.S. EPA action in an effort to reduce greenhouse gas (GHG) emissions.  As part of the CAP, the President recommitted the United States to reduce greenhouse gas (GHG) emissions by 17% below 2005 levels by 2020 (but only if all other major economies agree to similarly limit their GHG emissions).  In an effort to meet this commitment, the CAP targets, at least in part, GHG emissions from new and existing power plants.  

More specifically, in the CAP, the President directs U.S. EPA to promulgate regulations that limit GHG emissions at existing power plants. The CAP also directs U.S. EPA to re-propose New Source Performance Standards (NSPS) for newly constructed power plants. U.S. EPA had previously issued proposed NSPS rules in April 2012; however, U.S. EPA had missed its one-year deadline for issuing a final NSPS for new coal- and natural gas-fired utilities.  

Other key elements of the President’s CAP include: 

An end to public financing of coal-fired power plants abroad that do not include carbon capture and sequestration technology, except in developing nations where no viable alternatives exists; 
Setting a target for the Department of Interior to double renewable energy production on public lands (from 10 gigawatts to 20 gigawatts) by 2020; 
Directing federal agencies to streamline the siting, permitting and review process for electricity transmission projects; 
Directing U.S. EPA and the Department of Transportation to work on a second round of heavy-duty vehicle emission limits for post-2018 model years; 
Making available up to $8 billion in loan guarantees for advanced fossil energy projects that are intended to avoid, reduce, or sequester anthropogenic emissions of GHGs; 
Directing federal agencies to ensure that new roads and other taxpayer-funded projects are built to withstand extreme weather events and anticipated rising sea levels; 
Establishing a new energy efficiency standards goal for consumer products; 
Efforts to craft a free trade agreement on environmental goods and services that will seek to lower tariffs and other market barriers; 
Initiatives to curb emissions of hydrofluorocarbons and methane; and 
Directing agencies to focus on the impacts of climate change in key sectors, including health, transportation, food supplies, oceans and coastal communities and implement strategies to mitigate the impact of climate change on these key sectors. 

Both sides of the debate have weighed in on the CAP.  Not surprisingly, the coal industry is critical of the CAP, with the American Coalition for Clean Coal Electricity noting that “taking American’s most significant source of electricity offline would have disastrous consequences for our nation’s economy.”  On the other side of the fence, the Natural Resources Defense Council applauded the President, stating “the President’s commitment to set the first-ever carbon limits on power plants is an important first step … to protect Americans and future generations from the dangerous pollution fueling climate change.”  However, notwithstanding the diatribe from both sides of the debate, climate change doesn’t seem to be a priority for the average U.S. citizen.  Although a recent Pew Research Center poll of 37,000 respondents in 39 countries identified climate change and fiscal volatility as top global threats, in the United States, only 28% of Americans think climate change should be a top priority for the Administration.  It will be interesting to see if the President is able to convince the average citizen that climate change is an important issue that needs to be addressed, especially if the President’s CAP results in increased utility bills.    

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On June 8, 2013, President Barack Obama and President Xi Jinping of China issued a joint statement announcing that the two countries have agreed to work together to phase down the consumption and production of hydrofluorocarbons (HFCs), a potent greenhouse gas used in refrigerators, air conditioners, and industrial applications.  While the two countries have (at least for now) sidestepped any collaborative measures to address the consumption and production of carbon dioxide (CO2) -- generally considered to be the most harmful of the anthropogenic greenhouse gases -- the Presidents’ statement asserts that a global phase down of HFCs could potentially reduce some 90 gigatons of CO2 equivalent by 2050, equal to roughly two years’ worth of current global greenhouse gas emissions.

The Presidents’ statement comes on the heels of a pair of federal court actions that likely mark the final demise of two high-profile private climate change litigations in the United States federal courts.  On May 20, 2013, the United States Supreme Court denied certiorari in the case Native Village of Kivalina v. Exxon Mobil, wherein the plaintiffs unsuccessfully sought to sue the defendants under a federal common law nuisance theory for the destruction of the village of Kivalina, Alaska by flooding allegedly caused by climate change.  And on May 14, 2013, the United States Fifth Circuit Court of Appeals affirmed dismissal on res judicata grounds of the plaintiffs’ second lawsuit in Comer v. Murphy Oil, which sought to sue several alleged greenhouse gas emitters in tort for damages caused by Hurricane Katrina.  

