EPA’s Clean Air Act Litigation Scorecard and What It Portends for Carbon Emissions Reduction Regulations

By Michael Krancer
Follow: @MikeKrancer 

The Environmental Protection Agency (“EPA”) is running the table in the courts on its key Clean Air Act initiatives: (1) the MATS Rule; (2) the Transport Rule; and (3) the Soot Rule.

  • On April 15, 2014, the D.C. Circuit upheld the 2012 Mercury and Air Toxics Standards (“MATS” Rule) in White Stallion Energy Center LLC v. U.S. Environmental Protection Agency, No. 12-1100.
  • On April 29, 2014, the U.S. Supreme Court reinstated the Cross-State Air Pollution Rule (“Transport Rule”) in U.S. Environmental Protection Agency v. EME Homer City Generation, LP, No. 12-1182.
  • On May 9, 2014, the D.C. Circuit affirmed the EPA’s discretion to tighten standards on particulate matter from coal power plants, refineries, manufacturers, and vehicles (“Soot Rule”) in National Association of Manufacturers (NAM) v. EPA, No. 13-1069.

The MATS Rule. The D.C. Circuit, by majority decision, upheld MATS, which requires coal- and oil-fired power plants to reduce emissions of mercury, arsenic, chromium, and other air pollutants.  The court gives wide latitude to the EPA’s discretion to act under the Clean Air Act.

The Transport Rule.  The “Good Neighbor Provision” of the Clean Air Act requires the EPA and individual states to prohibit upwind states from significantly contributing to the nonattainment of National Ambient Air Quality Standards (“NAAQS”) in downwind states.  42 U.S.C. § 7410(a)(2)(D)(i).  The D.C. Circuit, in a 2 to 1 decision with a vigorous dissent, vacated the Transport Rule on several technical grounds.  Per Justice Ginsburg, the Supreme Court reversed.  The court gives a very wide berth to the EPA’s discretion and judgment calls under the Clean Air Act in accordance with the landmark Chevron U.S.A. Inc. v. NRDC decision.  The court plainly rebukes the two-judge majority of the D.C. Circuit for not doing so.

The Soot Rule.  The D.C. Circuit upheld the EPA’s decision to revise the annual standard for particulate matter in order to address what the EPA believes to be a public health threat.  After considering NAM’s arguments, the court again decided in the EPA’s favor, basing its decision on the wide discretion that courts must give to the EPA in its decision-making under the Clean Air Act, especially when making science-related judgments.

With the EPA’s two big greenhouse emissions reduction rules on the brink of coming out, i.e., the final rule for new power plants and the proposed rule for existing power plants, what do we think the courts might do?  In the investment industry, it is said that “past performance is no indication of future results.”  In the legal business, it’s the opposite.  The challengers are starting this series down three games to none—and arguably down by two goals in the first period of game four.  First, the Supreme Court and D.C. Circuit have sent clear messages that the EPA will be given wide deference when it comes to the Clean Air Act.  Second, the new greenhouse gas rules come with the backdrop of the Supreme Court having already ruled in Massachusetts v. EPA that greenhouse gases are “contaminants” under the Clean Air Act, along with the D.C. Circuit having already upheld the EPA endangerment finding (with that decision now pending for review in the very Supreme Court that decided the Transport Rule case)—thus compelling the EPA to act on greenhouse gases.

Odds, anyone?

Read about the three recent Clean Air cases and what they mean in more detail in Blank Rome’s Client Alert by clicking here.

The National Climate Assessment and the Nuclear Energy Solution

By Michael Krancer
Follow: @MikeKrancer 

The White House released on Tuesday the long-awaited Third National Climate Assessment, Climate Change Impacts in the United States (“Assessment”), required by Congress.   It contains some stunning findings and does not mince words.   In the words of John Holdren, the White House Science Advisor, this is the “loudest alarm bell to date” on the need for climate action change.

