Climate:

Former EPA general counsel Martella discusses Obama administration's options on regulation

With the two year anniversary of the Supreme Court's Massachusetts v. EPA decision just weeks away, will the Obama administration take the symbolic step of acting on emissions regulation on, or around the anniversary? During today's OnPoint, Roger Martella, former general counsel at U.S. EPA, outlines the Obama administration's various options for moving forward on emissions regulation. Martella, now a partner at Sidley Austin, explains how an endangerment finding would affect EPA's regulatory framework. He also discusses how the lack of certainty for the permitting of new projects could stall stimulus-related ventures.

Transcript

Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. With us today is Roger Martella, former general counsel at U.S. EPA and currently a partner at Sidley Austin. Roger, it's great to have you back on the show.

Roger Martella: Thanks, Monica.

Monica Trauzzi: Roger, the Obama administration has been moving pretty quickly to address some controversial environmental decisions made by the Bush administration. The two-year anniversary of Massachusetts v. EPA is right around the corner, April 2, and we could see some significant announcements on climate change on or around that day. And there are a couple different routes that the administration could take at this point to address greenhouse gas regulation. Is sort of want to walk through all of those with you. But first off, what is the likelihood that we're actually going to see developments over the next month?

Roger Martella: Well, April 2 is a very significant date from the perspective of greenhouse gas regulations. It's the two-year anniversary of the Massachusetts v. EPA decision. Last year, on the one-year anniversary, environmental groups went to the DC Circuit and asked for a writ of mandamus, a very extraordinary request asking the DC Circuit to force the EPA to regulate greenhouse gases. The DC Circuit said, "No, one year is too soon." But it didn't say how long is too long neither, so it wouldn't be surprising if something happens on April 2, whether it's the environmental groups or the administration. The administration has been sending some signals that they think the April 2 is significant too. Carol Browner, a few weeks ago, said that she was expecting an endangerment finding on or around April 2. And the new administrator has said it's just a matter of time before she addresses endangerment; that she believes she has a pending obligation to respond to Massachusetts v. EPA.

Monica Trauzzi: What are the three different things, I know you've spoken about this before, the three different things that they could do with the endangerment finding?

Roger Martella: In trying to piece together the various statements we've seen from them and trying to think about what are their options given the Massachusetts decision, there does seem to be three options they're probably considering. The first option would be just a stand-alone proposal of endangerment saying we propose to find that greenhouse gases endanger public health and/or welfare. This would probably be the first time EPA has ever done a stand-alone endangerment finding. And that, by itself, would not trigger regulation. There would be a public comment period and then they would make a final determination and presumably at some point in the future they would take that final endangerment finding and move forward with regulations. The second option would be they go a step further, which is what their historical practice has been, would be to say we propose endangerment, but we also propose regulations. We're going to also regulate greenhouse gases and they'd have to regulate something and the very likely suspect there is cars and light-duty trucks. Cars and light-duty trucks were at issue in Massachusetts v. EPA. The court's holding goes to Section 202 of the Clean Air Act which addresses cars and light-duty trucks. When we look at the ANPR, which we talked about a while ago, there is basically a proposal for cars and light-duty trucks buried inside of there. So they have a lot of information ready to go. They're probably standing by in a position to propose cars and light-duty trucks if necessary. The third option goes a step beyond that. In addition to endangerment, in addition to cars, they may want to send a signal on stationary sources and make a proposal for a new source performance standard for example, for either utilities or petroleum refineries or a source category of stationary sources.

Monica Trauzzi: So, lots of different options. Is there any indication of which route they may go?

Roger Martella: I would say option one or option two are more likely. The stand-alone endangerment finding gives them the benefit of having more flexibility in the process longer term. We've heard, several times, the notion of 18 months. They want to give Congress an 18-month window to pass legislation and if you want to have a longer window, doing a Phase 1 endangerment finding, doing a Phase 2 proposed rule furthers that goal. If you do everything at once it's going to be harder to effectively stretch the process out to give Congress that window.

