Jenner & Block

Climate Change Update Resource Center

As a service to Jenner & Block's clients and the greater legal community, the Firm's Climate and Clean Technology Law practice maintains this online resource center that offers the latest case law and other developments in climate change.

Please also visit the Firm's Environmental, Energy and Natural Resources Law practice website for information about our capabilities, and our Corporate Environmental Lawyer Blog for current developments in this area.

Jenner & Block will update this web  page with new developments and items of interest as they become available.  For further information, please contact Partner Gabrielle Sigel.

Federal Legislative Developments

Congress Omnibus 2012 Spending Bill Includes Reduced EPA Appropriations

On December 17, 2011, the Senate voted (67-32) to pass the House version (296-121) of the multi-agency appropriations bill providing funding for the Department of Interior, Environmental Protection Agency, Defense and other agencies. The approved bill provides more than $12 trillion in funding, below President Obama’s initial request and 2011 levels, but above the House’s initially proposed funding levels. The Consolidated Appropriations Act of 2012 (H.R. 2055) was signed by the President on December 23, 2011, thus averting a potential government agency shutdown.

The bill included some increases over prior year funding, including more than the President requested in research regarding fossil fuel technology and more than last year’s level for nuclear energy research.

Funding for EPA was particularly hard hit. EPA was funded at $8.4 billion, a $233 million reduction from the 2011 appropriation and $524 million less than President Obama requested. During calendar year 2011, EPA funding has been reduced by 18.4%, i.e., by $1.8 billion. Cuts of almost 10% were made to EPA’s regulatory development office, plus other reductions in air and climate change research. In addition, President Obama is required to report to Congress on all FY 2011 climate change program spending.

Initially, the spending package included many policy riders affecting EPA’s and Interior’s authority under existing programs, such as stopping EPA from regulating GHGs under the Clean Air Act, prohibiting the agency from regulating fossil fuel combustion waste under the Solid Waste Disposal Act, and preventing new Endangered Species Act listings. The final bill includes fewer riders, but retained riders transferring EPA’s authority over air permits for Arctic drilling to the Department of Interior, removing EPA’s authority over that program.  The Department of Interior also was directed to expedite permit approval for new offshore energy production.

California Proposed New Zero-Emission Vehicle Regulations

On December 7, 2011, CARB issued draft “advanced clean car” rules, which includes GHG emission standards for 2017-2025 model year vehicles that match those issued by federal agencies on November 16, 2011. However, the California rules have more stringent zero-emission, low-emission vehicle rules starting in 2018. The goal of the vehicle rules is to require that, by 2025, 15.4% of new car sales will be of zero- or low-emission vehicles. In addition, CARB’s draft allows vehicle manufacturers who manufacturer vehicles with lower GHG emissions than required by federal standards to earn “credits” towards meeting California’s zero-emission vehicle rule. Automakers are split, largely between domestic and foreign manufacturers, over the credit option. It appears that foreign automakers, who sell more low-emission vehicles, would gain more benefits from the credit program.

The regulations also include a proposed Clean Fuels Outlet requirement. This requirement obligates major gasoline suppliers to provide the piping and other infrastructure necessary for hydrogen and other alternative fuels at their retail locations. CARB will consider whether to adopt the proposed rules at a meeting in late January 2012.

Federal Court Strikes Down California Low-Carbon Fuel Standard

In counterpoint to the just-announced proposed California “clean car” rules, on December 29, 2011, a federal court judge found that California’s low-carbon fuel standard, issued by CARB in April 2010, violated the U.S. Constitution. California’s standard applied to all transportation fuels sold in or supplied to California. It requires both gasoline and diesel fuels to have their carbon intensity reduced by 10% by 2020. Carbon intensity is the amount of lifecycle GHG emissions per unit of energy of fuel delivered, including all stages of a fuel’s production, distribution, and use.

In Rocky Mountain Farmers Union v. Goldstene, No. 1:09 cv 2234 (U.S. Dist. Ct. E.D. Cal. Dec. 29, 2011), plaintiff industry groups sued the state arguing that the California low-carbon fuel standard gave a lower emissions rate to ethanol produced in California, discriminating against interstate commerce. The court agreed with plaintiffs’ position. The court also found that the fuel standard impermissibly favored crude oil produced in California. The court enjoined the state from enforcing the rule while it is being appealed.