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No good deed goes unpunished when it comes to the United States Environmental Protection Agency’s (“U.S. EPA”) efforts to regulate climate change.  Rather, U.S. EPA’s authority to regulate climate change (e.g. greenhouse gas emissions or “GHGs”) is currently being challenged by some States, while other States are simultaneously threatening to sue U.S. EPA for failing to act to address climate change.

Since the United States Supreme Court’s decision in Massachusetts v. EPA, 127 S. Ct. 1438 (2007) holding that U.S. EPA could regulate GHG emissions under the Clean Air Act, various States and industrial groups have challenged U.S. EPA’s subsequent attempts to regulate GHGs.  Most recently, on April 19, 2013, the Attorney General of Texas supported by 11 other state attorney generals, filed a petition for writ of certiorari to the United States Supreme Court claiming that U.S. EPA overreached its authority by regulating GHGs, and requested that the Court overrule its decision in Massachusetts v. EPA on the basis of the “absurd” and detrimental economic consequences of regulating GHGs under the Clean Air Act.

Ironically, on April 17, 2013, 10 different states, the District of Columbia and the City of New York jointly sent U.S. EPA a Clean Air Act Notice of Intent to Sue for U.S. EPA’s failure to promulgate rules on new power plant emissions by the regulatory deadline (the “Notice”).  Under the Clean Air Act, U.S. EPA was required to finalize the New Source Performance Standards for fossil fuel power plants and petroleum refineries by April 13, 2013.  These are contentious standards that have been the subject of millions of public comments, as they effectively bar the construction of new coal fired power plants without prohibitively expensive control technologies.  The States’ intention in filing the Notice is to force U.S. EPA to issue/finalize these rules through court order, or through an agreement with U.S. EPA.

Thus, U.S. EPA now finds itself fighting a two fronted war both trying to defend its action and inaction at the same time.  Given these conflicting positions, U.S. EPA would be justified in feeling that it just can’t win when it comes to climate change, and it appears that the more aggressive states may be the ones that start to drive change in this arena.

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EPA and Texas have an ongoing fight about many things, greenhouse gas regulation and permitting being only one of them.  The State refused to accept EPA’s decision under what is known as the Tailoring Rule to require states to implement as part of air emissions permits for certain new and modified existing sources a greenhouse gas permitting requirement.  As a result, in Texas, for facilities that emit over a certain amount of greenhouse gases, they have to apply to the Texas Commission on Environmental Quality (TCEQ) for a permit for conventional emissions and a permit from EPA for emissions of GHGs.  One of the key issues is whether carbon capture will be required, and whether the State will ultimately take over the greenhouse gas permitting from EPA.

As Texas desperately needs new power plants to avoid rolling brownouts and blackouts, some of these permits are for new natural gas power plants.  One of the critical issues that arises is to what extent carbon capture and storage (CCS) or carbon capture and utilization (CCU) is required.  In every permit for a power plant, EPA Region 6 is requiring a demonstration under the Best Available Control Technology (BACT) that CCS or CCU is not economically feasible.  

In Texas, there are several plants under development on the coal side and one on the natural gas side that are seeking to capture CO2 for use for enhanced oil recovery in old oil fields that have extracted all of the oil they can in primary and secondary processes.  CO2 has long been used to remove even more oil in a tertiary process. Historically, the CO2 has been obtained from natural sources.  Today there is greater demand than supply from natural sources.  Several oil companies are seeking to obtain CO2 from man-made sources.

The long-term viability of these processes may to some extent affect BACT analysis for power plants under the Prevention of Significant Deterioration (PSD) process under the federal Clean Air Act.  CCU for enhanced oil recovery (EOR) may prove one way to cost effectively capture CO2.  This will need to be proven through plants that are yet to be built.  
These developments may also affect EPA developing regulation on existing and new power plants.  So far the approach has been to set emissions from natural gas power plants as the standard under proposed rules for both natural gas and coal-fired power plants.  CCS or CCU/EOR has not been identified as a standard by EPA.