Monica Trauzzi: And there's a lot of controversy surrounding using the clean air act to regulate emissions. I mean a lot of people feel like this is trying to put a square peg in a round hole. Is that sort of a way, if they were to go that route, to buy some time, you know, spur Congress to act more quickly, buy some time and then eventually have some legislation enacted?

Roger Martella: That's right. I mean the administration hasn't been entirely correct, but they seem to be favoring an approach of working with Congress on new legislation as opposed to the Clean Air Act. They've said on the one hand we have an obligation under the clean air act. We are going to respond to it, but on the other hand they favor, so far we've heard cap and trade or a regulatory based system with Congress. The new administrator has hired David McIntosh on her staff from Senator Lieberman's staff to, from what we understand, be something of a liaison between EPA and Congress on climate change issues. So that may be a sign that they intend to work more coordinated with Congress on developing such legislation.

Monica Trauzzi: Yeah, what does the makeup of EPA say to you, the current EPA, say to you about how these types of regulations may go?

Roger Martella: Well, it's interesting because they do have something of a skeleton crew over there at the moment, but they have very smart and very talented people at the same time. In addition to the administrator she has three advisers on climate change, David McIntosh, Lisa Heinzerling and Robert Sussman. And so these are all people with very strong climate change backgrounds. And so it would suggest this is something they are putting a lot of the energy, a lot of focus on, on developing both Clean Air Act options, but also keeping the option open to working with Congress on legislation.

Monica Trauzzi: And the public comment period on the California waiver decision is closing in early April.

Roger Martella: Yes.

Monica Trauzzi: So we could see the administration also use that as a vehicle to address emissions, but there are a couple of different issues that come into play with that.

Roger Martella: On the California waiver, this is an issue where, literally, on the administrator's first day on her job she stood up with the President Obama and signaled they would be reconsidering the California waiver. And while in other reconsideration motions they haven't really signaled how they might come out, this one they've done some foreshadowing. They've said that the Bush administration's denial of the California waiver raised substantial issues and was a significant departure from experience with the California waiver. So, as you said, the public comment period closes April 6 and, like many things, it's probably going to not be a black and white grant or deny. These issues are much more complicated and it would be hard I think to just simply grant the waiver given the lack of lead time before the waiver comes in to affect in the near term.

Monica Trauzzi: There's a lot of uncertainty right now surrounding the permitting of new projects, because we don't know how emissions are going to be regulated. Is that sort of going to push the administration to act more quickly? I mean you contend that this could impact some stimulus projects as well.

Roger Martella: Yes.

Monica Trauzzi: The lack of certainty.

Roger Martella: That's right and this could be the single biggest game changer over the next couple of months, is what happens to permitting in the meantime. We talked about an endangerment finding, nothing really is triggered under the Clean Air Act until you finalize an actual regulation. You have an endangerment finding, you have a regulation, you finalize that and that triggers very significant consequences. And what it basically does is it gets you to the point where greenhouse gases become regulated pollutants. If EPA decides sooner to regulate greenhouse gases through their permitting process, you've basically skipped that entire step. Those 18 months become irrelevant because you're now, tomorrow, at the point where greenhouse gases are regulated pollutants. So, we paid very close attention when the administrator offered to reconsider the prior administration's position that, in fact, you should not be imposing greenhouse gas requirements because, again, that would very much jump ahead of the process, jump ahead of the public comment periods and get to the endpoint where greenhouse gases are regulated before we're prepared to address the regulations.

Monica Trauzzi: Final question here. How much pressure do you think the Obama administration is feeling from the enviro community, NGOs, to act on something quickly?

Roger Martella: Well, the environmental community has not been shy in saying that they do speak a lot to the administration. They speak a lot to Congress and share their views and, to their credit, they make their views quite public. Recently the Sierra Club indicated that it is telling the administration it is opposed to any new technology, any new power plants that emit more than 800 tons of carbon dioxide per megawatt power. What that basically means is it shuts down any opportunity for coal-fired power absent carbon sequestration. So, they are taking aggressive views and they're sharing those views both with the administration and with the public. I don't even know where they're coming from.

Monica Trauzzi: All right, we'll end it right there on that now. Thank you for coming on the show again, interesting stuff.

Roger Martella: Thanks, Monica.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

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