When the new Farm Bill finally passed this February, two years behind schedule, many environmental groups breathed a sigh of relief–if not outright celebrated. In addition to other conservation provisions, the bill included a hard-fought requirement for farmers to adopt basic soil conservation measures to obtain crop insurance subsidies. Although the soil conservation requirements aren’t new, they had not been linked to crop insurance subsidies for many years and instead were a quid pro quo only for receiving direct subsidy payments. With the new Farm Bill’s emphasis on crop insurance subsidies in lieu of direct payments to support the agriculture sector, the environmental need to tie conservation measures to crop insurance became acute.
Commonly known as “conservation compliance,” these Farm Bill provisions are aimed at reducing soil erosion by requiring farmers to develop conservation plans for what are known as highly erodible lands. Conservation compliance has contributed to substantial reductions in soil erosion. According to USDA data, soil erosion declined by about forty percent annually from 1982 through 1997. But despite the track record of success, it took a multi-year, concerted campaign simply to apply conservation compliance to crop insurance subsidies. Environmental groups rightly see this addition to the new Farm Bill as a victory. As Steve Kline of the Theodore Roosevelt Conservation Partnership, which helped lead the campaign, told EE News: “We are certainly going to be celebrating this bill . . . . . I do think it’s the best we can get.”
At the same time, however, conservation compliance only partially addresses the environmental consequences of large-scale commodity crop production. Not only sediment pollution, but also nutrient and pesticide pollution resulting from commodity crop operations can have harmful effects both locally and downstream. Nutrient pollution, for example, has had wide‐ranging and costly impacts—from the dead zones that form in the Gulf of Mexico and other water bodies, to polluted streams, rivers, and lakes, to contaminated drinking water.
Agriculture is the only major industrial sector that is routinely exempted from baseline environmental safeguards. This is not to say that there are no requirements in environmental laws that apply to the agriculture industry, but environmental laws are more noteworthy for their exemptions for agriculture than for their coverage of it. And while many agricultural operations do implement some stewardship practices, pollution resulting from commodity crop production remains a significant national problem.
As a result, the costs associated with the environmental impacts are not accounted for by either the seller of commodity crops (the farmer) or the purchaser (such as grain‐trading companies, meatpackers, and feedlots). Instead, the externalized pollution costs attributable to large-scale agriculture are borne by the public.
In an HELR article last year, we made two proposals. First, to reduce the impacts of downstream pollution, we argued that large‐scale commodity crop operations that choose to accept federal subsidy payments should assume responsibility for implementing a baseline set of stewardship practices designed to minimize nutrient pollution. The aim is not to establish a significant new administrative program, but rather a workable, streamlined process for adoption of stewardship measures that can be integrated into existing subsidy program administration.
Second, to increase public access to information on the sources and quantities of nutrient pollution entering surface waters and groundwater, we recommended that large‐scale commodity crop operations publicly report on the quantity, type, and timing of fertilizers they apply.
Disclosure of fertilizer usage would increase public access to information on the sources and quantities of nutrient pollution entering surface waters and groundwater, while at the same time helping to discourage practices that result in overuse. Existing environmental disclosure programs (think Toxics Release Inventory) work in part because they cause the disclosing entity to focus on its chemicals use, which in turn can lead to opportunities for reductions – some of which can save money and increase efficiency. Reductions also occur in response to perceived public or market pressure. The goal is to generate an easy‐to‐understand dataset while minimizing the administrative burden on operators.
We proposed that these requirements be applied to large-scale commodity crop operations—farms that produce crops such as corn, wheat, and soybeans and gross $500,000 dollars or more in annual sales—because as a class they represent a large share of production, can generate substantial pollution, have the potential to afford conservation measures, and receive the most federal farm subsidies.
The 2014 Farm Bill took an important step toward enhanced environmental protection by linking conservation compliance to crop insurance. And yet, much more can reasonably be expected of large-scale commodity crop operations as a condition of federal support. If we settle for retention of current requirements, we risk setting the bar too low.
As climate change threatens to reshape our coastlines and rewrite our expected weather patterns, it poses another less obvious but very real threat: climate change may decimate our retirement funds.