The construction of plants particularly natural gas fired plants with CCS may prove to be an interesting development over the next several years.  The ability to build and technically operate these plants and the ability to show they are economically viable may provide fodder for EPA regulation and technology requirements for fossil fueled power plants in the coming decade.  What may be a significant limitation is the cost to implement capture and the ability and cost to transport CO2 to its point of use in an old oil field.  Much of the country may simply not have the CO2 pipelines or oil fields for utilizing the CO2.

In Texas, the issue is much more of an issue because EPA is implementing the program, and the state has lots of old oil fields, which can use CO2, and the history of CO2 use dates back many decades.  There are no known cases of any problems with CO2 coming back to the surface.

A current question is whether the TCEQ will take over GHG permitting in Texas.  A bill has been proposed in the Texas legislature that would require the TCEQ to take over the job from EPA.  Several industry groups have testified in favor of the bill, to allow a streamlining of the air permitting process, and to reduce the time to get an EPA permit.  Some of the industry representatives are concerned that the EPA is taking too long to issue the permits.  The President and Chief Operating Office of Targa Resources and President of the Gas Processors Association is reported to have testified in favor of the bill.  

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It was reported on February 20, 2013, that President Obama appears to have selected federal air regulator, Gina McCarthy, to take over for Lisa Jackson as head of the EPA.  The news indicates that the executive branch intends to build upon the agency’s recently-validated efforts to regulate greenhouse gas (GHG) emissions, in the face of persistently anemic congressional action on the issue.

The likelihood of increased regulatory, as opposed to legislative, involvement is further evidenced by the reactions of various legislators who oppose GHG controls.  For example, Sen. David Vitter (R-La.) was quoted as saying, “[t]he administration should be looking for someone who will end the standard of ignoring congressional requests, undermining transparency and relying on flawed science…Instead, it looks like they may double down on that practice.”  “Obama Expected to Tap McCarthy for EPA, Moniz for DOE,” http://www.law360.com/articles/417045.

In other words, if President Obama is going to make climate change a legacy issue for his second term—which seems to be the case based upon statements made in his inaugural  and State of the Union addresses—he is going to have to revisit his previously-stated aversion to doing so primarily through top-down regulation.  But how is he going to go about doing that?  The issue of climate change was conspicuously absent from the topics discussed during the 2012 presidential campaign, and any increased attention it has received in recent months might deservedly be credited in significant part to Hurricane Sandy.  Nor does it help that the administration has offered up few, if any, real details about its future climate-change-related regulatory agenda (see, e.g., http://www.whitehouse.gov/energy/climate-change).

Until that plan is made public, outside observers must rely on a review of EPA’s past successes and ongoing initiatives in order to predict what the future has in store.  However, it seems clear that an emboldened EPA will likely pursue all or some of the following initiatives with increased vigor and political support in the coming months and years.

·         New Power Plants:  EPA is expected to finalize a rule, originally proposed in 2012, requiring new fossil-fuel-fired power plants to be constructed with carbon capture and sequestration technology.

·         Existing Power Plants:  Finalization of the rule governing CO2 emissions from new power plants will force EPA to address the same issue with respect to existing facilities.  EPA is expected to address this by requiring each state to adopt its own emission standards pursuant to guidelines issued by the federal agency.

·         Refineries:  The terms of a 2010 settlement agreement required EPA to issue a GHG rule for refineries by November 2012.  The agency did not comply with that deadline and expected to act on the issue this year.

·         Oil & Gas Operations:  EPA finalized emission standards for oil and gas operations in 2012.  Several states subsequently filed a notice of intent to sue the agency for its failure to include provisions that directly regulate methane.  EPA has indicated that it will revise the final rule in 2013.

·         Mobil Sources:  EPA has proposed a rule designed to ensure that transportation fuel sold in the United States contains a minimum volume of renewable fuel.

·         Climate Adaptation Plan:  EPA released its draft Climate Adaptation Plan this month, which discusses the impact of climate change on the agency’s ability to fulfill its mission and describes how EPA will factor climate change adaptation into new regulations.  The public comment period runs through April 9th.