The Assessment is the result of a prodigious and significant scientific exercise.  It is the product of the 60-person Federal Advisory Committee of distinguished scientists and other experts who oversaw the development of the Assessment, and an intense peer and public review process.  The bottom line is that climate change is here now, and time is running out to do something about it.

As can be predicted, the Assessment has received some push-back from the Cato Institute and others.  But regardless of whether one can nit-pick the 800-page report, one thing is for certain—we can do something about climate change here in America right now.  We can make sure our existing nuclear generation fleet remains intact and healthy.

Nuclear power is the zero-carbon workhorse of our electricity generation fleet.   Every time we lose a healthy nuclear plant, we are shooting ourselves in the foot on carbon emissions.  Climate scientists are telling us how critical it is to maintain our nuclear power capabilities in the face of the challenges that the National Climate Assessment talks about.  This important point should not be lost on those who call themselves environmentalists or “Greens.”  We simply will lose the battle to climate change if we surrender on nuclear power.

Germany is an object lesson.  For purely political reasons, Germany suddenly announced the closure of its nuclear power plants.  The result: carbon emissions from Germany are booming and Germany has gone from an electricity exporter to an electricity importer virtually overnight.  The irony: neighboring France has a healthy and safe nuclear power sector and Germany will import power from it.

The release of the Climate Assessment coincided with the Monday roundtable event in Philadelphia of Nuclear Matters. Nuclear Matters is a bipartisan effort co-chaired by former Senators Evan Bayh and Judd Gregg whose mission is to foster discussion and inform the public about the clear benefits that nuclear energy provides to America; raise awareness of the economic challenges to nuclear energy that threaten those benefits; and to work with stakeholders to explore possible policy solutions that properly value nuclear energy as a reliable, affordable, and carbon-free electricity resource that is essential to America’s energy future.

I contributed an op-ed article to The Philadelphia Inquirer that points out those benefits, with a particular focus on how they impact the Commonwealth of Pennsylvania.  Click here to read my op-ed.

A prime issue for nuclear power is the “free rider” problem.  Nuclear power provides the clear, simultaneously delivered benefits of: (1) extraordinary high reliability both with respect to the plants themselves and to the grid; (2) zero-carbon emissions power; and (3) being an economic engine of direct and indirect employment. However, distortions in the marketplace fail to place any market value on those critical, irreplaceable, and unique features of nuclear power.  I have discussed these points in more detail in my op-ed, and in an article I wrote for Forbes.com, which can be accessed here.

So if the National Climate Assessment offers sobering prospects, the potential of the U.S. and world nuclear power fleet provide off-the-shelf promise and good news, and even an antidote.  Our challenge is to make sure that we make the right policy decisions so we don’t poison the antidote.

Obama Energy Official: Nuclear Plants Essential To Our Carbon Reduction Goals

By Michael Krancer
Follow: @MikeKrancer 

Peter Lyons, the Department of Energy’s (“DOE”) assistant secretary for nuclear energy, outlined the Obama Administration’s reasons for supporting nuclear power in the United States at the Platts 10th Annual Nuclear Energy Conference earlier this month.

Lyons, who is also a former Nuclear Regulatory Commission member and science advisor to the former Senator Pete Domenici, emphasized that nuclear power is a key contributor to our country’s goal of reducing greenhouse gas emissions (“GHG”). Moreover, he sounded the alarm that the growing list of perfectly healthy and well performing nuclear power plants being shut down for political and/or commercial reasons, or being slated for shutdown, is a serious climate-change threat.

He stated that he is gravely concerned that the loss of existing healthy nuclear plants will cost us dearly in terms of increased carbon emissions. The DOE studied a scenario where 30 percent of the county’s 100 reactors would be shut down. If those closures were to go ahead as per that scenario, there would be no way to meet our goal of cutting GHG emissions and, in fact, GHG emissions from the U.S. would skyrocket. Unsurprisingly, Lyons supplied that the DOE regards many of the nuclear plant closures currently on the calendar as premature.

