The Obama Administration last week announced plans to significantly reduce the national ambient air quality standards for ground-level ozone. If adopted, the proposed rule would reduce ozone from 0.075 parts per million (ppm) to between 0.060 - 0.070 ppm for any eight-hour period.

The new regulations could require utilities, refineries, gas stations and other businesses to implement costly new policies and technologies to drastically reduce emissions of chemicals that can form smog. Business groups assailed the new regulations, arguing that the proposal could lead to unnecessary energy cost increases and job losses at major businesses and refineries.

For more information, see the EPA’s Website.

Now that the Copenhage Climate Change Change Conference has ended without a major treaty, the question remains whether the U.S. Senate will pass climate change legislation. Congress earlier this year passed sweeping climate change legislation imposing a cap-and-trade program. A similar bill introduced in the Senate has since stalled.

After a brusing debate over controversial health-care legislation, Politico.com is reporting that a number of moderate Senate Democrats are indicating that they are unwilling to tackle climate chnage legislation, especially during this economic downturn. According to the article:

The creation of an economy-wide market for greenhouse gas emissions is as the heart of the climate bill that cleared the House earlier this year. But with the health care fight still raging and the economy still hurting, moderate Democrats have little appetite for another sweeping initiative - especially another one likely to pass with little or no Republican support.                                                     

“We need to deal with the phenomena of global warming, but I think it’s very difficult in the kind of economic circumstances we have right now,” said Indiana Democratic Sen. Evan Bayh, who called passage of any economy-wide cap and trade “unlikely.”

This does not mean, however, that greenhouse gases will escape federal oversight. Earlier this month the Obama Administration announced its endangerment finding, setting the stage for the EPA to regulate greenhouse gases. In addition, as The Wall Street Journal discusses in its editorial pages this morning, the issue of climate change is entering the federal courts as environmental groups seek to impose significant damages on entities that emit greenhouse gases.

The Hamilton Consulting Regulatory Watch website will continue to track the issue at all levels over the upcoming months.

The EPA today is expected today to declare carbon dioxide (CO2) a dangerous pollutant, and thus hand the agency sweeping regulatory authority under the Clean Air Act (CAA).

An endangerment finding under the CAA is the first step toward regulating CO2 and other greenhouse gases. The proposed endangerment finding will be issued under § 202 of the CAA, which pertains to mobile sources. However, similar “endangerment” language exists in other sections of the CAA, thus EPA’s expected announcement today is likely the first step towards the EPA regulating stationary sources as well.

The Wall Street Journal reports that the EPA’s decision is a source of major concern for businesses, in particular manufacturers, which argue that regulating greenhouse gases under the CAA will be extremely costly.

The Obama Administration’s endangerment finding coincides with the opening of the Climate Conference in Copenhagen, where it was once expected that world leaders would sign a successor to the Kyoto Protocol. However, it appears that there will be no major treaty, disappointing many environmentalists who see Copenhagen as the last chance to lock countries into an agreement to reduced GHGs.

The EPA last week proposed to strengthen the primary National Ambient Air Quality Standard (NAAQS) for sulfur dioxide (SO2). The new rule is the first time EPA has tightened controls for SO2 since 1971.

Specifically, the EPA proposes to replace the existing annual and 24-hour primary SO2 standards with a new 1-hour SO2 standard and set a level between 50 and 100 parts per billion (ppb).  The proposed standard does not address the secondary SO2 standard, which the EPA is currently reviewing separately as part of a joint review of the welfare effects associated with SO2 and NO2 (expected to be completed in 2012).

The Clean Air Act requires EPA to set two types of national ambient air quality standards for “criteria” air pollutants. The primary standards protect public health, while secondary standards protect public welfare and the environment.

The rules are aimed at coal-fired power plants and other sources that produce SO2, such as industrial plants, locomotives, ships, and non-road equipment.

The proposed rule is the latest move by the current Administration to dramatically increase air quality regulations. Since taking office, the Obama Administration proposed mandatory greenhouse gas reporting regulations. In addition, the Administration issued proposed rules proposing to find that greenhouse gases endanger the public health and welfare, which could ultimately lead to the EPA regulating CO2 under the Clean Air Act. In addition, the EPA is currently reconsidering the 2008 8-hour ozone standard.

Hamilton Consulting will provide continuous updates on each of the proposed regulations.

The EPA yesterday announced that it sent to the White House its final endangerment finding. An endangerment finding paves the way for the EPA to regulate greenhouse gases under the Clean Air Act.

 In April, the EPA announced its findings (and technical support document) that greenhouse gases threaten the public health and welfare. EPA’s finding was in reaction to the U.S. Supreme Court’s decision, Massachusetts v. EPA. In that landmark decision, the Court found that greenhouse gases may be air pollutants covered under the Clean Air Act if the EPA Administrator determines that such emissions cause or contribute to air pollution and reasonably can be anticipated to endanger public health or welfare.

The EPA’s action could have an effect on the climate change legislation currently pending in Congress. If Congress does not enact climate change legislation, the EPA has announced that it will move forward with regulations that potentially could be much more stringent and harder to comply with than the currently drafted climate change legislation. This has led some larger utilities to call on Congress to pass federal climate change legislation. According to the Wall Street Journal, some power companies prefer a cap-and-trade program as opposed to EPA regulations because the former gives utilities greater flexibility. Some utilities also believe that a federal cap-and-trade legislation would be less costly to comply with than regulations under the Clean Air Act.

As we’ve previously reported, it’s not entirely certain that the Senate will be able to pass comprehensive climate change legislation this year due to other major pending issues, such as the health care legislation and annual agency spending bills. This kicks the controversial climate change legislation into an election year, which may make it difficult for the Senate to reach the necessary votes (60) to stave off a filibuster.

