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    Scott DuBoff’s practice focuses on environmental and energy matters. Scott represents corporations and local government clients before federal and state administrative agencies, trial and appellate courts and ...

CO2Last month, President Obama’s EPA finalized the agency’s Clean Power Plan, the regulatory initiative to establish first-time restrictions on greenhouse gas (carbon dioxide – CO2) emissions from existing fossil-fueled power plants. Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units, 80 Fed. Reg. 64662 (October 23, 2015). As expected, a number of court challenges were filed the same day (although EPA Administrator Gina McCarthy signed the Clean Power Plan on August 3rd, Federal Register publication on October 23rd was the trigger for seeking judicial review).

iStock_000010382621_LargeThe Federal Clean Water Act became law in 1972 with the goal of eliminating pollution of the nation’s rivers, lakes and coastal waters by 1985. Despite the intervening decades, there is widespread recognition that the goal line is still off in the distance. Although significant progress has been made in reducing pollution from “point source” discharges such as industrial facilities and municipal sewage treatment plants, it is generally recognized that considerably more needs to be done, particularly with respect to “non-point source” pollution from agriculture (fertilizers and livestock management are examples), urban stormwater runoff, and residential sources (e.g., lawn fertilizers, certain soaps and detergents, etc.).

Green leaf with water dropIn the non-fiction best-seller (and Hollywood film) A Civil Action a New England community confronts the very serious consequences that followed when a manufacturing company’s chemical waste contaminated the local water supply. While chemical wastes can continue to present health and environmental concerns, an increasing concern today focuses on a different type of contamination – “nutrient pollution,” which is affecting many of the nation’s waterways. The “civil war” metaphor referenced above reflects the fact that actions to address nutrient pollution can find state and local government entities squaring-off against each other. A recent example is in Iowa, where the City of Des Moines has issued formal notice that it intends to file a suit to enjoin nutrient pollution from neighboring communities.

Background. “Nutrient pollution” may sound like an oxymoron since plants and animals require nutrients as part of their food supply. But too much of a good thing can be bad, which in this case means the nutrients nitrogen and phosphorus. As the U.S. Environmental Protection Agency explains, excessive amounts of nitrogen and phosphorus in rivers, lakes, etc., cause significant increases in algae (“algal blooms”) that deplete the oxygen aquatic life requires. The algae also produce toxins and bacteria that can cause illness for humans through consumption of contaminated fish, shellfish or drinking water. In fact, for several days last summer Toledo, Ohio imposed water usage restrictions, which included a ban on all potable uses, due to nutrient pollution in the form of toxic algae in Lake Erie. In addition, nitrates (a form of nitrogen) in surface waters and groundwater pose a significant health concern because nitrates can lead to serious illness in adults and can be fatal for infants and small children. http://www2.epa.gov/nutrientpollution. Nutrient pollution from the Mississippi River basin (which drains all or portions of 31 states) is also responsible for the more than 5,000 square-mile “dead zone” in the Gulf of Mexico where hypoxia (oxygen deficiency) has excluded many forms of aquatic life. Given these facts, EPA’s admonition is not surprising: “Nitrogen and phosphorus pollution has the potential to become one of the costliest and the most challenging environmental problems we face.” http://www2.epa.gov/sites/production/files/documents/memo_nitrogen_-framework.pdf.

Nutrient pollution results from several factors. That includes urban stormwater runoff, residential sources (e.g., lawn fertilizers, yard and pet waste, certain soaps and detergents), fossil fuel use (increased air emissions of nitrogen) and sanitary wastes (from septic systems and sewage treatment). But while those sources can contribute to nutrient pollution, the primary source, as noted by the National Oceanic and Atmospheric Administration, is agriculture, including fertilizers and animal waste. See generally http://oceanservice.noaa.gov/-products/hypox_t3final.pdf. Paradoxically, however, when Congress enacted the Clean Water Act (CWA) in 1972 (the CWA is the primary federal law for controlling water pollution), it chose to exempt two agricultural categories, agricultural stormwater and return flows from irrigation. Absent the exemptions, those sources could be required to have permits under the Clean Water Act’s National Pollutant Discharge Elimination System (NPDES) program. Although the CWA does not require states to mirror the federal exemptions for agriculture, as a general rule states choose not to be more stringent than the CWA (to do otherwise would be akin to exporting jobs and tax revenue to more lenient states, a non-starter for state policymakers). That is the case with nutrient pollution from agriculture – state regulation is voluntary and generally regarded as inadequate. See https://www.nacwa.org/images/stories-/public/2012-03-06wp.pdf at 15 (voluntary control measures “have been unable to deliver reliable and sustained nutrient loading[] reductions from the agriculture sector”); see also http://www.gao.gov/assets/660/659496.pdf at 60-61 (water quality improvement is restricted nationally due to inadequate regulatory authority over non-point source pollution, which includes agriculture).