The court’s ruling comes just two weeks after CARB agreed to adopt several changes to its fuel standard. On December 16, 2011, CARB voted to change its accounting for the use of crude oil from energy-intensive sources such as tar sands, as well as other changes. CARB did not, however, change its accounting for corn-derived ethanol fuels, one of the main focuses of the court’s ruling striking the low-carbon fuel standard.

Washington Must Impose GHG Limits On Refineries

In a case portending the eventual imposition of GHG emission standards for refineries, a federal court judge in Seattle, Washington, ruled that under that state’s Clean Air Act law, as reflected in its federally-approved State Implementation Plan (“SIP”), state regulators must apply a federally enforceable technology standard for GHG emissions from refineries. Wash. Env’tal Council v. Sturdevant, No. C11 417 MJP (U.S. Dist. W.D. Wa. Dec. 1, 2011). Washington’s SIP provides that refineries, as “emission units” under the SIP, must install reasonably available control technology (“RACT”) for all “air contaminants.” In 2009, Governor Gregoire (D-Wa.) defined GHGs as “air contaminants.” The environmental group plaintiffs sued the Washington State Department of Ecology for violating the Clean Air Act by not enforcing the SIP. The court found that, based on the plain language of Washington’s SIP, RACT must be applied to the five oil refineries located in Washington. The court did not accept the state’s argument that it cannot be required to impose RACT for a non-criteria pollutant; i.e., a contaminant, like GHGs, for which EPA has not issued a National Ambient Air Quality Standard.

The court did not decide how soon the state must establish GHG emission limits. The court noted that the plaintiff environmental groups seek to have GHG RACT limits imposed within 90 days, but the state argued that it will take three years to establish the new limits. The court stated that it will decide the timing issue at a later point in the litigation, after the court has heard further evidence.

On December 15, 2011, the Western States Petroleum Association, an intervenor-defendant in the lawsuit, filed a motion asking the court to reconsider its ruling, which, the Association argued, was based on “manifest error.”

Federal Litigation Developments

Litigation Over EPA’s GHG Emissions and Texas Air Permit Takeover Will Continue in 2012

On December 21, 2011, the U.S. Court of Appeals for the District of Columbia Circuit issued orders organizing the litigation process for several lawsuits addressing EPA’s rules issued in 2010 and 2011 requiring State Implementation Programs (“SIPs”) to address GHG emissions in their prevention of significant deterioration (“PSD”) air permits. One set of lawsuits, Utility Air Regulatory Group v. EPA, No. 11-1037, challenges EPA’s rules requiring states to modify their SIPs to address GHG emissions. Briefs in that lawsuit will begin to be submitted by February 8, 2012, with final briefing to be completed by June 5, 2012.

In a related lawsuit, Texas v. EPA, No. 10-1425, Texas not only challenges the SIP rule, but specifically challenged EPA’s decision on May 3, 2011, which asserted federal control over the state’s GHG permitting authority. EPA took over the state permit program after Texas refused to amend its SIP to create a GHG permitting requirement. 76 Fed. Reg. 25,178 (May 3, 2011). The D.C. Circuit has not set a briefing schedule for the Texas takeover case, however, the court decided that proceedings in the case did not have to be stayed while awaiting the outcome of other lawsuits challenging EPA’s GHG endangerment finding, vehicle rule, and permit tailoring rule.

In November, the D.C. Circuit set dates in February 2012 for oral argument in the separate lawsuits challenging EPA’s principal GHG regulatory initiatives for mobile and stationary sources. Coalition for Responsible Regulation v. EPA, Nos. 09-1322, 10-1073, and 10-1092, U.S. Ct. App. D.C. Cir. In its final briefs on these issues, filed by EPA on December 14, EPA defended its GHG permit tailoring rule, which limits the number of facilities to which its PSD permitting program applies. EPA reiterated that a literal application of the PSD program’s requirements would cause so many sources to be regulated that it would be an absurd result and, thus, the tailoring rule is an administrative necessity. Some industry groups filed briefs arguing that the absurd result cited by EPA is exactly why the PSD program should never apply to GHG emissions.
On November 28, 2011, EPA and states supporting and opposing EPA’s position filed briefs with the court addressing EPA’s issuance of the GHG vehicle rule. EPA argued that its endangerment finding required that it issue the vehicle rule. Moreover, EPA asserted, the rule will have a small, but measurable effect on reducing GHG emissions worldwide. EPA rejected critics’ views that the rule was not required and that EPA needed to consider the cost of regulation of GHG emissions from stationary sources when it put the regulatory “ball in motion” by issuing the vehicle rule.

