MA Highest Court Quashes State’s Attempt to Allow Electric Power Suppliers to Fund Increased Gas Pipeline Capacity Via Passthroughs to Ratepayers

In a decision dated August 17, 2016, the Supreme Judicial Court of Massachusetts vacated an order of the Massachusetts Department of Public Utilities (MDU) which would have had the effect of subsidizing, via a pass-through to ratepayers, the cost to electric energy suppliers of developing increased natural gas pipeline capacity into the state.  This was also a big win for plaintiff ENGIE Gas & LNG LLC (formerly GDF Suez Gas NA LLC), a major importer of LNG. See 

https://1.next.westlaw.com/Document/I41144b53646211e6a807ad48145ed9f1/View/FullText.html?navigationPath=Search%2Fv3%2Fsearch%2Fresults%2Fnavigation%2Fi0ad7052400000156bab7d9de70f5423e%3FNav=CASE%26fragmentIdentifier=I41144b53646211e6a807ad4814
MDU saw a problem in the limited availability of natural gas pipeline capacity for gas-fired electric generation and attempted to solve that problem through an expansive reading of Massachusetts law. MDU would have permitted electric power companies to sign long-term contracts, typically 20 years, with natural gas suppliers to permit the suppliers to secure funding for new pipeline construction.  MDU also saw that the electricity producers wouldn’t be willing to take on the risk of those contracts and authorized the electric generators to pass the cost of the pipeline capacity through to consumers.

ENGIE has an LNG import facility in Massachusetts.  Because of the competitive threat the MDU order posed to ENGIE’s business, it sued to overturn the order. An interesting twist is that the independently elected Attorney General of Massachusetts, a Democrat (the Governor is Republican), filed an amicus brief in the case also urging vacation of the MDU decision, in part because the Attorney General had already taken the public position that Massachusetts did not need more gas pipeline capacity and should look to renewable sources of energy to meet future electric energy demand.  

Now the ball is back in the Legislature to consider whether to amend the law to authorize the subsidy program that the MDU proposed.  But the SJC decision also keeps very much alive the issue whether there is a natural gas capacity problem, leading to higher electric energy prices, that cannot be resolved without additional gas pipelines, or whether new sources of alternative energy, wind, solar, hydropower, plus LNG, can meet the State’s electric energy demand. 
Kenneth A. Reich, Esq., Principal, Kenneth Reich Law, LLC

Steve Kalish, Esq.

August 2016

Note:  This article may be considered legal advertising in some jurisdictions.

©KennethA.Reich 2016

A New Era in Climate Change?

Kenneth A. Reich, Esquire
Kenneth Reich Law, LLC

December 2015

Is This a New Era in Climate Change Policy?

As a tumultuous year in U.S. energy and environmental policy comes to an end, the Paris Climate Accord was signed. Will it save the world from the reasonably foreseeable results of Climate Change or is it simply an inadequate agreement with no teeth?  I think the answers are ‘hopefully, with some further tweaking’, and ‘no’.  The goals set in the Accord are, according to many scientists, much too modest to avoid a catastrophic rise in temperatures.  Yet it is the first time in history that nearly 200 countries, including China and India, have signed any type of agreement, much less an agreement to do something as important and complex as address Climate Change.   And the Accord does establish a framework for monitoring the progress of each of the signers in achieving their individual goals,  5 year reviews to consider additional reduction targets, and a commitment by developed nations to provide substantial monetary assistance to the undeveloped nations in order to allow them to leap frog the Industrial Revolution and move quickly to a renewables based energy system.  Although there is no overall enforcement mechanism, the worldwide recognition that Climate Change is a major problem is a train that has left the station and a combination of public pressure (including the refusal of ordinary citizens to tolerate persistent air pollution (see China)), recognition by the financial and energy markets that fossil fuel cannot be the predominant energy source of the future and the new worldwide opportunities for clean investments spawned by this Accord should keep that train moving forward. Provided that the largest greenhouse gas emitters—the U.S., China and India—don’t back out of the Accord or fail to follow through in good faith with their own emission reduction goals and that the developed world does not default on its pledge to give substantial assistance to the undeveloped nations, the Accord is very likely to usher in a new energy era much less dependent on fossil fuels and much more dependent on renewables and energy conservation/efficiency.  While low cost, high emitting coal will be the energy source of choice for much of the developing world in the near term and the U.S. will struggle with the politics and issues of moving to a less carbon intensive energy system, including the need to assist workers who depend on the coal economy for their livelihood and to support states and localities that must adjust to the economic reality of a different energy mix, there are billions to be made by whichever company invents the most efficient and least expensive system to capture and sequester carbon and by the developers of new renewable technologies.  Already fracking, for all of its environmental and seismic risks that need to be addressed, is a national game changer in producing abundant supplies of low cost natural gas as a competitor to coal and oil.   Not too far from the horizon is the magic bullet energy storage device that will make wind and solar even more viable.  Also, let’s not forget zero emissions nuclear energy.

