Environmental update

Author: Andrew E. Skroback Publication | December 2017

A top credit rating agency, Moody’s Investors Service Inc., put coastal communities in the United States on notice in late November that they must either start preparing for the impacts of climate change or risk paying more for credit.

Moody’s explained in the report to clients how it incorporates climate change into its credit ratings for state and local bonds. If states and cities fail to address risks from more intense storms and sea surge and other effects of climate change, Moody’s will consider them to be at a greater risk of default. The greater the risk of default, the higher the interest rates those states or municipalities will pay.

The report lists six indicators that Moody’s uses to “assess the exposure and overall susceptibility of US states to the physical effects of climate change.” Chief among them are the share of homes in a flood plain, the degree of economic activity that comes from their coastal areas, and hurricane and extreme-weather damage as a share of the economy.

Texas, Florida, Georgia and Mississippi are among the states most at risk from climate change, according to Moody’s.

Clean power plan

The US Environmental Protection Agency held public hearings in late November on its plan to withdraw the agency’s Obama-era greenhouse gas emissions standards for existing power plants, known as the Clean Power Plan.

EPA Administrator Scott Pruitt set the hearings in Charleston, West Virginia as outreach to “coal country” to build support for the Trump policy of reversing Obama-era regulations.

The agency took testimony on its proposal to withdraw the Clean Power Plan, which it now says is required because the Clean Power Plan exceeds its statutory authority.

Though most of the industry groups that testified called for a replacement plan — not just outright withdrawal — the hearings dealt only with the repeal proposal and not also a potential replacement. Most of the witnesses who testified complained that the Obama administration had been waging a “war on coal.”

EPA will accept comments on its repeal proposal through January 16, 2018. EPA plans to hold additional public hearings on the repeal plan in three states. Pruitt has long said he wants to withdraw the Clean Power Plan without waiting for a replacement because it is unclear how long the US Supreme Court’s 2016 stay of the plan will remain in effect, and he wants to provide the coal power sector with certainty straightaway.

Many industry groups renewed calls for a replacement in their testimony because they wish to avoid an extended period of regulatory uncertainty given that the courts have held the EPA is required by law to regulate greenhouse gases from the power sector.

For example, the National Rural Electric Cooperative Association supported withdrawal, but “strongly encourages EPA to propose and finalize a 111(d) rule, consistent with the history of the regulation. Both actions are needed to provide America’s electric cooperatives and their members with a rule that is clear and durable.” Other witnesses called for a replacement plan that would give states the primary authority to implement unit-by-unit emissions caps.

An “endangerment finding” by EPA in 2009 is viewed by many lawyers as requiring EPA to regulate carbon emissions from power plants.

Pruitt told the House Energy and Commerce Committee in early December that EPA will be “introducing a replacement rule to replace the Clean Power Plan under Section 111” of the Clean Air Act. In a subsequent court filing, EPA said it now plans to release an advance notice of proposed rulemaking seeking public comment on potential proposals to replace the Clean Power Plan in the next few weeks. EPA will “solicit information on systems of emission reduction that are in accord with the legal interpretation that has been proposed by EPA.”

Neither the West Virginia hearings nor Pruitt’s House testimony shed any light on whether Pruitt will try to revisit the agency’s “endangerment finding.” Some conservative groups have urged him to withdraw it as well. Reversal of the endangerment finding would undermine the legal foundation on which all federal greenhouse gas regulations are built.

In a recent interview, Pruitt criticized the 2009 finding, but said the endangerment issue is “untethered” to the EPA’s immediate plan to withdraw the Clean Power Plan and then consider a possible replacement.

Some in industry argue that EPA could move to revise its earlier determination that the 2009 endangerment finding applies to power plants. Others are concerned that industry will be vulnerable to citizen suits until some form of replacement for the Clean Power Plan is approved that arguably fulfills the obligation imposed by the endangerment finding. This may be why Pruitt now aims to replace the plan with something EPA can claim fulfills its obligation.

Meanwhile, the long-running litigation over the legality of the Clean Power Plan remains in limbo. The plan remains on the books, but enforcement has been suspended by the US Supreme Court while the agency that created it is moving quickly to withdraw and replace it. EPA filed an obligatory status report with the court on October 10, citing the agency’s new proposal to withdraw the Clean Power Plan and arguing the court should continue the stay until the withdrawal is final. The report said the agency is contemplating the scope of any potential replacement to cover carbon emissions from existing power plants, but did not provide any details.

Many argue that it would be useless for the court to adjudicate a plan that is stayed and that the agency is in the process of withdrawing. Supporters of the Clean Power Plan argue that the appeals court should nevertheless assess its legality because many of the issues being litigated will come up in the forthcoming legal fight over withdrawal and any potential replacement offered by EPA. The appeals court appears likely to dismiss the case.

Pruitt appears to be weighing how he can limit any replacement plan through further reevaluation of the agency’s legal authority. In a recent interview with Time, Pruitt said his priority is to reexamine EPA’s authority to regulate greenhouse gas emissions from power plants instead of revisiting the endangerment finding. Pruitt said, “A lot of people just start with the endangerment finding and the scientific questions about the underpinnings of that. They don’t ask about what authority we have to do it ultimately anyway, and both are very important.”

