The US Environmental Protection Agency proposed reducing US greenhouse gas emissions from existing power plants in early June by 30% by 2030 from 2005 emissions. It said this is equivalent to taking two thirds of US cars and trucks off the highways. However, the new rules are complicated. Each state has been assigned a different percentage reduction. The percentages range from 11% for North Dakota to 72% for Washington state. Each state goal is a pollution-to-power ratio for the future carbon intensity of existing power plants in the state that use fossil fuels. The Environmental Protection Agency determined earlier that carbon dioxide is a pollutant as defined under the Clean Air Act because it endangers human life and health. Based on that finding, the law obligates EPA to regulate it. The agency proposed regulating carbon dioxide emissions from new power plants that use fossil fuels in January this year. The latest proposal takes the further step of proposing similar emissions limits for existing power plants. The new limits would be administered by state and local regulators through a process similar to that used by EPA to approve state implementation plans for ambient air quality. States would have the option to reach the emissions targets they have been assigned or to convert that state target into a “mass-based standard,” which would allow the state to establish a new cap-and-trade program for trading carbon allowances or join an existing regional program. The message EPA tried to convey is flexibility. Instead of imposing a uniform standard for reducing power plant carbon emissions, it gave states room to adopt a range of measures to curb emissions. EPA identified four “building blocks” that can be used in any combination to comply with the new standards. States can make plants more efficient. They can encourage use of low-carbon power sources. They can use more zero-carbon power sources. They can increase energy efficiency. EPA set individual state targets based on each state’s current energy mix and the improvements that are achievable through these four building blocks. For example, to comply, a state might order aging coal plants to close. It might increase its renewable energy portfolio standard. It might join a regional cap-and-trade program. It might even impose a state-level tax on carbon pollution. There will be a period for comment, and then the new standards will become final in June 2015. States will then have one year, until June 2016, to prepare compliance plans, although the possibility of extra time is built into the proposal. States have the option to use a two-step process for submitting final plans if more time is needed. Individual states may also request one-year extensions, and any state participating in preparation of a multi-state plan may ask for an additional two years. EPA expects states to make “meaningful progress” toward reductions by 2020 despite extensions, and all states would be required to meet their reduction targets by 2030. Coal-fired power plants will have to make the greatest reductions because they are by far the greatest source of greenhouse gases in the power sector. US coal plants are more than 40 years old on average, and the sector generates approximately 39% of the nation’s power. Even after closures expected from the new rule, EPA projects that 30% of US electricity will still come from coal in 2030. Critics and EPA are at loggerheads. Critics argue the new limits will cause electricity bills to skyrocket and lead to a catastrophic loss of jobs. Meanwhile, EPA says the plan will lead to more jobs and the increase in energy efficiency across the power sector will actually lead to lower electricity costs by 2030. EPA estimates that the new limits will cost the economy up to $8.8 billion a year, but produce between $55 billion and $93 billion a year in benefits by preventing premature deaths and mitigating respiratory diseases. Other critics complain that giving the states the flexibility to design their own plans will lead to a patchwork of different rules that will complicate power company compliance. Other critics dispute the need for any action on carbon emissions. For example, Senator Jeff Sessions (R-Alabama) takes issue with an EPA claim that climate change contributes to more violent weather like Hurricane Sandy in 2012. Sessions said the storm “was not even a hurricane when it hit land . . . . It just happened to hit the Northeast where people are not used to it, and it did a lot of damage.” As is the pattern with new environmental regulations, years of litigation and negotiation over compliance are sure to follow. However, the choice of 2005 as a baseline measure was received positively because many utilities have already spent money to curb emissions significantly since 2005. Thus, those early actors essentially get a credit for past steps. The public will now have an opportunity to comment on the 645-page proposal. There will also be efforts in Congress to block enforcement, but the Democrats are likely to retain enough seats even after the November 2014 elections to prevent this from happening. The next elections in November 2016, when a new president will be elected, are too far away to predict the outcome or what public opinion polls will say about support for government action on