ELR Blog

Corporate Law and Climate Change Disclosures

MOUNTAINS_clawpeak_CO_alecharrisBy Molly CohenJan. 6, 2013 at 8:57am

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.

The Uncertain Future of the Northern Pass

MOUNTAINS_NH_CaravelloBy Ted Hamilton — Dec. 3, 2013 at 12:11pm

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.

Automatically Green

PLANTS_clover_CA_alecharrisBy Caroline Stern — Nov. 18, 2013 at 5:16pm

Over the coming months, the ELR blog will be publishing a series of blog posts that preview articles that will appear in the forthcoming Volume 38.1. This blog is the first in that series.

In the forthcoming issue of the Harvard Environmental Law Review, Professors Cass Sunstein and Lucia Reisch offer an excellent resource for policymakers seeking ways to encourage consumers to choose green energy instead of environmentally unfriendly (“gray”) energy.  Their article, “Automatically Green: Behavioral Economics and Environmental Protection,” provides a “choice architecture” that analyzes the pros and cons of different possible approaches to encouraging green behavior.  At one end of the spectrum is imposing green mandates on consumers (legally banning gray options); at the other end is relying on consumers to make active choices to be green.  Between these two extremes is implementing green defaults—such as the automatic double-sided printer setting in offices and schools—which promote green options, but also permit consumers to deviate from them.

The article discusses in detail the economic and environmental costs and benefits associated with each approach.  In order to implement any one of these methods effectively, policymakers must also assess the political and social contexts surrounding their choices.  For example, employees would likely be receptive to green defaults in their offices because the impacts are limited to the physical place of work and do not affect their personal finances.  By contrast, the general consumer population may be less receptive to green defaults in their homes because such policies can directly affect their privacy and personal expenses.

The article notes a troubling example of why policymakers may need to be attuned to the politics of the targeted consumer population: at least one study has found that certain politically conservative households will actually increase their energy consumption when informed that their consumption levels exceed those of their peers.  It is important to note that the policy used in that study was a “social norms” approach—not green defaults—which seeks to change behavior by informing consumers about the greener habits of their peers.  However, it is possible that green defaults could provoke the same resistance if consumers viewed the default as an unwanted interference with their private choices.  This disheartening behavioral pattern illustrates that, in at least certain limited circumstances, consumers’ political and social views can foil environmentally friendly policies, despite the benefits of going green.

In some contexts, it may be difficult to predict the politics or social views of the likely consumer population when implementing a green policy.  In order to avoid the risk of backlash, it may be worthwhile to consider, as an alternative, a variation on the green default: “green design,” a facially neutral policy that has subtle yet meaningful impacts on consumer behavior.  A green design approach has already succeeded in experiments promoting healthy eating choices through subtle rearrangements of lunch buffets and supermarkets.

In the absence of contextual information about political or social attitudes, green design should appeal to policymakers because it may be more neutral in appearance than mandates or ordinary defaults.  Unlike defaults, which explicitly promote one option over another, green design reinforces the message that the consumer retains full control over his or her choices; its subtlety also means it may be less likely to provoke backlash.  Green defaults have proven to be an especially effective, low-cost approach, but green design could be a viable option for policymakers seeking alternative ways to facilitate green choices.

A New Cost of Cost-Benefit Analysis?

LAND_arches_UT_alecharrisBy Gabriel Daly -- Nov. 7, 2013 at 12:10pm

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,[1] 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.[2] 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:[3] that is, an attempt to insulate the agency’s rule against review from within the administration at OIRA.[4] 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.[5] 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.[6] 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.[7] PM2.5 is not a hazardous pollutant.[8] 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.[9]

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.[10] 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.

[1] No. 12-1100 (D.C. Cir.).
[2] 77 Fed. Reg. 9306 tbl.2.
[3] 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.
[4] 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).
[5] 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).
[6] 77 Fed. Reg. 9306, tbl.2.
[7] See 77 Fed. Reg. 9306; CAA § 112.
[8] See Clean Air Act § 112, codified as amended at 42 U.S.C. § 7412(b)(1) (listing hazardous pollutants).
[9] 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).
[10] 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).