As we bid goodbye to what has been an awful year in many respects, may the Climate Accord and the spirit of cooperation exhibited in Paris inspire us all to confront, with intelligence, compassion and renewed determination, the tremendous problems we face as citizens of a small, populous planet. Best of the holidays to all!  Ken

Recent Federal and State Court Decisions Cast Doubt on Whether State Nuisance Claims Are Preempted by the Clean Air Act

Kenneth A. Reich, Esq. Kenneth Reich Law, LLC

Recent Federal and State Court Decisions Hold that Sources with Clean Air Permits Mav Be Subiect to State Nuisance Law Claims

Hiding behind all of the buzz about President Obama’s rejection of the Keystone Pipeline project permit, the multiple appeals to the Clean Power Plan final rule and to the final EPA/ Corps of Engineers Rule defining “waters of the United States” are a series of recent federal and state court decisions that may have far more importance to the regulated community in the long term. These cases hold that state nuisance and other tort claims against power plants and other major sources of air emissions are not preempted by the federal Clean Air Act. This is an issue that the Supreme Court specifically left open in its 2011 decision in American Electric Power v. Conn. (“AEP”).

In AEP the Supreme Court held that the Clean Air Act displaces (preempts) claims under the federal common law of nuisance, but it expressly refused to decide whether state nuisance claims are also preempted. The Federal Court of Appeals for the 6th Circuit recently answered this question by holding that state nuisance and tort claims against sources of air emissions are not preempted by the federal Clean Air Act. Little v. Louisville Gas and Electric, decided November 2, 2015, 2015 WL 6646984 and Merrick v. Diageo Americas Supply, Inc., Nov. 2, 2015, 2015 WL 6646818. Little involved a power plant, Merrick involved a whisky distillery. In each case a group of homeowners brought state private and public nuisance actions against the sources alleging that dust and fumes from the plants was coating their properties, reducing the market value, threatening health, etc. The 6th Circuit, relying on the Supreme Court’s decision in Int’l Paper Co. v. Ouellette that source state nuisance remedies (as opposed to claims under the law of an affected state) were not preempted by the federal Clean Water Act and on identical language in each Act preserving state remedies, denied the defendants’ motions to dismiss.

In light of Ouellette and prior decisions by federal appeals courts from the second, third and filth circuits and the supreme court of Iowa that the Clean Air Act does not preempt state nuisance claims, the recent 6th Circuit decision is not surprising. However, as of the date of this blog, the Supreme Court has not answered its own question in AEP.

Another issue that has not been given much attention in the recent caselaw is the effect of the so-called permit shield under the Clean Air Act. The permit shield protects sources with federally enforceable Clean Air permits from suits brought under any federal and state laws that are listed in the permit. See 42 U.S.C. 7661c. It is difficult to reconcile the supposed protection of the permit shield with these recent non-preemption decisions.

The bottom line takeaway: Unless the Supreme Court reverses the recent lower court caselaw trend, sources of air emissions that hold federally enforceable Clean Air permits are not immune from state law nuisance and tort claims based on the law of the source state. However, bringing a suit and winning it are very different things. If the source has good controls to mitigate or eliminate odors, dust and other “nuisances” and/or if the source is located in an industrial area where it is difficult for the plaintiffs to prove that the source caused the alleged nuisance, the suits may ultimately fail. Unfortunately this is modest comfort to sources that have spent hundreds of millions of dollars to comply with their air permits and with new federal regulations.

Copyright KennethReich2015

Kenneth A. Reich of Kenneth Reich Law, LLC concentrates his practice in environmental law and energy law, including both transactions and litigation. He also provides strategic regulatory consulting. For more information, please see his website at www kennethreichlaw com.

Note: This blog is not intended to convey legal advice and the reader should consult a lawyer with the relevant legal experience for specific legal advice. Also, this blog may be considered legal advertising in some jurisdictions.