Investment funds, like other corporate forms, are bound by the bedrock corporate law tenets of shareholder primacy and profit-maximization. According to these principles, managers and officers are bound by their fiduciary duty to protect shareholders interests above all by seeking solely to maximize corporate profits. They are barred from considering outside interests at the expense of share value maximization (see, e.g., Dodge v. Ford Motor Co., 170 N.W. 668 (Mich 1919)). While corporations can act for the “public good” (by making donations), these actions must be framed as an instrument to maximize profits and benefit stockholders, for example, corporate donations increase goodwill (see, e.g., AP Smith Mfg Co. v. Barlow, 13 N.J. 145 (1953)). For years, investment fund managers have used the cloak of profit-maximization to avoid acting on climate change. To them, climate change is an ethical, non-financial issue, and therefore beyond the bounds of what they consider.
And yet, there is a growing understanding around the world that climate change is an inherently economic issue. The head of the IMF described climate change as “the greatest economic challenge of the 21st century.” Insurance companies are hopping on board as well, adjusting rates based on the increasing frequency of catastrophic weather events. Even the Department of Defense has begun incorporating climate change risks into its long-term planning. When your insurance company and your military start factoring climate change into their long-term economic decisions, shouldn’t your retirement fund do so as well?
Because climate change is an economic issue, it can be framed as necessary to profit-maximization and therefore can be included within the ambit of shareholder primacy.
Pension funds, with their enormous financial holdings and long-term strategy, are the perfect businesses to lead the way. Pension funds are inherently long-term investors, and their ultimate end is not just to raise money but also to ensure pensioners have a prosperous and secure retirement. Moreover, pension funds in the past have used their considerable financial clout to make investment decisions based on policy preferences. For example, a year ago, the California Teachers Retirement pension chose to divest from companies that manufacture firearms that are illegal in California.
By incorporating climate change risk and opportunity into investment calculus and strategies, pension funds can both increase fund returns and advance sustainability goals. Funds can both improve the environmental performance of companies already in their fund and also consider climate risk in evaluating and pricing new stock (e.g., might a company have to comply with costly greenhouse gas emissions regulations in the future). Really forward-looking funds should invest in solutions offered by clean energy and energy efficiency companies.
Making climate change into an economic issue may not be sufficient, though. In Funding Climate Change, Claire Woods argues that fiduciary duties are just one part of a greater problem keeping institutional investors from acting on climate change. She argues that “the realities of human behavior,” including “inertia and myopia” serve as the greatest barrier to sustainability investment. Similarly, in a talk on global warming and psychology, Harvard Psychologist Dan Gilbert explains that our psychological impulses make it difficult for us to confront global warming. As humans, we’re programmed to respond most to threats that are intentional, immoral, imminent and instantaneous; in contrast, climate change is silent, amoral and slow, allowing it to sneak under the radar.
To ensure that pension funds actively address climate change, we must make the issue salient and relevant to their bottom-line and thus to their beneficiaries. Corporate law can help: we should consider passing legislation to explicitly include environmental considerations and climate change within the bounds of pension funds’ fiduciary duties. Beyond the legal element, though, we must stress to investors the losses that may result due to the ravages of climate change (behavioral economics has taught us that humans are hugely averse to loss). We must engage pension-holders and ask them to put direct pressure on their pension fund, explaining that their money is at risk. Pension funds are should be investing for the future; instead they’re investing in climate change.
 Courts for the most part would likely agree with managers’ vision of climate change as a non-financial issue outside the bounds of what they can consider, though there are rare exceptions. Courts have allowed investment funds to consider social impacts of investment decisions; for example, a Maryland Court of Appeals, ruling on divestment from South Africa, wrote “[n]evertheless, we do not believe that a trustee necessarily violates the duty of loyalty by considering the social consequences of investment decisions.”
When it comes to corporate law, the Securities and Exchange Commission (SEC) is king. Most people connect the SEC with the stock market, the 2008 financial crisis, and Bernie Madoff. However, for four years, the SEC has required companies to tackle an unlikely target: climate change.
