Gina McCarthy was confirmed as EPA Administrator . . . The House passed a bipartisan bill delegating authority to states to regulate coal ash (again) . . . The House Energy and Commerce Committee marked-up bills on FERC permitting of gas pipelines and DOE approval of EPA regulations imposing $1 billion or more in costs . . . The House also held hearings on the Renewable Fuels Standard and the Stream Buffer Zone Rule . . . The D.C. Circuit rejected challenges to EPA’s federalization of GHG permitting in states that did not update their plans for such permitting . . . The D.C. Circuit also rejected environmental and industry challenges to the 2008 ozone NAAQS . . . The Third Circuit upheld EPA’s imposition of pollution transport regulations under Sec. 126 of the Clean Air Act.

• BOEM Plans Offshore Wind Lease Sale in Virginia Wind Energy Area. On July 22, the Department of Interior’s Bureau of Ocean Energy Management (BOEM) announced that it will hold an auction for commercial offshore wind energy leases in the designated Wind Energy Area off the coast of southern Virginia. In June, BOEM announced that it will hold its first commercial offshore wind energy auction in another Wind Energy Area off the coasts of Rhode Island and Massachusetts (see our June 5 Edition of the Update: http://www.vnf.com/news-alerts-849.html). The Virginia Wind Energy Area commercial lease auction will take place on September 4, and will make available nearly 113,000 acres for offshore wind development. For additional information, see http://www.boem.gov/Renewable-Energy-Program/State-Activities/Virginia.aspx.
  
  
• McCarthy Confirmation as EPA Administrator Leads to Changes in Air Office; Administration Announces Additional Energy-Related Nominations. On July 18, the Senate confirmed Gina McCarthy as Administrator of the EPA. McCarthy, who was formerly EPA Assistant Administrator for Air and Radiation, will be temporarily replaced by Janet McCabe, who will serve as the acting Assistant Administrator until a successor can be nominated and confirmed by the Senate. The Administration also announced the nomination of Bob Simon to serve as Associate Director for Energy and Environment in the White House Office of Science and Technology Policy. Finally, President Obama announced the nomination of Beth Robinson for the newly created post of Undersecretary of Energy for Management and Performance at the Department of Energy.
  
  
• Additional Developments:
• July 18: FERC issued new rules to streamline provision of energy storage services in wholesale electric markets. According to the Commission, the new rules will enable third party providers of ancillary services—including energy storage services—to access electric markets on a less discriminatory basis. See http://www.ferc.gov/whats-new/comm-meet/2013/071813/E-22.pdf.
  
  
• July 23: BOEM awarded 307 leases worth $1.2 billion for oil and gas exploration in the central Gulf of Mexico. See http://www.boem.gov/press07222013a/.
  
  
• July 24: EPA has extended the comment period for its proposed rule setting implementation requirements for the 2008 ozone National Ambient Air Quality Standards. Comments are now due Sept. 4. See https://www.federalregister.gov/articles/2013/07/24/2013-17830/implementation-of-the-2008-national-ambient-air-quality-standards-for-ozone-state-implementation.
  
  
• July 29: EPA issued a new Notice of Data Availability seeking comments on additional information it has obtained on the disposal of coal ash from coal-fired power plants. The comments will inform the agency’s decision-making on the long-delayed Coal Combustion Residuals Disposal Rule, which the agency proposed in 2010. See http://www.epa.gov/epawaste/nonhaz/industrial/special/fossil/ccr-rule/index.htm.

• New Senator from Massachusetts Sworn-In. On July 16, Ed Markey (D-MA) was sworn in to fill the Senate seat left vacant by now Secretary of State John Kerry. Shortly after he was sworn in, he was assigned to the Senate Commerce, Science and Transportation; Small Business and Entrepreneurship; and, Foreign Relations committees. He also was named Chairman of a Senate Foreign Relations subcommittee that oversees international energy security, climate change, and environmental protection.
  