Emerging Battleground. Given the increasing concerns it presents, nutrient pollution has become a catalyst for testing the scope of the CWA’s agricultural exemptions. A recent example is the previously referenced pre-litigation notice the City of Des Moines issued to neighboring counties and their drainage districts last month (although CWA enforcement is primarily a state and federal government responsibility, individuals, organizations and local governments can also file enforcement actions – “citizen suits” – for which a 60-day notice of intent to sue is required). Des Moines’ would-be suit (which could be filed shortly) concerns groundwater the drainage districts remove artificially (using drainage tiles and other conveyances) from moisture laden agricultural lands and then discharge to local rivers. The result is a lower water table, which benefits agriculture through reduced interference with root growth and enhanced crop development. But there’s also a downside: discharging the groundwater to nearby rivers significantly increases the nitrate concentration in the rivers, which are the primary local water supply. That, in turn, requires Des Moines to augment its water treatment system – at considerable cost – to reduce nitrates to meet the federal Safe Drinking Water Act limit. Des Moines’ notice of intent concludes that the drainage districts’ discharges are not covered by the CWA’s agricultural exemptions because they are not stormwater or associated with irrigation, and as consequence are unpermitted discharges in violation of the CWA. There is very little precedent interpreting the CWA’s agricultural exemptions, and it does not appear to address facts such as those pertinent to Des Moines.

It is not yet known whether Des Moines will proceed with litigation. Although extension of the NPDES permit program to a presumably vast number of agricultural sources could be daunting, that concern must be juxtaposed with the increasing national focus on the adverse impact of nutrient pollution from agricultural sources. These concerns far transcend Des Moines’ individual circumstances and implicate a number of additional states, broad agricultural interests and a considerable number of municipalities as well. Developments in this matter will be very useful to monitor.

CO2When Barack Obama was a law student at Harvard University, his constitutional law professor was Lawrence Tribe. A distinguished legal scholar and teacher, Professor Tribe has also been counsel in a number of high profile cases such as Bush v. Gore (Tribe represented former Vice President Al Gore). President Obama and his former professor appear to have maintained a cordial relationship (e.g., Tribe has described the President as “the best student I ever had” and he served as a judicial adviser to Mr. Obama’s 2008 presidential campaign; in addition, during President Obama’s first term Tribe was “Senior Counselor for Access to Justice” in the Department of Justice). Despite his apparent goodwill toward the President, last month Tribe filed rulemaking comments suggesting that the U.S. Environmental Protection Agency should scuttle its proposal to establish first-time restrictions on greenhouse gas (carbon dioxide - CO2) emissions from existing coal-fired power plants. EPA’s proposal, Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units, 79 Fed. Reg 34830 (June 18, 2014), which is often referred to as the Obama Administration’s “Clean Power Plan,” is intended to reduce CO2 emissions from the electric power sector by 30% through various means including shifting a significant portion of coal-fired generation to natural gas and increased reliance on renewable energy. Tribe’s comments, filed on December 1st in conjunction with Peabody Coal Company, take direct aim at the Clean Power Plan as a “remarkable example of executive overreach” that violates the Constitution’s bedrock principle of “separation of powers” (“separation of powers” is an important aspect of the curriculum for constitutional law, and one could conclude from Mr. Tribe’s comments that he must think his former student missed class on those days!).

Attempts at humor aside, Professor Tribe’s comments have received considerable attention. Among other things, he argues that the Clean Power Plan’s downgrading of coal-fired electricity contradicts many decades of federal government encouragement of – and financial support for – producing electricity from coal, and results in an unconstitutional “taking” of private property. That argument seems questionable (a “taking” in the regulatory context assumes that the government action at issue deprives the injured party’s property of essentially all value, which is not the case here). In addition, Tribe challenges EPA’s interpretation of the statute that is the underlying legal basis for the Clean Power Plan, section 111(d) of the Clean Air Act. This relates to the fact that when section 111(d) was modified as part of the Clean Air Act Amendments of 1990, the Senate and House each approved different and somewhat conflicting versions of the statute. Although the conflict should have been addressed in a House-Senate conference, that did not happen. Instead, the legislation signed by President George H.W. Bush and recorded in the U.S. Statutes at Large included the two different versions of section 111(d). In the Clean Power Plan EPA refers to the conflict as an ambiguity that the agency reconciles by interpreting section 111(d) in a manner that authorizes EPA to regulate CO2 emissions from existing power plants and other industrial sources. Professor Tribe, on the other hand, says there is no ambiguity and he treats the House version of section 111(d) – which would not authorize EPA regulation of power plants’ CO2 emissions – as controlling. He adds that even if there is an ambiguity, EPA’s attempt to reconcile the two provisions violates separation of powers because “choos[ing] which of two competing versions of a statute . . . to make legally operative” is “the exclusive responsibility of the legislature.”

