On March 31, 2009, a 648-page draft bill from the House Energy & Commerce Committee was introduced by Reps. Edward Markey (D-Mass) and Henry Waxman (D-Calif.) entitled “The American Clean Energy and Security Act of 2009.”

The bill has four titles that the House of Representatives boasts “will create millions of new clean energy jobs, save consumers hundreds of billions of dollars in energy costs, enhance America’s energy independence, and cut global warming pollution.”¹  Although it is uncertain how the final bill will impact the job market or cut energy costs, it is certain to result in some highly contentious debating as it works its way through Congress. Now is an excellent time for companies involved in those industries that will be most impacted, including the energy and chemical sectors, to start taking preventative measures to ensure they are not left out of the negotiations altogether. Even companies that would not ordinarily be involved in this type of legislation are becoming involved with the hopes of capitalizing on America’s new “green” economy.   

Title III is the most interesting, which is aimed at reducing global warming pollution with the addition of Title VIII to the Clean Air Act (“CAA”) – Additional Greenhouse Gas Standards. A cap-and-trade program would be created to reduce the quantity of greenhouse gas emissions over the next 40 years. The details remain to be determined, including any price floors or ceilings on credits and whether companies will receive their initial credits for free or at the auction house for market price. In 2012, greenhouse gas emissions would be reduced 3% from 2005 levels, 20% by 2020, 42% by 2030, and 83% by 2050. Greenhouse gases listed include carbon dioxide, methane, nitrous oxide, sulfur hexafluoride, hydrofluorocarbons, perfluorocarbon, and nitrogen trifluoride.

Nearly everyone agrees that the Clean Air Act was not designed, and is not equipped, to handle greenhouse gas regulations. Unlike other pollutants that impact the ambient air in a particular region, greenhouse gases equalize globally rather quickly. A cap-and-trade program will therefore reduce the total greenhouse gas emissions nationally, regardless of the greenhouse gas emissions in any particular area. The proposed CAA provisions exempt greenhouse gases under the National Ambient Air Quality Standards (“NAAQS”), Hazardous Air Pollutant (“HAP”), and New Source Review (“NSR”) pre-construction permitting programs, and Title V operating permits program. Although Title V permits for stationary sources will require each permitted entity to hold enough emission allowances from the cap-and-trade program to cover its annual greenhouse gas emissions.

The bill, however, does not leave greenhouse gas emitters unregulated. Besides the cap-and-trade program, it leaves open the possibility for regulating greenhouse gas emissions under the New Source Performance Standards (“NSPS”) program and actually proposes such standards for coal and petroleum coke fired power plants under Title I of the Act. These provisions could make any new coal or petroleum coke fired power plant nearly impossible, or at least financially impracticable, to permit.  

Most importantly, section 336 of the Act would dramatically expand the current citizen suit provision under the CAA. 42 U.S.C. § 7604. The revision would allow “any person who has suffered, or reasonably expects to suffer, a harm attributable, in whole or in part, to a violation or failure to act . . .” The term “harm” would include “any effect of air pollution (including climate change), currently occurring or at risk of occurring, and the incremental exacerbation of any such effect or risk that is associated with a small incremental emission of any air pollutant (including any greenhouse gas as defined in Title VII), whether or not the effect or risk is widely shared.” The “effect or risk associated with any air pollutant . . . shall be considered attributable to the violation or failure to act if the violation or failure to acts slows the pace of implementation of this Act or compliance with this Act or results in any emission of greenhouse gas or other air pollutant at a higher level than would have been emitted in the absence of the violation or failure to act.”       

This citizens suit provision attempts to eliminate the Supreme Court’s standing requirements established in Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) and reiterated recently in Summers v. Earth Island Institute, 555 U.S. ____ (2009). Standing is a constitutional requirement that cannot be usurped by the legislature; however, companies will still be faced with defending the actions brought under the revised citizens suit provision. To have standing, “a plaintiff must show that he is under threat of suffering injury in fact that is concrete and particularized; the threat must be actual and imminent, not conjectural or hypothetical; it must be fairly traceable to the challenged action of the defendant; and it must be likely that a favorable judicial decision will prevent or redress the injury.” As seen above, the proposed citizens suit purports to allow a plaintiff with only a reasonable expectation of harm, not actual or imminent injury, to sue any greenhouse gas emitter for a small incremental emission of any air pollutant, even if not fairly traceable to the defendant.
 
Title I imposes renewable energy standards by requiring retail electricity suppliers to meet a certain percentage of their load from renewable sources—including wind, biomass, solar, and geothermal. Carbon capture and sequestration is also discussed with concentration on power plants primarily fueled by coal and petroleum coke. New performance standards for coal-fired power plants under the CAA are proposed for all new coal and pet coke fired plants permitted after January 1, 2009. Title I also establishes a new low-carbon transportation fuel standard that would apply to all motor vehicles and encourage the development and distribution of electric cars, including financial assistance to automobile manufactures that retool their plants to build electric vehicles. Smart grid and electricity transmission is also included, which would price electricity based on demand and encourage transmission from renewable sources that often have more intermittent supplies—such as solar and wind.     

Title II is aimed at promoting energy efficiency by funding state codes that adopt advanced building efficiency and retrofit existing buildings to improve efficiency. The current Department of Energy efficiency standards are expanded and financial incentives for retailers who sell high quantities of “best-in-class” appliances. Federal fuel economy standards will also be targeted, with the goal of harmonizing standards across the country, and requires the Environmental Protection Agency (“EPA”) to set emission standards for other mobile sources such as trains, boats, and nonroad sources.

Title IV establishes a National Climate Change Adaptation Council charged with serving as “a forum for interagency consultation on, and coordination of, Federal policies relating to assessment of, and adaptation to, the impacts of climate change on the United States and its territories” with the National Oceanic and Atmospheric Administration representative as the permanent chair of the council. Sixteen other representatives would be appointed by the head of other agencies including the EPA; Departments of Agriculture, Commerce, Defense, Energy, Health and Human Services, Homeland Security, and Housing and Urban Development; the Army Corps of Engineers; Federal Emergency Management Agency; and National Aeronautics and Space Administration to name a few. Every agency on the council is required to complete an agency climate change adaptation plan “detailing the agency’s current and projected efforts to address the potential impacts of climate change on matters within the agency’s jurisdiction” and submit it to the president for review within one year of the publication.

Title IV also provides vague references to rebates that would help ensure U.S. manufacturers are not disadvantaged relative to overseas competitors; however, the bill does not provide where the rebates will come from, or give eligibility requirements. A consumer assistance section is contemplated in the discussion draft notes, but remains to be provided. Other provisions aim to promote green jobs by awarding grants to universities to development curriculum and training in renewable energy and energy efficiency careers and encourage the exportation of clean technologies to developing countries.

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¹ U.S. House of Representatives Discussion Draft Summary: The American Clean Energy and Security Act of 2009