The bigger problem, Lyons added, is that the market presently has no mechanism to sensibly recognize the value of carbon-free power generation, particularly nuclear power. He stated: “When well-run, clean [nuclear] energy sources are forced out of the marketplace due to a combination of reduced demand, low natural gas prices and market structure…our markets are providing the wrong signals.”

Nuclear power accounts for 20 percent of the electricity generated in the U.S. and for 64 percent of all zero-carbon emission sources. But many nuclear power plants are seeing their profits squeezed these days. There’s very little growth in the demand for electricity, thanks to energy efficiency, demand response, and a hobbled economy. Low gas prices have further reduced energy prices—and the profitability of the existing nuclear fleet.

Nuclear plants aren’t subsidized like other non-carbon-emitting energy plants are. Solar and wind are doubly subsidized; they receive direct taxpayer dollars—about $12.1 billion in the last round of the renewal of the Production Tax Credit. And in about 30 states and the District of Columbia, Renewable Portfolio Standard laws mandate that consumers buy a certain amount of wind and solar power.

Meanwhile, the U.S. has recently seen the closing of viable plants like Wisconsin’s Kewaunee, which in 2008 had won a license extension to 2033, and Vermont Yankee, which in 2011 had its operating license extended for 20 years. Replacing these two plants, even with new, highly efficient plants that burn natural gas, will lead to millions of tons of new carbon emissions. Many other plants are in danger of closing early as well.

This is terrible news for our GHG reduction goals. Just look at the case of Germany when it rushed to shutter its nuclear plants after Fukushima. The result: an estimated whopping increase of 15 million tons in GHG emissions if the gap in power demand is replaced by natural gas burning plants, and 30 million tons if the gap were to be filled with coal-fired plants.

How might policymakers and business people seek to prevent something similar from happening here? Lyons suggests measures that would help the markets recognize the value of carbon-free power generation—a carbon price or a cap-and-trade mechanism, in other words. A Stanford Woods Institute for the Environment review of survey data has shown that the public would favor those measures. The CDP, a U.K.-based environmental data group, recently reported that most big companies are ready, too.

For further insight from Michael Krancer on this issue, please read his recently published Forbes.com article by clicking here.

Associated Press “Investigation” Confirms Safety of Gas Drilling

By Michael Krancer
Follow: @MikeKrancer 

Despite claims to the contrary, the recently released AP “investigation” proves that drilling for natural gas or oil has an excellent safety record.  Moreover, it’s getting better, especially in Pennsylvania.

Let’s first set the broader context.  This is not about hydraulic fracturing.  It’s about well drilling.  Drilling any well has to be done carefully—even (or especially) a drinking water well.  Pennsylvania has 3 million citizens who rely on private water wells as their primary source of drinking water, but we remain alone with Alaska as the only two states in the nation that have no statewide technical protective standards applicable to drilling private water wells.  As reported and documented by the Center for Rural Pennsylvania, 40% of private water wells in Pennsylvania exhibit some level of contamination above federal standards from natural conditions.  In fact, there are many wells in Pennsylvania that experience naturally occurring methane intrusion.  Those wells, by the way, are quite effectively managed by their owners to mitigate the methane.  On the other hand, there are strict technical standards applicable to drilling a natural gas or oil well.

Here are the facts from the AP’s investigation.  The AP says that Pennsylvania has confirmed that, out of more than 5,000 new wells, at least 106 private water well impact cases have been reported since 2005.  While even one case is one case too many, those numbers translate to a 97.9% plus success rate in well drilling.  I say “plus” because, undoubtedly, of the 106 cases reported, there must certainly have been multiple reports about different private water supply wells that applied to the same, single unconventional well.  The story is even more dramatic when all wells, conventional and unconventional, are considered.  The number of all wells drilled in Pennsylvania since 2005 is about 32,000.  That translates to a 99.67% success rate for all wells.

