A new report from the U.S. Chamber of Commerce claims that the Environmental Protection Agency (EPA) uses a regulatory tactic dubbed “sue and settle rulemaking” to force states to relinquish their authority and accept agency-promulgated plans to mitigate regional haze that are much costlier to implement.

The EPA’s Regional Haze program, established by the Clean Air Act in 1977, seeks to remedy visibility impairment at federal national parks and wilderness areas. But because the rule is an "aesthetic regulation, and not a public health standard," Congress stressed that the states, not the federal agency, should impose regulations that govern it, says the chamber’s July 13 report titled "EPA’s New Regulatory Front: Regional Haze and the Takeover of State Programs."

"However, EPA—with some help from its friends at special interest groups and the controversial ‘Sue and Settle’ Rulemaking process—has devised a loophole to usurp state authority and federally impose a strict new set of emissions controls that cost 10 to 20 times more than the technology the states would otherwise have used," alleges the report authored by William Yeatman, an assistant director of the Center for Energy and Environment at the free-market think tank, the Competitive Enterprise Institute.

As evidenced by five consent decrees, the EPA negotiated with environmental groups and committed itself to deadlines, the report says. "On the eve of any given deadline, the agency, due to the Consent decree, determines that it cannot approve a state’s strategy to reduce haze due to alleged procedural inadequacies. Then, EPA claims that it has no choice but to impose its preferred controls through a Federal Implementation Plan (FIP) in order to comply with the Consent Decree."

The EPA’s typical reason cited as procedural inadequacy in state submissions is "incorrect estimation of costs. “But the EPA’s own basis for this assertion is itself suspect," the report declares. The EPA-hired independent contractor who vetted the cost-effectiveness analysis of regional haze implementation plans submitted by New Mexico, Oklahoma, and North Dakota was "a paid consultant who routinely serves as a witness for the very same environmental groups who sued to obtain the Regional Haze Consent Decrees," it alleges.

U.S. Chamber of Commerce: EPA FIPs Require Installation of More Costly Controls than SIPs

Using this "pretextual rational," beginning in 2009, the agency imposed millions of dollars in annual costs on six coal-fired power plants in New Mexico, Oklahoma, and North Dakota, requiring installation of more costly controls than the best available retrofit technology (BART) controls each state chose, the report says.

In North Dakota, the agency rejected the state’s proposed installation of Selective Non-Catalytic Reduction (SNCR) technology at a cost of $50 million for all the state’s coal plants and instead implemented a FIP that requires Selective Catalytic Reduction (SCR), which could cost more than $500 million, the state has claimed.

Meanwhile, New Mexico is legally contesting the EPA’s FIP that will require PNM to install SCR technology at its 1,800 MW San Juan Generating Station by September 2016, costing the utility $345 million—substantially more than the $77 million to install SNCR as required by the now-defunct state plan.  According to legal documents filed by state of Oklahoma, an EPA-promulgated FIP would require the state’s largest generator, Oklahoma Gas & Electric, to spend more than $1.2 billion to install dry flue gas desulfurization scrubbers on four generating units over the next five years.

Beyond the three states, the EPA has also proposed $24 million in annual costs for a coal plant in Nebraska, the report notes. Over the next few years, the EPA’s "Regional Haze power grab" could extend to Wyoming, Minnesota, Arizona, Utah, and Arkansas, it claims. 

Noting it had not read the entire report, the EPA said it continues to work closely with the states to put in place flexible plans that improve visibility and protect public health, and to date has taken action to propose or finalize full approval of plans to reduce pollution in 30 states. "EPA is currently working on finalizing plans in the remaining states," the agency said in a statement to POWERnews.

Regional Haze Has Health Implications, Environmental Groups Say

Environmental law group Earthjustice on Friday issued a statement contesting the report’s claims, specifically that haze cleanup requirements do nothing to improve health or visibility in national parks or wilderness areas. "The same pollutants that cause visibility impairment also contribute to very serious health damage like lung and heart disease, asthma attacks, and premature death," the group said. "EPA estimated that in 2015, full implementation of the Regional Haze Rule nationally will prevent 1,600 premature deaths, 2,200 non-fatal heart attacks, 960 hospital admissions, and more than 1 million lost school and work days."

