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Changing the Climate for Greenhouse Gas Regulation: Decisions by Appellate Court and EPA May Help to Pave the Way for Comprehensive Federal Legislation



September 25, 2009

Since late June, when the House narrowly passed the American Clean Energy and Security Act of 2009, the loud and rancorous debate over health care may have obscured another critical issue being considered by Congress: climate change and the regulation of greenhouse gas emissions. Decisions made public on successive days in September by a federal appellate court and the U.S. Environmental Protection Agency (EPA), however, may go a long way toward making wide-ranging federal controls over greenhouse gas emissions a reality.

On September 21, more than three years after they had been argued, the U.S. Court of Appeals for the Second Circuit issued its decision in a pair of consolidated lawsuits against five corporations that generate electric power, one by six states and New York City, the other by three non-profit land trusts. See Connecticut v. American Electric Power Co., — F.3d –, Nos. 05-5104-cv, 05-5119-cv (2d Cir. Sept. 21, 2009). In complaints first filed in 2004, the plaintiffs alleged that the defendants are the largest emitters of carbon dioxide in the country, and among the largest in the world, and contribute to global warming by releasing more than 650 million tons of carbon dioxide into the atmosphere each year. Asserting claims grounded in the federal common law of nuisance, the plaintiffs sought injunctive relief in the form of an order that would compel the defendants to cap and then reduce their emissions of carbon dioxide. The U.S. District Court for the Southern District of New York dismissed the complaints in 2005, holding that the plaintiffs’ claims would require the court to engage in the sort of balancing of competing public policy concerns that are the province of Congress and the President, and therefore presented a non-justiciable political question. Connecticut v. American Electric Power Co., 406 F. Supp. 2d 265 (S.D.N.Y. 2005).

On appeal, a two-judge panel of the Second Circuit (the panel originally included Judge Sonia Sotomayor, who was elevated to the Supreme Court during the pendency of the case) vacated the district court’s dismissal and remanded the matter. The 139-page decision touches on numerous complex issues, but three are worth mentioning. First, the appellate court held that the obvious political ramifications of any decision that a court might render in the case does not necessarily transform the issue into a “political question.” Responding to assertions that courts should not enter the global warming debate until the political branches have made an initial policy determination, the Second Circuit instead pointed to the lack of a detailed legislative or executive branch policy as evidence that courts could adjudicate such cases without interfering with the prerogatives of the political branches.

The appellate court also held that both the states and the non-state plaintiffs (New York City and the private land trusts) could assert federal common law claims for public nuisance. In particular, the non-state plaintiffs could assert such claims because of the widespread, interstate nature of the harms alleged and because they alleged harms that qualified as a “special injury” under the approach of Section 821C of the Restatement (Second) of Torts. Finally, the Second Circuit held that the plaintiffs’ claims were not displaced by the Clean Air Act. Walking a fine line between the Supreme Court’s decision in Massachusetts v. EPA, 549 U.S. 497 (2007), which held that EPA has the authority under the Clean Air Act to regulate carbon dioxide as an air pollutant, and the principle that federal common law is displaced when Congress has spoken directly to a particular issue, the appellate court held that at least until EPA takes some specific regulatory action — beyond its proposed (but not final) finding that greenhouse gases endanger public health and welfare, see 74 Fed. Reg. 18886 (April 24, 2009), the statute does not regulate greenhouse gas emissions, or does not regulate such emissions from stationary sources.

The Second Circuit concluded with an allusion to the Supreme Court’s decision in a nuisance case brought by Milwaukee against Illinois over interstate water pollution in the days prior to the enactment of the comprehensive regulatory scheme of the Clean Water Act. In Illinois v. City of Milwaukee, 406 U.S. 91 (1972) (Milwaukee I), the Supreme Court held that the courts could adjudicate Milwaukee’s claim under federal common law because federal water pollution control legislation up to that point did not provide a remedy for the plaintiff’s harms. The Second Circuit wrote:

With regard to air pollution, particularly greenhouse gases, this case occupies a niche similar to the one Milwaukee I occupied with respect to water pollution. With that in mind, the concluding words of Milwaukee I have an eerie resonance almost forty years later. To paraphrase: “It may happen that new federal laws and new federal regulations may in time pre-empt the field of federal common law of nuisance. But until that comes to pass, federal courts will be empowered to appraise the equities of the suits alleging creation of a public nuisance” by greenhouse gases. Milwaukee I, 406 U.S. at 106.

Slip op. at 139.

The day after the Second Circuit issued its opinion, EPA promulgated its Final Mandatory Reporting of Greenhouse Gases Rule. The rule, first proposed on March 10, requires suppliers of fossil fuels or industrial greenhouse gases, manufacturers of vehicles and engines, and facilities that emit 25,000 metric tons or more of greenhouse gases per year to submit annual reports to EPA. In addition to carbon dioxide, the rule covers methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, and other fluorinated gases including nitrogen trifluoride and hydrofluorinated ethers. According to the agency’s website, “EPA’s new reporting system will provide a better understanding of where [greenhouse gases] are coming from and will guide development of the best possible policies and programs to reduce emissions.” The rule is available at http://www.epa.gov/climatechange/emissions/ghgrulemaking.html.

The Second Circuit’s decision and EPA’s new reporting rule may well help to create the political conditions and technical groundwork, respectively, for aggressive federal climate change legislation. Connecticut v. American Electric Power Co. virtually invites similar nuisance actions, and provides a road map for the kind of legislative and regulatory action that could forestall such lawsuits. Rather than facing the possibility of numerous unpredictable and potentially inconsistent judicial decisions, industry groups may prefer a single federal scheme that, while costly, would have the virtue of predictability. Similarly, EPA’s reporting rule will provide baseline data that could form the basis of aggressive regulation in the future.