Generally, publicly traded companies are required to disclose material business risks to investors via regular filings (called “10-K filings”) with the SEC. In July 2010, the SEC published binding interpretative guidance requiring companies to address how climate change (and climate change regulation) could potentially impact their businesses in their annual 10-K filings. Like all SEC disclosures, this is aimed at informing market price and protecting investors.
The climate disclosure requirement has been shrouded in controversy since its inception. It was approved in a three-to-two split vote by the five SEC Commissioners. The two in opposition believed that the science was not robust enough to require regulation; this belief was bolstered by criticism by the electricity-generating industry. The House and Senate responded by introducing bills to prohibit enforcement of this disclosure guidance, with their supporters arguing that it was a job-killing veiled attempt to promote a political agenda.
Four years later, the question is: has it worked? Numerous studies have answered this with an unfortunate and resounding “no.” After poring over annual reports of 3,895 U.S. public companies listed on major stock exchanges, a citizen researcher found that almost 75% of the companies failed to mention “climate change” or “global warming,” including retail giants like Apple and Amazon. Of the 1,050 businesses that acknowledged climate change, few disclosed specific issues, with most mentioning that operating costs may be affected by pending EPA greenhouse gas regulation. A Davis Polk & Wardwell study similarly found no significant impact on disclosures.
Why might companies be ignoring the requirements? An ABA study found that companies felt climate change disclosure was a “speculative process” without recognized standards; meanwhile there was also little interest in climate change among potential investors and the financial community. However, a 2011 Ceres report did find that public companies had improved their climate change risk disclosures, but it also noted that corporate filers still need more experience communicating risk, because currently disclosures “often fail to satisfy investors’ legitimate expectations.”
Given SEC personnel and funding limitations, enforcement of the disclosure requirement is limited if not negligible. The toughest penalty for not properly reporting risks is requiring a company to rewrite the report. More often, the SEC simply requests more information in the following year’s report.
Despite these disappointing results, the SEC disclosure rule could still be viewed as a success simply because it puts the idea of climate change risks into the corporate consciousness. At the time the SEC passed the Guidance, the Commission took pains to explain it was “not opining on whether the world’s climate [was] changing.” Nevertheless, the disclosure requirement ensures that climate change is treated the same as any other financial, environmental, or regulatory risk that a company must disclose.
At the time the measure passed, Luis Aguilar, then the Democratic Chairman of the SEC, explained, “this release clarifies that effects resulting from climate change that are keeping management up at night should be disclosed to investors.” Despite this ambitious sentiment, it is not clear that climate change actually keeps officers and directors up at night (except perhaps those in the electricity-generating industry currently battling in court to prevent GHG emission regulations). Given the current lack of interest from managers, investors, attorneys, securities regulators, and the financial industry generally, disclosure does not seem like an effective tactic. Yet, with GHG emission regulations imminent, insurance costs rapidly rising, and the potential for regulation to limit coal, oil, and gas extraction and decrease share prices, a failure to take heed will likely come at an investor’s own peril.
With the recent announcements that the Vermont Nuclear Power Station will go off-line next year and that Brayton Point, the region’s large coal plant, is ceasing operations by 2017, the face of New England energy is going through a rapid transformation. As environmentalists call for a greener grid and policymakers search for new sources to meet their states’ energy demands, ISO-New England, the regional grid operator, estimates the area will need an additional 6,000 megawatts of electricity within a decade.
One possible solution? An ambitious plan to transmit 1,200 megawatts of dam-generated electricity from Quebec to New Hampshire.
The Northern Pass, a joint venture between Northeast Utilities, NSTAR, and the public Canadian utility Hydro-Quebec, was proposed in 2008 as a way to bring cheap, clean energy to New England. The project calls for 187 miles of transmission lines to be built from the Canadian border to southern New Hampshire, with the electricity eventually finding its way to the heavily populated metropolitan areas of Massachusetts, Rhode Island, and Connecticut. Proponents see the Northern Pass as a one-size-fits-all solution, offering reliable, inexpensive energy that’s cleaner than fossil fuels and safer than nuclear power.
