16 July 2018

Sidley Environmental Trends

Topics discussed this week include

  • Supplemental legal analysis provides additional support for Administration’s narrower interpretation of “waters of the United States”
  • EPA proposes new volume requirements under Renewable Fuel Standard
  • EPA extends comment period of advance notice of proposed rulemaking on cost-benefit analyses
  • Rhode Island brings climate change suit against fossil fuel companies
  • EPA proposes “close-out” of upwind states’ interstate air transport obligations under 2008 ozone standard

Supplemental legal analysis provides additional support for Administration’s narrower interpretation of “waters of the United States.” On July 12, 2018, the U.S. Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (USACE) issued a supplementary notice of proposed rulemaking in support of its “Step One” proposal to rescind the 2015 Clean Water Rule. The 2015 Clean Water Rule interpreted “waters of the United States” as those with a “significant nexus” under the test articulated by Justice Kennedy in Rapanos v. United States, 547 U.S. 715 (2006). In February 2017, President Trump signed an Executive Order directing the agencies to consider rescinding the rule in favor of the “adjacency” standard articulated by Justice Scalia in Rapanos. The agencies first proposed to rescind the Clean Water Rule in July 2017, but agencies received extensive comments on the proposal, including comments criticizing the scope of the supporting legal analysis. In response to those comments, the supplemental notice provides additional support for the agencies’ initial July 2017 proposal to rescind the rule. The July 2018 supplemental notice explains, for example, that the 2015 rule expanded the meaning of tributaries and adjacent wetlands to include waters well beyond those regulated by the agencies under preexisting regulations and established Supreme Court precedent. EPA and USACE propose to rescind the 2015 rule for these reasons, explaining that the 2015 rule altered the balance of authorities between the federal and state governments, contrary to the agencies’ statements in promulgating the 2015 Rule and in contravention of the Clean Water Act. This proposal only supports rescission of the 2015 Clean Water Rule.  EPA and USACE still intend to proceed to “Step Two” and propose a replacement interpretation of “waters of the United States” in a separate rulemaking.

EPA proposes new volume requirements under Renewable Fuel Standard (RFS). On June 26, 2018, EPA issued proposed renewable volume obligations (RVOs) under the RFS for cellulosic biofuel, advanced biofuel, and total renewable fuel for calendar year 2019. EPA also proposed biomass-based diesel volume obligations for calendar year 2020. The RFS requires EPA to annually update these requirements to the volumes set forth in the RFS provisions of the Clean Air Act, but EPA can reduce the volume requirements under certain conditions, taking into account cellulosic biofuel availability, domestic supply, and severe economic harm. The proposal does not address several recent highly contentious RFS issues — eliminating summertime limits on use of E15, changing rules for biofuels exports, undertaking a statutorily mandated “reset” of the RVOs, or addressing the D.C. Circuit’s invalidation of the 2016 RVOs. Another hotly debated issue is whether the agency will reassign to large refiners mandates that have been waived for small refineries. EPA does not propose this here; instead it notes that it has not yet granted any exemptions for 2019 but “is maintaining its approach that any exemptions for 2018 that are granted after the final rule is released will not be reflected” in the final 2019 standards. EPA is also requesting input on a future rulemaking to address market manipulation and fraud related to trading and banking renewable fuel credits through the use of Renewable Identification Numbers (RINs).

EPA extends comment period of advance notice of proposed rulemaking on cost-benefit analyses. EPA initially issued its advance notice to solicit comment on whether to promulgate regulations on how it determines the costs and benefits of regulatory action. Such cost-benefit analyses are required by various environmental statutes, including the Clean Air Act and Clean Water Act, and are allowed by many others. Additionally, the Trump Administration policy has been to avoid regulations that pose significant burdens on regulated entities. The proposal seeks input on how EPA should consider co-benefits—i.e., benefits that accrue indirectly from a rule — and cumulative regulatory costs and benefits. The comment period has been extended to August 13, 2018.

Rhode Island brings climate change suit against fossil fuel companies. Rhode Island brought suit in state court against major oil and gas producing companies alleging the companies knew about and concealed the climate change impacts of greenhouse gas emissions from the use of their products. The state raises several causes of action, including public nuisance, negligence and strict liability claims for failure to warn, and for design defect, trespass, and impairment of public trust resources. Rhode Island also claims that these companies violated the state’s Environmental Rights Act by selling fossil fuels that produce significant greenhouse gas emissions when used. The state seeks compensatory and punitive damages, equitable relief, and other remedies. Rhode Island’s suit in state court comes close on the heels of a California federal judge’s June 25, 2018 decision to dismiss similar suits filed by the cities of Oakland and San Francisco. In that case, the judge had decided that the federal courts were the appropriate venue for such suits, but that Congress, not an individual district court, is the appropriate branch of government to address climate change.

EPA proposes “close-out” of upwind states’ interstate air transport obligations under 2008 ozone standard. On July 10, EPA issued a proposed finding that 20 upwind states satisfied their Clean Air Act obligations to address interstate transport of air pollution that allegedly contributes significantly to certain downwind states’ problems with meeting the 2008 National Ambient Air Quality Standards (NAAQS) for ozone. EPA explained that since its Cross State Air Pollution Update Rule (CSAPR II), which created a NOx emissions allowance trading scheme across 20 states to address their CAA “good neighbor” obligations, EPA has conducted further modeling and determined that the CSAPR II trading program will allow all downwind eastern states to achieve compliance with the 2008 ozone NAAQS by 2023. Thus, EPA proposes that it and the upwind states have no obligation to take additional action to satisfy those upwind states’ good neighbor obligations. A federal court had imposed deadlines on EPA to issue federal implementation plans for several of these states. If finalized as written, the proposal would also resolve all of EPA’s remaining obligations under the court order.

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