Georgetown Law panel talks Duke Energy and Mass. v. EPA decisions

On April 2, 2007, the Supreme Court handed down two decisions that will likely have major impacts on key environment and energy issues. During today's E&ETV Event Coverage, a Georgetown Law panel discusses the implications of the Massachusetts v. EPA and Environmental Defense v. Duke Energy decisions. The panelists outline the details of both decisions and give their thoughts on the rulings. Participants include Lisa Heinzerling, Georgetown University Law Center professor and the lead author of the petitioners' briefs in the Massachusetts case; Peter S. Glaser, partner at Troutman Sanders; Sean H. Donahue, counsel for Environmental Defense; and William M. Bumpers, partner at Baker Botts.


Richard Lazarus: Well, welcome everyone. It was a truly historic day yesterday at the Supreme Court. The court released two Clean Air Act decisions, Massachusetts v. EPA and Environmental Defense v. Duke Energy.

In each case the court embraced an expansive view of EPA's authority under the Clean Air Act. In Massachusetts v. EPA the court reversed the DC Circuit. The court concluded that EPA does, in fact, have authority to regulate greenhouse gas emissions for motor vehicles. And it concluded EPA's reasons for deciding not to exercise that authority were invalid and the Court ordered EPA to go back and reconsider its decision.

The court also rejects it's in threshold jurisdictional arguments that Massachusetts lacked Article III standing. Environmental Defense v. Duke Energy, the court reversed the Fourth Circuit. The court ruled that EPA can measure whether a major stationary source is subject to the very tough New Source Review requirements under the Clean Air Act based upon its emission increases on an annual basis and did not have to do so based on increases on an hourly basis.

It was a day of firsts. Either one of these rulings standing alone would have been the first time in decades, if not ever, that environmentalists as petitioners have persuaded the court to accept review over the federal government's opposition and then won before the court. It happened yesterday in the Supreme Court. It was the functional equivalent for the environmentalists of winning two national championships in the same day.

The other first is stranger, that based upon my preliminary research this is the first time in more than 200 years of Supreme Court opinions that a justice has used the word flatulence, at least in a written opinion. To help us undertake a preliminary assessment of the legal significance, not the semantics, we have a wonderful panel.

First, professor Lisa Heinzerling, who was at the Georgetown University Law Center, but more importantly today was the primary author of the many briefs filed in this case on behalf of petitioners. Mr. Peter Glaser, of Troutman Sanders, who specializes in anarchy environmental law, heavily involved in this case on behalf of the energy industry, a client since 1999 when the petition was first filed with EPA seeking EPA's regulation of greenhouse gas emissions for motor vehicles. Sean Donahue is in law faculty, teaches that Washington and Lee School of Law, a partner at Donahue & Goldberg, and he was counsel of record, the primary brief writer and the oral advocate in Environmental Defense v. Duke Energy for the petitioners. And finally, Bill Bumpers of Baker & Botts. Bill heads the Baker & Botts global climate group. But he also represents electric utilities in New Source Review permitting. Each of our speakers is going to talk for about 10 minutes about the significance of the case. And then we'll have a little back-and-forth and then open it up for questions.

Lisa Heinzerling: Thanks. Is it just me or is it really a beautiful day here in Washington?

If I had been asked by the Supreme Court somehow to write its opinion, let's say I understand that would be highly improper, but say it asked me, I could not have produced an opinion I liked better than the one produced by Justice Stevens. It is a fantastic opinion from petitioner's point of view. Indeed, it goes farther than we would have gone, farther than we asked for, in some sense, in our briefs.

For example, it opens with a discussion of the problem of climate change. We had sort of pretended that this was not a case about the climate change. It was an ordinary statutory administrative law case, nothing new here justices. Nothing to worry about, you don't have to weigh in on this dispute. And yet they opened with the science of climate change. So a dramatic statement, even if not legally relevant to the decision, not technically part of the legal intricacies of the tape, but a highly suggestive mood set by the Supreme Court in that opinion.

