Federal Environmental Issues

On January 25, 2018, the U.S. Environmental Protection Agency (“USEPA”) issued guidance withdrawing the “once in always in” policy for the classification of major sources of hazardous air pollutants (“HAPs”) under section 112 of the Clean Air Act.  Under the new guidance, sources of HAPs previously classified as major sources may be reclassified as area sources when the facility limits its potential to emit below major source thresholds.

The guidance supersedes the “once in always in” policy that had been in place since May 1995, shortly after promulgation of the HAPs MACT rule.  Its rescission should provide incentive for HAPs reduction at facilities that are major sources by virtue of HAPs emissions.

The policy memorandum finds that the 1995 policy memorandum is contrary to the plain language of the Clean Air Act, which the current EPA interprets to not contain a time limit on when a facility emits or has the potential to emit HAPs in excess of regulatory thresholds.

USEPA intends to publish the memorandum in the Federal Register for comment but has commenced implementing it.  The EPA page addressing the policy can be found here: https://www.epa.gov/stationary-sources-air-pollution/reclassification-major-sources-area-sources-under-section-112-clean

On January 5, 2018, the Pennsylvania Public Utility Commission (“PUC” or “Commission”) reserved a public docket to review the impact of the Tax Cuts and Jobs Act, the federal tax reform bill that was signed into law on December 22, 2017, on utilities and companies under the PUC’s jurisdiction.  The PUC has not issued a tentative order or any further guidance or details regarding the scope and objectives of the proceeding.

The Tax Reform Act of 2017 lowers corporate tax rates from 35% to 21%.  Because income taxes are a significant component of a public utility’s revenue requirements, the Commission will be investigating potential means by which to provide the benefits of the Tax Reform Act of 2017 to customers.  Regulators and consumer advocates in other states, including Oklahoma, Kentucky, Michigan, and Montana, have already begun taking steps to investigate the impact of the Tax Reform Act of 2017, including potential refunds or rate reductions for consumers.

We will provide additional information through this blog once the PUC issues more information regarding its proceeding.

If you manufacture or import a chemical subject to the Toxic Substances Control Act (“TSCA”) Chemical Substance Inventory (currently 85,000 chemicals), the U.S. Environmental Protection Agency (“EPA”) has proposed to require you to confirm each such chemical’s active status using a ten-year lookback period of June 21, 2006 to June 21, 2016. In addition to manufacturers and importers, the proposal may affect “processors” of chemicals—basically anyone who adds a TSCA-regulated substance to its products for distribution in commerce.  Because the rule will require reporting by December 22, 2017, you will want to begin gathering the requisite information and evaluating its impacts now. This proposed rule, the TSCA Inventory Notification (Active-Inactive) Requirements (the “Inventory Proposal”), is one of many rules that will implement the 2016 TSCA reform.

Entities affected by this proposed regulation have until March 14, 2017 to submit formal Comments on the EPA’s proposed rule.  To learn more about the EPA’s proposed regulation and how it may impact your business, please click here or contact Rick Friedman at 717.237.5469 (rfriedman@mcneeslaw.com), Scott Gould at 717.237.5304 (sgould@mcneeslaw.com), or Steve Matzura at 717.237.5276 (smatzura@mcneeslaw.com).

As we transition from the dog days of summer and prepare for changes that are guaranteed to come this fall in our state and national political landscapes, we at McNees are considering what the upcoming elections and legislative sessions in Pennsylvania and Washington D.C. mean for our clients.  As discussed this summer, the Pennsylvania budget that became law on July 13 2016, provided relief for those who use state funding and its programs. The Pennsylvania General Assembly and Governor initially faced  a $1.3 billion shortfall in revenues when working on the FY 16-17 budget.  However, the final budget package was $1.2 billion less in spending than what Governor Wolf initially proposed and 5% higher than last year’s budget.  There are a number of new revenue sources for FY 16-17 including a $1 per pack tax increase on cigarettes with new taxes on e-cigarettes and smokeless tobacco products; expansion of the sales and use tax on digital downloads of videos, books, etc.; expansion of the income tax to include state lottery winnings, and a bank shares tax increase. While there was no across the board tax increases such as sales or income taxes or a tax on energy, it is expected and very likely that such tax increases will be necessary in the next budget cycle and is something we advise our large energy consumer clients to be mindful of as we approach this fall when elections and upcoming budget discussions will be front and center.

In addition to those relieved that a budget was passed somewhat timely in early July, there was also a sigh of relief for those who benefit from Senate Bill (SB) 1195 (Act 57 of 2016)  that was signed into law on June 23, 2016 and amends the Pennsylvania Greenhouse Gas Regulation Implementation Act by imposing requirements on Pennsylvania state government regarding its submission of a Clean Power Plan (CPP) to the EPA.  The CCP is intended to regulate states’ carbon emissions from existing electric power plants.