The Assembly Committee on Renewable Energy and Rural Affairs and Senate Committee on Rural Issues, Biofuels, and Information Technology this week held a joint hearing on companion bills - SB 279, introduced by Senator Pat Kreitlow (D-Chippewa Falls) and AB 408, introduced by Rep. Scott Suder (R-Abbotsford) - dealing with domestic biofuels.

The bills are the result of recommendations produced by the Joint Legislative Council Special Committee on Domestic Biofuels. The general purpose of the legislation is to promote domestic biofuels, and in particular, biofuels produced in Wisconsin.

While most of provisions in the bills are not controversial, two provisions garnered opposition from business groups. In particular, oil companies have concerns with a provision forcing refiners to offer gasoline free of ethanol so that dealers can blend the ethanol themselves. Oil companies argue that the blending of ethanol, which is required by federal law, should be done by refiners to ensure quality. Oil companies further argue that dealers may not have the technology to properly blend ethanol with gasoline, which could in turn lead to engine problems. In such circumstances the oil companies could be held liable even though they did not perform the blending.

In addition, the oil companies argue that on one hand the federal government mandates the amount of renewable fuel they are required to produce, and yet on the other hand Wisconsin would make it harder for them to meet this standard by forcing them to provide unblended fuel.

Another provision that raised concerns is the creation of annual sales goals for renewable fuels in Wisconsin equaling 110 percent of the state’s share of renewable fuel sales required nationally under the federal renewable fuel standard. Corn growers, who support the measure, argue that implementing such a standard is positive for Wisconsin corn growers and means less money going towards buying oil in foreign countries.

The Wisconsin Manufacturers & Commerce testified in opposition to the bill. WMC argued that the bill could lead to an extremely high ethanol mandate, which in turn would increase prices for consumers. In addition, WMC argued that the state’s fuel policy making should not be handed over to bureaucrats within the Department of Agriculture, Trade and Consumer Protection.

Under the plan, industrial facilities, refiners, and power plants that emit at least 25,000 tons of GHGs a year would be required to obtain construction and operating permits. The permits would require the operator to demonstrate the use of best available control technologies and energy efficiency measures to minimize GHG emissions when facilities are constructed or significantly modified.

Business groups are extremely concerned about the EPA regulating GHG emissions under the Clean Air Act because that law limits the agency’s authority to take into consideration the costs of new regulations.

For more information from the EPA, see its Fact Sheet and Proposed Rule. Also see articles in the Wall Street Journal and NY Times  for more information.

Two U.S. Senators that head the Committee on Environment and Public Works today are introducing climate change legislation. Based on early reports, the bill authored by Senators Barbara Boxer (D-California) and John Kerry (D-Mass.), will call for greater reductions of greenhouse gas (GHG) emissions than the House version, which narrowly passed in June.

The House bill calls for a 17 percent reduction of GHG emissions below 2005 levels by 2020. The Senate version reportedly imposes a 20 percent reduction by 2020. Unlike the House version, the Senate bill will also preserve the authority of the Environmental Protection Agency to use the Clean Air Act to regulate greenhouse gases. Unlike the House version, the Senate bill does not stipulate how the carbon permits will be allocatted, essentially punting on the most contentious issue until hearings begin. The Senate version also will include provisions to fund training of workers in the nuclear industry and provides some funding for development of clean coal technology.

Senator Boxer’s office has indicated that the legislation’s remaining details will be fleshed out in upcoming committee hearings, with the expectation of passing the bill out of committee by the end of October. The prospect of a climate change bill passing the full Senate this year, however, is looking less and less likely. The health care legislation is consuming almost all of Washington’s time and attention, leaving little time for the Senate to address climate change. Senate Majority Leader Harry Reid (D-Nevada) has also publicly acknowledged that there might not be enough time or support to bring the bill for a vote before the full Senate by the end of the year.

This then raises the question of whether a bill can pass at all during the 111th Congress (which ends in Jan. 2012). Heading into an election year, it may be difficult for the Senate to cobble together enough votes to stave off a filibuster.

We will continue to provide updates on both the Senate and House climate change bills.

A federal appeals court this week ruled that eight states can proceed with their lawsuit against five power plants for their contribution to global warming. (State of Connecticut, et al. v. American Electric Power Company, Inc. et al.)

The eight states, including Wisconsin, sued the power plants seeking abatement of “ongoing contributions to the public nuisance of global warming.” The states claim in their lawsuit that by emitting CO2 the power plants are causing “serious harms affecting human health and natural resources.”  (Wisconsin joined the case at the direction of former Attorney General, Peg Lautenschlager.)

The lower federal district court dismissed the states’ lawsuit. That court ruled that the plaintiffs did not have legal standing to bring the lawsuit because their claims involved  political questions. The appellate court reversed the lower court and ruled that the plaintiffs had legal standing and could proceed under either a federal or state nuisance claim.

The decision could have significant implications for emitters of CO2. In addition to potential legislation and regulations, the court’s decision will likely set precedence allowing more litigation against businesses and utilities.

The U.S. Chamber of Commerce and National Automobile Dealers Association on Tuesday filed a lawsuit in the U.S. Court of Appeals in Washington, D.C. over the EPA’s decision to grant California a waiver under the Clean Air Act.

On June 30, 2009, the Obama administration granted California’s waiver request for its greenhouse gas emission standards for motor vehicles beginning with the 2009 model year. Under the Clean Air Act, California has special authority to enact stricter air pollution standards for motor vehicles than the federal government.

The U.S. Chamber and automobile dealers argue that granting California’s waiver would set dangerous precedent by allowing a state the authority to regulate global warming, which they contend should be handled at the federal level.

For more information about the lawsuit, see here and here.