Supreme Court Strikes Down EPA Power Sector Rule

Supreme Court strikes Down EPA’s Mact Rule for the Power Sector

On June 29, 2015, In a 5-4 decision (J. Scalia) the Supreme Court invalidated EPA’s Clean Air Act MACT rule setting hazardous air pollution standards (including mercury) for the power sector on the grounds that EPA should have taken costs in account when it initially decided to list the power sector as a source.  See full opinion here.

The Clean Air Act subjects major sources of hazardous air pollutants to regulation, culminating in promulgation of source specific technological standards (“MACT”). However, the Act deferred similar regulation of power plants, requiring EPA first to study the health impacts from the power sector to determine if listing was “appropriate and necessary”.  Based on the study, EPA decided to list power plants as a source of hazardous air pollutants, but did not expressly consider costs in this listing decision, the same procedure it used when listing other major sources.  Although EPA argued that following the decision to list the power sector as a source it took a number of additional regulatory actions in which it expressly  took costs into account, J. Scalia wrote that EPA could not “gerrymander” its decision-making and defer consideration of costs since Congress intended to treat the power sector differently from other major sources of hazardous air pollutants.

J. Kagan’s lengthy dissent took the majority to task for ignoring the big picture, i.e. that EPA took costs into consideration at many stages of the complex regulatory process involving power plants.  For instance, EPA divided the power plant sector into subcategories, e.g. different types of coal-fired plants, oil plants, gas plants, such that a plant in one subcategory did not need to meet the standard met by the top 12% of plants in another subcategory (the statutory emissions standard).  J. Kagan also took issue with the majority’s comparison of costs, i.e. 9 billion of costs vs. a few millions of benefits, as erroneous since the ultimate cost-benefit analysis found that the benefits were between 3-9 times the costs. Further, she pointed out that the majority ignored the Congressional rationale for deferring the power sector’s inclusion in the MACT program pending a health effects study: not to treat the power industry differently than other major sources of hazardous air emissions, but to give EPA time to study whether existing regulation of the power industry would yield the same benefits as the MACT regulations.  Additionally, J. Kagan wrote that the language in issue:  “appropriate and necessary”, was ambiguous and that the Court should have deferred to EPA’s interpretation pursuant to the well-established Chevron doctrine.  J. Kagan concluded that the majority’s decision “deprives the Agency of the latitude Congress gave it to design an emissions-setting process sensibly accounting for costs and benefits alike.  And the result is a decision that deprives the American public of a pollution control measure that the responsible Agency acting well within its delegated authority, found would save many, many lives.”

The practical impact of the decision is limited since many power suppliers have already begun to install  technology to meet the MACT standard and there are few plans to install/retrofit coal plants.  However, this decision is potentially significant to the extent it signals a willingness by a majority of the Court to disregard Chevron deference to an agency’s interpretation of the statutes it administers where the stakes are high, as they usually are in challenges to EPA rulemaking.  Note that J. Thomas’ separate concurrence specifically called for an end to the Chevron doctrine.  The decision also is significant because the majority appears to have ignored its own precedent that where the Clean Air Act does not expressly require EPA to consider costs in rulemakings, it need not.

While EPA has generally fared well recently in the Supreme Court, the question is whether this decision (and a partial defeat by EPA in the UARG case last term) indicates a new trend or is just a reflection of the specific facts of this case.

For further information, please contact the author at kreich@kennethreichlaw.com or 781-608-7267.

Kenneth A. Reich, Esq. July 2015 Kenneth Reich 2015 ©, All Rights Reserved

EPA/ARMY CORPS Issue Long Awaited Final Rule Defining “Waters of the United States”

       On May 27, 2015, the EPA and the Army Corps of Engineers issued a final Rule defining “waters of the United States” (“WUS”) for purposes of the federal Clean Water Act. Click here for the final Rule.

       The Rule provides needed clarity to the definition of WUS, whose coverage has been made muddy by a trio of recent Supreme Court cases, culminating in the plurality opinion in Rapanos v. United States, 547 US 715 (2006). The bottom line for practitioners and for their clients is that the EPA has established some bright line tests for what are and are not considered WUS, but still leaves it to the Army Corps, EPA and the States to determine on a case by case basis the close calls. Call it clarity with a large asterisk.

       NOTE that the Rule and Preamble are more than 250 pages and defy easy summarization. This blog article highlights the key points one needs to know about the significance of the Rule, but a close reading of the Rule is necessary for anyone attempting to make decisions or give advice regarding its content.

          A. The Rule clarifies that the following bodies of water are jurisdictional WUS by rule:

          1. traditional navigable waters

          2. interstate waters

          3. territorial seas

          4. impoundments of jurisdictional waters

          5. tributaries

          6. adjacent waters

       The Rule provides helpful details on the definition of these terms in order to eliminate ambiguity present in the proposed rule.

