By Craig B. Simonsen and  Jeryl L. Olson

Seyfarth Synopsis: Businesses and industries that had been impacted by the EPA’s HFCs rule may wish to monitor EPA’s response to this opinion carefully.

The DC Circuit Court of Appeals this week, by a split three-judge panel, vacated part of a 2015 EPA rule intended to target greenhouse gas emissions, saying that while Section 612 of the Clean Air Act (CAA) does require manufacturers to replace ozone-depleting substances with safe substitutes, hydrofluorocarbons (HFCs) do not deplete ozone, so the agency never had the power to enforce the replacement provision of the rule.  “The fundamental problem for EPA is that HFCs are not ozone-depleting substances, as all parties agree.”  Mexichem Fluor, Inc. v. EPA, No. 15-1328, — F.3d —-, 2017 WL 3389376 (DC Cir. Aug 8, 2017).

This case was filed because in 2013, President Obama announced that EPA would work to reduce emissions of HFCs because HFCs contribute to carbon emissions. “Plan to Cut Carbon Pollution and Address Climate Change” (June 25, 2013). The Climate Action Plan indicated that “… the Environmental Protection Agency will use its authority through the Significant New Alternatives Policy Program” of Section 612 to reduce HFC emissions. Consistent with the Climate Action Plan, EPA promulgated its Final Rule in 2015 that moved certain HFCs from the list of safe substitutes to the list of prohibited substitutes (Change of Listing Status for Certain Substitutes Under the Significant New Alternatives Policy Program, 80 Fed. Reg. 42870, July 20, 2015).

Th DC Circuit Court concluded this week that “EPA’s novel reading of Section 612 is inconsistent with the statute as written.  Section 612 does not require (or give EPA authority to require) manufacturers to replace non-ozonedepleting substances such as HFCs.  We therefore vacate the 2015 Rule to the extent it requires manufacturers to replace HFCs, and we remand to EPA for further proceedings consistent with this opinion.”

For businesses and industries that had been impacted by the EPA’s HFCs rule, it is time to watch for what the Agency does in response to the Court’s opinion.  Whether it appeals to the Supreme Court, or begins rulemaking to revise the current rules, you may wish to monitor this carefully.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Seyfarth Environmental Compliance, Enforcement & Permitting Team.

By Jeryl L. Olson, Patrick D. Joyce, and Craig B. Simonsen

Seyfarth Synopsis: Last week Administrator Scott Pruitt signed a final rule to further delay the effective date of EPA’s Risk Management Program (RMP) Amendments an additional 20 months to allow the agency to conduct a reconsideration proceeding.

The U.S. Environmental Protection Agency’s new rules to strengthen the Clean Air Act’s Risk Management Program (RMP), 40 C.F.R. Part 68, were first adopted on January 13, 2017 (82 Fed. Reg. 4594), after the proposed regulations were published for notice and comment on March 14, 2016 (81 Fed. Reg. 13638).

However, Administrator Pruitt has now signed a rule changing the effective date of the amendments to February 19, 2019 (82 FR 27133).

For an analysis on the proposed rules see our previous blog on U.S. EPA To Require Stronger Chemical Safety Regulation.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Seyfarth Environmental Compliance, Enforcement & Permitting Team.

By Patrick D. Joyce, Jeryl L. Olson, and Craig B. Simonsen

Blog - Fracking WaterSeyfarth Synopsis: With significant objection from Industry, EPA has issued its Final Report on whether hydraulic fracturing activities can impact drinking water resources under certain circumstances.

The U.S. Environmental Protection Agency published its controversial final report on “Hydraulic Fracturing for Oil and Gas: Impacts from the Hydraulic Fracturing Water Cycle on Drinking Water Resources in the United States.” In the report, which has already been subject to great objection from Industry, EPA issued its finding that hydraulic fracturing (fracking) activities in the U.S. may have impacts on the water lifecycle, affecting drinking water resources. The Agency had put out a draft of the report for public comment in June 2015, which we blogged on at that time. 80 Fed. Reg. 32111.