As for timing, it appears the agency intends to ask the court for a dismissal first, but then delay any replacement. Pruitt said the agency’s review of its authority to regulate greenhouse gases under the Clean Air Act will be ongoing for “months into the future.”

Federal climate change report

One obstacle Pruitt will face to overriding the endangerment finding is a report the US government released in early November about the cause of climate change that said “it is extremely likely that human activities, especially emissions of greenhouse gases, are the dominant cause of the observed warming since the mid-20th century.”

The report is part of a Congressionally mandated review conducted by a federal interagency group every four years, known as the “national climate assessment.” The report is produced by hundreds of experts within the government and academia, guided by a federal advisory committee and peer-reviewed by the National Academy of Sciences.

The report is billed as “an authoritative assessment of the science of climate change, with a focus on the United States.” What was released in early November is the first of two volumes of the fourth national climate assessment.

It said the “[g]lobal climate is changing and this change is apparent across a wide range of observations. The global warming of the past 50 years is primarily due to human activities. Global climate is projected to continue to change over this century and beyond. The magnitude of climate change beyond the next few decades depends primarily on the amount of heat-trapping gases emitted globally, and how sensitive the Earth’s climate is to those emissions.”

According to the report, “For the warming over the last century, there is no convincing alternative explanation supported by the extent of the observational evidence.”

A decision by a Trump EPA to withdraw the agency’s endangerment finding would be less likely to survive court challenge as the Trump administration would be in the position of having to discredit the repeated conclusions of US government scientists vetted by the broader community of experts in the field that the release of greenhouse gases by man has caused significant warming.

In August, President Trump disbanded the advisory committee attached to the national climate assessment by failing to renew its charter. The advisory committee had helped take scientific findings from the national climate assessment and turn that information into guidance for both public officials and the private sector.

The EPA is currently prohibiting its scientists from presenting scientific reports on climate change and has exorcized the topic from its website. Pruitt has indicated his “red team” review of climate change science could begin as soon as next month.

Science and censorship

The Trump Administration has repeatedly insisted that our current knowledge of climate science is insufficient to conclude that emissions of greenhouse gases are causing climate change, even at times casting doubt on climate change itself. It has moved at the same time to gut or otherwise restrict program after program designed to study climate change and its causes, barring the use of the words “climate change” from government websites, removing access to agency information and restricting agency talking points.

In early December, the Trump administration disbanded one of the last federal government organizations to discuss climate change openly, the Community Resilience Panel for Buildings and Infrastructure Systems. The panel was a cross-agency organization created within the National Institute of Standards and Technology at the US Department of Commerce to advise local officials and utilities on how best to protect infrastructure and residents from extreme weather and other natural disasters. The panel was created in 2015 after “super-storm” Sandy.

Clean water act jurisdiction

EPA and the US Army Corps of Engineers are working on a new proposed definition of the “waters of the United States.” The federal government has jurisdiction over such waters under the Clean Water Act. The new definition would eventually replace the Obama-era definition, the implementation of which is currently stayed by a court, with a narrower, but as yet undefined standard.

The Trump EPA has attacked the Obama-era definition as an unlawful or at least unwarranted expansion of agency power to regulate small, short-lived or isolated streams and wetlands.

The deadline to comment on the topic before EPA releases its new definition was the end of November.

The comments received by the agency highlight the sharply conflicting views of industry groups, states and environmentalists on how the agency should define the term in the future. The stark differences are a foretaste of the issues that will eventually be addressed in the inevitable litigation that will follow release of the new definition.

In February, Trump signed an executive order directing EPA and the Army Corps to reconsider the Obama-era definition. EPA’s most recent public agenda suggests the agency will withdraw it by April 2018 and propose a replacement a month later, with any new definition taking effect no earlier than June 2019.

The new definition will probably use the jurisdictional test favored by the late Justice Antonin Scalia in a Supreme Court case called Rapanos v. United States. The justices split 4-4-1 in that case. Scalia’s test would limit Clean Water Act jurisdiction to “relatively permanent” water bodies that share a “continuous surface connection” with navigable waters.

A plan to adopt the Scalia test may have been complicated by a federal appeals court decision in late November in the 9th circuit — the appeals court for the US states along the west coast, including Hawaii and Alaska — that said that court will follow Justice Anthony Kennedy’s “significant nexus” test for Clean Water Act jurisdiction. His test is to look at whether wetlands, for example, have a significant nexus with navigable waters. If so, then the US government may regulate them, including by imposing criminal penalties for filling in wetlands without a permit.

The Obama EPA used Kennedy’s test as the basis for its definition of “waters of the United States” in 2015. The Trump EPA now argues that the regulation expands the water law’s scope beyond what Congress intended.

In the interim, the Trump EPA is seeking to delay implementation of the Obama definition for two more years to give it time to come up with a new definition before a nationwide stay of the Obama-era definition is reviewed by the Supreme Court.


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