California Public Trust Challenge to GHG Emissions Now in D.C. Federal Court

As part of a nationwide campaign to use the common law public trust doctrine to require the U.S. and state governments to control GHG emissions, Our Children’s Trust environmental group filed petitions in state and federal courts to require GHG emission regulation by the federal and state government. On December 6, 2011, the U.S. District Court for the Northern District of California granted defendants’ request that the California case, which names the EPA Administrator and other government agency heads as defendants, be transferred to the federal court in Washington, D.C.  Loorz v. Jacobson, No. CV-11-2203. The court found that because plaintiffs both named government personnel as parties and challenged national policy, the case is more appropriately heard in Washington, D.C.  Prior to the transfer to D.C., on October 31, 2011, the Department of Justice moved to dismiss the case as a “novel interpretation and radical extension of the ‘public trust doctrine.’”  The D.C. court will now rule on that motion to dismiss.

Similar public trust cases have been filed against state governments, including California. In the California case, Blades v. State of California, No. CGC 11 510725, Superior Ct. CA, industry groups have moved to intervene on the side of the defendant state. California has moved to dismiss the lawsuit for failure to state a claim. Similar dismissal motions have been filed by Minnesota, Alaska, Colorado, and New Mexico with respect to lawsuits filed in each of those states.

For other articles in this publication addressing the Our Children’s Trust litigation initiatives, please see editions of this publication published in May and October, 2011.

Katrina Plaintiffs Fight Dismissal of GHG Property Damage Lawsuit

After plaintiffs suing oil companies for GHG emissions that allegedly exacerbated the impact of Hurricane Katrina had their first lawsuit dismissed in federal court, they filed a new lawsuit attempting to avoid the same outcome. In Comer v. Murphy Oil USA, Inc., plaintiff property owners in Mississippi sued oil companies alleging that GHG emissions worsened the property damage they suffered from the hurricane. That case was dismissed for lack of standing, i.e., the court found that challenges to the efficacy of climate change regulation raised non-justiciable questions. 2007 WL 6942285 (S.D. Miss. 2007). Although a three-judge panel from the U.S. Court of Appeals for the Fifth Circuit reversed that ruling, the appellate panel’s decision was vacated, and after the U.S. Supreme Court declined to review the case on January 11, 2011, the original dismissal order became the final decision in the case.

Attempting to avoid dismissal on standing grounds again, plaintiffs filed a new lawsuit on May 27, 2011, and added new defendants. Comer v. Murphy Oil USA, Inc., No. 1:11 cv 220 LG RHW. On December 9, 2011, plaintiffs filed their brief opposing defendants’ motion to dismiss. Plaintiffs argue that (1) their case is not barred by statute of limitations because, based on Mississippi law, they were entitled to refile their case within one year of the Fifth Circuit’s dismissal; (2) they have standing based on the U.S. Supreme Court’s decision in Massachusetts v. EPA; and (3) the Supreme Court’s 2011 decision in Am. Elec. Power v. Connecticut, dismissing plaintiffs’ global warming tort claims seeking injunctive relief, does not preclude their claims for monetary damages.

Federal Regulatory Developments

EPA Issues 2012 Renewable Fuel Standard

On December 27, 2011, EPA announced that it had finalized its 2012 standards under the Renewable Fuel Standard program (“RFS”). RFS, which was re-authorized by the Energy Independence and Security Act of 2007 (“EISA”), requires EPA to set steadily increasing percentages and volumes of renewable fuel that refineries and importers must make available to consumers. Under EISA, 2012 standards must require at least 1.25 billion more gallons of renewable fuels than required in 2011.