The report was prepared at the request of Congress. Its purpose was to follow water resources used for fracking through the entire water cycle from water acquisition, to chemical mixing at the well pad site, to well injection of fracking fluids, to the collection of fracking wastewater (including flowback and produced water), and finally, to wastewater treatment and disposal. EPA claimed that the study “identified conditions under which impacts from hydraulic fracturing activities can be more frequent or severe.” The report also identified “data gaps [that] limited EPA’s ability to fully assess impacts to drinking water resources both locally and nationally.” The final conclusions were based on review of over 1,200 cited sources.

In response to EPA’s report, the American Petroleum Institute (API) blasted the EPA’s “abandonment of science in revising the conclusions to the Assessment Report….” API and the fracking industry requested changes to EPA’s Draft Report that EPA did not incorporate in the Final Report. As a result, API Upstream Director Erik Milito said, “the agency has walked away from nearly a thousand sources of information from published papers, technical reports and peer reviewed scientific reports demonstrating that industry practices, industry trends, and regulatory programs protect water resources at every step of the hydraulic fracturing process.”

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Seyfarth Environmental Compliance, Enforcement & Permitting Team.

By Kay R. Bonza and Craig B. Simonsen

Private jet plane in the blue skySynopsis: EPA’s recent finding paves the way for the Agency to develop standards regulating greenhouse gas emissions from aircraft. Businesses in the commercial jet manufacturing and aviation transportation industry should watch this rulemaking closely, as it will affect environmental compliance costs and may have an impact on the cost of capital purchases and daily operations.

On July 25, 2016, the U.S. Environmental Protection Agency (EPA) issued a final determination under the Clean Air Act, finding that greenhouse gas (GHG) emissions from certain types of aircraft engines contribute to air pollution that causes climate change and endangers public health and the environment.

The EPA determination applies specifically to the six well-mixed GHGs in the atmosphere: carbon dioxide (CO2), methane, nitrous oxide, hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6). Two of these six gases, CO2 and nitrous oxide, are emitted by aircraft engines.  The EPA’s determination triggers its duty under Section 231 of the Clean Air Act to promulgate aircraft engine emission standards.

Approximately 89% of U.S. aircraft GHG emissions are included in the determination, from smaller jet aircraft, to the largest commercial jet aircraft on the market. The determination does not cover some small jet aircraft, including piston-engine aircraft, helicopters, and military aircraft.  According to Janet McCabe, EPA’s Acting Assistant Administrator for the Office of Air and Radiation, “aircraft are the third largest contributor to GHG emissions in the U.S. transportation sector, and these emissions are expected to increase in the future.”

The EPA is not yet issuing proposed emission standards, nor are they commenting on what those standards will be. The International Civil Aviation Organization (ICAO), which works with member states and industry groups to develop international civil aviation standards and policies, anticipates releasing its international aircraft CO2 standards in March 2017.  The EPA will look to the ICAO standards as a starting point in drafting domestic aircraft engine standards.  ICAO member states, including the U.S., will be required to adopt standards that are at least as stringent as the ICAO standards.

According to the EPA, its determination supports the goals of President Obama’s Climate Action Plan to reduce carbon pollution from large sources.  Approximately 12% of the U.S. transportation sector’s GHG emissions come from U.S. aircraft, and U.S. aircraft account for 29% of global aircraft emissions.  Once the EPA promulgates aircraft emission standards, Section 232 of the Clean Air Act requires the Federal Aviation Administration to prescribe regulations that ensure compliance with these standards.  Any standards that EPA sets “must not cause a significant increase in noise or adversely affect safety.”

Future GHG standards for aircraft could significantly increase the costs of environmental compliance, capital purchases, and daily operations for the aircraft engine manufacturing industry. Businesses in this industrial sector may wish to keep an eye on the EPA rulemaking, participate in public meetings, and provide comments to EPA as appropriate.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Environmental Compliance, Enforcement & Permitting Team.

By Robert S. Winner, Andrew L. Berg, and Ashley M. Hymel

Energy sources conseptSeyfarth Synopsis: In this edition of Seyfarth Shaw’s Energy Insights Newsletter, our Energy and Clean Technologies team covers important developments in Q1 2016 for the energy industry including 1) the fate of the Clean Power Plan and potential impact on U.S. compliance with the Paris Agreement, 2) the increased pressure by the DOL to wage and hour practices in the oil and gas industry, and 3) growing interest and use of EB-5 financing for renewable energy projects and proposed changes to the program.