ELR Article Receives Praise in JOTWELL

TREES_Fall trees_New Haven_MHoldenBy Meg Holden — Oct. 30, 2013 at 3:42pm

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!

Smart Rules for the Smart Grid (HELR Podcast)

Power lines_Wikimedia Commons Non-dropframe

Photo credit: Non-dropframe, Wikimedia Commons

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.”

Should the Federal Circuit Require Takings Plaintiffs to Demonstrate FTCA Exhaustion?

TREES_redwoods_CA_alecharrisBy David BaakeOct. 21, 2013 at 11:41am

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.[1] If the FTCA provides the plaintiff’s cause of action, Title 28 instructs that “the district courts . . . shall have exclusive jurisdiction.”[2] 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,”[3] 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.[4] 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.[5] Moreover, the Supreme Court’s recent decision to assert appellate jurisdiction in Arkansas Game & Fish Commission v. United States[6] – 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.”[7] Among other things, this policy prevents federal courts from unnecessarily restricting the freedom of other branches of government.[8] 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,[9] 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.[10] 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.

[1] 28 U.S.C. § 1491(a)(1).
[2] 28 U.S.C. § 1346(b)(1).
[3] 28 U.S.C. § 1491(a)(1).
[4] 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).
[5] 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.”).
[6] 133 S. Ct. 511 (2012).
[7] See Mills v. Rogers, 457 U.S. 291, 305 (1982).
[8] See Rescue Army v. Mun. Court of City of Los Angeles, 331 U.S. 549, 571 (1947).
[9] 2013 WL 3746090 (Fed. Cir. 2013).
[10] See Oral Argument at 3:48 (statement of Matthew J. Dowd, counsel for TrinCo).

The First Cut is the Deepest: EPA Proposes First GHG Cuts for Power Plants

MOUNTAINS_Mountains_Montana_MHoldenBy Cecilia Segal — Oct. 9, 2013 at 2:14pm

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 CO– 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.

A global solution to climate change: the possible impact of Bond v. United States

SKY_rainclouds_WY_alecharrisBy Theresa Borden — Oct. 1, 2013 at 3:33pm

New legislation to deal with the global problem of climate change may seem politically unrealistic given the current inhospitable environment in Congress, but there are reasons to think that the prospect of reaching an international agreement may be more viable now than it was in the past.  UN Secretary-General Ban Ki-Moon recently called for world leaders to meet in anticipation of the 2015 international climate meeting in Paris and the Intergovernmental Panel on Climate Change (IPCC) recently announced that humans are the dominant cause of global warming since the 1950s.  Although climate change denial still exists in the U.S., the international community generally accepts the science.  Interestingly, this could indicate that reaching an international agreement is easier than reaching a domestic agreement.  Of course, Congressional action would still be necessary to ratify any treaty, but if the enumerated shortcomings of the Kyoto Protocol are addressed in the 2015 negotiations, domestic action may be facilitated, especially if the President stands behind the agreement.

But even if the legislature and the executive get behind an international climate change agreement, there is still the judiciary.  The Supreme Court recently granted cert for Bond v. U.S., which challenges Congressional authority to enact a federal statute enforcing the Chemical Weapons Convention on the grounds that it intrudes on areas of police power reserved to the states.  The Court found that Ms. Bond lacks standing to bring a claim that applying the chemical weapons treaty to her violated the Tenth Amendment, thus avoiding revisiting Missouri v. Holland.  However, the Court did certify one question that may have implications for international climate change agreements: “Do the Constitution’s structural limits on federal authority impose any constraints on the scope of Congress’ authority to enact legislation to implement a valid treaty, at least in circumstances where the federal statute, as applied, goes far beyond the scope of the treaty, intrudes on traditional state prerogatives, and is concededly unnecessary to satisfy the government’s treaty obligations?”