  
• House Committee Holds Mark-Up. On July 16, the House Energy and Commerce Committee held a mark-up to consider several energy related bills. The Committee passed, by a vote of 28 to 14, H.R. 1900, the “Natural Gas Pipeline Permitting Reform Act,” which would alter FERC’s permitting authority over natural gas pipelines. The bill’s sponsor is Rep. Mike Pompeo (R-KS). The Committee also passed, by a vote of 25 to 18, H.R. 1582, the “Energy Consumers Relief Act of 2013,” which would prohibit the EPA from finalizing any energy-related rule estimated to cost more than $1 billion if the Secretary of Energy determines that the rule will cause “significant adverse effects” to the economy. The bill’s sponsor is Rep. David Cassidy (R-LA). Finally, the Committee approved by unanimous consent H.R. 83, a bill that would require the Secretary of the Interior to assemble a team of technical, policy, and financial experts to address the energy needs of the insular areas of the United States and the Freely Associated States through the development of an energy action plan. The full list of bills passed by the Committee, additional background information and a webcast are available at http://energycommerce.house.gov/markup/full-committee-vote-hr-968-hr-1900-hr-2094-hr-2052-hr-83-hr-1582.
  
  
• House Passes Pipeline Safety Bill. On July 16, the House passed H.R. 2576 by a vote of 405 to 2. Sponsored by Reps. Jeff Denham (R-CA), Nick Rahall (D-WV), Corrine Brown (D-FL), and Bill Shuster (R-PA), H.R. 2576 would extend the deadline for the Pipeline and Hazardous Materials Safety Administration (PHMSA) to make industry standards publicly available, eliminate the publication requirement for standards referenced only in guidance documents, and eliminate the requirement that PHMSA post referenced standards online. Additional information on the bill is available at http://denham.house.gov/press-release/house-passes-denham-bill-protect-intellectual-property-rights.
  
  
• Interior Secretary Testifies Before House Committee. On July 17, the House Natural Resources Committee held a hearing entitled “The Department of the Interior: Operations, Management, and Rulemakings.” Interior Secretary Sally Jewell, appearing before the committee for the first time, was the only witness at the hearing. Committee Members focused on the agency’s activity related to regulating the practice of hydraulic fracturing. Written testimony and a webcast of the hearing are available at http://naturalresources.house.gov/calendar/eventsingle.aspx?EventID=341777.
  
  
• House Leadership Appoints DeFazio to Ranking Member. On July 19, the House Democratic Caucus unanimously voted to appoint Rep. Peter DeFazio (D-OR) to replace Senator Ed Markey (D-MA) as the Ranking Member of the House Natural Resources Committee.
  
  
• Senate Confirms EPA Administrator. On July 19, the Senate voted 59 to 40 to confirm Gina McCarthy to be the EPA Administrator. For more news, see the Executive Branch section of this update.
  
  
• House Subcommittee Begins Work on Interior Appropriations Bill. On July 22, the House Appropriations Subcommittee on Interior, Environment and Related Agencies passed the “Department of the Interior, Environment, and Related Agencies Appropriations Act, 2014” by a party-line vote of 7 to 4. In total, the bill includes $24.3 billion in base funding, which is a cut of $5.5 billion below the fiscal year 2013 enacted level (-19%) and a cut of $4 billion below the current level caused by sequestration cuts. The full Committee is set to mark-up the bill this week. Additional information on the bill is available at http://appropriations.house.gov/news/documentsingle.aspx?DocumentID=343384.
  
  
• Senate Committee Holds Hearing on Revenue Sharing. On July 23, the Senate Energy and Natural Resources Committee held a legislative hearing to consider S. 1273, the “FAIR Act of 2013.” Sponsored by Senator Mary Landrieu (D-LA), S. 1273 would establish sharing of revenues generated by energy development on the Federal Outer Continental Shelf with coastal states and counties that are located close to that development. Witnesses included Pamela Haze, Deputy Assistant Secretary for Budget, Finance, Performance and Acquisition at the U.S. Department of the Interior; and Athan Manuel, Director, Lands Protection Program at the Sierra Club. Haze expressed concerns with the bill, citing Congressional Budget Office estimates that it would add approximately $5 billion to the federal deficit and run contrary to the Administration’s conservation objectives. Additional information on S. 1273 is available at http://www.landrieu.senate.gov/?p=video&id=3813 and a full witness list and webcast are available at http://www.energy.senate.gov/public/index.cfm/hearings-and-business-meetings?ID=1ff67840-7880-4549-b236-574b01da1df9.
  