It is also worth noting that a vast majority of complaints were investigated and found to be either without basis or unrelated to unconventional well drilling.  Let’s take a look at only 2012 and 2013, during which time the AP says that a total of 898 complaints were reported.  Yet, there have only been 106 total cases of actual impact since 2005, per the AP’s investigation.  So the numbers show that at least 9 out of 10 complaints investigated by the Department of Environmental Protection (“DEP”) are determined to have no adverse impact.  The actual ratio must be much more lopsided, however, since the AP only reports the number of complaints for 2012 and 2013 as compared with 106 cases of impacted private wells since 2005.  Moreover, the raw number of complaints has been trending down in the last two years.  This supports the view that drillers are improving over time.

Let’s not also forget that even in cases where there is impact, many times the impact is quite temporary, such as sediment, elevated iron, or turbidity.  Impacts from methane migration are easily and quickly remedied, and the driller is required by law to do so.  In my experience, I have found that remedies are effectuated very quickly.  After all, the Environmental Protection Agency, after spending months and who knows how many millions of dollars in Dimock, PA, reported what the Pennsylvania DEP already knew—namely, that there was no health issue with the private water wells there from any parameter.

Complaints about “lack of transparency” are equally unfounded.  Supposed “aggressive” efforts by the DEP to prevent the AP from accessing information were more about respecting the privacy of homeowners than anything else.  The DEP has a quite transparent reporting system accessible on the Internet through its Oil and Gas Department Compliance Portal.  Also, the AP got its information, didn’t it?

In conclusion, despite reports from some circles that claim the AP says the sky is falling, in actuality, the glass isn’t even half full—it’s 98% plus full, and the AP deserves credit for bringing this to light.

Report: Big Companies Ready for EPA Climate Change Regulations

By Michael Krancer

First came the news that a majority of the American public and many big investors are increasingly open to curbing the effect of global warming and supportive of mitigating carbon emissions by government action. Now comes a new report from the CDP revealing that many of the largest U.S. and global companies are ready for it, too.

The CDP, which released its report last week, analyzed data from many of the biggest companies headquartered in the U.S. or doing business here. They included oil giants like ExxonMobil, Chevron, BP, and Shell, and industrial behemoths like GE, DuPont, and Duke Energy, just to name a few. The CDP found that many are planning their fiscal futures around a price on carbon. A price on carbon—whether through a simple tax or a market-based cap and trade type system—is the most likely mechanism regulators would use to reign in greenhouse gas (“GHG”) emissions and, ultimately, climate change.

This is a big deal both politically and from a business standpoint. The CDP (formerly the Carbon Disclosure Project) is an international, not-for-profit organization that provides the only global system for companies and cities to measure, disclose, manage, and share vital environmental information. The CDP works with institutional investors with assets of $87 trillion. The study is based on the CDP’s annual voluntary disclosure process. The conclusion: a broad, diverse group of American and global companies have accepted a price for carbon and incorporated it into their normal business planning.

The CDP says companies fully expect an eventual regulatory approach in some form that addresses climate change. Accordingly, companies are using a price for carbon to plan for identifying revenue opportunities, risks, and to incentivize the achievement of maximum energy efficiencies to reduce costs and guide capital investment decision.

What happened to the claim that business opposes a price on carbon or a carbon tax? While some politicians call any effort to control carbon a “job killer,” lots of big companies are apparently saying “get over it.” The New York Times published an article on December 5 analyzing some of the political ramifications. Its take was that coalitions are shifting, and that business leaders, even those who count themselves as conservative Republicans, have sensed the direction of climate change policy in America and have decided to prepare to profit from it. They’re voting with their business plans.

The kicker is that no company thought that any business disruption would result from achieving GHG reductions or from carbon regulatory regimes. That may come as an inconvenient truth—so to speak—to politicians and pundits who’ve labeled efforts to control carbon job killers. It’s becoming increasingly clear that big business is not afraid of a regulatory regime for carbon. In fact, most companies are planning for it and even see opportunities for growth.