But the Northern Pass has run into fierce opposition from many sides, leaving the ultimate fate of the project in doubt. The increasingly rancorous debate over the plan has centered around some of the most vexing problems facing environmental law today: the conflicting demands of conservation and energy production, the true costs of “clean” energy, and the proper role of state and federal regulators in designing the energy regimes of the future.
The most controversial aspect of the proposed project is the feared impact of the Northern Pass on the natural beauty of the White Mountains and surrounding areas. The project’s transmission lines would require rights-of-way hundreds of feet wide to accommodate towers up to 155 feet tall, and would be visible from miles away. Many conservation and recreation groups, such as the Appalachian Mountain Club, have warned that these towers would permanently scar New Hampshire’s wilderness, damaging both local ecosystems and a thriving tourist industry. Critics estimate that at least 40 miles of new transmission corridors would need to be built to run power through the state.
In this atmosphere of increasing indecision over the Northern Pass’s ultimate shape, federal regulators have gone forward with the permitting and approval processes. Because the transmission lines would cross an international border, the utilities must seek a special presidential permit from the Department of Energy. The DoE will consider how the project affects “the public interest,” and must also prepare an Environmental Impact Statement, to be released sometime in 2014 in draft form for public hearing and comment. A decision on the permit is not expected for at least two years. The Northern Pass must also pass regulatory hurdles from an array of other federal and state agencies. These concerns have led to growing calls to bury the lines. While the utilities maintain such a project would be prohibitively expensive, New Hampshire Governor Maggie Hassan made headlines in September by urging the utilities to explore this option more seriously.
Another point of contention is just how clean the Northern Pass’ hydroelectricity would be. A 2012 report by Synapse Energy Economics suggested that the reservoirs that Hydro-Quebec creates to power its dams release greenhouse gases at a rate equivalent to two-thirds of a typical natural gas power plant’s emissions, and that utilities have typically underestimated the carbon dioxide and methane released by decomposing organic matter trapped under the reservoirs. Groups like the Conservation Law Foundation have pointed out that many New England states may attempt to use Northern Pass hydropower as part of their Renewable Portfolio Standards, relieving them of the obligation to seek equivalent power from other, greener sources. The massive influx of Canadian hydroelectricity would not only be dirtier than previously assumed, critics argue, but would also cripple New England’s budding renewable energy sector by undercutting the competitive advantage of smaller utilities producing wind, solar, or tidal power.
What began, then, as an emblematic solution to a set of typically twenty-first century energy problems has morphed into a hard-fought, intensely political battle over how best to balance environmental protection with energy security and local concerns with regional demands. As policymakers at the state and federal levels attempt to wade through the competing interests and contradictory predictions surrounding the Northern Pass, stakeholders will continue to disagree over whose concerns are paramount. The coming months and years will offer a test case for how — or how not — to build the next generation’s grid.
If an agency uses cost-benefit analysis (CBA) to inform its decision-making, what costs and what benefits should it consider? A case currently before the D.C. Circuit, White Stallion Energy Center, LLC v. EPA, raises this issue. White Stallion suggests a tension between the incentives created by Office of Information and Regulatory Affairs (OIRA) review and those created by judicial review, such that an agency seeking to insulate itself from review from within the administration may end up exposing itself to increased risk of losing upon external (judicial) review.
White Stallion concerns one of the most important and expensive rules the EPA has ever promulgated: a regulation under Section 112(n)(1)(A) of the Clean Air Act (CAA) that requires oil- and gas-fired power plants to reduce their emissions of mercury and other hazardous air pollutants. The benefits of the regulation are staggering: monetized benefits of $37 billion to $90 billion, plus non-monetized benefits above and beyond that range. But the costs are also significant – approximately $9.6 billion per year. Among the issues before the court is whether the statute requires EPA to consider these costs, as industry challengers to the rule contend. EPA argues that Section 112(n)(1)(A) – which permits it to promulgate regulations that are “appropriate and necessary” to address hazards to public health posed by oil- and gas-fired power plants – does not require the agency to take costs into account.
