Prominent environmental and energy law firms are taking a lead in helping companies navigate the legal, policy and business implications of U.S. EPA's finding this week that greenhouse gas emissions endanger human health and welfare.

"Ever since the Supreme Court's April 2007 decision in the Massachusetts v. EPA case, we have been advising our clients to anticipate the endangerment finding," said Kyle Danish of Van Ness Feldman.

"In particular, after the Obama administration took office, it became clear that the endangerment finding would be a key link in a chain of actions that would empower the EPA to start regulating greenhouse gas emissions," Danish said.

On Monday, EPA unveiled its "endangerment finding" about greenhouse gases and that emissions from new cars are contributing to the buildup of those gases in the atmosphere.

The final endangerment finding could trigger national air pollution standards for greenhouse gases, although Administrator Lisa Jackson has signaled that her agency would oppose such limits (Greenwire, Dec. 8).

"The key concern for clients, especially energy companies and intensive energy users, is that the endangerment finding has cleared a hurdle for greenhouses gases to be regulated under the Clean Air Act, instead of -- or in addition to -- any future climate change legislation," said Gabriel Rodriguez, a partner at Schiff Hardin, a Chicago firm whose clients include natural-gas distribution companies, manufacturers and power generators.

"While the [finding] directly impacts mobile sources, EPA views regulation of mobile source pollutants as incidentally triggering certain other Clean Air Act programs" for power plants, factories and other so-called stationary sources, he added. "Given the dramatic impact that kind of regulation would have on industry and the U.S. economy, the better approach is to address greenhouse gas emissions in separate energy or climate change legislation rather than as an incidental outgrowth of mobile source regulation."

David Reiser, a partner at McGuireWoods in Chicago, said most of his clients have already anticipated the results of the finding.

"In and of itself, the endangerment finding is not much of a driver, since it's part of this larger process," Reiser said. "Our clients are aware that EPA plans to issue its mobile-source greenhouse gas emissions rule in spring 2010 and that this will kick in the full panoply of Clean Air Act requirements for greenhouse gas emissions from all sources. At the same time, we are tracking congressional action on climate change legislation and reporting on those developments, as well."

Reiser said his firm represents "the full spectrum, from extremely large energy providers to startup ethanol facilities. We have numerous clients in the energy production industry, as well as manufacturing and chemical clients, and we also represent developers of alternative energy and biofuels processes," he added.

Advice on making voluntary changes

Some attorneys have been encouraging clients to make voluntary adjustments in advance of EPA or congressional action.

"We have been talking to clients about how you can implement a lot of programs as an early measure to reduce your greenhouse gas emissions," said Robert McKinstry, the partner in charge of the climate and sustainability initiative at Ballard Spahr Andrews & Ingersoll. "A lot of companies that have already addressed greenhouse gas emissions have found it's like addressing hazardous waste in the 1980s."

McKinstry added, "For many companies, energy is a cost, and in some cases, greenhouse gases may be a lost resource. Reduce cost, increase efficiency and you operate better. On top of that, a lot of the things that you can do can get you tax benefits -- things like cogeneration or combined heating power. You're producing process steam and producing electricity at the same time."

In the absence of a regulatory program, Reiser added that his firm "continues to monitor developments, report to our clients and work with them to develop strategies based on the information we have so far."

"Many businesses have been evaluating their carbon footprint and have been looking at ways to reduce GHG emissions over the last several years," Reiser said.

At the same time, some firms have cautioned clients to wait on specific requirements before implementing changes.

"Firms can help clients prepare for new regulatory regimes when the requirements are known," Rodriguez said. "At that point, companies can assess the kinds of changes in process and equipment required to comply. But if the changes that will be required for compliance are substantial, then companies will also need to know that the requirements are fixed."

"There is so much uncertainty as to the direction of future regulations that the notion that clients can begin to 'comply' voluntarily is more than fanciful -- it simply can't be done," Rodriguez added. "At this point, there is no way to know what greenhouse gas regulation is going to look like at the end of the day."

Meanwhile, large energy companies, automakers and others have pressed their attorneys about "the extent to which the endangerment finding is legally vulnerable and could be invalidated in the courts," Danish said.

The Competitive Enterprise Institute, a free-market advocacy group, has already stated its intention to challenge the agency's endangerment finding in federal court.

"Even though everyone expected the rules would be litigated, unless there's some extreme change, the U.S. Supreme Court will uphold the finding," said Scott Deatherage, a partner and leader of the climate and renewable energy group at Thompson & Knight.

'Murky' picture in Congress

Until recently, the focus for many was on the climate change legislation making its way through Congress.

"I tell most of my clients that they're better off under a congressional system than an EPA system," said Deatherage, who works with both oil and gas companies and renewable energy and carbon-credit project developers. "After the endangerment finding came out, there may be an even greater push for industry to negotiate an acceptable bill."

It is no longer clear, however, that Congress will act first.

"The legislative picture has gotten pretty murky," Danish said. "It would be one thing if there was a clear choice between EPA regulation and some particular piece of legislation, but now it looks as though the Senate is kind of back to square one. Accordingly, it may be too much to expect that 'industry,' speaking as a monolith, will request some particular legislative program as an alternative to EPA regulation."

At the moment, many clients are concentrating on compliance with EPA's new reporting rule, which will require about 10,000 facilities that emit about 85 percent of the nation's greenhouse gases to begin to collect emissions data.

Suppliers of fossil fuels and industrial facilities that emit 25,000 metric tons or more of carbon dioxide equivalent will be subject to the new requirements (Greenwire, Sept. 22).

"This impacts a much wider group of companies than have typically been required to deal with air issues and provides something of a preview to the types of companies that may be affected by EPA greenhouse gas emission programs under the Clean Air Act," Reiser said. "I have given numerous talks on the subject to various trade associations and, with respect to smaller facilities, there is not a lot of clarity about which companies this will affect."