This also may have very significant legal ramifications because the politics are shifting at an interesting time—the Environmental Protection Agency (“EPA”) is about to promulgate its new rules for requiring states to apply the “best system of emissions reduction” for existing power plants. Just a short time ago, the nine densely populated Northeast and Mid-Atlantic states that make up the Regional Greenhouse Gas Initiative (“RGGI”) submitted comments to the EPA regarding those upcoming rules. RGGI is a proven and effective system of carbon emissions control that raises revenue for participating states to boot through its auctions. The gist of what the RGGI states said is that membership and participation in the RGGI would satisfy the “best system of emissions reduction.”

For further insight from Mike Krancer on this issue, please visit his Forbes.com article by clicking here.

Memo to Policymakers: Americans Want Greenhouse Gas Cuts

By Michael Krancer
Follow @MikeKrancer 

Energy policymakers should heed the results of a survey released last week by the University of Stanford: a surprising majority of Americans across the political and geographical board are hungry for action on climate change.

A new analysis of 21 scientific surveys reflecting public opinions in 46 states showed that a large majority of Americans now believe that global warming is manmade and that the government should reign in greenhouse gas emissions—especially at power plants.

“Majorities in every state surveyed said the government should limit greenhouse gas emissions” and “in particular, by power plants.”  This includes eastern coal states like ours, Pennsylvania, as well as Ohio, Indiana, Illinois, and Michigan.  The story is the same in states like Texas, Mississippi, Alabama, and South Carolina.

This is big news for policymakers, especially for those seeking to be or to remain elected as policymakers.  New coalitions are forming; there is no Red State-vs.-Blue State or geographical divides on this issue any more.

The study was conducted by Stanford University’s Jon Krosnick and his colleague, Visiting Scholar Bo MacInnis.  Their findings were presented to the congressional Bicameral Task Force on Climate Change in Washington, D.C. on November 13. (Read more from them here.)

Krosnick says he often hears legislators declare that there is divided opinion about climate change, and that many constituents are still skeptical it exists.  But those officials, he says, are basing their opinions on ad hoc constituent phone calls and emails.  As anyone who has been in politics knows, it is always dangerous for an elected official to draw opinions or conclusions based solely on those forms of outreach.  Indeed, Krosnick’s empirical findings show that large majorities of base constituencies across the board feel differently—and they want action.

Krosnick’s data is not just an anomaly.  A 2012 nationwide poll found that 87% of registered Democrats polled believed that global warming was happening, and so did 53% of Republicans.  (www.businessweek.com/news/2012-07-18/record-heat-wave-pushes-u-dot-s-dot-belief-in-climate-change-to-70-percent.)  While the Democrat numbers were unsurprisingly higher, the bottom line is that a majority of Republicans are in tune with doing something about carbon emissions.

Big investors are mirroring the citizen concern—no surprise since investors, whether individuals, pension funds, or mutual funds, are made up of folks like you and me: citizens.  In October, a coalition of 70 global investors with $3 trillion in funds called on the world’s largest carbon emitters to assess risks under climate action and “business as usual” scenarios.  That initiative, dubbed Carbon Asset Risk (“CAR”), was coordinated by Ceres and the Carbon Tracker Initiative, with support from the Global Investor Coalition on Climate Change. (www.ceres.org/press/press-releases/investors-ask-fossil-fuel-companies-to-assess-how-business-plans-fare-in-low-carbon-future.)

Americans have some pretty concrete notions on how we should be dealing with this issue.  For example, they would welcome government efforts to curb emissions from power plants.  Wide majorities also favor market-based solutions like a cap and trade.  A price on carbon would be a similar market-based measure.  A recent report by the CDP shows that businesses, including big oil and energy companies, are already there.  They are planning on a price for carbon and they see no disruption to the economy if one were established by a regulatory regime.