Regardless of how the D.C. Circuit resolves that question, the way in which EPA did consider costs raises an interesting issue with broad implications. EPA did tabulate costs and benefits in its rulemaking, not because it believed the CAA required it to do so, but because Executive Order 13,563 requires all agencies (to the extent permitted by law) to adopt regulations “only upon a reasoned determination that [their] benefits justify [their] costs.” EPA’s use of CBA in this context may be seen as an example of what Jennifer Nou has identified as agency self-insulation: that is, an attempt to insulate the agency’s rule against review from within the administration at OIRA. The tension, however, is that, in insulating itself from review from within the administration – by demonstrating very positive CBA scores – EPA may have exposed itself to liability in external review.
Under D.C. Circuit precedent, agency rulemaking will not be invalidated for failure to conduct a CBA if consideration of cost is not required by statute. But if an agency relies on a CBA in making its decision (even if it is not required to conduct a CBA), the agency’s analysis must be reasonable to survive judicial scrutiny. Here, EPA explicitly did not rely on a CBA to make its “appropriate and necessary” finding; so the strength of the CBA will be irrelevant if the court affirms EPA’s legal theory that section 112 does not require consideration of costs. But if the court rejects this theory, EPA might be in real trouble. This is because EPA’s CBA estimated benefits from mercury reductions totaling just $4 million to $6 million. The vast majority of benefits from the regulation come from “co-benefits” due to reductions in particulate matter, PM2.5. EPA’s decision to regulate oil- and coal-fired power plants was based on health effects caused by hazardous air pollutants, under a provision of the CAA specifically focused on hazardous pollutants. PM2.5 is not a hazardous pollutant. Thus, there is an argument that EPA’s consideration of the benefits of PM2.5 reduction was arbitrary and capricious because these benefits are statutorily irrelevant for the purposes of Section 112.
In this case, the tension between intra-administration review and judicial review of an agency’s CBA will likely remain below the surface. EPA quite explicitly declined to rely on its CBA to justify its “appropriate and necessary” determination, and it has a very strong argument that this determination should be upheld under Chevron. But even if EPA is vindicated in the D.C. Circuit, the underlying tension between intra-administration and judicial review is unlikely to be resolved anytime soon.
This is because the tension between intra-administrative and judicial review highlights a larger problem: the shortcomings of our current environmental laws. Since the Reagan Administration, cost-benefit analysis has gained an increasingly prominent role in agency decisionmaking, and courts (the D.C. Circuit in particular) are increasingly likely to read cost-benefit balancing into statutes.
But the environmental laws have not been revised to reflect these policy choices. Agencies, left trying to make sense of laws that have not been revised in decades, are left in limbo. To pass muster at OIRA, an agency must justify its decisionmaking in terms of costs and benefits. In a case like this one, where the costs are very significant but the benefits are even greater, EPA has every incentive to insulate its rule with a CBA highlighting those great benefits. But reliance on a CBA of this kind may create a risk that a court will invalidate the rule as arbitrary and capricious.
 No. 12-1100 (D.C. Cir.).
 77 Fed. Reg. 9306 tbl.2.
 See Jennifer Nou, Agency Self-Insulation Under Presidential Review, 126 Harv. L. Rev. 1755 (2013). Nou suggests a “simple theory”: Under an anti-regulatory president, agencies will submit CBAs of poor quality to increase the costs of review for OIRA, making it less likely that OIRA will reverse the agency. Under a pro-regulatory president, agencies will submit high-quality CBAs to reduce the costs of review for OIRA, making it more likely that OIRA will approve the agency’s rule. Id. at 1806–07. The agency-OIRA interaction here suggests a complication to Nou’s “simple theory.” The Obama Administration would surely be considered “pro-regulatory,” but EPA might still feel a need to insulate itself because of the sheer magnitude of this rule and its high political saliency.
 OIRA is not the only body within the Administration that participates in review, but “OIRA” is often used as convenient shorthand for this review process. See Cass R. Sunstein, The Office of Information and Regulatory Affairs: Myths and Realities, 126 Harv. L. Rev. 1838, 1856 (2013).