The standards are issued for four renewable fuel categories:

  • Biomass-based diesel = 1.0 billion gallons; 0.91%
  • Advanced biofuels = 2.0 billion gallons; 1.21%
  • Cellulosic biofuels = 8.65 million gallons; 0.006%
  • Total renewable fuels = 15.2 billion gallons; 9.23%

Percentages used in the standards are based on a ratio of renewable fuel volume to non-renewable gasoline and diesel volume. The cellulosic biofuel standard is based on the amount of projected available cellulosic fuel. The cellulosic biofuel standard is a 31% increase from 2011, but the required 8.65 million gallon goal for 2012 is less than the 500 million gallon target set by Congress when the law was passed.

EISA requires that in year 2013 and thereafter, EPA’s renewable fuel standards include a minimum of one billion gallons of biomass-based diesel. Earlier in 2011, EPA had proposed exceeding that minimum requirement in 2013, but has postponed finalizing the 2013 standard in light of public comments. EISA requires EPA to set the biomass-based diesel standard 14 months before the start of year; thus, EPA is late in announcing the standard for 2013.

In November, EPA secured a victory for its renewable fuels program when the U.S. Supreme Court denied a petition to review a U.S. Court of Appeals decision challenging EPA’s 2010 standards. In Nat’l Petrochemical & Refiners Ass’n v. EPA, No. 10-1071 (U.S. Ct. App. D.C. Cir. Dec. 21, 2010), members of the transportation fuel industry challenged EPA’s first set of standards. Although Congress had required EPA to develop annual standards by December 2008, EPA did not do so until March 2010. When EPA published those standards, it made them retroactive for all of 2010. The industry groups argued that, absent explicit authority from Congress, the standards could not be made retroactive to the beginning part of the year. The appellate court disagreed, finding that Congress had implicitly authorized retroactive regulation in the structure of the statute. On November 7, 2011, the U.S. Supreme Court denied the industry groups’ petition to review the appellate court’s 2010 ruling. No. 11 102 (U.S. Sup. Ct. Nov. 7, 2011).

State and Regional Developments

California Issues Final Clearance for Cap-and-Trade Program

On December 13, 2011, the California Office of Administrative Law approved the rules issued by the state’s Air Resources Board (”CARB”) to initiate a state-wide cap-and-trade program for GHG emissions. The California cap-and-trade program will apply to approximately 600 major industrial sources, electric utilities and power retailers. The program intends to apply to transportation, natural gas and other fuels by 2015. During the first year of the program, starting in 2012, CARB will focus on start-up issues with the goal of having its first auction of allowances by August 2012. By CARB rule, enforcement actions under the program are delayed until 2013.

CARB had issued its cap-and-trade rules on October 20, 2011, after fighting off a lawsuit from community groups opposed to a program that allows GHG emissions to be offset by trading and credits. On December 6, 2011, the California Superior Court approved CARB’s expanded environmental alternatives analysis accompanying the cap-and-trade rules. The court had ruled on May 20, 2011, that CARB was required to provide a more thorough analysis of these rules. Ass’n of Irritated Residents v. CARB, No. CPF 09-509562, Sup. Ct. CA.  While CARB filed an appeal of the court’s ruling, over the summer, CARB conducted an expanded alternatives analysis in order to allow the rules to go into effect by January 1, 2012.  CARB will now drop its appeal of the court’s initial ruling that had rejected the original alternatives analysis.  Plaintiffs still have a pending appeal of the Superior Court judge’s decision that upheld the cap-and-trade program against other statutorily-based attacks.

Research and International Developments

International Climate Talks Close With Agreement to Plan for a Binding Future Commitment

On December 11, 2011, the 17th Conference of the Parties to the UN Framework Convention on Climate Change (“COP-17”), in Durban, South Africa, came to a close – two days after its previously scheduled closing date. The final deliberations led to agreement on “the Durban Platform,” which sets a roadmap for negotiation, agreement, and start of a legally-binding agreement to succeed the Kyoto Protocol. The Kyoto Protocol will expire on December 31, 2012, and includes binding obligations on developed nations to reduce GHG emissions by a specific target amount. The Durban Platform contains an Ad Hoc Working Group on the Durban Platform for Enhanced Action, which will commence work in 2012 and complete an agreement to replace the Kyoto Protocol “as soon as possible” but no later than 2015. The new agreement would be adopted at COP-21 and come into effect in 2020. Although the U.S. never signed the Kyoto Protocol, the U.S., China, India and Brazil were among those countries approving the Durban Platform. Notably, while there was agreement to plan for an agreement, there was no agreement that this plan or any interim measures would have legally binding targets.