Indeed, market-based mechanisms such as RGGI (Regional Greenhouse Gas Initiative) carbon auctions have been up and running quite successfully in the Northeastern United States since 2008, raising many millions of dollars for participating states’ coffers to boot.  With the EPA’s blueprint for states to choose how they will control emissions from existing power plants coming down the pike next year, we may now have the perfect match of citizen, investor, and business will to make these market-based mechanisms work.

For further insight from Michael Krancer on this issue, please visit his Forbes.com blog by clicking here.”

Top Climate Scientists To Environmental Groups That Oppose Nuclear Power: “Stop It!”

By Michael Krancer
Follow me @MikeKrancer 

Four top climate change scientists have directed a tour de force letter to world environmental groups advising them of an important fact: we cannot stop global warming without nuclear power.  The letter comes from Dr. Ken Caldeira, Department of Global Ecology, Carnegie Institution; Dr. Kerry Emanuel, Atmospheric Scientist, MIT; Dr. James Hansen, Columbia University Earth Institute; and Dr. Tom Wigley, Climate Scientist, University of East Anglia and the National Center for Atmospheric Research.

The letter is remarkable for its frank and logical discussion of not only science and policy but also reality and context, commodities that the authors urge their environmental group audience to grasp more of.   They state that continued opposition to nuclear power “threatens humanity’s ability to avoid dangerous climate change.”  Besides the obvious moral imperative of reducing global greenhouse gas emissions, there is a further moral underpinning to their argument.   The developing world will require more electric power to meet the needs of and advance the health and safety of a huge population, and our future generations have every right to that aspiration.   In a very cleverly turned sentence, they sum it up this way, “we can only increase energy supply while simultaneously reducing greenhouse gas emissions if new power plants turn away from using the atmosphere as a [GHG] waste dump.”

While renewables like wind, solar and biomass will play a role, it is unrealistic to think those sources will be enough.  In the “real world there is no credible path to climate stabilization that does not include a substantial role for nuclear power.”

No energy system is without downside risks, they correctly note.  However, numerous systems and advancements make today’s nuclear plants much safer.  As a former insider at a nuclear generation company I can vouch for that.  Furthermore, spent nuclear fuel can be effectively and safely managed by utilizing efficient consumption and disposal techniques.  I would add that it can also be addressed in this country by the federal government stepping up to do what it should have done long ago—proceed with a decision on the Yucca Mountain facility or provide an alternative.   The D.C. Circuit Court of Appeals has weighed in on that issue too by ordering the administration to follow the Nuclear Waste Policy Act and make a decision.

The bottom line is that “quantitative analyses show that risks associated with the expanded use of nuclear energy are orders of magnitude smaller than the risks associated with fossil fuels.”  The authors pointedly ask the environmental groups to base their decisions and advocacy on “facts, not on emotions and biases that do not apply to 21st century nuclear technology.”

The letter  goes on to say that, “The time has come for those who take the threat of global warming seriously to embrace the development and deployment of safer nuclear power systems” as part of the solution to global warming.  We cannot afford, they say, to turn away from nuclear power that has the potential to displace a large fraction of our carbon emissions.  In fact, our existing nuclear fleet in the United States has been doing just that for decades.   The U.S. Energy Information Agency says that U.S. carbon emissions avoided through nuclear power since 1995 total 11,879 million metric tons.  Moreover, numerous studies have shown that lifecycle carbon emissions from nuclear power are comparable to renewable power sources.

The scientists wrap up with the exhortation that “the time has come for a fresh approach to nuclear power in the 21st century” and by asking the environmental groups to “demonstrate [your] real concern about risks from climate change by calling for the development and deployment of advanced nuclear energy.”

At the end of the day, the scientists’ letter is a lesson and exhortation to all of us.

The text of Drs. Caldeira, Emanuel, Hansen, and Wigley letter can be read Here.