Let's get to the issues. I was told over the weekend in a panel I was on about climate change, I was reminded that we had to win all three issues in order to win and that sent a chill down my spine. And that was reminding me, yes, that's right, we have to win on everything in order to win. And I'm very pleased to say we did, on standing. The court opened with a long preamble about how states are different. As you may know there are 12 states involved in this case as petitioners, the lead among them Massachusetts. That was the state on which we focused in describing our injury for purposes of standing. And the court said there has to be a remedy in federal court for states to complain about damage to their environment. And indeed the words the court used were special solicitude on the part of courts for states' claims.

The interesting part to me is the court then went on to discuss standing in perfectly conventional terms. In other words, once it had decided that states have a special interest in pursuing their claims in federal courts, it then went on to a perfectly traditional of analysis of injury in the fact. That is do you have an injury that can get you into court? Causation, is your injury caused by the legal violation you're complaining about? Redressability, that is will the courts be able to do something? Perfectly conventional, so that even private litigants I think, not states, can take heart in the Supreme Court's opinion. States too can take heart to the extent that many, many state Attorneys General today are very interested in pursuing claims in federal court. Their task, I think, is made easier by the opinion issued yesterday. On redressability and causation in particular, Justice Stevens said we need only show that our injury will be relieved to some extent by a judicial relief in our favor. That is a very broad and forgiving standard.

Also on standing, my last point, there was no separate opinion by Justice Kennedy. Justice Stevens wrote alone for the majority of justices. And so that there's no concurrence, no concurring opinion saying that may be this ... I disagree with none of that. They were solid together, five of them, nothing to muddy the waters in that opinion. Second, on authority, EPA has the authority to regulate greenhouse gases under the Clean Air Act. The court took a pretty conventional, again, statutory reading. Said, look, the language of the statute covers these gases as air pollutants under the statute. We don't see any two ways about it. The statute is clear. Therefore…therefore, another agency may not change that point of view. That's the legal significance of that piece of the ruling. The statute is so clear that the EPA has authority under this statute no matter what the agency thinks.

There's also a narrow ruling of an important case, a case called FDA v. Brown and Williamson, in which the court a number of years ago overturned FDA's regulation of tobacco. That case has been used by a variety of litigants in recent years to argue that when a case is economically and politically significant we need a very clear signal from Congress that we want regulation. You have to have some kind of magic words in order to regulate when it's a real big case. That's what that case has been taken to mean. It does not mean that any more after yesterday. It can't be used in that way on my reading of the court's opinion. The court's opinion makes clear that that is a case for tobacco and I believe tobacco only. Last, on discretion, and here's where, if you're an administrative law aficionado, which I understand many of you are not, but I encourage you to become one. Here's where the court's opinion is stunning I would say.

It is very hard to lose a case when you're representing an agency that has simply said no or it's not time or not yet. We won't act now, maybe we'll act later. Things are uncertain. They're kind of percial and on and on. It's very hard to lose that case. EPA did. And what Justice Stevens said in ruling against the agency on its refusal to act on greenhouse gases is that when you say no, when you say not yet, it's not yet time, you can't simply refer to a bunch of stuff that doesn't have anything to do with the statute. You can't simply say, oh, maybe this will ruin our foreign policy position, when you don't really have a foreign policy position on climate change. You can't say that. You must ground your refusal to act in the statute itself. The court leaves the door open a little bit to policy concerns at the end, but most of the decision is about how you have to ground your decision in the language of the statute. The EPA did not do that. Therefore, the case goes back to the EPA for a decision on the statutory terms.

Significantly, on scientific uncertainty, the court said that EPA may not simply, oh, goodness, things are very complicated. We can't figure it out. They have to give it a good try. If they can say that things are so uncertain that they can't even decide whether we're being endangered by greenhouse gases, the court says that's fine. Then that's a legitimate basis for a decision. But to simply say there's some uncertainty out there is not enough. In climate change it is extremely important because as you know the scientific community is coalesced, I believe, on the question whether climate change is happening.