Regarding the claim that the EPA has not given states sufficient time to update technology and clean up power plants, the group said that haze cleanup plans now being completed were nearly five years past the 2007 deadline set in the Regional Haze Rule. "Thirteen years ago, states were put on notice of their obligations in the 1999 Regional Haze Rule, and 22 years ago Congress told EPA and states to cut regional haze by requiring BART on antiquated coal plants and factories. The current regulations give industries that must install controls five years to install required controls," it said.

The group also faulted the EPA for not doing more to enforce the Regional Haze Rule—which it said was enacted by Congress with "overwhelming bipartisan support," and mandated restoration of clear air in 156 of U.S. national parks and wilderness areas (known as Class I areas).

"To date, EPA has finalized only four plans—with just seven more proposed—replacing parts of a state’s proposal in instances where the impacts on Class I areas have been demonstrated to be significant; where technology to clean up pollution sources has been deemed cost effective, feasible and available; and where the state has failed to take any or any meaningful action that would result in required Clean Air Act improvements in Class I air quality," Earthjustice said. "Three of these 11 plans are for jurisdictions that proposed no plan of their own. In addition, the EPA has finalized a required technical change that does not impose any new conditions in 12 states."

“Sue and Settle” in the Congressional Spotlight

The report comes on the heels of a U.S. House Committee on Oversight and Government Reform hearing in late June on the EPA’s alleged "sue and settle" practice. Committee Chairman Darrell Issa (R-Calif.) said two case studies examined during the hearing—one concerning the EPA’s implementation of a FIP in Oklahoma to mitigate regional haze, and the other, a settlement concluded by the EPA in Dec. 23, 2010, that forced it to promulgate New Source Performance Standards (NSPS) for greenhouse gases at new and existing U.S. power plants—were but two examples of the "dozens of policy changes the EPA has committed to in sweetheart sue and settle arrangements with special interests."

In both cases, the "EPA was not in violation of any mandatory duty and as such, the litigants didn’t have a legal leg to stand on," said Rep. Issa. "And yet the agency settled, committing the agency to make major policy changes, without interested parties at the table, and rewarding litigants with a cash prize they never were entitled to."

At that hearing (where U.S. Chamber of Commerce Senior Vice President William Kovacs and the recent report’s author William Yeatman were also witnesses) Roger Martella, an environmental attorney with law firm Sidely Austin LLP, testified that while environmental nongovernmental organizations (NGOs) were key to the success of environmental laws in the U.S., a "subset of NGOs” had added “a new and unanticipated weapon in an unfortunate effort to conflate the respective roles and boundaries of governmental and nongovernmental organizations."

Martella said that he was concerned that the increased use of the "sue and settle" approach to interactions with the government on regulatory issues could "risk the core principles of transparency, public participation, and judicial review." The resulting "off ramp settlements" would enable NGO plaintiffs and petitioners, not the agencies entrusted with implementation of the laws, "to set priorities and timelines for how the government enacts certain rulemakings over other competing concerns and resources."

This "quasi-governmental role is not only inconsistent with the respective dividing lines between governmental and nongovernmental functions, but, critically, also threatens to distract the government’s limited resources away from other important priorities, contributing to a cycle of the
government unable to meet other important obligations and priorities," he said. Beyond that, "sue and settle" consent decrees breach the guarantee of transparency, being typically reached with a subset of interested parties outside the public process, without full and broad stakeholder input.

Martella claimed that the settlements had become so common that "some groups had labeled the phenomenon of reaching an enforceable agreement with the government on regulatory commitments and shifting of government resources as ‘mega settlements.’"

Robert Percival, a professor of law at the University of Maryland Francis King Carey School of Law and former Environmental Defense Fund attorney, testified that U.S. environmental law "is the envy of the world." Suits against government agencies ensured conformity to legal and procedural requirements and to force them to perform non-discretionary duties, he said.

"In most cases where agencies are sued for failing to perform a non-discretionary duty, such as missing a statutory deadline, liability is clear and the primary issue is when the violation will be cured by the agency performing its mandatory duty. An agency will only enter into a settlement when it believes that the settlement will leave it better off than it would have been had the litigation continued to judgment," Percival told the House committee.

Characterization of settlements of environmental litigation against agencies "as collusive ‘sue and settle’" to bypass normal statutory and rulemaking requirements is "simply a fantasy," he added. "Such litigation does not exist because existing legal safeguards preclude it."

Sources: POWERnews, U.S. Chamber of Commerce, Earthjustice, U.S. House Committee of Oversight and Government Reform
—Sonal Patel, Senior Writer (@POWERmagazine)