In addition to the Durban Platform, an agreement was reached among some countries to extend the Kyoto Protocol with a second commitment period. This extension agreement was negotiated by the EU, Brazil, South Africa and the Least Developed Countries group. The start and end dates for the second compliance period were left unclear when the meeting ended. The current compliance period ends at the close of 2012. The day after conclusion of COP-17, Canada formally withdrew from participating in the Kyoto Protocol. Canada attributed its withdrawal to the failure to provide a comprehensive agreement, particularly one that includes the U.S. and China. However, Canada has confirmed its commitment to the Copenhagen Accord (COP-15), which included the U.S. and other developed countries. Under the Copenhagen Accord, countries agreed voluntarily to take steps to reduce GHG emissions by 17 percent from 2005 levels by 2020.
The remaining Kyoto Protocol signatories did not commit to any additional emission decreases, only to make voluntary pledges. Developed countries (Annex 1) are to submit their pledges, called “quantified emission limitation reduction objectives” by May 2012. China recently agreed to a five-year plan to reduce GHG emissions. It pledged to cut emissions intensity by 40-45% by 2020 and to have an emissions trading scheme by 2015. According to the U.N. Intergovernmental Panel on Climate Change’s calculations, however, the levels of emission reductions designated for the second commitment period will not cap a global temperature increase at the 1.5 to 2 degrees Celsius ceiling necessary to avoid irreversible effects of global warming.

The Durban meeting was the second largest COP meeting that has been held, with 194 parties participating. The conference resulted in more than 36 decisions. COP-17 also saw an agreement to make operable the Green Climate Fund, first proposed in 2009 at COP-15, with financing of $100 billion by 2020. The parties, however, still have not agreed as to the source of funding. A proposal to use levies on international shipping as a source of revenue was rejected. Similarly, at COP-17, the parties agreed to start the Adaptation Committee and Technology Executive Committee to assist developing countries address and limit the impacts of climate change. Agreement also was reached on procedures for measuring, reporting, and verification of GHG emissions in all countries. The parties also agreed to carbon capture and storage as an approved credit under the Clean Development Mechanism (“CDM”), which provides the basis for recognizing emissions credits based on this technology.

No agreement was reached on how to address CO2 emissions from international aviation and shipping. The parties also could not agree regarding further revisions to CDM procedures, including the appeals process and accreditation for sectoral or programmatic credit arrangements.

Notably, on November 17, 2011, the U.S. Government Accountability Office released a report to Congress stating that from 2001 through 2010, the U.S. Government had provided $31.1 million to the U.N. Intergovernmental Panel on Climate Change, through programs administered by more than a dozen federal agencies.

European Court Requires GHG Regulation of U.S. Airlines’ Emissions

On December 21, 2011, the Court of Justice of the European Union ruled that airlines based outside the European Union (“EU”) will be required to comply with EU regulations reporting GHG emissions. The EU regulations were issued as part of the EU’s commitments under the Kyoto Protocol, as implemented by the European Trading System (“ETS”). Those regulations require all airlines flying in EU air space to cap their GHG emissions and obtain emission allowances through the ETS. Failure to do so would subject the airline to fines. The suit pending before the Court of Justice was brought by a U.S. industry group and argued that the EU regulation violates international law because of its extra-territorial impact. Air Transport Ass’n v. Secretary of State for Energy and Climate Change, No. C-366/10. The court ruled that the application of the ETS regulation to non-EU airlines does not violate principles of international law nor the 2007 Open Skies Agreement between the U.S. and the EU.

The airlines’ next steps are unclear. Bills are pending in the U.S. House of Representatives (H.R. 2594) and Senate (S. 1956), prohibiting U.S. airlines from participating in the ETS. On December 16, 2011, Secretary of State Clinton and Secretary of Transportation LaHood wrote to European leaders, urging reconsideration of the regulation’s application. However, environmental groups brought a petition in the U.S. District Court for the District of Columbia alleging that EPA’s failure to regulate GHG emissions from airplanes violates the Clean Air Act. Center for Biological Diversity v. U.S. EPA, No. 10 985 (FSS). In addition to intervening in that lawsuit on behalf of EPA, the airline industry has won support for their position opposing the EU regulation from the U.N. International Civil Aviation Organization.

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