It will be extremely difficult for EPA on remand to say we don't think it's happening or we don't have enough information to know whether it's happening. What are the implications, very quickly, for other cases? One, for this case, the case goes back to EPA. It's remanded to them for their decision on the legal standard. There is no deadline for that decision. But I think there's a spotlight on EPA now. EPA has been, in the words of many newspapers, rebuked. Not my word, it's a quote, rebuked. And I think there's a spotlight.

I understand there will be hearings on what EPA intends to do. So that may well mean that EPA acts sooner rather than later. On power plants, EPA has refused to regulate power plants on the same legal basis that it cited here. That legal basis is no longer valid, so we're talking not just about cars, but about power plants over the country. Cars and power plants, by the way, represent about 60 percent of the carbon dioxide emissions in this country, non-trivial.

On California cars, there's litigation against the California standards for greenhouse gases from automobiles that was stayed pending this decision. That stay is automatically lifted with this decision. The court, in that case, has already said, the judge has said, that the two cases are very much intertwined. I believe if you read the judge's opinion you will expect a victory for California in that case after this decision. Also on California cars, EPA has been asked to approve California's standard for greenhouse gases from automobiles. We've been waiting for that decision for over a year.

There is a deadline here. That deadline is passed. I believe that the decision in this case makes a refusal to allow California standards to go forward unlawful. Other states also, 10 states in fact, about a third of the US fleet are affected by those California standards and by the states' decisions to opt into those standards. So that all of that litigation now can be resolved I believe, and resolved in favor of the state standards, I believe, after this decision.

Beyond climate change I think there are also implications. First, as I said, the standing opinion is very broad. And I believe private litigants will be able to take advantage of this case in arguing in the many cases that we see and the many cases that we can expect to see, that they have standing to sue, to challenge actionary inaction on climate change. Also, on the issue of the agency discretion, there's been a lot of talk about when an agency refuses to act, maybe it's not reviewable, it's not reviewable on extremely narrow grounds, and on and on.

This decision is very, very strong authority for the idea when an agency refuses to act it may not simply say some words that have nothing to do with the statute, that's a ground of refusal in the statute. One word on the dissents. Justice Roberts and Justice Scalia broke up the work. Each wrote for all four dissenting justices. Chief Justice Roberts wrote on standing, I think it's fair to say, that he believes that there is no plaintiff in the United States who has standing to challenge action or inaction on climate change. He cites favorably to Judge Sentelle, below, who definitely took that opinion.

I think it'd be hard to find a standing in these cases with Chief Justice Roberts. Everybody knew he was a stickler on standing before, but I think it's worse than we expected. Justice Scalia said that the agency had discretion to decide whether to make a rule here or not. That part of his analysis is not particularly surprising and it's a difficult issue as I said. On the issue of authority, here's where things got a little weird. Justice Scalia said that greenhouse gases were not air pollutants and, therefore, the language of the statute doesn't cover them. First he said they're not pollutants because they're not dirty. And second of all he said that the atmosphere isn't air. I just leave it to you to ponder the significance of that dissent. Thank you.

Richard Lazarus: And that was ____. Thank you.

Peter Glaser: Okay, let me talk about the decision also. I'll try to divide my talk equally into talking about the decision itself and then, after that, probably a much more interesting topic of what are the implications of the decision for country's greenhouse gas regulation, the greenhouse gas litigation going forward?

First, on the decision itself, I did feel that the decision was unusually activist for this court. And I also agree with Lisa that perhaps the reason for that was explained in the first couple of paragraphs of the decision where the court started talking about the global warming issue. And I think that that sort of infused the way the court came down on the three different areas of the case.

