What You Need To Know About The New SEC Guidance on Climate Change Disclosure
Bills Would Bar Consideration of Climate Change Impacts under NEPA

February 2010 Update: Climate Change

By Gabrielle Sigel and Jennifer L. Cassel

Federal Legislative Developments

  • Obama Requests Increased Funding for Climate Change

    On February 1, 2010, President Obama sent to Congress a budget request for fiscal year 2011 in which he requested increased funding for climate change measures even as he decreased his overall budget request. 

    Some of the items listed in the President’s budget request include: $54.5 billion for Dept of Energy loan guarantees for clean energy technologies; $21 million for EPA to implement the mandatory greenhouse gas (“GHG”) reporting rule; $56 million for EPA and State climate change programs, including $25 million to be used to assist EPA and the States to incorporate GHG emission restrictions into Clean Air Act (“CAA”) permitting, $5 million to develop best available control technology (“BACT”) for GHG emission limits in CAA permits, and $7 million to develop new source performance standards for certain sources that produce GHG emissions; $7 million to fund carbon capture and sequestration (“CCS”) projects and $545 million to fund research of CCS technologies; $6 million for EPA to implement GHG emission standards for vehicles; and $2.6 billion to fund research related to climate change.  Unlike his budget request for FY 2010, President Obama does not request funding to implement a cap-and-trade program in FY 2011.
  • House Bill, Resolution Seek to Block EPA Regulation of GHGs

    On February 3, 2010, Reps. Ike Skelton (D. Mo.), chairman of the House Armed Services Committee, Collin Peterson (D. Minn.), chairman of the House Agriculture Committee, and Jo Ann Emerson (R. Mo.) introduced a bill, H.R. 4572, which would bar EPA from regulating GHGs under the CAA.  The bill also would call for amendment of the CAA to exclude six GHGs, namely carbon dioxide, methane, nitrous oxide, hydroflourocarbons, perflourocarbons, and sulfur hexafluoride, from the CAA definition of air pollutant.  In addition, the bill would direct EPA to exclude “any activities relating to the inclusion of international indirect land use change” from the CAA’s renewable fuel program; would prohibit EPA from considering such international land use change in calculating lifecycle GHG emissions; and would expand the definition of “renewable biomass” under the CAA.
    On February 25, 2010, the same three Representatives introduced a resolution to disapprove of the EPA’s finding that GHG emissions endanger public health and welfare (“the Endangerment Finding”) and thus prevent EPA from implementing or enforcing that Endangerment Finding.  The resolution, H.J. Res. 76, is an exact copy of the resolution (S.J. Res. 26) introduced by Sen. Lisa Murkowski (R. Alaska) in the Senate in January of this year, and like that resolution is proposed pursuant to the Congressional Review Act.  Under that Act resolutions such as H.J. Res. 76 require only 51, rather than 60, votes for passage in the Senate. However, like all legislation, the resolution would have to be passed by both the House and the Senate, as well as signed by the President, before it could take effect.
Federal Regulatory Developments
  • CEQ Issues Draft Guidance on Evaluating Climate Impact in NEPA Reviews   
    On February 18, 2010, the White House Council on Environmental Quality (“CEQ”) released draft guidance for federal agencies on the evaluation of GHG emissions as part of environmental statements and environmental impact assessments conducted pursuant to the National Environmental Policy Act (“NEPA”).  In the draft guidance, CEQ suggests that agencies should take GHG emissions into account in NEPA reviews when a proposed action “would be reasonably anticipated to cause direct emissions of 25,000 metric tons or more of CO2-equivalent GHG emissions on an annual basis.”  CEQ explains that the “reference point” of 25,000 tons per year was selected because it “has been used and proposed in rule-makings under the Clean Air Act,” including the GHG reporting rule finalized in October 2009.  In their evaluations, “agencies should consider the specific effects of the proposed action…, the nexus of those effects with projected climate change effects on the same aspects of the environment, and the implications for the environment to adapt to the projected effects of climate change.”  Evaluations should take into account a project’s timetable and its impacts on vulnerable lands and populations, among other considerations.  Finally, if a proposed action subject to NEPA review “meets an applicable threshold for quantification and reporting…, CEQ proposes that the agency should also consider mitigation measures and reasonable alternatives to reduce action-related GHG emissions.”  Notably, CEQ proposes that federal land and resource management actions be exempt from the guidance.  CEQ published notice of the draft guidance in the Federal Register on February 23, 2010 (75 Fed. Reg. 8046 (Feb. 23, 2010)), and will be accepting comments on its draft guidance until May 24, 2010.    