Act 57 reflects a compromise between the Pennsylvania General Assembly and Governor Wolf that allows the General Assembly the opportunity to review and approve the state’s proposed CPP before it is submitted to the EPA.  If either chamber of the General Assembly disapproves the draft CPP, the Department of Environmental Protection (DEP) must review and consider the reasons for disapproval and modify the draft CPP.  At that time, the DEP must resubmit a CPP to the General Assembly and open a public comment period for no less than 180 calendar days on the modified CPP during which time the department shall conduct at least four public hearings in geographically dispersed areas of the Commonwealth.  The Act also includes other provisions that address a default approval or a situation where neither chamber approves the draft or resubmitted modified CPP.  The amendment language further restricts the administration from submitting a CPP to the EPA until after the expiration of the stay issued by the United States Supreme Court on February 9, 2016.

While no one can truly predict how the U.S. Supreme Court will rule, Hillary Clinton’s campaign has boldly made its prediction. Recently during a panel discussion hosted during the Democratic National Convention in Philadelphia at the end of July 2016, Hillary Clinton’s campaign and energy adviser expressed the campaign’s expectation that the U.S. Supreme Court will uphold the CPP and the EPA’s authority to regulate greenhouse gases under the Clean Air Act.  While Donald Trump has not predicted the high court’s position, he has made clear that he is against the CPP and would work to repeal it regardless of the high court’s ruling.  Meanwhile, in Pennsylvania, the republican majority dominated General Assembly will be closely monitoring when the U.S. Supreme Court rules and monitor the state’s plan if and when it is submitted to the EPA.  Until then, the political landscape and issues being debated by the presidential candidates are indicators that this Fall will be quite interesting in many respects with the status and future of the CPP being just one of them.

At McNees, our energy attorneys and government relations professionals will be closely monitoring the politics that will affect this and many subjects of interest to our clients.  Please let us know if there is a specific issue or piece of legislation or subject you have interest in learning more about and we will help you.  Please contact Pam Polacek or Kathy Bruder at 232-8000 should you have any questions or want to discuss.

Since its adoption on September 6, 2015, the federal Clean Power Plan (“CPP”), the United States’ first comprehensive rule for lowering greenhouse gas emissions, has been a topic of simultaneous praise and criticism.  With respect to the impact of the CPP on future electricity costs, there are also significant differences of opinion.  Although the Environmental Protection Agency (“EPA”) acknowledges CPP compliance costs of $8.4 billion per year, the EPA contends that the CPP will encourage energy efficiency programs and switching to lower cost fuels that could eventually result in lower electricity costs for consumers.  By contrast, non-governmental organizations such as the National Economic Research Associates (“NERA”) estimate compliance costs at approximately $33.5 billion per year and predict an electricity cost increase of between 12 and 17%.  In light of such varying predictions related to the impact of the CPP on electricity costs, large consumers of electricity should, at a minimum, pay close attention to individual state implementation plan proposals to assess how these specific proposals may affect their electricity costs.

In addition to the questions associated with the CPP’s impact on future electricity costs, the future of the CPP is also subject to significant uncertainty.  On February 9, 2016, the United States Supreme Court issued a stay of the CPP preventing the EPA from enforcing the CPP until legal challenges are resolved by the federal courts.  As a result, the Supreme Court will not review the CPP until late 2017 or 2018.

The composition of the Supreme Court at that time will likely be the deciding factor regarding the CPP’s fate.  Specifically, since the death of Justice Antonin Scalia, the Supreme Court is considered to have four conservative Justices and four liberal Justices.  As a result, the upcoming Presidential election will almost assuredly determine whether or not the CPP will be upheld.  A President Hillary Clinton likely means a fifth liberal justice and the CPP surviving challenge at the Supreme Court.  A President Donald Trump likely means a fifth conservative justice and rejection of the CPP by the highest court.

Whether or not the CPP is upheld by the Supreme Court, however, the push by some for greenhouse gas reductions will continue.  The United States is now subject (as part of the Paris Agreement) to an international commitment to lower its greenhouse gas emissions by 26 to 28 percent from 2005 levels by 2025.  In addition, a number of states have adopted legislation and regulations to address climate change solutions or combat greenhouse gases directly.  For example, Pennsylvania’s Climate Change Act of 2008 requires Pennsylvania’s Department of Environmental Protection (“DEP”) to draft a Climate Change Action Plan that identifies greenhouse gas emissions baselines and recommends legislative changes to reduce greenhouse gas emissions in the Commonwealth.  Other states, such as California, have more aggressive and binding ambitions.

If you have any questions regarding the CPP or state proposals for reducing greenhouse gas emissions and the impact on electricity pricing, please do not hesitate to contact us.