EPA’s Cost – Benefit Analysis Reforms Welcome

The Environmental Protection Agency (EPA) is one of the largest and most broad reaching bureaucracies in the country, responsible for reviewing, monitoring, and enforcing regulations that are supposed to protect citizens and the environment. With all these responsibilities it is no surprise that energy infrastructure deals intimately with the EPA and for companies it is important that they know the regulator is transparent, fair, and consistent. Proposals from agency lead Andrew Wheeler are helping codify those practices through new cost – benefit analysis directives.

Following Executive Order 13777, signed by President Trump in March 2017, Andrew Wheeler outlined reforms to the EPA’s cost – benefit analysis structures being used by various divisions. In short, feedback from a variety of stakeholders showed that the EPA’s procedures for determining the costs and benefits of regulations was wildly inconsistent and often overestimated benefits while underestimating costs. A better and more uniform methodology could help curtail these issues, and to the benefit of the taxpayer.

Review of the EPA shows the agency to be responsible for nearly 70% of costs for all significant federal regulations. Further, estimates suggest that federal regulations cost the American economy as much as $1.9 trillion a year. Imagine the economic potential that the EPA could free up by improving its analyses by a mere 10 or 20%? Energy infrastructure companies could divert compliance costs to new project, new hires, or to increase wages that would then be spent into the economy at large.

Wheeler’s reforms will help hone the regulator by bettering the agency’s decision making project to stick to its promise of imposing regulations with benefits exceeding costs, not the other way around. This has been a long sought after policy goals in Washington, too. Presidents Reagan, Clinton, and Obama all signed executive orders advocating for regulators to implement regulations more beneficial than costly.

There is little doubt that Wheeler’s reform efforts will continue to be needlessly politicized in the press as this becomes a larger and more prescient issue but the meat of the issue here is quite clear: regulators will benefit from playing from the same sheet of music during decision making processes. The EPA should move forward with these reforms and lead the way in regulating properly.

Climate Litigation Looks Destined for SCOTUS, But When?

In the past couple of weeks there has been a momentous change to the state of climate litigation in the U.S. in favor of the many plaintiffs and trial attorneys seeking damages from energy companies responsible for producing and marketing fossil fuels. This change came courtesy of the U.S. Court of Appeals for the Ninth Circuit, who found that plaintiffs have a case under California common law to allege that the defendants created a public nuisance through their operations. The U.S. Court of Appeals disagreed with an earlier ruling by Judge William Alsup that determined the California cases to be better addressed federally.

Judge Alsup’s decision makes lots of sense. The global nature of climate challenges, and the many thousands of energy producers worldwide, makes it dubious to suggest that plaintiffs in California can nail down those responsible for climate change related costs within its border.

Further, Judge Alsup knows that the AEP v. Connecticut Supreme Court ruling has already addressed the public nuisance angle and this is key for the outstanding cases that continue to push for cases to be heard in state courts. As mentioned earlier, California has been successful in holding these cases in state court and the Baltimore case was also remanded to state court earlier this year. Bloomberg has shared a graphic showing where various cases are:

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Not pictured in the above is Honolulu’s case that filed in state court until defendants transferred it to federal district court.

Settling in state court is the ongoing push among the cases, but it only further highlights the importance of the Supreme Court to weigh in and clarify this issue before more and more resources are poured into the climate litigation fight.

Honolulu, Hawaii the Latest Sher Edling Climate Litigation Target

Climate change litigation has quietly become one of the trendiest tactics for law firms hoping to score a huge payday from contingency fee arrangements. These lawsuits, typically filed by municipalities and accompanying counsel, seek damages from energy companies for alleged climate change related costs from their operations. Honolulu, Hawaii is the latest city to join the climate litigation foray at the behest of Sher Edling.

In March, 2020 Honolulu filed a 119 page lawsuit against eight energy companies following proclamation from the City Council of intentions to do so in late November. Honolulu’s chief resilience officer, Josh Stanbro, explained the reasoning for the suit, alleging that oil companies have left the municipality “unjustly having to bear climate change and its impacts due to the information that’s been withheld over time by the fossil fuel corporations.”

In the lawsuit, plaintiffs argue that climate change caused by the eight companies has:

  • Created a likelihood that sea levels along Honolulu’s coast line will rise, causing flooding, erosion, and beach loss. Extreme weather, including hurricanes and tropical storms, will become more frequent around the city the suit alleges.
  • Heat waves will grow in frequency thanks to temperatures warming four times faster than seen in the last 50 years.
  • Induced less rainfall and thus a scarcity of freshwater while warming oceans and acidification could reduce fishing yields and kill coral reefs.

Plaintiffs argue that the costs the city faces surpasses $19 billion.

This suit, as with others similar in nature, raises many questions about identifying direct causes and costs, narrowing culpability to these eight sole companies as drivers of climate change, and the role the city itself plays as an emitter.

Further, it should interest readers that the Sher Edling law firm is serving as counsel on 11 of the 14 climate cases filed in the last two and a half years. Others following the issue have obtained emails between the firm and municipality elected officials or states’ Attorneys General pitching these climate litigation lawsuits. Sher Edling’s other lawsuits are structured through contingency fees, meaning the firm’s lawyers must work under the supervision of the municipality’s in – house counsel and are paid a percentage of the settlement.