  • Jackson: GHG Emissions Requirements for Stationary Sources to Begin in 2011 

    On February 22, 2010, EPA Administrator Lisa Jackson stated in a letter to eight Senators that EPA plans to begin phasing in GHG emissions requirements for stationary sources in 2011, and that, for those sources phased in between 2011 and 2013, she “expect[s] that the threshold for permitting will be substantially higher than the 25,000-ton limit that EPA originally proposed.”  Whatever the final threshold is, Jackson continued, “EPA does not intend to subject the smaller sources to Clean Air Act permitting for greenhouse gas emissions any sooner than 2016.”  Jackson further clarified that she expects to “take actions to ensure that no stationary source will be required to get a Clean Air Act permit to cover its greenhouse gas emission in calendar year 2010.”  Jackson’s letter comes in response to a letter submitted to her by the eight Senators, expressing concern about the regulation of GHGs from stationary sources and the impact of that regulation on the economy and energy security.   

  • FWS: American Pika Not Endangered By Climate Change; Coral Species to be Considered

    On February 9, 2010, the Fish and Wildlife Service (“FWS”) published its finding that the American pika, a small mammal which lives in the American Rocky mountains, is not endangered at this time.  75 Fed. Reg. 6438 (Feb. 9, 2010).  The finding was made in compliance with a settlement of a Feb. 2009 lawsuit filed by the Center for Biological Diversity (“CBD”) challenging FWS’s failure to respond to CBD’s 2007 petition to list the mammal as endangered.  CBD had argued that pika populations were declining because the pika was forced, due to rising temperatures, to live only on more limited areas of higher, cooler ground.  In its determination, FWS found that the American pika has adapted to higher temperatures in parts of its habitat by “using cooler habitat below the surface” and restricting movement during the hotter daylight hours.  Nonetheless, FWS requested that the public submit any new information concerning threats to the American pika or its habitat.  

    On February 10, 2010, FWS announced that it had found “substantial scientific or commercial information” indicating that listing under the Endangered Species Act may be warranted for 82 species of coral. 75 Fed. Reg. 6616 (Feb. 10, 2010).  In response to a petition filed by CBD in October 2009, FWS evaluated the impact on coral species from factors including ocean acidification and increased oceanic surface temperatures, both of which are tied to climate change.  FWS found that it is “reasonable to conclude” that the 82 species of coral “may be threatened or endangered,” citing ocean acidification, decreased resilience of corals, and elevated sea surface temperatures as factors which “could cause coral populations to collapse and make it difficult for them for them to recover.”  The announcement leads to a formal status review for the 82 species of coral, which should be completed in Oct. 2010.

Federal Litigation Developments

  • District Court: Issuance of Pipeline Permit Constitutional, NEPA Claims Viable 

    On February 24, 2010, the U.S. District Court for the District of Minnesota dismissed one count of environmental groups’  challenge of the State Department’s issuance of a permit for a crude oil pipeline - the “Alberta Clipper,” owned by Enbridge Energy - that would cross the Canadian/U.S. border, holding that the State Department’s issuance of that “Presidential permit” was Constitutional because the permit was issued pursuant to the President’s power over foreign affairs and his authority as Commander-in-Chief.  Sierra Club v. Hillary Clinton, No. 09-2622 (D. Minn. 2010).  Explaining its holding, the Court noted that Presidents’ authority to issue such “Presidential permits” is “well-recognized,” and that “Congress’s inaction suggests that Congress has accepted the authority of the President to issue cross-border permits.” The Court also dismissed the environmentalists’ claim that the State Department failed to properly complete an environmental assessment under the NEPA for an already-complete pipeline, holding the claim moot when the pipeline has been built and is operational.  Finally, the Court declined to dismiss four other claims of NEPA violations with regard to the environmental impact statement conducted by the State Department before issuing the permit, holding that the environmental groups have standing to challenge the alleged procedural violations, the Court has jurisdiction to rule on their claims pursuant to the Administrative Procedure Act, and that there has been insufficient factual development of those claims for the court to rule in a motion to dismiss. 