Clean Power Plan Awaits Decision

In June 2014, Environmental Protection Agency (EPA) issued its proposed Clean Power Plan (CPP) to regulate CO2 emissions from existing power plants under section 111(d) of the Clean Air Act (CAA), which proposes to limit carbon emissions from existing fossil fuel-fired electric generating units, including steam generating, integrated gasification combined cycle, or stationary combustion turbines (in either simple cycle or combined cycle configuration) operating or under construction by January 8, 2014.  Specifically, the CPP requires states to reduce carbon dioxide emissions from existing power plants by 32 percent below 2005 levels by 2030.  States are required to submit compliance plans to reduce their emissions by 2022, with full compliance not required until 2030.  The Department of Energy (DoE) believes implementing the CPP will forestall hundreds of millions of tons of greenhouse-gas emissions from human activities, a key driver of climate change.

However, immediately following the release of these proposed regulations, two dozen states and numerous interested corporations and industry groups sued the administration claiming the EPA overstepped its constitutional authority and statutory authority under the CAA.  And on February 9, 2016, the U.S. Supreme Court granted a stay preventing the implementation of the CPP pending further review. Oral arguments are scheduled for June 2nd and even though it could take up to a year for a final ruling to be released, some experts believe the three judge panel will seek to render a decision by the end of summer 2016 since the judges’ clerks change at the end of August, a potential delay.

Many have argued that the stay could, and if the CPP is struck down entirely, would, impact the U.S.’s ability to meet the United Nations Framework Convention on Climate Change (UNFCCC) Paris Agreement goals of (1) reducing emissions “in the range” of 17 percent below 2005 levels by 2020 and (2) a “further emission reduction” up to 26-28 percent of total reductions below 2005 levels by 2025.

Interestingly, voting in favor of the stay was Justice Scalia’s last decision before passing away suddenly. A 4-4 decision would have upheld the lower court’s reversal and thus implementation of the CPP.

The Oil and Gas Industry’s Wage and Hour Practices Remain A High Priority for the Department of Labor

In 2012, the Department of Labor’s Wage and Hour Division (WHD) began an initiative to improve oil and gas industry compliance with the Fair Labor Standards Act (FLSA) and in particular, the federal law that requires overtime compensation for hours worked over 40 in a workweek. According to the WHD, this ongoing initiative was meant to “focus resources where data shows that violations are common and business models lend themselves to violations.”

Through 2015, the WHD has obtained several high-dollar settlements from oil and gas companies. Notable recent settlements include a $4.5 million settlement with an oil and gas exploration and production company for failure to compensate employees for pre-shift meetings and an $18.3 million settlement with an oilfield services company for misclassification of employees in 28 job positions.  These investigations, and their subsequent settlement, demonstrate both the depth and the breadth of the WHD’s expending reach.  Already in the first quarter of 2016, the WHD has touted settlements with six oil and gas companies for a total of almost $2 Million under similar wage hour theories. These companies’ services range from drilling to engineering to selling oil and gas equipment.  The WHD recently expressed its hope that industry executives will take the lead and serve as models for industry-wide compliance.

And, while the “industry” on the radar used to include only oil and gas exploration and production, or oilfield services, companies, the WHD has expanded its pursuit to include related businesses, such as water and stone haulers, trucking, lodging, water, and staffing companies.  One prime example of this expansion lies with a supply chain management company that settled with the WHD to the tune of over $146,000 in August of 2014 for failure to pay overtime at time and a half for hours worked over 40 in a week.

After four years, 1,100 investigations, and $40 million in settlements, the WHD is still on the hunt and it shows no signs of slowing down.  As the WHD stated in a recent press release, “employers must know and comply with the law.”  Employers in the oil and gas industry should continue to review their current wage and hour practices to ensure compliance.

