In January of this year (2010), the US EPA passed the first mandatory greenhouse gas reporting rules. The EPA has the authority to pass administrative rules of this nature because of the Supreme Court's 2007 decision Massachusetts v. Environmental Protection Agency, 549 U.S. 497 (2007), which held that section 202(a)(1) of the Clean Air Act (CAA), 42 U.S.C. ยง 7521(a)(1), requires the EPA to set emission standards for "any air pollutant" from motor vehicles or motor vehicle engines "which in [the EPA's] judgment cause[s], or contribute[s] to, air pollution which may reasonably be anticipated to endanger public health or welfare." Accordingly, the judgment stated that the EPA always had authority under the Clean Air Act to regulate greenhouse gases, and if there is a danger to the public health or welfare, it may do so. However, the exact scope of the authority was uncertain and there has been an open question regarding how far the EPA could use this perceived authority to regulate emissions sources and corresponding energy outputs.
After three years that has seen an administration change, it appears as though we are witnessing an impact of that ruling as the Cupertino, CA based Lehigh Southwest Cement Company is involved in the first greenhouse gas related CAA Notice of Violation issue. See http://www.aggregateresearch.com/articles/18975/Lehigh-Cement--violated-Clean-Air-Act.aspx. Violations of the CAA can result in penalties that may include plant closure, criminal action, civil action and fines (identified as $25,000 to $37,500 a day for violating periods for the Cupertino plant). Accordingly, this under the radar case could prove highly relevant, very quickly to the energy industry.
THE MATERIAL RISK
The CAA has been around in some form since approximately 1970 with a revision in 1990 that changed its scope. Accordingly, because there has been no greenhouse gas legislation passed in Congress, the CAA presumably remains the controlling law dictating the EPA's ability to regulate greenhouse gases. In this context, the EPA could theoretically identify past violations of the CAA that may have been under the radar and find that non-permitted alterations to a facility, for example a power plant, that resulted in increased greenhouse gas emissions represents a violation of the CAA. Resulting punishments may not then be retroactive, because, as the Supreme Court ruled, the EPA has had authority to regulate greenhouse gas emission since the implementation of the applicable CAA provisions. (Notably that question is also debatable).
This creates three (3) very important questions,
(i) Are your operations in compliance with greenhouse gas emissions standards and do you have a process for tracking and reporting your emissions?
(ii) Will your operations be compliant once greenhouse gas emissions regulations are expanded? and
(iii) What can you do proactively to mitigate the risk of receiving a CAA Notice of Violation in the mail?
If you would like to know more, feel free to contact Foresite Systems' environmental compliance team's manager Travis Miller, travis.miller@foresitesystems.com or (408) 377-7400.
Notably it is not necessarily the justices or courts at play here. What we are seeing is the emergence of administrative regulations filling the gap where no legislative action has occurred. The court ruling only left open the door by stating that greenhouse gases could be regulated under the CAA. Feel free to give a call if you would like to discuss: 408-377-7400.