  • Numerous Parties Petition for Review or Reconsideration of Endangerment Finding 

    In February 2010, numerous lawsuits were filed in the U.S. Court of Appeals for the District of Columbia, petitioning the court to review EPA’s December 7, 2009, Endangerment Finding.  Parties requesting review of the Endangerment Finding include: the states of Alabama, Texas and Virginia (all filed Feb. 16); the American Farm Bureau Federation (filed Feb. 12); the American Iron and Steel Institute (filed Feb. 16); the Competitive Enterprise Institute (filed Feb. Feb. 16); Gerdau Ameristeel (filed Feb. 16); the National Mining Association (filed Feb. 12); the Ohio Coal Association (filed Feb. 16); Peabody Energy Co. (filed Feb. 12); the Portland Cement Association (filed Feb. 16); the U.S. Chamber of Commerce (filed Feb. 12); the Utility Air Regulatory Group (filed Feb. 16); and Rep. John Linder (R-Ga.), along with 11 other Republican Representatives and 17 organizations (filed Feb. 10).  These lawsuits add to that filed by the Coalition for Responsible Regulation and several other groups in December 2009, and to administrative petitions for reconsideration filed with EPA by the Pacific Legal Foundation (filed Feb. 9) and Texas (filed Feb. 16).  Most petitions allege that, in making the Endangerment Finding, EPA relied on flawed science and paid insufficient attention to evidence countering the conclusions made in the Finding.  In its petition, the American Iron and Steel Institute further asserted that climate change must be addressed through the legislative process and international negotiation, rather than regulatory measures.  Commenters observe that the petitioners may fail to establish standing to challenge the Endangerment Finding, which itself does not impose any new regulatory obligations and thus, the commenters claim, cannot itself cause any injury.  

  • Industry Groups File Challenge to California’s Low Carbon Fuel Standard
    On February 2, 2010, industry groups filed suit in the Eastern District of California against the California Air Resource Board (“CARB”), seeking declaratory relief and to enjoin CARB from implementing the state’s low-carbon fuel standard (“LCFS”) because, they claim, the standard violates the Commerce Clause and the Supremacy Clause of the U.S. Constitution.  Nat’l Petrochemical & Refiners Association (“NPRA”) v. Goldstene, No. 10-cv-163 (E.D. Cal. filed Feb. 2, 2010).  The groups argue that the LCFS violates the commerce clause by ‘directly regulating” the “fuel pathway” of transportation fuels both inside and outside of California and by discriminating against out-of state fuel producers.  They further assert that the LCFS violates the Supremacy Clause of the U.S. Constitution because it conflicts with the 2007 federal Energy Independence and Security Act (“EISA”) by “penalizing the continued production of certain renewable fuel in existing biorefineries,” which the EISA exempted from the requirement of cutting GHG emissions.  The NPRA’s suit is the second filed in federal court challenging the LCFS; the first suit, Rocky Mountain Farmers Union v. Goldstene, No. 1:09-cv-02234-LJO-DLB (E.D. Cal. filed Dec. 29, 2009), based on similar arguments, was filed in December 2009.

State and Regional Developments

  • Michigan Court Refuses to Require Control of GHGs 

    On February 10, 2010, in an unpublished opinion, a three-judge panel of the Michigan Court of Appeals upheld a lower court decision refusing to direct the Michigan Department of Environmental Quality (“DEQ”) to promulgate regulations controlling the emissions of carbon dioxide (“CO2”) from sources within the state.  Citizens for Envtl. Inquiry v. Dep’t of Envtl. Quality (Citizens), No. 286773 (Mich. Ct. App. Feb. 10, 2010).  In Citizens, an environmental group and several individuals petitioned DEQ to adopt regulations controlling the emissions of CO2, claiming that such regulations were required under the state Natural Resources and Environmental Protection Act (“NREPA”).  NREPA directs DEQ to “‘promulgate rules for purposes of… [c]ontrolling or prohibiting air pollution.” Id. at 1.  The Michigan trial court granted DEQ’s motion for summary disposition, holding that plaintiffs had failed to establish that they had a “clear legal right” to mandamus relief under state common law and denied plaintiffs’ subsequent motion for leave to amend the complaint to seek injunctive and declaratory relief under the Michigan Environmental Protection Act (“MEPA”).

    Upholding the lower court’s decision, the Michigan Court of Appeals held, first, that plaintiffs failed to establish that they had a clear legal right to DEQ’s promulgation of regulations controlling CO2.  Under Michigan law, the appellate court explained, plaintiffs seeking mandamus relief must “demonstrate some special injury beyond what would be suffered by the public at large,” Id. at 2, and plaintiffs - who acknowledged that climate change injures everyone in the state - failed to demonstrate such an injury.  Second, the appeals court held that the lower court correctly denied plaintiffs’ motion for reconsideration because plaintiffs’ proposed amended complaint failed to state a claim under the MEPA.  MEPA, the court explained, provides for suits against actors who harm the state environment, but an administrative agency decision is not “‘wrongful conduct’ within the contemplation of the MEPA.”  Id. at 4.