Foreign Investors Going Green in Pursuit of Green Cards

For those who have heard of or read about “EB-5” financing, they may have only thought it was for certain categories of assets such as resorts, casinos, hotels, multi-family and mixed use office properties, which make up more than half the EB-5 funding distributed.  However, a smaller (3-5%), but growing segment of financing obtained from foreign investors participating in the employment-based, fifth-preference visa category (EB-5) has been within the renewable energy industry, and has significantly contributed toward the development of large-scale energy projects across the United States.  Not only has the percentage of EB-5 financing in the alternative energy space grown, so has the number and size of projects in the areas of utility scale solar power, alternative fuel production and lithium battery production, especially in California. As the nation’s preference for clean energy over traditional fossil fuels has gained momentum and states increasingly seek to implement aggressive renewable portfolio standards, marketing EB-5 projects to foreign investors has become much more common since it positively correlates with increased job creation.

By way of background, under the United States Citizenship and Immigration Services’ (USCIS) EB-5 Immigrant Investor Pilot Program (Program), foreign individuals who invest $1,000,000 (or $500,000 in targeted employment areas (TEA) in a new commercial enterprise are able to pursue permanent residency in the United States if they can prove that their investment created a minimum of ten full-time jobs.  The permitted $500,000 investment amount for projects located in areas of high unemployment or rural tracts of land is ideal for the alternative energy industry since the power plants, solar panel farms, and other energy-generating equipment installations require large amounts of land.

The Program was initially due to expire on September 30, 2015 and received a one-year extension. However, in connection with a potential further extension, some bad press and bad apples has caused lawmakers to draft new bills to provide additional protections for investors in EB-5 projects. For example, the Integrity Act, introduced by Senators Schumer, Flake and Cornyn on December 17, 2015, seeks to strengthen the Program by requiring greater government oversight of regional centers (entities that sponsor the EB-5 projects), including authority to assess fines for noncompliance, and requiring registration of all affiliated parties of regional centers. Other bills include increasing the required minimum investment amount in a TEA from $500,000 to $800,000, and from $1 million to $1.2 million for non-TEA investments. Further, the SEC has been carefully watching EB-5 financings and their compliance with securities laws. However, despite the new oversight, developers continue to move full-steam ahead and raise hundreds of millions of dollars in EB-5 funding to create jobs, including those in the renewable industry.

By Jeryl L. Olson, Andrew H. Perellis, and Patrick D. Joyce

Power Lines and Pulp Mill PollutionLong awaited proposed regulations were published for notice and comment on March 14, 2016 (81 Fed. Reg. 13638) by the U.S. Environmental Protection Agency to strengthen its Risk Management Program (RMP), 40 C.F.R. Part 68.

Though EPA has been considering changes to the RMP rules for many years, the 2013 explosion at a fertilizer facility in West, Texas that killed fifteen people, at least ten of them first responders, spurred EPA to speed up its revisions to the rules. As a result, the proposed rules contained strengthened emergency response obligations in addition to additional accident prevention requirements and enhanced availability of information to the public.

Comments on the proposed rule will be accepted until May 13, 2016. The proposal, among other changes, would impose (a) additional accident prevention requirements, (b) strengthen emergency response obligations, and (c) provide enhanced availability of public information.

Additional Accident Prevention Requirements:

  • Current rules regarding incident investigation require an analysis of factors that contributed to the incident. EPA seeks to expand this analysis for Program 2 or 3 processes to conduct root cause analysis for catastrophic releases or incidents that could have reasonably resulted in a catastrophic release.
  • For facilities that experience a reportable release, EPA proposes to require a post-incident compliance audit performed by an independent third-party. Current rules allow for the audit to be conducted by an internal representative of the facility’s owner or operator.
  • For Program 3 regulated processes in certain SIC codes, EPA proposes a new element to the process hazard analysis (PHA) obligating affected facilities to conduct safer technology and alternatives analysis (STAA) as part of their PHA, and to evaluate the feasibility of inherently safer technology (IST).