          B. The Rule categorically excludes the following waters from being classified as WUS:

          1. already exempted waters like agricultural drainage and previously created farmlands

          2. groundwater, about which there had been some dispute

          C. The Rule provides that all other waters are to be evaluated on a case by case basis to determine if they meet the “significant nexus” test. “Significant nexus” is essentially defined as it was by J. Kennedy in his concurrence in Rapanos: whether a water has the potential to impact the “chemical, physical and biological integrity of [jurisdictional waters]”. Where the connection is “speculative or insubstantial” there is no significant nexus.

       In order to narrow the scope of waters that will need to undergo a case by case analysis, the Rule sets forth some bright line tests and guidelines.

Conclusion

       The purpose of the Rule was to attempt to bring clarity to this decidedly murky area of law for the benefit of farmers, developers, landowners and a myriad of other parties affected by the definition of the term WUS. The Rule largely accomplishes its purpose, although it still leaves a number of situations to case by case determination. Hopefully the EPA and the Army Corps will issue guidance or further rules to narrow the universe of situations in which a case by case determination is necessary. Whether the Rule went too far or not far enough is in the eye of the beholder and will be inevitably decided by the courts.

Kenneth A. Reich, Esq.

June 2015

*This blog article does not constitute and should not be interpreted as legal advice related to a specific issue arising under or impacted by the Rule. Readers are cautioned to consult a lawyer with significant experience in the field for specific legal advice regarding the coverage of the Rule.

Court Remands on EPA PM 2.5 Rule, Leaving Industry in a Fog

DC Circuit Remands EPA PM 2.5 Rule

On January 22, 2013, in Sierra Club v. EPA, No. 10-1314, 2013 WL 216018, a three-judge panel of the DC Circuit remanded most of an EPA permitting rule regarding de minimis exemptions from certain analysis and monitoring requirements for projected emissions of PM 2.5.  The Court held that EPA exceeded its authority to set such de minimis levels where the Act did not provide it such discretion.  The significance of this ruling is that it potentially widens the set of sources to whom PM 2.5 requirements apply and will make permitting of sources of such pollutants more challenging.

Under EPA’s PSD permitting program (applicable to new source and modification permits for attainment areas), sources seeking such permits must perform one year of pre-permit monitoring to set the baseline for the pollutants at issue and must make a demonstration that the source’s projected emissions of such pollutants will not exceed the national ambient air quality standard for each such pollutant.  The Rule at issue set de minimis screening values (i.e. thresholds) for PM 2.5 (so-called small particulate matter) that would have allowed the EPA or state agencies to exempt PSD permittees from the NAAQS analysis and/or one year monitoring requirement for PM 2.5.  Sierra Club challenged the EPA Rule as unauthorized under the Clean Air Act and the intervenor, UARG, argued that EPA did not go far enough in providing a blanket exemption for such de minimis levels.

The Court, in a brief opinion, held that a) based on EPA’s concession and request for remand, that it would remand to EPA a portion of the Rule dealing with significant impact levels (“SILs”) to reconsider the cumulative impact of more than one de minimis source of PM2.5 on the required analysis of potential violations of the National Air Quality Standard for PM2.5 and b) that with respect to the requirement of significant monitoring concentrations (“SMCs”) and the provision that a projection of de minimis SMCs could exempt a source from the one year pre-construction monitoring, that it would remand to EPA for further consideration in light of the same cumulative impact issue.

The significance of this decision is that it potentially places a hold on PSD permitting with respect to PM2.5, primarily for coal-fired utilities and other industrial sources using fossil fuels, since these fuels, unlike natural gas and renewables, are the main stationary sources of particulate emissions, including PM2.5. Without certainty on whether there is a de minimis or other threshold for PM 2.5 pre-construction monitoring, sources do not know how to plan for and price the controls for PM2.5 (such controls are emerging technology). This uncertainty builds on the existing uncertainty about PM 2.5 controls in light of EPA’s  recent reversal of its longstanding guidance that for purposes of measurement and control of PM 2.5 emissions, sources can use as a surrogate for PM 2.5 emissions, PM 10 emissions.  See Implementation of the New Source Review Program for Particulate Matter Less Than 2.5 Micrometers (PM2.5) (Final Rule), 73 FR 28321 (May 16, 2008); 74 FR 48153-01 (9/22/09) (9 month stay of implementation of the revocation of the EPA’s surrogate method); Memo from Stephen D. Page, “Implementation of New Source Review Requirements in PM-2.5 Non-Attainment Areas” (explanation of rationale for long-standing surrogate policy).