For instance on standing, I thought that by far the most interesting part of the case, at least to me anyway, was we have a new Chief Justice of the Supreme Court who has said and written a lot about the need to restore consensus and stability to the court and lower the judicial temperament. And in his dissent he just went off on the majority decision on standing. As he pointed out, the court had determined in its first page of the discussion of standing that states were deserving of special solicitude and standing analysis. And the court had cited a centuries old case that nobody had cited in their briefs. I mean the court just sort of came up with this on its own. And that Justice Roberts what, Chief Justice Roberts, saw this as an expansion of court authority on standing or court practice on standing, I think was upsetting to him.

Similarly on endangerment. This is where Justice Scalia wrote, this is also another, and I agree with Lisa, a significant aspect of the decision. I think from my own analysis going into the case I actually did not think that EPA had authority to consider non-Clean Air Act factors in making an endangerment finding. So it did not surprise me that the court said on foreign policy concerns that's not allowed.

But EPA certainly can consider air-quality related factors, including global warming science factors. And EPA had gone on for about eight or ten paragraphs of the Federal Register citing scientific authority as to why it felt that global warming science was too uncertain to regulate. And the court threw it out. And this is a court that on the same day issued the decision in the Duke case which seemed to indicate a great deal of deference to agency rulemaking. But on this question, in terms of the EPA scientific analysis, the court said not good enough, which I thought was surprising to me. Justice Scalia I think quoted the entire Federal Register discussion on this point in his dissent.

And at the end of it had something to say, something to the effect of what else does the court want EPA to say about this? He also said something to the effect of the Supreme Court obviously agrees with deference as long as that deference is exercised in a way that the court likes. So he was obviously pretty upset about that as well. Even on the question of authority, whether there's fundamental authority, underlying authority in the Clean Air Act to regulate, I felt that the court missed one of the main issues in the case, which is that if you can regulate motor vehicle emissions under Title II, then you also have to regulate general emissions under Title I. Title I is a much broader program and it includes the program for National Ambient Air Quality Standards.

And the logic of this decision is that EPA is now supposed to establish an Ambient Air Quality Standard for carbon dioxide. An Ambient Air Quality Standard sets the proper concentration in the air above which there is danger to human health and welfare. The states are then required to adopt implementation plans to make sure that those NAAQS are not exceeded. And if they don't adopt those plans, or the plans don't work, there are serious sanctions.

Well, there's nothing in the state can do or any combination of states can do to meet a NAAQS for carbon dioxide. And that is the sort of underlying point about how carbon dioxide might literally be an air pollutant. But under the Clean Air Act regulation of carbon dioxide for global warming purposes just doesn't fit. Now that sort of segue ways into talking about the implications of this, because this is pretty interesting in terms of what happens next.

As Lisa said, it now goes back to EPA. EPA still gets to make an endangerment finding or not make an endangerment finding. That is left open, although, as I said, the court left very narrow room for EPA to not make an endangerment finding. And if it makes an endangerment finding it must regulate. Now technically, right now, all that would be pending before EPA. Coming out of this decision would be motor vehicle tailpipe emissions. So perhaps EPA starts with that.

On the other hand, there were petitions for rulemaking for power plants for New Source performance standards. Those went up to the Court of Appeals when EPA wouldn't regulate and that was stayed pending the outcome of this case. So there was already an effort underway to regulate CO2 under Title I. So what does this administration do? It normally takes EPA more than two years to do a rulemaking. This administration doesn't have two years left.

Is the administration going to try to act before it leaves office or will it punt? Open question. I think in a related issue I never felt that even from the petitioners' point of view that this case was really very much about regulation of carbon dioxide and global warming under the Clean Air Act. I always felt that it was an effort to try to increase leverage to force congressional action. The case was brought. The original petition was eight years ago. Things have changed in eight years. Even without this case there is already a great deal of momentum towards some kind of national regulation.

Does this case increase the chances that Congress will do something? Perhaps. Certainly reading the national press where apparently there's now all this added momentum to the extent there wasn't momentum before. Perhaps industry, fearful of what could come out of EPA in this or the next administration will be more compromising. But some of the fundamental issues that Congress has been grappling with in terms of greenhouse gas regulation, what kind of regulation? How much? How quickly? How much is it going to cost?