Strengthened Emergency Response Obligations:

  • EPA proposes that facilities with Program 2 or 3 processes must coordinate with local emergency response agencies at least once a year, with the intent that such coordination will ensure that resources and capabilities are in place to respond to an accidental release.
  • Facilities with Program 2 or 3 processes would be required to conduct notification exercises annually. This is intended to ensure that emergency contact information is accurate and complete.
  • Facilities subject to subpart E of the RMP rules (emergency response program for “responding facilities”) would be required to conduct a field exercise at least once every five years, and a tabletop exercise annually in other years. Also, any responding facility with a reportable accident would need to conduct a full field exercise within a year of the accident.

Enhanced Availability Of Public Information:

  • The proposed rule would require all regulated facilities to make certain basic information available to the public. Internet access would be required if the company maintains a web site, and if otherwise, to be available at the public library or governmental office.
  • A subset of facilities would be obligated to provide additional information, upon request, to the Local Emergency Planning Committee (LEPC), Tribal Emergency Planning Committee (TEPC) or other local emergency response agencies. The additional information to be shared would include summaries relate to: (a) compliance audits (facilities with Program 2 and Program 3 processes); (b) emergency response exercises (facilities with Program 2 and Program 3 processes); (c) accident history and investigation reports (all facilities that have had RMP reportable accidents); and (d) any ISTs implemented at the facility (a subset of Program 3 processes).
  • A timely public meeting with the local community would be mandated for any facility suffering a reportable accident.

The Occupational Safety and Health Administration (OSHA) is also considering updates to its Process Safety Management (PSM) standards. Though targeting differing communities (employee safety versus public and environmental health), EPA’s RMP and OSHA’s PSM regulations complement each other.  For example, an employer complying with OSHA’s PSM standards can satisfy RMP’s “prevention program” and process hazard analysis (PHA) element because PSM’s process safety techniques employ systematic methods for evaluating a process and identifying hazards.  EPA’s proposed rule creates additional RMP requirements that are not mirrored in OSHA’s current PSM regulations.  However, that may change when OSHA releases updates to the PSM regulations.

EPA’s proposed rule does not add any additional listed hazardous substances under Section 112(r) of the Clean Air Act. In addition, the proposed rule does not include any changes to EPA’s regulations that govern siting of chemical facilities and requirements for buffers or setbacks.

Our take on EPA’s proposal is that a regulated facility’s compliance burden could significantly increase. Given that enforcement of the Risk Management Program is already a current EPA enforcement priority, regulated facilities should become familiar with the proposed rule changes, and, if appropriate, submit comments to EPA in advance of May 13.

For further information on EPA’s national enforcement initiative, see National Enforcement Initiative: Reducing Risks of Accidental Releases at Industrial and Chemical Facilities Fiscal Years 2017-19.

By Joshua L. Ditelberg and Robert S. Winner

In this edition of Seyfarth Shaw’s Energy Insights Newsletter our Energy and Clean Technologies team covers important developments in Q3 2015 for the energy industry including 1) the latest initiatives from the Environmental Protection Agency on clean power, climate and chemical regulation, 2) the National Labor Relations Board’s major shift on joint-employer status impacting contractor relationships, and 3) the surprising results upon Mexico opening its energy markets.

The EPA Has a Very Busy Third Quarter

In a flurry of activity in this past quarter, the Environmental Protection Agency (EPA) issued its final version of the Clean Power Plan (CPP), proposed new regulations to reduce methane emissions under the Climate Action Plan (CAP), and tightened chemical regulations for safe use, ahead of the proposed changes to the Toxic Substances Control Act of 1976 (TSCA).

The CPP is specifically geared towards the reduction of carbon emissions from power plants and energy producing facilities.  In the final rules the Clean Power Plan call for a reduction in greenhouse gas emissions from their 2005 levels by 32% by the year 2030, but the deadline for commencing reduction has been pushed back to 2022.  Opponents are already challenging the right of the EPA under the Clean Air Act to implement and enforce such rules and it is expected that the legal challenge will reach all the way to the Supreme Court, potentially further delaying implementation.

Similar to the Clean Power Plan, the EPA’s proposed regulations under the Climate Action Plan announced back in 2013 to reduce methane gas emissions from oil and gas producing activities, such as hydraulic fracking, also has its sights on reduction in such emissions by 45% by the year 2025.