climate change. The battles will move eventually from the courts and Congress to state capitals as stakeholders fight over implementation. Cooling Water The US Environmental Protection Agency issued new rules in May for cooling water intake structures at an estimated 1,065 existing power plants and factories. There is a very good chance that these regulations will be challenged. In the meantime, at a minimum, lenders involved with such facilities should determine the potential cost to comply with the new rules. Many of these facilities cool their equipment by using large amounts of water taken from water bodies that are subject to federal jurisdiction. Cooling water intake structures can injure or kill fish and other aquatic organisms as result of entrainment (drawing organisms into the structures) and impingement (pinning the organisms against the intake screen or the intake structure itself). EPA issued the new regulations under section 316 of the Clean Water Act in response to a settlement agreement with an environmental group. Section 316(b) of the Clean Water Act requires “that the location, design, construction, and capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impact.” The regulations apply to existing facilities that have or require a water discharge permit under federal rules and withdraw at least 25% of their water from a cooling water intake structure with a design flow intake of more than two million gallons per day from a water body. Because the issues associated with entrainment differ from impingement, the new rules address the two situations separately. With respect to impingement, some environmental groups wanted EPA to require cooling towers and closedcycle cooling systems that recirculate withdrawn water, which uses significantly less water (and, as a result, causes less harm to aquatic life) than facilities that withdraw water, use it once for cooling and then discharge it back into the environment. However, the use of closed-cycle cooling systems is impractical for many existing facilities since the technology may be prohibitively expensive or require additional land to install. As a result, EPA did not adopt closed-cycle cooling as the best technology available to reduce impingement. Rather, it concluded that modified traveling screens on intake structures represent the best technology available and offered seven options for doing as well or better than modified traveling screens. For example, one option is to use a cooling water intake structure with a maximum through-screen intake velocity of 0.5 feet per second. EPA said there is no nationally available technology that represents best technology available when it comes to reducing entrainment. The best approach to reduce entrainment will be determined on a case-by-case basis. This may include the use of fine mesh screens, variable speed water pumps or even closed-cycle cooling either alone or in combination with other technologies. Although this site-specific approach should benefit industry, it also creates uncertainty. Without a set standard, it is more difficult to determine whether any site-specific solution could be successfully challenged by an environmental group. Under the new regulations, facilities that withdraw more than 125 million gallons of water per day will have to do additional studies to help determine the best technology available to reduce deaths from entrainment. Existing facilities that have a design intake of less than two million gallons per day or use less than 25% of water for cooling are not left unregulated. Instead, EPA decided that these facilities will have to use best professional judgment to reduce harm to fish and other aquatic organisms (as opposed to best technology available) determined on a caseby-case basis. Under the regulations, EPA is also requiring that new electrical generating capacity added to existing facilities use technology that meets existing requirements for new facilities, which is essentially closed-cycle cooling or its equivalent. It is not considered a new unit to repower an existing power plant. Critics claim that the regulations will increase the price of electricity and cause electrical reliability issues since many power plants are already strained by complying with the sometimes costly requirements imposed by other environmental regulations like the mercury and air toxics rule. Senator Jim Inhofe (R-Oklahoma) said he will try to overturn the regulations. At the same time, environmental groups complain that the regulations are inadequate. The new rules will take effect 60 days after they are published in the Federal Register. Individual facility requirements will not be imposed until a facility is issued its water discharge permit pursuant to federal rules. Federal Jurisdictional Waters The US Army Corps of Engineers and EPA are trying to enlarge the scope of waters that are considered federally protected under the Clean Water Act. The existing definition has been in place for over 20 years. Even now, many developers move parts of projects to avoid such waters because of the added permitting burden. If the proposal stands, permitting requirements that would not have existed before could be triggered. For example, additional permitting requirements could be imposed on development projects that will affect wetlands