 See Bus. Roundtable v. SEC, 647 F.3d 1144, 1148–49 (D.C. Cir. 2011) (invalidating agency action as arbitrary and capricious because, inter alia, it “inconsistently and opportunistically framed the costs and benefits” of its rule).
 77 Fed. Reg. 9306, tbl.2.
 See 77 Fed. Reg. 9306; CAA § 112.
 See Clean Air Act § 112, codified as amended at 42 U.S.C. § 7412(b)(1) (listing hazardous pollutants).
 See Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42–44 (1983) (holding that an agency acts arbitrarily when it considers statutorily irrelevant factors in its decision-making).
 Cf. Richard J. Lazarus, Congressional Descent: The Demise of Deliberative Democracy in Environmental Law, 94 Geo. L. J. 619, 629–32 (2006) (noting the lack of environmental legislation since 1990, with particular focus on the absence of new laws addressing substantive environmental issues, including climate change).
If you’ve been reading the ELR blog, you might also be interested to know that all of our articles from Volume 37.2 are now available in print and on our website! One article, Administrative Proxies for Judicial Review: Building Legitimacy from the Inside-Out, by Emily Hammond and David Markell, recently received a favorable review in JOTWELL. Hammond and Markell’s piece explores how to build legitimacy from the “inside-out” when judicial review of agency actions is unlikely or unavailable. The article presents an empirical study of an EPA process that allows parties to petition EPA to withdraw a state’s authority to administer environmental statutes (which EPA has the authority to do if the state is inadequately implementing environmental laws). EPA’s decision to withdraw authority is within its enforcement discretion, and is largely not subject to judicial review. Hammond and Markell evaluated a set of petitions that spanned a 25-year period to determine whether EPA takes actions to legitimize its decisions with regard to the petitions. The authors found that despite the absence of judicial review (and the unlikelihood that EPA would actually withdraw a state’s authorization to implement the law), EPA independently engages in behaviors to create internal legitimacy. EPA works to resolve the petitions informally, investigating the concerns raised in the petitions and negotiating with states to reach substantive outcomes. Hammond and Markell draw a number of lessons from this case study, and highlight institutional design features that might enhance “inside out” legitimacy.
In its review of the piece, JOTWELL states that the article is “a thought-provoking and admirable” piece of scholarship, noting that it raises central questions of administrative governance, offers a theoretical framework for evaluating the performance of agencies within the administrative state, and ambitiously seeks to connect theory with practice. With respect to this last feature of the article in particular – its connection of theory with practice – the JOTWELL reviewer notes that “[r]ather than articulating a theoretical framework and stopping there, the authors use their framework to structure their examination of actual agency process, to see how well the data fits the theory. This is good work. We need more of it.”
Don’t forget to check out the article, as well as the others in Volume 37.2, here!
By Sachin Desai – Oct. 24, 2013 at 8:18am
What makes the Smart Grid “smart”? Of course the technology plays a role. Grid-scale batteries allow renewable energy generators to be more competitive. New smart meters allow homeowners to know which appliances are energy hogs. However, what also makes the Smart Grid “smart” is legal in nature. In particular, a unique approach is being undertaken to develop the standards and regulations that will govern the new grid. Professor Joel Eisen, one of the nation’s energy law experts, leads us through this critical aspect of the renewable energy revolution in an article and podcast published by the Harvard Environmental Law Review (HELR).
The Smart Grid has often been compared to the internet, a giant network, governed by an underlying set of traffic rules, which allows energy to travel, two-way, from place to place just like information. However, unlike the internet, the Smart Grid is being built in an environment with huge entrenched interests, as well as multiple federal and state regulatory agencies with diverging missions. The current grid consists of 3,200 electric utilities, interacting with even more suppliers and supporting businesses. To top it off, citizens groups are resisting the Smart Grid due to privacy concerns.
So how can all these different organizations come together to develop the common foundation of rules and standards that will govern the electric internet? One traditional route is command and control – where (federal) agencies set the rules after notice and comment. However, private groups and state agencies have fought against this approach, in large part arguing that federalism prevents the federal government from reaching into private homes and intrastate utility operations. Another traditional route is self-regulation – where the private sector set its own rules (many internet standards were set this way). However, getting so many actors with different incentives together on their own has proven difficult, to say the least.