Finally, the EPA took the lead in identifying a list of 83 “Work Plan” chemicals for further risk assessments and potential regulation. The TSCA grants the EPA the power to regulate the manufacture and sale of chemicals that may be a risk to the public.  Congress is expected to finally pass The Toxic Substance Control Modernization Act, which will, among other things, significantly overhaul some outdated methods, provide for a shift in expense towards the chemical companies, and set safety standards for thousands of chemicals currently unregulated.

The often maligned EPA may be hitting its stride in the twilight of Obama’s second term and ahead of the UN Climate Change Conference set for Paris in November.

The Browning-Ferris Decision and Potential Implications on Energy Industry

In a ruling that will affect most business relationships and extends far beyond either labor law or the concept of employment generally, the National Labor Relations Board (NLRB) recently issued a much awaited decision, Browning-Ferris Industries of California (Browning-Ferris), that expansively broadened the definition of who is a joint employer — an unrelated entity that arguably does not determine matters governing essential employment terms of another employer’s employees but that nevertheless is found to bear responsibilities to those employees under the National Labor Relations Act (NLRA).

Under the NLRB’s newly expanded test, two or more otherwise unrelated employers may be found to be a joint employer of the same employees under the NLRA “if they ‘share or codetermine those matters governing the essential terms and conditions of employment.’ In determining whether a putative joint employer meets this standard, the initial inquiry is whether there is a common-law employment relationship with the employees in question. If this common-law employment relationship exists, the inquiry then turns to whether the putative joint employer possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful collective bargaining.” Affecting both unionized and non-union companies (and even entities that have no employees of their own) alike, the decision has broad implications for other employment laws and government agencies such as the Department of Labor, EEOC and OSHA.

For the energy industry, which heavily relies on staffing companies, subcontractors and outsourcing to perform services such as well drilling, well-head services, equipment operation and services, and water and oil and gas transportation, to name just a few, the implications can be far reaching and potentially crippling.  Employers will need to reevaluate their relationships and protections against unintended liability or consequences.

A Tale of Two Energy Markets in Mexico: Renewables Ramp Up While Oil Falters 

In August of 2014, Mexico passed sweeping legislation opening up its largely closed energy markets, breaking up the government’s 70+ year monopoly in the areas of oil and gas, electricity and other power segments.  Large oil and gas blocks would now be available and auctioned off for foreign investment and lease, and changes in the electricity market would cause new competition with longer fixed price power purchase contracts, with a clearly defined push towards clean energy / renewable power generation of 35% by 2024.

A year after that legislation passed, Mexico held its first auction for oil and gas reserve blocks and by all accounts, the auction was a “disappointment”, with only two of the fourteen block up for auction actually sold.  Some blamed the oil market in general, others blamed minimum prices, the terms and conditions of the auction.  Whatever the circumstance or reasoning, Mexico is finding it difficult to offload large oil and gas reserves to foreign investment.

Conversely, the first auction for renewable energy projects will be held later this year and interest is strong, in particular for solar energy projects.  5-10 GW of solar power projects have already been permitted in 2015 and if proposed goals are to be met, much more will be required.  The longer term 15 year PPAs at fixed price with clean energy certificate obligation lasting 20 years, and solar prices on par with other power generating facilities, the conditions are ripe for Mexico to take advantage of the opportunity.

Let’s hope officials learned from their mistakes at the oil and gas auction and listen to the bidding public on what they need to make projects financially attractive.

Energy Insights: An Update from the Third Quarter of 2015

Ecology Earth concept word collagePhilip Comella, in a recently published article, writes about how everyone in the landfill gas industry knows how contracts are a necessary evil.

The parties understandably focus on the engineering aspects of the design; how many wells and engines to install; how to increase or extend gas production; how the gas production translates into revenue; the status of carbon credits or RECs; or any number of benefits that will result from a successful project. Contracts, however, serve not only to define the rights and obligations of the parties in performing the project, but they also serve to clarify the responsibilities of the parties if something goes wrong.

For more information on ten of the key problems that arise in performing under a landfill gas contract, and to see some sample contract provisions to help avoid them, see Phil’s full article, “Avoiding Disputes Down the Road: The Top Ten Problems With Landfill Gas Contracts.”