because the determination of what a wetland is for purposes of federal jurisdiction relies on the definition of “waters of the United States.” This is the term that the Army Corps of Engineers and EPA are proposing to redefine. The new proposal was published in the Federal Register in April. The government is collecting public comments on the proposal through October 20, 2014. The existing definition of “waters of the United States” has left room for argument. The definition is important since it is used in many sections of the Clean Water Act, including sections that apply to permits under the national pollution, discharge and elimination system program and permits to fill wetlands. In June 2006, the US Supreme Court addressed the definition of “navigable waters” in a closely-watched case called Rapanos v. United States. “Navigable waters” are considered “waters of the United States” for purposes of the Clean Water Act. In the end, the Supreme Court failed to endorse one single test to identify navigable waters. In Rapanos, four of the nine justices decided that “navigable waters” are “only those relatively permanent standing or continuously flowing bodies of water ‘forming geographical features.’” Wetlands, according to those justices, were also “navigable waters” if they have “a continuous surface connection” to such bodies of water with “no clear demarcation between” them. A fifth justice, Anthony Kennedy, proposed his own test. He suggested that a wetland would be subject to federal jurisdiction if that wetland had a “significant nexus” to traditionally navigable waters, meaning that federal jurisdiction, in Justice Kennedy’s view, should be asserted if the wetlands “either alone or in combination with similarly situated lands in the region, significantly affect the chemical, physical, and biological integrity of other covered waters more readily understood as ‘navigable.’” The Army Corps of Engineers and EPA propose to treat six categories of waters as “waters of the United States” by rule. They are waters that are currently used, were used in the past, or may be susceptible to use in interstate or foreign commerce, including water bodies that are subject to tides, interstate waters (including wetlands), territorial seas, all impoundments of these waters, tributaries that connect to them, and any water adjacent to such waters. The government would also assert jurisdiction on a caseby-case basis over other waters that have a “significant nexus” to tidal waters, interstate waters (including wetlands) and territorial seas. This test is similar to Justice Kennedy’s test in Rapanos; however, the term “significant nexus” would mean water (including a wetland) that drains to the nearest tidal water, interstate water (including a wetland) or territorial sea and “significantly affects the chemical, physical, or biological integrity of” any of those specified waters. The effect is “significant” if it is more than speculative or insubstantial. Although the agencies are seeking comments on the proposal, the study on which the proposal is based (“Connectivity of Streams and Wetlands to Downstream Waters: A Review and Synthesis of the Scientific Evidence”) is still in draft form. EPA said that its final rule will be based on the final report.Cross-State Air Pollution The US Supreme Court upheld the authority of the Environmental Protection Agency to hold upwind states responsible for cross-border air pollution that harms downwind states in a case called EME Homer City Generation v. EPA in late April. In a six-to-two ruling, the court reinstated a cap-and-trade program, called “CSAPR,” intended to cut emissions of sulphur dioxide and nitrogen oxides from power plants and other sources in 28 states. The emissions trading program was originally scheduled to take effect in 2012, but implementation was delayed pending resolution of various legal challenges. The decision reverses an earlier US appeals court finding that the agency went beyond its authority in the way it apportioned the required emissions reductions among affected upwind states. The CSAPR rules will let the market decide where pollution should be reduced by setting a limit on total pollution and allowing credits or allowances to be traded. The lower court suggested that the agency should have apportioned emissions reductions by state based on the amount of pollution each upwind state causes. The Supreme Court also held that EPA may impose a federal solution where states have failed to comply, rather than letting the states amend their state implementation plans, or SIPs. Downwind states complain that upwind states can be in compliance with air quality requirements within their borders while sending some of their air pollution to neighboring states, thereby interfering with the neighboring states’ ability to meet their regulatory obligations. The affected downwind states are largely located in the Northeast and the midAtlantic, while the upwind states are mainly in the Midwest and use more coal to generate electricity. The Supreme Court reversed and remanded the matter to the lower court for further proceedings. Adjustments to the CSAPR implementation schedule will certainly be needed as some compliance deadlines passed while the appeals were working their way through the courts. While some observers