  • PSD Permit for California Power Plant Includes GHG Emissions Limits  

    On February 3, 2010, California regulators approved a CCA Prevention of Significant Deterioration (“PSD”) permit which includes BACT emission limits for GHGs.  The permit, issued to Calpine Corp. for a natural gas-fired power plant, requires that the plant limit GHG emissions from gas turbines, heat recovery system generators, a fire pump diesel engine, and several circuit breakers. Calpine Corp. is to meet those limits by (i) limiting heat input to that equipment, (ii) limiting their operation, and (iii) keeping close track of their use.  For example, the permit requires Calpine to keep a daily log of heat input to each of the gas turbines and heat recovery system generators, and to conduct a heat rate performance test on that equipment within 90 days of start-up.  Although EPA maintains that PSD permits need not contain GHG emission limits, Calpine asked the Bay Area Air Quality Management District, the San Francisco-regional body charged with issuing Clean Air Act permits, to include such limits in the permit.  In a statement released when the permit was first proposed in June 2009, a Calpine representative said that, “[b]y taking this historic and early action to limit greenhouse gas emissions, Calpine demonstrates that our long-term commitment to environmental stewardship is fundamental to our corporate philosophy.”  

  • South Dakota Rejects GHG Regulation; Arizona Abandons Climate Initiative Plan  

    On February 17, 2010, South Dakota legislators passed a resolution that “strongly opposes” cap-and-trade legislation currently under consideration by the U.S. Congress.  House Concurrent Resolution No. 1008.  The resolution, which passed the state House of Representatives 48-21 and the state Senate 24-8, states that cap-and-trade provisions would (a) “have a negative effect on agriculture, manufacturing, and small business in South Dakota;” (b) “substantially reduc[e] South Dakotan’s disposable income” due to higher energy costs; (c) “cost jobs,” exemplified by the abandonment of the plan for an expansion of the Big Stone power plant in the state “due to utility and investor uncertainty giving the looming federal cap-and-trade threat;” and (d) would put the country “at a competitive disadvantage.” 

    On February 2, 2010, Arizona Governor Jan Brewer (R) signed an executive order (Executive Order 2010-06) providing notice that the state will not implement the Western Climate Initiative (“WCI”), at least during the “economic downturn.”  In the order, Gov. Brewer echoes sentiments included in South Dakota’s resolution, stating that implementation of a cap-and-trade program would “cost investment and jobs in Arizona and put Arizona at a competitive disadvantage without effectively addressing what is a national and global issue.”  Nevertheless, the order mandates the establishment of a Climate Change Oversight Group to “monitor the continued work of the WCI” and any federal laws, rules or orders addressing climate change, and to make recommendations to the Governor regarding “how best to assert Arizona’s position on these matters.”  Moreover, the order clarifies that Arizona will continue its membership in the WCI even while it postpones implementing the WCI cap-and-trade program, set to begin on January 1, 2012. 

International and Business Developments

  • 100 Countries Declare Support for Copenhagen Accord     

    On February 1, 2010, administrators of the United Nations Framework Convention on Climate Change (“UNFCCC”) announced that they have received declarations of support for the Copenhagen Accord from 100 countries, and that 55 countries - including nations in the European Union, the U.S., China, India and Japan - have submitted voluntary GHG reduction targets, either in accordance with that Accord or pursuant to the UNFCCC agreement itself.  Among the countries promising GHG cuts under the UNFCCC treaty, but not pursuant to the Copenhagen Accord, were the “BASIC” nations (Brazil, South Africa, India and China), all of which agreed to formalize pledges made prior to the December 2009 UNFCCC Conference in Copenhagen.  Specifically, Brazil agreed to cut GHG emissions 36-39 percent below business as usual (“BAU”) scenarios by 2020; South Africa promised to cut emissions 34% below BAU by 2020; India pledged to reduce the “carbon intensity” of its economy by 20-25% by 2020; China agreed to reduce its carbon intensity by 40-45% by 2020.  These pledges were made contingent on Article 4, paragraph 7 of the UNFCCC treaty, which states that developing countries’ compliance with their commitments “will depend on… effective implementation by developed country Parties of their commitments under the Convention related to financial resources and transfer of technology….” Notwithstanding those contingencies, UNFCCC Executive Secretary Yvo de Boer noted that the strong showing of support for the Copenhagen Accord and that the U.N. treaty “represents an important invigoration of the U.N. Climate Change talks…”