The climate litigation trend is turning out to be a dirty one with law firms pitching these ideas to vulnerable municipalities while structuring huge percentage fees and massive settlement demands. Supreme Court Justice Ruth Bader Ginsburg wrote the AEP v. Connecticut decision that lays this issue to rest, but law firms continue to hope for that one Hail Mary to break the ice on the issue.

NEPA Reform an Obvious, and Straightforward, Option to Spur Economic Recovery

The ongoing COVID – 19 pandemic has brought with it unimaginable economic consequences. Unemployment and salary cuts across the United States have reached levels reminiscent of the Great Depression with an onset faster than models projected and though the government has deployed all levers of fiscal and monetary authority to mitigate the economic damages a recovery remains distant.

To clear the path forward for an economic recovery the Trump Administration can keep true to its promised reform of the National Environmental Protection Act (NEPA) outlined in mid – January. NEPA was signed into law in 1970 as a means of ensuring large scale, public and private infrastructure projects were in line with environmental laws and regulations of the time by requiring Environmental Assessments (EAs) and Environmental Impact Statements (EISs) be compiled.

The White House’s Council on Environmental Quality (CEQ) conducted an assessment of the timeline and page length of these documents between 2007 and 2017. A summary of the proposed reforms, the first since its inception, can be read here but it boils down to this:

  • EAs and EISs have become bloated documents that average over 600 pages in their final forms and typically take over four and a half years to complete. This drawn out timeline, and frequent accompanying litigation by third parties, disrupts important investment tables, work contracts, and more that are essential to large infrastructure project.
  • In response, the White House’s CEQ has called for reforms that focus on modernizing and simplifying EAs and EISs to accelerate the NEPA process with presumptive page limits and a two year timeline. This would be assisted by better identifying lead agencies to conduct the review, require earlier public comment in the process, and improve coordination with states, tribes, and localities.

These reforms strike an important balance of prioritizing the success of infrastructure works without disarming agencies’ environmental review capabilities. As with fiscal and monetary policy, the status of the regulatory state is also impactful on the success and wellbeing of the economy.

Further, the many failures of NEPA have been well documented by researchers showing the regulation to be antiquated and counterproductive to infrastructure buildout needed in the country.

In the wake of COVID – 19 these large scale infrastructure project will be important shovel – ready jobs for many displaced by the virus. Moreover, infrastructure projects light up business for a number of other industries that have a piece in the supply chain.

The Case of State or Federal Court for Climate Litigation

As climate litigation cases continue to grow worldwide an obvious trend is developing for those in the United States, which is: most cases spend a significant portion of their lifespan pressing for remands or stays to the state courts where they are originally filed rather than federal court.

The most obvious exception here is Juliana v. United States, but that case is altogether different by alleging the federal government violated the plaintiffs’ constitutional rights by causing dangerous concentrations of carbon dioxide. Juliana is now on a crash course with the Supreme Court after a refusal by an Oregon judge to dismissal the case.

For the more localized cases, though, much effort is expended on keeping the cases is state court. Why is that?

An easy answer may come from Judge William Alsup’s ruling in the San Francisco and Oakland, California climate litigation suits. U.S. District Judge Alsup presides over the Ninth Circuit Court and soundly gutted the San Francisco and Oakland cases via dismissal in 2018.

In the first high profile ruling on these cases, he refuted plaintiffs’ arguments that 5 oil and gas companies are liable for climate change related damages. Judge Alsup offered a couple interesting points; he wrote in the dismissal:

  • “This order fully accepts the vast scientific consensus that the combustion of fossil fuels has materially increased atmospheric carbon dioxide levels, which in turn has increased the median temperature of the planet and accelerated sea level rise. But questions of how to appropriately balance these worldwide negatives against the worldwide positives of the energy itself, and of how to allocate the pluses and minuses among the nations of the world, demand the expertise of our environmental agencies, our diplomats, our Executive, and at least the Senate. Nuisance suits in various United States judicial districts regarding conduct worldwide are far less likely to solve the problem and, indeed, could interfere with reaching a worldwide consensus.”
  • “Our industrial revolution and the development of our modern world has literally been fueled by oil and coal. Without those fuels, virtually all of our monumental progress would have been impossible. All of us have benefitted. Having reaped the benefit of that historic progress, would it really be fair to now ignore our own responsibility in the use of fossil fuels and place the blame for global warming on those who supplied what we demanded? Is it really fair, in light of those benefits, to say the sale of fossil fuels was unreasonable?”

Judge Alsup is right to point out the judiciary’s role as interpreting law and federal policy, not working to re – imagine or set either via judicial power. Federal policy is set by lawmakers in the halls of Congress or the President of the United States.

Judge Alsup’s ruling was key in spurring many other cases – particularly Rhode Island and Baltimore – to seek stays in state court, hoping for a friendly judge to see the case through without dismissal.

The other factor in the climate litigation equation is the Supreme Court’s AEP v. Connecticut ruling in by Justice Ruth Bader Ginsburg. Issued is 2011 the decision in the case confirmed the Environmental Protection Agency’s primacy in as the federal regulator of greenhouse gases and limited the possibility of claiming federal common law public nuisance for climate litigation.

Justice Ginsburg’s ruling took the wind out of the issue’s sails well before they became popular, and that ruling alone has spurred many plaintiffs and counsel teams to keep cases in state courts. The AEP v. Connecticut precedent is a buzzsaw to the argument put forth in a vast majority of climate litigation cases.