Do the American consumers really want to pay a lot more for energy? That's all still there. I don't make predictions in terms of Congress, so I don't know the answers to that, but that is still out in front of us. As Lisa said, there's a great deal of litigation out there that's going to be affected by this decision. I think she mentioned the California litigation that was stayed where the autos sued California over carbon dioxide regulations on motor vehicles. That was stayed. That's now unstayed. There are other lawsuits like that. I think the Vermont case is going to trial today, tomorrow, sometime pretty soon. So that's going to have an impact on that obviously.

I mentioned the New Source performance standard litigation, that's going to have an impact. We also have some other lawsuits out there that I think bear paying attention to and I just sum up quickly with this. There has been an effort by state Attorney Generals and plaintiffs' lawyers to apply state common law and federal common law, port law, to greenhouse gas emissions. And we have litigation that was brought in the Southern District of New York where five states tried to apply federal common law and federal nuisance common law to electric utilities out-of-state.

A query -- and that's on appeal now to the Second Circuit. The Second Circuit has been holding that case, perhaps they've been waiting for the Supreme Court case, but query, now that EPA has authority to regulate greenhouse gas emissions under the Clean Air Act, is there federal common law on interstate air pollution applicable to greenhouse gases? Or is that preemptive? We have, in Mississippi, plaintiffs' lawsuits seeking damages on the theory that carbon dioxide emissions by a whole bunch of energy and chemical company intensified Hurricane Katrina. Now the query, can Mississippi apply its own common law to state law, state common law to out-of-state emitters if EPA has authority to regulate greenhouse gases? And these are some of the questions I know that industry lawyers and environmental lawyers are going to be looking at very carefully because this case will definitely have ramifications for this other type of litigation.

Richard Lazarus: Thanks very much. Everyone's done ___. It's fabulous. My job is easy. Now we're going to move to the Environmental Defense v. Duke Energy case, hearing first from Sean Donahue and then Bill Bumpers and he can talk about that case. He may have a little bit on climate change and then open it back up. Sean?

Sean Donahue: Thank you. It's hard to talk about the Duke case in 10 minutes, but I will do that and I will abandon my initial project, which was to explain why it's in fact contrary to what the entire U.S. media seems to think, much, much more important than that.

The Duke case is a Clean Air Act enforcement action. It comes at the opposite end of the regulatory process whereas Massachusetts v. EPA is about whether EPA can and perhaps should begin the process of writing regulations to limit CO2. Duke is about the application of regulations, the central ones at issue in Duke, of which were enacted before many of you were born, to a power plant or to a set of power plants in North and South Carolina.

And whereas Massachusetts v. EPA involves quite general questions of statutory construction, a lot of the Duke case is very deep in the weeds of regulatory construction and regulatory history. It is, nonetheless, a very important case because the New Source Review program that it's about is itself very important, just in terms of the amount of harmful conventional pollutants.

This is not about CO2. It's about pollutants that even Justice Scalia would recognize and love, like sulfur dioxide, the amount of pollution that's at stake in these cases and the amount of money that's at stake. The New Source Review program requires stationary sources to install modern pollution controls when they build new source is and when they modify sources. So this is a sort of limited grandfathering, existing sources didn't have to install these controls unless they modify. And this case is about what's a modification?

And what typically happens with a lot of these old power plants, which emit sulfur dioxide and other pollutants in disproportionate amounts, is that the plant will have deteriorated over time such that it can't operate all the time or in some cases can't operate at all. And the company will be faced with the choice of shutting it down or renovating it fairly comprehensively. And the effect of comprehensively renovating will be that the plant will be able to operate more of the time and that will lead to more emissions. And if it can do this without triggering the modification rule it doesn't have to install pollution controls. The statute defines modification in part in terms of whether the activity increases the amount of pollution emitted by the source.