suggest much of the burden of complying with CSAPR as drafted has been blunted due to recent coal power plant retirements and the implementation of other EPA regulations, EPA could strengthen the emissions reductions required by CSAPR. Despite this win for EPA, when the case returns to the lower appeals court, the appeals court will have to wade through other issues that could still conceivably derail the cross-state rule. The downwind states complain that several aspects of the rule, including the air quality modeling used to determine which upwind states are covered, the method for setting state emissions budgets and the compliance deadline, were all the result of arbitrary and capricious action by EPA. On the other hand, the appeals court struck down CSAPR earlier on probably the strongest possible grounds, and its decision was then reversed by the Supreme Court. The odds of CSAPR failing on the remaining grounds are reduced. While the lower courts and EPA sort out these issues, a less stringent “clean air interstate rule,” which preceded CSAPR, will continue to apply. Opponents of CSAPR argue that the CSAPR rule, combined with the mercury and air toxics standards rule, could lead to the retirement of up to 60,000 megawatts of coal-fired power plants by 2020. Climate Change A series of scientific studies over the last several months suggest that the effects of climate change are coming faster and more furiously than previously believed. The Intergovernmental Panel on Climate Change, a United Nations group that periodically summarizes climate science, released several reports over the last six months that conclude that climate change is already having sweeping effects on every continent and across the oceans. The panel warns that the problem is likely to grow substantially worse unless greenhouse gas emissions are brought under control. The current impacts described in the report include that sea ice in the Arctic is collapsing, water supplies are coming under stress, heat waves and heavy rains are intensifying, coral reefs are dying, and fish and other creatures are migrating toward the poles or, in some cases, going extinct. The report finds that the oceans are rising at a pace that threatens coastal communities and are also becoming increasingly acidic as they absorb carbon dioxide. Organic matter frozen in Arctic soils for millennia is now melting, allowing it to decay into greenhouse gases that will cause further warming. The report noted that many businesses around the world are making plans to adapt to climate change. It noted that the impacts of climate change may be moderated by factors like economic or technological changes. Despite that, it said there is an increasing risk that climate changes could overwhelm the efforts by businesses to adapt without a meaningful global effort to limit greenhouse gas emissions. While such emissions have begun to decline slightly in a number of wealthy countries, including the United States, the gains are being lost to emissions from rising economic powers like China and India. The UN report is expected to receive attention as nations try to agree on a new global climate treaty when they meet in New York this fall and in Paris in 2015. In the United States, a large panel of scientists overseen by the federal government issued the National Climate Assessment in early May. This region-by-region assessment documents how the effects of climate change are being felt throughout the country, with water growing scarcer in dry regions, rains increasing in wet regions, heat waves increasing in number and severity, worsening wildfires, and greater insect infestations in forests. In the Northeast, for example, the report found a substantial increase in heavy rains and risks from a rising sea level that could lead to further flooding of the sort that occurred during Hurricane Sandy. The report suggests that such sweeping changes have been caused by an average warming of less than 2 degrees Fahrenheit in most of the US over the past century. It says that if global greenhouse gas emissions remain on their current path, future warming could exceed 10 degrees by the end of this century. The National Climate Assessment is the third such report in 14 years. It was supervised and approved by a large committee of experts, including representatives of two oil companies. The White House released it in May in part to build political support for contentious new climate change regulations that EPA issued in early June. In addition, two other groups of scientists also recently concluded that a large section of the western Antarctic ice sheet is falling apart and its loss now appears to be unstoppable, a development that scientists have feared for decades. The separate findings were published in the journals Science and Geophysical Research Letters. The western Antarctic ice sheet sits in a bowl-shaped depression, with the base of the ice below sea level. Scientists report that warm ocean water is causing the ice along the rim of the bowl to thin and retreat. As the front edge of the ice pulls away and enters deeper water, it can retreat much faster than before. If the studies are accurate, then the melting could destabilize neighboring parts of the ice sheet and an eventual rise in sea level of 10 feet or more may be unavoidable.