Earlier this week, U.S. EPA released its reconsideration of the "Johnson memo." The agency announced it will hold off on regulating greenhouse gas emissions from stationary sources until January 2011. During today's OnPoint, Roger Martella, a partner at Sidley Austin and former general counsel at EPA, explains the agency's reasoning behind the nine-month freeze on regulation. He also discusses how the new deadline on regulation will affect pending permits, the mobile sources standard and the tailoring rule.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is Roger Martella, a partner at Sidley Austin and former General Counsel at EPA. Roger, wonderful to see you, as always.
Roger Martella: Thanks Monica, it's great to be back.
Monica Trauzzi: Roger, earlier this week EPA released its reconsideration of the Johnson memo and the bottom line is that regulation of emissions from stationary sources will be held off until January 2011. What's the reasoning behind this nine-month freeze?
Roger Martella: Well, as EPA rolls out its greenhouse gas regulatory regime it has to answer three basic questions. When will it start regulating greenhouse gases, who will it start to regulate and how will it regulate them? What EPA needs to do is answer that first question first, when will it regulate greenhouse gases, and it's decided that January 2, 2011 will be the date. It needs to do that because, absent this notice, greenhouse gases would be basically regulated for all sources virtually overnight once EPA finalizes the rule for greenhouse gases from cars and that would effectively permit a gridlock, both for EPA, for states and for industry. So, this buys them some time. It's a transitionary rule. It buys them about nine months to continue to put the pieces together of its overall regulatory regime as it turns to the next questions of who it will regulate and how it will do so.
Monica Trauzzi: So, they're giving this January 2011 deadline, but are they giving themselves some wiggle room beyond that? There's been some speculation that maybe they're giving some padding that they could set a later date even beyond the January 2011.
Roger Martella: I think this is one of the surprises that came out in the rule, that they don't seem to be giving any further wriggle room. There had been other alternative dates proposed and some of us thought that perhaps they would reserve some options in their back pocket to push the date out further, depending on how things evolved, but in this notice they explicitly take on these alternative theories. One of them is October of 2011. They say we're not going to go with that date. We believe very strongly January 2, 2011 is the right date at the law and I think they're locking themselves into that at this point.
Monica Trauzzi: There were complaints from some members of Congress when this memo was released; in particular Senator Murkowski said that EPA was not specific enough in this memo. Is there a lack of specificity or do you think that EPA has really drawn a very clear line with this memo?
Roger Martella: I think they draw a clear line on the question of when. I think some people would like to see them turn to those other questions sooner; who will they regulate, how will they regulate them? They have not addressed specifically, in this rulemaking, who's going to be subject to regulations come January 2, 2011 and they haven't even touched on the subject of how those people who are subject to regulation will be addressed and that remains probably the biggest mystery right now.
Monica Trauzzi: Okay, so what does this nine-month freeze mean? What will it do for smaller and larger sources? I mean what's the impact going to be? Is there an impact?
Roger Martella: If you're a large source and you have something on the drawing boards or you're planning to do something, it's probably not going to help you. It takes on average 400 days to get a permit. It's probably going to take longer once greenhouse gases are imposed, so it's unlikely you're going to get in under the radar. EPA has made it very clear, if you don't have a permit complete in hand come January 2, you're going to be subject to the new rule. So it's not going to do much to help large sources. There's an argument that some of the smaller sources who would not otherwise be subject to permit until January 2 may be able to get a permit through before, but come January 2 they also likely will be subject to these new permitting requirements.
Monica Trauzzi: How does this play into the mobile sources standard?
Roger Martella: This is basically complementary of that. This sets the stage for the Mobile Source Rule. If the Mobile Source Rule was enacted without this, we would see these permitting requirements taking effect as soon as this week or perhaps in 60 days. So, this, again, buys some time for EPA, for the states, for industry to prepare over nine months for the impact of these permitting requirements. But, again, it's not in and of itself a solution a solution to the problem. EPA also needs to finalize a tailoring rule which will decide who will be affected by these regulations, so it's not just a question of timing. It's also a question of who is impacted. So we're looking for that to come out and there's also the question of how will these rules impact individuals and that will be done through a guidance EPA plans to issue by the end of the year defining what types of controls it plans to impose.
Monica Trauzzi: Senator's Murkowski and Rockefeller have both been very vocal about their lack of support for EPA regulation, so how much of this has to do with politics?
Roger Martella: I think, clearly, EPA is listening to a number of outside factors. It's listening to Congress. It's listening to the states in particular. Thirty-one states have asked EPA, states that EPA normally works very collaboratively with have asked EPA for more time. They've asked for up to two years, not nine months. And I think to some extent it's listening to industry in saying that it needs more time to prepare. So, whether it's Congress, states, or industry, I think part of the change in plans that we've seen in this notice is a matter of listening to those concerns that have been expressed.
Monica Trauzzi: You mentioned the states; EPA was very specific about what it wants from the states. What are the expectations there that it laid out in this memo?
Roger Martella: EPA set forth very specific expectations and this perhaps with another surprise. The states had asked for as much as two years to implement these greenhouse gas regulations at the state level. EPA says we're giving you nine months, but we're drawing the line there. Once again, they're not allowing for a lot of wiggle room and they're saying we expect you to have your greenhouse gas rules in place come January 2, 2011, or we'll be taking a close look at your state implementation plans. So that yet remains to be seen, how the states who are going to need longer than nine months are going to reconcile this very definitive order from EPA to be ready on January 2.
Monica Trauzzi: OK, very interesting. Thank you for coming on the show, as always.
Roger Martella: Great, thank you Monica.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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