And so the question in many of these NSR enforcement cases is has there been an increase in emissions when what the utility or other source is doing is restoring capacity that has been lost due to decay and the passage of time? And the position that EPA and the Justice Department sought to vindicate in this case and the basis for this lawsuit was that the regulations in place since 1980 look to the effect of the change on actual annual emissions. So that you do, when you have a physical change, which the statute and regulations require, you do consider whether that change enables the plant to operate more of the time. And that additional pollution is considered in determining whether there's been an increase in the amount of pollution.

The industry position in the Duke case and in many other of these cases is that instead the measure should be whether the maximum hourly emissions rate of the plant has gone up. So that if you are just kind of replacing the original physical configuration with new equipment, but not increasing the maximum capacity of the plant, regardless of how much more of the time the plant operates when it's been refurbished, you may not have a modification. And so this dispute, as to the measure of emissions, hourly versus annual, is sort of at the policy core of the case. The Fourth Circuit held that the statute and the regulations required EPA to use an hourly emissions rate.

And it was stipulated in this case, by the government and by my environmental clients who intervened to support the enforcement action, that by that test, Duke's activities did not increase the amount of pollution. But they claim that that was flagrantly inconsistent with the text of the regulations. And the Fourth Circuit believed that it had to read the regulations that way because it read the statute to impose an hourly rate requirement. And after the Fourth Circuit decision came down, the EPA litigated and the Fourth Circuit argued aggressively that the court should adopt the annual test and that's what the regulations required. After the government lost that it decided not to seek cert.

And Environmental Defense and other environmental interveners decided to go up to the court knowing that it was a long shot, especially without EPA's participation, because we felt that the effect of the Fourth Circuit decision was going to be to really gut the NSR program and really undermine, if not effectively end, many of these major enforcement actions that have the potential to reduce emissions greatly. The court, to our delight and surprise, granted cert.

In part this was because there was a DC Circuit decision that seemed to take quite the opposite view of both the statute and the regulations and Congress gave the DC Circuit exclusive authority to review EPA's regulations for consistency with the statute. So we could both argue the conventional cert argument of a Circuit split, and an argument that the Fourth Circuit had overstepped jurisdictional boundaries. And the court granted cert. The decision yesterday, I would echo Lisa and say that we are delighted with it. I would say it's different from what I would've written in that what I would've written would have been much longer and more confusing.

Otherwise it really hit pretty much every point that we wanted to hit. It rejected many of the central defenses that have been raised on this emissions increase issue and, therefore, should be very useful not only in the Duke case on remand, but in other enforcement suits. The court didn't - it was hard, given the interplay of this jurisdictional issue, the statutory construction issue, and the issue of how to read these old regulations, it was difficult to figure out which should go first. And the court didn't fret a lot about that. It decided to look at the way the Fourth Circuit had read the regulations. And in the course of doing that consider the statute and the various elements of regulatory history and regulatory text that the Fourth Circuit had relied on, and each time fairly decisively rejected the industry position.

So what we come up with, even though it's hard to classify what box but the decision was put in, jurisdictional, statutory, or regulatory interpretation, it ruled for us on what we saw as all the important issues. Justice Souter's opinion for a unanimous court paid close attention as we thought was critical to the text of the regulations, and concluded that they can't be read to impose an hourly rate standard. That they speak in terms of tons per year and actual emissions. It rejected various arguments having to do with regulatory history, including certain pronouncements by EPA officials at the beginning of this program in the early 80s.

The court said that that, by the way, figured prominently at oral argument and led me to be buffeted around a little bit and to speak very fretful for the last five months. And of course that these things don't really say very much, these isolated pronouncements. And, anyway, we don't rely on isolated pronouncements of agency officials who bury the meaning of adopted regulatory language.

I'll briefly say in addition to reviving this important enforcement action involving many thousands of tons of pollutants and other suits that are pending, the case is significant because the administration has been for several years now and is currently in the process of trying to reform the NSR program in ways that are very controversial and with environmentalists bad. And there's a lot of question about the relationship of the Duke decision to these ongoing NSR reform efforts.