  
• House Committee Holds Two Day Hearing on RFS. On July 23, the House Energy and Commerce Subcommittee on Energy and Power held a hearing entitled “Overview of the Renewable Fuel Standard: Stakeholder Perspectives.” The hearing follows the release of five “White Papers” released by the committee on the RFS and a June hearing entitled “Overview of the Renewable Fuel Standard: Stakeholder Perspectives.” The Subcommittee heard from 16 witnesses on three separate panels over two days. Additional information on the hearing, including a full list of witnesses and webcast, is available at http://energycommerce.house.gov/hearing/overview-renewable-fuel-standard-stakeholder-perspectives.
  
  
• House Committee Holds Additional Oversight Hearing. On July 23, the House Natural Resources Subcommittee on Energy and Mineral Resources held a hearing entitled “War on Jobs: Examining the Operations of the Office of Surface Mining and the Status of the Stream Buffer Zone Rule.” According to Committee-issued documents, the intent of the hearing was to continue the Committee’s ongoing investigation into the Obama Administration’s rewrite of the 2008 Stream Buffer Zone Rule. Only one witness testified, Joseph Pizarchik, the Director of the Office of Surface Mining Reclamation and Enforcement at the Department of the Interior. Additional background information and a webcast are available at http://naturalresources.house.gov/calendar/eventsingle.aspx?EventID=341265.
  
  
• House Committee Holds Mark-up. On July 24, the House Natural Resources Committee held a mark-up where they considered 15 land and energy related bills. One of the bills, which passed by a vote of 27 to 14, H.R. 1394, the “Planning for American Energy Act of 2013,” would direct the Secretary of the Interior to establish goals for an all-of-the-above energy production plan strategy on a 4-year basis for all onshore Federal lands managed by the Department of the Interior and the Forest Service. A full list of the legislation considered by the Committee, a webcast, amendments considered and additional information are available at http://naturalresources.house.gov/calendar/eventsingle.aspx?EventID=343258.
  
  
• Senators Introduce Bill to Promote Natural Gas Vehicles. On July 24, Senate Environment and Public Works Committee Ranking Member James Inhofe (R-OK) introduced S. 1355. S. 1355 would remove a cap on Corporate Average Fuel Economy credits for producing dual-fuel natural gas vehicles. The aim of this bill is to create parity with the incentives available for electric vehicles. Senators Mark Begich (D-AK), Roy Blunt (R-MO), and Robert Casey (D-PA) are original cosponsors. Additional information on the bill, including the text, is available at http://www.inhofe.senate.gov/newsroom/press-releases/inhofe-senators-introduce-bipartisan-bill-to-level-the-playing-field-for-natural-gas-vehicles-.
  
  
• House Passes Coal Ash Bill—Again. On July 25, the House passed H.R. 2218, the “Coal Residuals Reuse and Management Act of 2013.” Sponsored by David McKinley (R-WV), H.R. 2218 would give states primary authority to regulate coal ash residuals (CCRs) from power plants. The bill passed the House by a vote of 267-144 during the last Congress.