Professor Eisen discusses an alternative: a novel, “democratically-led” process for rule-making. It’s a two-part process. First, the National Institute of Standards and Technology, through its Smart Grid Interoperability Panel (SGIP), has brought together hundreds of participants to set standards through negotiation and dialogue. SGIP can leverage its benign, disinterested status (it does not have regulatory power) to bring skeptics to the table. The Federal Energy Regulatory Commission (FERC) can turn those standards into legally enforceable regulations only once “sufficient consensus” has been reached among the body. This process, especially in light of recent FERC decisions, has allowed Smart Grid standards to be created and implemented in an environment otherwise resistant to change. Professor Eisen discusses this and more in his article, “Smart Regulation and Federalism for the Smart Grid,” published by HELR in the fall issue of Volume 37. Professor Eisen also sat down with Sachin Desai of HELR to talk about this article and the concepts behind it an HELR exclusive podcast, “Smart Rules for the Smart Grid.”
Title 28 contemplates a clear distinction between cases for which the Constitution provides a damages action against the United States and cases for which the Federal Tort Claims Act (FTCA) provides such an action. If the Constitution provides a cause of action, Title 28 instructs that the Court of Federal Claims (CFC) shall have jurisdiction. If the FTCA provides the plaintiff’s cause of action, Title 28 instructs that “the district courts . . . shall have exclusive jurisdiction.” If, however, the Constitution and the FTCA each provide a cause of action – as is the case where the United States has caused property damage that could be framed as either a tort or a taking – Title 28 does not provide a clear answer to the jurisdictional question.
Because the CFC’s jurisdiction is limited to cases founded upon the Constitution “not sounding in tort,” Title 28 seems to instruct that these “mixed” cases must proceed in the district courts under the FTCA. For this reason, the CFC has occasionally declined to assert jurisdiction over mixed cases. On other occasions, however, the CFC has permitted parties to litigate mixed cases before it, reasoning that the CFC’s jurisdictional grant must be read to include mixed claims because all physical takings – including claims that the CFC indisputably has jurisdiction over – are potentially cognizable under tort law. Moreover, the Supreme Court’s recent decision to assert appellate jurisdiction in Arkansas Game & Fish Commission v. United States – a mixed case that originated in the CFC – suggests that the Court does not read Title 28 to prevent the CFC from hearing takings cases that also sound in tort.
If we assume that the question of the CFC’s authority to hear mixed cases is settled after Arkansas Game & Fish, we encounter the question of exhaustion: Should the CFC require a plaintiff to demonstrate that it has exhausted the remedies available to it under the FTCA before seeking relief under the Takings Clause? In my opinion, exhaustion should clearly be required. The Constitution does not prohibit the United States from taking private property; it only prohibits the United States from refusing to provide just compensation for taken property. Thus, a plaintiff must allege that the United States has refused to provide just compensation in order to state a claim for relief under the Takings Clause. Where there is a reasonable probability that the United States will provide relief under a statutory or an administrative mechanism such as the FTCA, the plaintiff cannot demonstrate that the United States has refused to provide compensation. Therefore, there is no constitutional violation over which the CFC can assert jurisdiction.
An exhaustion requirement is also desirable from a policy perspective. It is the “Court’s settled policy to avoid unnecessary decisions of constitutional issues.” Among other things, this policy prevents federal courts from unnecessarily restricting the freedom of other branches of government. This concern is no less relevant when federal courts are asked to expound unnecessarily upon the Takings Clause than when they are asked expound unnecessarily upon any other constitutional provision.
The Federal Circuit has not yet considered whether a plaintiff asserting a mixed claim before the CFC must demonstrate FTCA exhaustion. However, in TrinCo Investment Co. v. United States, the Court allowed a plaintiff to litigate a takings claim before the CFC, even after the plaintiff’s counsel admitted that his client had failed to exhaust the available remedies under the FTCA. If my analysis is correct, this was a mistake; the TrinCo Court should have stayed the action in the CFC pending the plaintiff’s exhaustion of its remedies under the FTCA. Whether the Federal Circuit will rule this way when directly confronted with the FTCA exhaustion issue remains to be seen.