And I would submit, perhaps not surprisingly, that Duke is a significant help to those who are resisting those efforts in several ways. First of all, EPA itself relied on the disarray created by the Duke decision and by the courts embrace of an hourly rate standard as a basis for proposing to adopt an hourly rate standard for NSR, which would dramatically scale back the application of the program for reasons suggested in my perhaps obscure discussion of increased capacity at the beginning of my remarks. So the Duke decision is now off the boards.

And to the extent that the EPA was relying on that disarray, it's no longer a good rationale. By clearing away this sort of interloping by the Fourth Circuit, the Supreme Court's decision puts the responsibility for review of EPA rulemaking under the act back where Congress expressly said it's supposed to be, which is the DC Circuit, which has so far been extremely unreceptive to EPA's NSR reform efforts. In two decisions, both named New York, the court has struck down important elements of NSR reform. One of those, the second, involving the so-called equipment replacement rule, is the subject of a petition for cert that EPA and industry, two petitions, filed that is currently before the court.

It's likely the court was holding those petitions pending the outcome in Duke and we'll see what it does with that. But we think given what the DC Circuit has already said, not only in those two New York decisions, but since the beginning of the program, we think that the reform efforts are in significant tension with the DC Circuit's understanding of the plain language of the statute and the fundamental thrust of this set of programs, which about protecting local air quality.

Even in the Duke case it self there is no entry of judgment for the government here, although there are people in this room who would like that. But there's much more to be litigated. There are other issues in the case. One of the major ones is whether these mitigation activities constitute routine maintenance, repair, and replacement. And that, along with the emissions increase issue that I think was largely resolved yesterday, have been really major defenses in a lot of these cases.

And the court's opinion doesn't address the latter one. That will remain for further litigation in Duke and other cases on remand. But I would suggest that the court's approach to the regulations here, I think, makes it difficult to make a lot of the arguments that have been raised in the routine maintenance argument as well, that have more to do with history and claims about what industry understanding was than they do about regulatory text. I'll stop there.

Richard Lazarus: Bill?

Bill Bumpers: All right, thanks. Well, my first and biggest point of disagreement with Sean is that this is not nearly as interesting as the New Source Review.

For those of you who are not steeped in the arcane of New Source Review, he did a fabulous job of making the sound pretty simple and incredibly it is not. You know, I represent a lot of power plant industry in America and have been helping them understand New Source Review and how to comply with it and occasionally having to defend them against enforcement suits or citizen action suits. And I was not at all surprised by the decision. I was, however, surprised by the magnitude of the decision after I sat through the oral argument and heard all of the jabs and punches at your clients.

What is interesting, and I think it's -- the New Source Performance Standards was in place first. And EPA defines modification in terms of a physical change and it's really broad, any physical change that results in an increase in emissions rate. And then when they passed the PSD Program, which was designed to address maintaining clean air in areas that are not badly affected by existing industrial activities or mobiles.

They created this PSD program and, in fact, they defined it with direct reference to the definition of modification in section 111 of the New Source Performance Standards, which EPA had already elaborated on because the definition is not clear in the statute, and defined it in terms of emission rates. As a result I thought industry is already in this, pretty clever. Now all that having been said I think, and some of my clients will probably fire me for saying this, this was a fairly ex post argument that we created because I agreed with the dicta, and I do believe it's a dicta, in the great part of the opinion that says, look, if you read EPA's regulatory scheme, the PSD, they've anticipated and dealt with this as an annual emissions test from the get-go.

And, in fact, I have been advising my clients since 1990 that you always look at it in terms of actual emissions increase. So it was a very good argument and I think there's merit to it. I don't want to say it was - well, there's no merit to it anymore, but I thought there was merit to it when we put it together. It was tremendously clever.

But in the end, what's interesting in my opinion is I really don't think this opinion is that critical for a number of reasons. One is the New Source Review program, as laid out, and even with this clarity, is one of the most messed up, least understood, poorly implemented and poorly enforced programs in the history of the Clean Air Act. Nobody today can tell you with any certainty when they go in to do a normal outage at a power plant, if they're going to replace a component of the power plant, whether that triggers New Source Review or not.