DRI’s Climate Change Task Force will continue to monitor developments in this evolving area of the law, and will submit regular blog postings and articles discussing relevant events.

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Even before Hurricane Sandy devastated the East Coast, climate change policy had been on the forefront of federal and state legislative agendas.    However, the size and scope of Sandy has brought a new wave of federal and state policy proposals aimed at preventing the frequency and magnitude of superstorms like Sandy.

In Congress, Senator Barbara Boxer (D-CA), the Chair of the Senate Environmental and Public Works Committee, is spearheading several efforts aimed at curbing climate change.  Although the legislation was proposed before Sandy, the aftermath of Sandy has renewed Senator Boxer’s calls to enact the Water Resources Development Act of 2012.  This bill authorizes infrastructure improvements to our nation’s water resources in order to reduce flood risk and storm damage and to foster ecosystem restoration. 

Senator Boxer, in a collaborative effort with the Chairs of the Senate Energy and National Resources Committee and Senate Foreign Relations Committee, has also recently proposed the creation of a “clearinghouse” in order to organize the Senate’s efforts on climate change legislation.  She intends the clearinghouse to be a central forum for lawmakers to examine the current state of the science on climate change and to raise federal and state-specific issues of interest.

In New Jersey, one of the states hit hardest by Sandy, the storm may already be shaping New Jersey’s strategic planning and growth efforts.  The State’s strategic development plan was scheduled for release just weeks after the storm; however, its release has been delayed, and according to the Christie Administration, the plan is under reconsideration “in light of the new challenges that have been presented by the storm and the aftermath of the storm.”     

While the predictability of future natural disasters is far from certain, we can be sure that in the aftermath of Sandy, legislative and public policy proposals addressing climate change will be on the horizon.    Indeed, since President Obama specifically mentioned climate change in his Inaugural Address on January 21, 2013, his Administration will likely seek congressional action before the 2014 mid-term elections.  


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With an election brewing, plaintiffs trying to impact climate change may find themselves lobbying politicians rather than running to the nearest courtroom.  On September 21, 2012, the Ninth Circuit further slammed the door on the ability for such claims to succeed in federal court.  Specifically, the Court held that federal common law public nuisance claims are unavailable to parties seeking damages or injunctive relief based on global warming.  Native Village of Kivalina v. ExxonMobil Corp., 2012 U.S. App. LEXIS 19870 (9th Cir. 2012).  In this case, the Native Village of Kivalina and the City of Kivalina filed federal common law public nuisance claims (among others) against twenty-two oil, energy, and utility companies alleging that greenhouse gas emissions caused by Defendants have resulted in global warming impacts to the Village and City.  Kivalina appealed the case to the Ninth Circuit following the district court’s dismissal of its claims for lack of subject matter jurisdiction.

The Ninth Circuit affirmed the district court’s holding and dismissed Kivalina’s federal common law public nuisance claims, explaining that “claims can be brought under federal common law for public nuisance only when courts are “compelled to consider federal questions which cannot be answered by federal statutes alone.”  In other words, federal common law cannot apply when congressional legislation directly speaks to an issue.  To make this determination, the Court relied on the recent Supreme Court decision in Connecticut v. Am. Elec. Power Co., Inc., 131 S. Ct. 2527 (2011) in which the Supreme Court concluded that the Clean Air Act provides a means to seek limitations on greenhouse gases, and thus, displaces any federal common law right to seek abatement of greenhouse gases.  While AEP focused on the abatement of emissions (i.e. injunctive relief), the Ninth Circuit’s holding significantly broadened AEP by applying this analysis equally to claims for damages.

Accordingly, the combination of Kivalina and AEP seems to bar future federal public nuisance claims for damages or injunctive relief based on global warming, and is likely to be a significant deterrent if not a complete bar to such claims being filed in federal court.  Significantly though,  the Ninth Circuit did not address Kivalina’s state claims, and thus, it is possible that  Kivalina will pursue those claims in state court.  State courts are likely to become the next battleground (in this action or in similar actions) to determine whether parties can assert similar public nuisance claims under state law, or if plaintiffs will need to wait for legislation to address climate change and forego any type of damage recovery. 

Heidi Goldstein and Devin Barry, Thompson Hine LLP


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