 28 U.S.C. § 1491(a)(1).
 28 U.S.C. § 1346(b)(1).
 28 U.S.C. § 1491(a)(1).
 See Moden v. United States, 60 Fed.Cl. 275, 288 (2004) (concluding that “the same operative facts [cannot] give rise to both a taking and a tort;” dismissing takings claim that also sounded in tort); Berenholz v. United States, 1 Cl.Ct. 620, 626 (1982).
 See Hansen v. United States, 65 Fed.Cl. 76, 80 (2005) (because “all takings by physical invasion have their origin in tort law and are types of governmental nuisances or . . . trespasses . . . it is not fatal to a plaintiff’s claim or [the CFC’s] jurisdiction if the government alleges that the facts might give rise to a tort.”).
 133 S. Ct. 511 (2012).
 See Mills v. Rogers, 457 U.S. 291, 305 (1982).
 See Rescue Army v. Mun. Court of City of Los Angeles, 331 U.S. 549, 571 (1947).
 2013 WL 3746090 (Fed. Cir. 2013).
 See Oral Argument at 3:48 (statement of Matthew J. Dowd, counsel for TrinCo).
On September 20, 2013, EPA issued a notice of proposed rulemaking to set standards of performance for GHGs emitted from new stationary sources. The proposal calls for new natural gas-fired plants to be built with an emissions limit of 1,000 lb CO2/MWh for smaller units and 1,100 lb CO2/MWh for larger units. New coal-fired plants must not exceed an annual average emission rate of 1,100 lb CO2/MWh. Alternatively, coal plants may elect to meet a 1,000 or 1,050 lb CO2/MWh/yr average over a seven-year period.
This rule proposal comes on the heels of a similar rule that was proposed in April 2012 but withdrawn on September 20, 2013. That earlier rule proposed a uniform standard for both natural gas- and coal-fired plants. Given new information discovered and the number of public comments received – over 2.5 million –in response to the 2012 rule, EPA felt substantial changes to the proposed standards were warranted and thus rescinded the 2012 version.
At first glance, the 2013 rule seems modest at best. It impacts only new plants being built, to the exclusion of existing, modified, or reconstructed sources. EPA also asserts that due to current industry trends – where low natural gas prices will encourage the construction of new natural gas, and not coal, power plants that already meet the emissions limits proposed – this rule “will result in negligible CO2 emission changes, quantified benefits, and costs by 2022.” With no declared costs or benefits, why then are environmentalists celebrating this rule and coal industry representatives condemning it?
There are a few reasons for this rule’s polarizing effect. For starters, this rule will in fact prevent the construction of any new coal-fired power plants that are allowed to emit an unlimited amount of CO2 – a huge win for environmentalists. Instead, such plants must incorporate partial implementation of carbon capture and sequestration (CCS) technology to reach the emissions limits. This is the piece that worries industry advocates. Because of its limited implementation to date, CCS is a young, expensive technology. Indeed, a coal plant with partial CCS will cost either 109 or 110 dollars per Megawatt hour, compared with 92 or 97 dollars per Megawatt hour without CCS technology. However, the main benefit of regulating CCS technology is that it will encourage technological innovation and widespread commercialization, which will in turn lower costs.
A bigger cause of the rule’s controversy is its symbolic effect. With this rule proposal, EPA is utilizing the authority granted it under Massachusetts v. EPA to regulate GHGs emitted by stationary sources for the first time ever. Moreover, this first step is a pivotal piece of President Obama’s Climate Action Plan, in which Obama intends to take executive action to evade congressional gridlock and move ahead with climate change regulation. This includes a rule imposing emissions limits on existing sources, to be proposed in June 2014. For this reason, opponents are denouncing the move as sparking a “war on coal.”
The real fight, then, is just gearing up. With standards regulating existing sources looming on the horizon, and possible Supreme Court review of Coalition for Responsible Regulation v. EPA, the D.C. Circuit decision upholding EPA’s GHG regulating authority, the next few months will mark a significant era in the U.S.’s stance on climate change.