While Professor Tribe’s role in challenging the Clean Power Plan initiative by his former student is an interesting irony, the more important point is the virtual certainty that the Clean Power Plan will be challenged in court. The Clean Power Plan is widely acknowledged by stakeholders across the spectrum (industry, state and local government, environmental organizations, etc.) as one of the most far reaching proposals in EPA’s 45-year history, and how courts interpret section 111(d) (which will include interpretive questions beyond those noted here) will be very important to the Clean Power Plan’s success or failure. If President Obama’s CO2 reduction initiative is upheld, it is likely to be the President’s signature environmental achievement. EPA is expected to take final action on the Clean Power Plan by mid-summer.

Wind EnergyThe Public Utility Regulatory Policies Act of 1978, 16 U.S.C. §§ 824a (PURPA), requires utilities to purchase electricity from renewable and other alternative energy facilities (referred to in PURPA as “qualifying facilities” – or “QFs”) at the utilities’ avoided cost.  A recent decision by the U.S. Court of Appeals for the Fifth Circuit, Exelon Wind 1, LLC v. Nelson, No.12-51228 (September 8, 2014), involves a Texas Public Utility Commission regulation (Texas PUC Rule 25.242) adopted in connection with PURPA’s mandatory purchase provision.  A sharply divided three-judge panel ruled that the Texas PUC regulation trumped a conflicting PURPA regulation adopted by the Federal Energy Regulatory Commission, the agency charged by Congress with administration of PURPA.  A petition for rehearing by the full Fifth Circuit has been filed, and Exelon Wind raises important principles of administrative law with potential implications for a broad array of federal regulatory laws in addition to PURPA.

The objective of PURPA’s mandatory purchase provision is to encourage the development of alternative energy sources such as QFs.  The applicable FERC regulation, 18 C.F.R. § 292.304(d), establishes two alternative means to implement the purchase requirement, both of which are at the option of the QF, that is, the seller.  One alternative is for the QF to rely on the spot market and sell its electricity for immediate delivery at the then-current market price (i.e., the buyer’s avoided cost at the time of delivery).  The other alternative is for the QF to enter a contract (the regulation uses the term “legally enforceable obligation”) to deliver electricity over a specified period based on the buyer’s avoided costs at the time of delivery or when the contract is entered.  Texas PUC Rule 25.242, on the other hand, restricts the options that FERC’s regulation provides for the QF.  More specifically, the Texas rule confines the second alternative, supra, only to QFs that sell “firm power,” i.e., power that is available 24/7, which generally excludes wind and solar power QFs.  Since nothing in 18 C.F.R. § 292.304(d) authorizes such a restriction, FERC issued a declaratory order finding that Texas PUC Rule 25.242 contradicts the federal regulation.

The immediate issue in Exelon Wind is whether the Texas PUC’s regulation impermissibly conflicts with the underlying federal regulation, as FERC determined.  Although the Fifth Circuit majority found no conflict, a vigorous dissenting opinion says the majority disregarded the regulation’s plain meaning.  See slip op. at 37-40.  In addition, the dissent concludes (id. at 50) that the majority improperly “minimizes the effect of” FERC’s declaratory order, which the majority characterized as only “an informal guidance document” that is not entitled to judicial deference. See id. at 18. As the dissent emphasizes, “the majority does not provide a good reason to refuse to give controlling weight to FERC’s interpretation of its own regulation,” id. 57, and, as a consequence, “contravenes established principles of interpretation and administrative law and disrupts the scheme that Congress intended.”  Id. at 34.

The majority opinion in Exelon Wind appears to be in tension with Supreme Court precedent that requires agency deference under circumstances similar to those in this recent Fifth Circuit case.  See, e.g., Auer v. Robbins, 519 U.S. 452, 462 (1997); NationsBank of North Carolina, N.A. v. Variable Annuity Life Insurance Co., 513 U.S. 251, 256-57 (1995).  Given the increasing national focus on development of alternative energy, as well as the fundamental principles of federal administrative law that Exelon Wind implicates, future developments in the case will be important to monitor.

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We regularly update clients about changes in real estate law and on industry trends. This includes briefing clients on legislative proposals in the federal tax, housing and other legal areas affecting their businesses. Staying current enables you to anticipate and prevent legal problems as well as capitalize on new developments.
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