Although Bond may not have a direct effect on international climate change negotiations, it could provide some guidance on how to frame the scope of the treaty and the government’s treaty obligations.  If an international agreement is reached, the U.S. must promulgate implementing legislation that will pass not only the political process, but also judicial review — it is possible that climate change deniers will try to undermine any climate change agreement in court.  Bond, along with EPA v. EME Homer City Generation,[1] will provide some insight into how the Court determines the scope of “traditional state prerogatives” and how such considerations play out in environmental regulation.

Meaningful climate change regulation is inevitable; the question is when it will come.  Environmentalists must be aware of not only possible political solutions, but also potential fallout of judicial determinations.  If an international deal is brokered, it would be counterproductive to provide domestic dissenters with any fodder to challenge it.  Hopefully the Court will rule narrowly in Bond, and not make any pronouncements that would confuse settled federal authority to regulate interstate pollution.  Even if it would be preposterous for domestic dissenters to challenge federal authority on such grounds, the commerce clause challenge to the Affordable Care Act — which many commentators dismissed as irrelevant — cautions against completely ignoring the possibility.

[1] Specifically, the Court’s consideration of “whether states are excused from adopting state implementation plans prohibiting emissions that ‘contribute significantly’ to air pollution problems in other states until after the EPA has adopted a rule quantifying each state’s inter-state pollution obligations.”

The uncertain future of Farm Bill conservation programs

By Margaret Wilson Reis — Sept. 17, 2013 at 10:30am

LAND_Hamburg IA_SCaravelloOn September 30, 2013, the one-year extension of the 2008 Farm Bill will expire. Congress appears unlikely to pass another. If Congress does not, the country stands to see the “single, largest source of funding for conservation on private U.S. land” reduced or even eliminated.

The Farm Bill is the primary food and agriculture legislation in the United States, and it affects many aspects of the US food production system. First established during the Great Depression, the Farm Bill is set for renewal every five years. The most recent update occurred in 2008.  While the impacts of the bill range far and wide, the Farm bill has profound impacts on environmental stewardship and conservation in the US. (For a detailed discussion of those impacts, check out the recent article by Linda Breggin and Bruce Myers in Vol. 37.2 of HELR.) One key aspect of the Farm Bill’s environmental impact is its maintenance of environmental programs such as the Conservation Reserve Program and the Environmental Quality Incentives Program, which are essential in defending against both soil erosion and water pollution from farm operations exempt from the Clean Water Act.

Although Congress never reauthorized the 2008 Farm Bill, some of its provisions were extended through September 30, 2013. This extension continued mandatory funding for various farm bill programs, but it did not provide funding for the environmental programs that lacked a mandatory funding baseline continuing beyond 2012. Thus, while the 2008 Farm Bill allocated $24 billion to conservation and environmental programs, many of these have remained without funding throughout 2013. If Congress opts for another extension rather than a new comprehensive bill, the conservation and environmental programs negatively impacted by the 2012 extension will likely continue to go unfunded. This lack of funding will threaten the efficacy, if not the very existence of such programs.

Congress has at least attempted to pass a new farm bill, but it’s not much better for conservation and environmental objectives. The Agriculture Reform, Food and Jobs Act, passed by the Senate in June would cut conservation funding by about $3.5 billion and consolidate various programs into larger umbrella programs (however, it would at least require conservation compliance for receipt of crop insurance subsidies). The House’s version of the bill would cut conservation programs by $5 billion and would not require conservation compliance. While the House initially voted down the bill, it later passed a pared down version that removed the nutrition title. These current proposed reforms represent a step up from a total lack of funding for conservation programs, but they would allow farmers who do not implement conservation measures to receive subsidies regardless, and are far from ideal.

With little time remaining before September 30 and the crisis in Syria having taken much of Congress’ attention, it seems unlikely that a comprehensive bill will be passed before the expiration of the 2008 Farm Bill extension at the end of this month. If Congress does manage to pass a new bill, it will likely be one that weakens conservation programs for the next five years. The future is looking bleak for Farm Bill conservation programs.