Today, you cannot do that with any confidence or certainty, with the exception that there is a program that was enacted in 1992, now called the WEPCO regulation, which gives the industry the ability to essentially do an actual projected actual test. And if you follow through that program well, which my clients do because I've been beating them over the head since 1992 that this is what you absolutely have to go through, and you give notice to the state that you're doing this and here's your calculations, then you're okay. You are, for the most part, protected from enforcement.

But that requires the jumping through of hoops that you can't believe and thank goodness they had to pay very expensive lawyers to help them through that. But frankly it's not a good program. And the other thing is, it is being, frankly, overtaken by time, by new programs, and the NAAQS and the fact that all of these power plants are having to put on - or not all, but the newer, tighter emission standards and ambient air quality standards are forcing all of these old belching pieces of junk to go away or be upgraded to really state-of-the-art controls.

So over about a 10-year period of time the New Source Review program will become far, far less important to the maintenance of air quality. Now what are the implications of this rule? There are a couple, one is it's going to reinvigorate the environmental enforcement community more than the EPA enforcement community. EPA, it's been noted, since the Duke decision has had a policy which precluded the Department of Justice and EPA enforcement from bringing actions against sources if they didn't trigger the New Source performance standards first.

So if they increased their emission rates and they increased their annual emissions, then you would bring an enforcement action against them. That policy hasn't changed as a result of this and if you were to read Inside EPA it's not going to change. In fact, EPA has sort of pre-proposed a change in the rules to codify effectively the Duke decision. And there is every indication that in the waning year and a half of the Bush administration they're going to try to push to the final and most of my clients can support that. I'm okay with it. I don't think it's going to matter that much.

The other is, in terms of compliance, again, I don't think it's that important because outside of the Fourth Circuit very, very few companies today, when they schedule outages, were relying on WEPCO - I mean on the Duke decision to make a decision. Gee, it's okay to wholly refurbish this power plant because I won't increase my emission rate. Nobody was doing that, so it's not really changing their behavior that dramatically. So in a nutshell that's sort of my reaction to the whole Duke decision. Again, the big shock for me was the 9-0 after hearing the oral argument, because the oral argument was really exceptional on both sides and it was one of the best I've ever heard because of so much give-and-take.

But as Richard said, I spend most of my time these days dealing with climate change, so I wanted to just hit a couple of little notes on this and then open it up so there'll be more time for questioning. The thing that I thought was most important and in some way scary was the preamble. It's most important because it really does reflect the scientific and cultural shift that we experienced in this country in the past eight months to ten months. People care about it and I think the justices in the majority felt the urgency of dealing with this issue.

And to that extent I think this special interest accorded to states for standings was a stretch. It's not completely unjustifiable, and they've articulated a good basis for the standing, but when they were lining up the basis for saying, yes, it's okay that you can bring this lawsuit, I think the majority really pushed the envelope in creating standing. In fact, to the extent that I was reading the majority opinion before I read sort of the limitation of according special interest to the states, red flags were flying all over the place for all of my clients.

For every time I go into permit a new power plant or a new refinery or any new industrial facility, right now, none of those permits address CO2 or climate change at all, because they're not required to under the Clean Air Act. But now the environmental community has a new quiver of arrows to shoot at these plants and to bring challenges to them. I mean we're accustomed to dealing with the standard challenges to an air permit, which is the BACT standard which PSD requires, the best available control standard, is not tight enough. You haven't modeled properly. You haven't taken into consideration the Class I area impacts.

Those are all things around which we understand and can fight and do fight every time and it forces industry to put on the best controls they can possibly do to avoid that fight because it just causes delay. They don't have a clue about how to deal with this new argument. And, frankly, the states, in their permitting capacity, don't have a clue of how to deal with it in their permitting process. And it's going to make a lot of people very nervous until we sort out the scope of this new standing threshold.

[End of Audio]



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