By Andrew H. Perellis and Patrick D. Joyce

Supreme CourtIn a 5-4 ruling, the U.S. Supreme Court today ruled that the EPA acted unreasonably when it refused to consider the cost of implementing its Mercury and Air Toxics Standard (MATS).

The MATS rule, issued in 2012, established emissions limits from power plants for mercury, filterable particulate matter, and hydrogen chloride.  U.S. power plants were required to come into compliance with the MATS rule by April 16 of this year, but 170 coal-fired power plants received a one year extension to either install control technology or shut down.

EPA estimated that it would cost the power industry nearly $9.6 billion per year in compliance costs while providing a pollution reduction benefit of only $4 to $6 million per year.  However, EPA said that Section 112 of the Clean Air Act only required it to consider compliance costs when establishing an appropriate emission level but not when deciding whether to regulate in the first place.

Justice Scalia, writing for the majority, found that the words “appropriate and necessary” under Section 112 required EPA to consider the costs of the regulation at the initial stages and that “EPA must consider cost—including cost of compliance—before deciding whether regulation is appropriate and necessary.”  Justice Scalia further said “Against the backdrop of [] established administrative practice, it is unreasonable to read an instruction to an administrative agency to determine whether ‘regulation is appropriate and necessary’ as an invitation to ignore costs.” Slip opinion pp 7-8.

Justice Scalia wrote that Section 112 requires EPA to consider “all of the relevant factors” and that “agencies must operate within the bounds of reasonable interpretation. EPA strayed far beyond those bounds when it read §7412(n)(1) to mean that it could ignore cost when deciding whether to regulate power plants.”  Slip op. p. 6.

Writing for the minority, Justice Kagan said that Congress had allocated broad authority to EPA to determine whether to regulate an industry and that EPA had properly considered costs at a later stage in the regulation, something EPA has done in other rules.

By Patrick D. Joyce and Craig B. Simonsen

Blog - Fracking WaterThe U.S. Environmental Protection Agency released a draft assessment study last week showing that hydraulic fracturing (“fracking”) activities in the U.S. may have potential impacts on the water lifecycle, affecting drinking water resources. 80 Fed. Reg. 32111 (June 5, 2015).

The report, Assessment of the Potential Impacts of Hydraulic Fracturing for Oil and Gas on Drinking Water Resources (External Review Draft), prepared at the request of Congress, follows the water used for fracking through the entire water cycle from water acquisition, to chemical mixing at the well pad site, to well injection of fracking fluids, to the collection of fracking wastewater (including flowback and produced water), and finally, to wastewater treatment and disposal. Dr. Thomas A. Burke, EPA’s Science Advisor and Deputy Assistant Administrator of EPA’s Office of Research and Development, noted that “EPA’s draft assessment will give state regulators, tribes and local communities and industry around the country a critical resource to identify how best to protect public health and their drinking water resources.”

While EPA’s study, which included over 950 sources of information, found specific instances where well integrity and waste water management related to fracking activities directly impacted drinking water resources, the number of instances found were “small compared to the large number of hydraulically fractured wells across the country.”

The study identified specific vulnerabilities to drinking water resources including:

  • Water withdrawals in areas with low water availability;
  • Fracking conducted directly into formations containing drinking water resources;
  • Inadequately cased or cemented wells resulting in below ground migration of gases and liquids;
  • Inadequately treated wastewater discharged into drinking water resources; and
  • Spills of fracking fluids and fracking wastewater, including flowback and produced water.

The study noted that while there were few instances of drinking water contamination cause by fracking, this may be due to a lack of pre- and post-fracturing data on water quality and the inaccessibility of some information on fracking activities.

The draft study will be finalized after review by the Science Advisory Board and public review and comment. Public teleconferences are scheduled on the draft report, on September 30, 2015, October 1, 2015, and October 19, 2015. Public face-to-face meetings will be held on October 28, 2015, October 29, 2015, and October 30, 2015.

Public written statements for the teleconferences or for the face-to-face meetings should be received by the EPA Docket,  No. EPA–HQ–OA–2015–0245, by August 28, 2015.