2009

When I first eyeballed the 648-page draft cap-and-trade bill, authored by Reps. Henry Waxman (D-CA) and Ed Markey (D-MA), I was perplexed, even stunned.

Secs. 831-834 of the draft bill exempt carbon dioxide (CO2) and other greenhouse gases from regulation under the Clean Air Act’s (CAA) National Ambient Air Quality Standards (NAAQS) program, Hazardous Air Pollutant (HAP) program, New Source Review (NSR) pre-construction permitting programs, and Title V operating permits program.

This surprised me for two reasons.

First, it is tacit admission that free-market and industry analysts were correct when they warned that EPA could not control the cascading effects of CAA regulation of CO2 once it starts. It is implicit confirmation of our view that the Supreme Court’s Massachusetts v. EPA decision set the stage for an economy-choking regulatory morass.

What a difference one presidential election can make! Back in July 2008, Waxman and Markey bashed Bush’s EPA for responding to Mass v. EPA by issuing an Advanced Notice of Proposed Rulemaking (ANPR). EPA’s purpose was to inform and solicit public comment on the administrative, legal, and economic repercussions of greenhouse gas regulation under the CAA. Waxman denounced the ANPR as “a transparent delaying tactic.” Markey called it a ”shameful display of political interference with potential regulation of global warming pollution.” They demanded that EPA simply declare ”global warming pollution” a menace to society, and propose regulations to combat it.

Yet today, Waxman and Markey are peddling legislation that would exempt greenhouse gases from several CAA regulatory authorities. It’s as if they actually learned something from the ANPR and the comments free-market and industry analysts submitted to EPA spotlighting the perils of CO2 regulation under the CAA.

Or maybe they knew all along that Mass v. EPA created a Pandora’s Box, pretending otherwise gave them another stick to beat Bush with, but now that Obama is in the hot seat, they have to sober up and avoid a politically-damaging regulatory debacle.

Whatever their reasoning, I was also surprised by Secs. 831-834, because the provisions seemed so contrary to the economic interest the eco-litigation “community.”

For example, if EPA establishes greenhouse gas emission standards for new motor vehicles–the explicit policy objective of petitioners in Mass v. EPA–an estimated 1.2 million previously unregulated entities (office buildings, big box stores, enclosed malls, hotels, apartment buildings, even commercial restaurants) would become “major stationary sources” of CO2. As such, those facilities would be vulnerable to new regulation, monitoring, paperwork, penalties, and litigation under the NSR pre-construction permitting programs. Applying NSR to CO2 would produce a surge in NIMBY (”Not In My Backyard”) lawsuits. Construction jobs and economic development would plummet, but “green jobs” for trial lawyers would soar.

Why would Waxman and Markey deny a full-employment program to  the eco-trial bar? This puzzled me. Until yesterday, that is, when I read a blog post by Matt Dempsey of Senator Inhofe’s Senate Environment Public Works Committee staff. As Dempsey explains, the draft bill would dramatically expand “citizen suit” provisions under the CAA:

Over the next few days, EPW PolicyBeat will focus on the Waxman-Markey draft climate change legislation and several of the most interesting provisions therein. In our view, Section 336 is far and away the most interesting in the 648-page bill. Here the authors amend the citizen suit provision in Section 304 of the Clean Air Act. The Waxman-Markey bill authorizes a “person” to “commence an action” who has “suffered, or reasonably expects to suffer, a harm attributable, in whole or in part, to a violation or failure to act referred to in subsection (a).” Sounds innocuous enough…until one reads on. For then one discovers how “harm” is defined: “For purposes of this section, the term ‘harm’ includes any effect of air pollution (including climate change), currently occurring or at risk of occurring, and the incremental exacerbation of any such effect or risk that is associated with a small incremental emission of any air pollutant (including any greenhouse gas defined in Title VII), whether or not the risk is widely shared.” In other words, should the unfortunate happen and Waxman-Markey become law, courts could conceivably be flooded with lawsuits filed by environmental groups who perceive some risk—and they undoubtedly will perceive it—that is “associated with a small incremental emission” of a greenhouse gas—whether from a coal-fired power plant, a manufacturing facility, or some other entity covered by the bill. This provision will further empower the eco-trial bar to fight the ravages of climate change and the businesses it dislikes, with no effect on the former and disastrous consequences for the latter.

So there you have it. What the left hand taketh away, the other left hand restoreth. Secs. 831-834 appear to shield businesses from litigation-driven regulation under the CAA, but this is a slight-of-hand. Sec. 336 would open up a whole new field of climate-related regulatory litigation.

The Waxman-Markey draft bill is tricky in at least one other respect. Although it precludes regulation under the aforementioned CAA programs, it does not preclude regulation under CAA Sec. 111, the New Source Performance Standards (NSPS) program. Anyone who reads the ANPR can see that EPA staff are hot to propose greenhouse gas performance standards for coal-fired power plants, petroleum refineries, and other large industrial facilities.

Although the greenhouse gas performance standards, as envisioned in the ANPR, would mostly require “process efficiency” upgrades, eco-litigation groups entertain much bigger ambitions. Last November, Sierra Club climate council David Bookbinder advocated using NSPS to block construction of new coal-fired power plants and, in time, shut down existing coal plants:

So what next?  Logically, I think the answer is New Source Performance Standards for fossil-fuel fired power plants.  Just such a rulemaking is sitting in limbo at EPA and it is the appropriate vehicle for limiting new power plant emissions to 800 lb. CO2/MWh.  This would permit new gas-fired plants but would effectively stop any new coal-fired ones that did not employ carbon capture and sequestration (”CCS”).  Perhaps this rulemaking could also contain a second phase, effective 2016 or so, tightening the standard to approximately 250 lb. CO2/MWh.  This would be achievable via either combined gas/solar or gas/wind generation or 90% CCS.  And then they could start thinking about how to deal with existing power plants under Section 111(d) of the Act.  But one thing at a time.

Since coal provides about 50% of all U.S. electric power, an agenda that aims to suppress or even kill off coal generation in a decade or so should worry anyone who worries about the economy (and who doesn’t worry about the economy these days!).

To sum up, the Markey-Waxman bill leaves intact the NSPS threat to our electric supply system. It would create a new launchpad for litigation based on the perceived environmental risks of “small incremental” emissions. Any “regulatory certainty” it appears to offer is illusory.