Audit, Compliance and Risk Blog

In the last week before President Obama left office, the Environmental Protection Agency (EPA) completed a multi-year review of its Accidental Release Prevention (ARP) program for toxic catastrophe prevention, and adopted significant expansions of ARP requirements (I wrote about them here). EPA proposed ARP revisions in March 2016 (I blogged about them here). Then, when President Trump took office, EPA reversed course, repeatedly deferring the effective date of those revisions while the agency reviewed them. In May 2018 EPA completed its review, and published a proposal in the Federal Register to rescind almost all these expansions and return ARP requirement to those in place before 2017. EPA also included an alternative proposal that retained a few more elements, and requested public comment on both versions no later than July 30, 2018.

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On May 9, Environmental Protection Agency (EPA) Administrator Chris Pruitt issued a policy memo recasting his agency’s basic approach to review and revision of national ambient air quality standards (NAAQSs) – EPA’s broadest and most basic targets for national pollution levels. He entitles it a “Back-to-Basics” Process for Reviewing [NAAQSs]”, echoing the phrase he used last year to recalibrate the agency’s relationships with the public and its various stakeholders. (I blogged about this general policy here).

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On April 2, the US Environmental Protection Agency (EPA) announced that it has completed its “midterm evaluation” of greenhouse gas (GHG) emissions standards for cars and light trucks for model years 2022-2025, has decided to withdraw standards agreed to between the Obama Administration and California during 2016, and will conduct additional rulemaking to consider less stringent standards. This review began in March 2017, soon after President Trump appointed Scott Pruitt as EPA administrator with a mandate to reduce regulation. California, which has special authority under the federal Clean Air Act (CAA), is leading a coalition of states that has already sued to stop the change. In response to this push-back, President Trump has ordered federal agencies to negotiate with California to seek a compromise.

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The Clean Air Act (CAA) directs the Environmental Protection Agency (EPA) to define “hazardous air pollutants (HAPs)” that may pose acute health hazards, and to impose regulations to reduce those hazards. Controls include permits for “major sources” of HAPs based on “Maximum Achievable Control Technologies (MACT),” and lesser controls for non-major “area sources.” Since 1995, EPA policy has been that every emission source that met major source criteria at the time a MACT became effective is “once in, always in” and cannot requalify as a less-regulated area source even if it accepts legally binding controls that reduce its “potential to emit.” On January 25, 2018 EPA reversed that decades-old policy.

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Since enacting AB 32 in 2006, California has pursued aggressive policies to reduce statewide greenhouse gas (GHG) emissions. Primary responsibilities are assigned to the California Air Resources Board (ARB), although other state agencies implement complementary policies within their areas of special jurisdiction. In addition to emissions control regulations, state law assigns ARB to develop a Scoping Plan that identifies the state’s strategic goals, and compiles the many tactical approaches through individual regulatory and incentive programs. ARB issued the first Scoping Plan in 2008, with an update in 2014 and the latest update in 2017. The rest of this note describes changes in the latest Scoping Plan to reflect the state’s ever-expanding GHG reduction goals.

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One of the longest running sub-national greenhouse gas (GHG) control efforts in the U.S. has been the Regional Greenhouse Gas Initiative (RGGI) program. RGGI provides a cap-and-trade program covering GHG emissions from targeted fossil fuel power plants in participating northeastern states. The program t has just been revised and extended through 2030.

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In December 2015, representatives of 195 countries agreed to continue to expand global efforts to combat climate change. The new Paris Agreement broke a longstanding impasse with a clever mixture of binding but unenforceable commitments, contemporary agreements, and ongoing agreements-to-agree (I wrote about the Agreement here). Since then, analysts have estimated that full implementation of these national targets would reduce greenhouse gas (GHG) emissions by about half the amounts necessary to accomplish the Agreement’s stated goal by holding average global temperature increases below 2 ^o C. Incomplete national successes – President Trump’s decision to back off U.S. commitments is the first and most obvious example – would leave even more to be done.

The Paris Agreement anticipated that sub-national governments and private organizations would contribute to global progress, by meeting and often exceeding national requirements (I wrote about formal United Nations programmatic expectations here).

One of the non-governmental efforts is the Science Based Targets Initiative, through which individual companies can set GHG-reduction goals. At latest report, over 300 companies participate.

What is the Science Based Targets Initiative?

The Initiative is a multi-sector collaboration among the following international organizations: CDP (formerly called the Carbon Disclosure Project), World Resources Institute (WRI), the World Wide Fund for Nature (WWF; formerly World Wildlife Fund), and the United Nations Global Compact (UNGC). Participation in the Initiative is also identified as one of the commitments under the We Mean Business Coalition, which is another international business initiative. The Initiative defines “science-based targets” by reference to the Initiative’s effort to support the 2^o C target (which the Initiative refers to as the “2°C pathway”):

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As governments worldwide consider expanding requirements to manage greenhouse gas (GHG) emissions and moderate climate change, private sector groups are mobilizing to craft voluntary reporting and management activities – which might shape or even avoid future governmental mandates. In May, the 32 international business leaders on the Financial Stability Board’s (FSB’s) Task Force on Climate-related Financial Disclosure issued recommendations for climate-related financial disclosures by public companies worldwide. The Task Force reported these recommendations to the Group of 20 (G-20) leaders at last month’s meeting in Hamburg – the G-20 finance ministers and central bankers had asked FSB in 2015 to commission the Task Force.

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Since 2012, California has administered a “cap-and-trade” program, setting total greenhouse gas (GHG) emission limits from selected major emitting sectors and creating tradeable emission permits and offsets to provide flexibility and encourage innovation. The program was created under authority of the state’s 2006 “AB 32” legislation, which focuses on reducing statewide GHG emissions by 2020. This authority would have expired in 2020, but new legislation extends the program until 2030. In order to secure enough votes for the extension, legislative leaders and Governor Brown agreed to statutory changes in this program and related air quality programs.

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On April 26, a federal district judge in Houston issued an order assessing Exxon Mobil nearly $20 million in civil penalties for thousands of Clean Air Act (CAA) violations at Exxon’s massive Baytown, Texas refinery and petrochemical complex. This decision is the latest in a long-running “citizen suit” enforcement case, seeking additional penalties to claw back the “economic benefits from noncompliance,” on top of nearly $1.5 million in civil penalties already assessed by the Texas Commission on Environmental Quality (TCEQ) for the same violations. This decision illustrates the power of these private enforcement cases, which may become more important if the Trump Administration eases its own enforcement efforts.

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