Until EPA rewrites this PM 2.5 de minimis rule, the states and permittees will remain in a fog of uncertainty regarding monitoring and control of PM 2.5.

___________________________________________________________________

Kenneth Reich is an experienced environmental and energy lawyer, including significant experience under the Clean Air Act.  He represents and counsels clients with respect to the requirements of the Clean Air Act and other federal and state laws and regulations and manages both litigation and transactional matters for his clients.  See his website for further information: www.kennethreichlaw.com.

Note:  This memo is not intended as nor should it be regarded as legal advice. Please consult an attorney for the specifics of any of the matters discussed above. Further, this memo may be regarded as lawyer advertising in some jurisdictions.

When Will We Wake Up?

When Will We Wake Up and Place Civilized Restrictions on Gun Sales,

Possession and Use?

               The latest tragedy involving guns must spur us to action to control this epidemic that is destroying the fabric of our society. Surely the “right to bear arms” was never meant to mean “the right to massacre innocent children.” It is way past time for the public—if its representatives won’t—to demand much more rigorous controls on the sales of all guns, including bans on the import, sale and possession of guns that are not meant for individual protection or hunting, but are simply weapons of mass destruction. This is demonstrably a public health issue.

What kind of country have we become if we freely allow virtually anyone to legally purchase assault rifles, machine guns and automatic and semi-automatic weapons, massive amounts of bullets and magazines that hold hundreds of rounds that make it simple to kill many people in a matter of seconds? The rationalization that “guns don’t kill people, people kill people” does not stand up. It’s like saying that “people kill, not bombs.” Yet we don’t allow just anyone to purchase TNT, plastic explosives or time bombs.

Civilization meant among other things the end of the law of the jungle where it was kill or be killed. However, we are rapidly descending back jungle law where fear is our daily bread and powerful weapons of mass destruction threaten our lives. According to a recent article in the Washington Post, the “United States has by far the highest per capita rate [of firearm related killings] of all developed countries.” http://www.washingtonpost.com/blogs/worldviews/wp/2012/12/14/chart-the-u-s-has-far-more-gun-related-killings-than-any-other-developed-country/. And a recent report that the U.S. has one of the lowest life expectancy rates for persons under 50 among industrialized countries, with death by gun one of the leading causes, should wake us up to the fact that guns are a major health problem.

The NRA’s suggestion that we put armed guards in our schools is ludicrous. The last thing we need is more guns, especially in this most vulnerable of venues. The time is long past for action. That action should include, at a minimum, the following steps:

• Re-establishment of the national ban on import, sale and possession of assault rifles and a ban on the import, sale and possession of their cousins, semi- and automatic weapons and any other guns with multiple shot/round firing capacity;


• Requirement that no one under the age of 21 be allowed to buy a gun and that those over the age of 21 wishing to purchase a gun of any type, and ammunition, obtain a license from the State Police. That license, which is discretionary, not a right, will be granted only to licensed hunters and those persons who can show a particularized need for self-protection, and then only after an extensive background check into arrests, convictions, , record of domestic abuse, job history and hospitalizations for mental illness, using a state and national database of such information, and a month long waiting period (longer if it takes longer to finish the background check);


• Requirement that anyone selling guns as a business—gun shops, gun fairs, sellers on the Internet-be required to register with the State Police and be forbidden from selling guns to anyone not possessing a valid in-state State Police license;


• No one be allowed to purchase more than one gun per year;


• No one be allowed to purchase more than a reasonable amount of ammunition at any one time or during a year and that sellers be required to report immediately to the State Police and FBI all sales of ammunition to any one person that exceed such reasonable amount (similar to the requirement that banks report cash transactions of over $10,000);


• The sale of protective armor, bullet proof vests, helmets, etc. be banned.


• Any individual wishing to sell or give a gun to a non-family member must instead sell it to the local or State Police at fair market value.


• These requirements will not apply to full time military or police personnel.


                No set of reasonable gun regulations can ever prevent someone from getting a gun illegally or from a legal gun owner from attempting to murder someone. But by vastly restricting the volume of guns sold in the U.S. and making it extremely hard to get a gun legally, other than for hunting or documented need for personal protection, hopefully we can put an end to this national insanity.

Kenneth A. Reich, Esq.
Boston, MA

@kennethreichlaw