• D.C. Circuit Rejects State, Industry Challenge to EPA Prevention of Significant Deterioration GHG Rules. On July 26, the Court of Appeals for the District of Columbia Circuit (D.C. Circuit) rejected appeals by several states and industry coalitions that challenged EPA’s determination under the Clean Air Act (CAA) that several state Prevention of Significant Deterioration (PSD) permitting programs were inadequate because they failed to require major new stationary sources to obtain pre-construction permits that include emission limits for greenhouse gases (GHGs). In December 2010, EPA issued rules determining that seven states had failed to update their State Implementation Plans (SIPs) to include GHG permitting requirements in their PSD programs. EPA subsequently issued Federal Implementation Plans (FIPs) to ensure that major emitting facilities in those states would be able to apply for valid PSD pre-construction permits. Under the FIPs, EPA took over PSD permitting for GHG emissions. In an opinion resolving 25 consolidated appeals of EPA’s SIP and FIP decisions [Texas v. EPA (Nos. 10-1425, et al.) and Utility Air Regulatory Group v. EPA (No. 11-1037, et al.)] the D.C. Circuit held that states and industry lacked standing to challenge the rules because the rules did not injure industry and because vacating the rules would not redress the states’ claims. The court found that the statute itself—not EPA’s rule—was the source of the petitioners’ claimed injury. The court reasoned that CAA section 165 automatically prevents construction of new emitting facilities in PSD areas unless the state or EPA issues those facilities valid PSD permits that include emission limits for all regulated air pollutants. Therefore, without EPA’s implementation of federal PSD permitting authority, states that failed to incorporate GHG permitting into their PSD programs would be prevented by law from issuing new PSD permits—a situation that effectively would result in an automatic construction ban on all new emitting sources. The consolidated opinions are available here: http://www.cadc.uscourts.gov/internet/opinions.nsf/3750B2A5A473450285257BB4005133CA/$file/11-1037-1448574.pdf.
  
  
• EPA Brief Urges Supreme Court to Deny Certiorari in Appeal of EPA Endangerment, Tailpipe Rules. On July 22, the Obama Administration submitted a brief to the Supreme Court in the Utility Air Regulatory Group, et al. v. EPA case now pending before the Court (Case No. 12-1146, et al.). The brief urges the Court to reject nine petitions for review of EPA’s GHG rules under the CAA. Among other things, the petitions for certiorari challenge EPA’s determination that GHGs endanger public health and welfare (the “Endangerment Finding”), EPA and the National Highway Traffic Safety Administration’s (NHTSA) joint issuance of GHG emission and fuel efficiency rules for cars and trucks (the “Tailpipe Rule”), EPA’s determination that major new stationary sources must obtain pre-construction permits that include GHG emission limits, and EPA rules implementing these decisions (including the “Tailoring Rule”). In its brief to the court, the Administration argues that EPA’s interpretations of the CAA were in line with the Supreme Court’s own decision in Massachusetts v. EPA (2007), and that its factual conclusions were neither arbitrary nor capricious. The Administration also argues that industry and state petitioners lack standing to challenge its implementation rules—either because the injuries they allege would not be remedied by reversal of the rules or because the petitioners lack a cognizable injury since EPA’s rules actually benefit industry and the states. The Supreme Court could rule on the petitions as early as October. The Administration brief is available here.
  
  
• Third Circuit Authorizes EPA to Address Cross-State Air Pollution from Power Plants. On July 12, the U.S. Court of Appeals for the Third Circuit (Third Circuit) ruled that the Clean Air Act does not foreclose the EPA from forcing upwind states to address air pollution that significantly contributes to a downwind state’s nonattainment of a National Ambient Air Quality Standard (NAAQS). GenOn REMA LLC v. EPA, No. 12-1022. In 2010, the New Jersey Department of Environmental Protection (NJDEP) petitioned the EPA to make a finding under the CAA’s Section 126(b) “good neighbor” provision that emissions from one of GenOn’s Pennsylvania coal-fired power plants significantly contributed to New Jersey’s failure to meet the one-hour NAAQS for sulfur dioxide (SO₂). The EPA granted NJDEP’s petition and issued a final rule ordering GenOn to reduce the plant’s SO₂ emissions by 81 percent within three years. GenOn appealed the agency’s rule, arguing that the CAA’s “cooperative federalism” structure prohibits the EPA from imposing direct regulations on GenOn before Pennsylvania is allowed to amend its State Implementation Plan (SIP) to address the issue. GenOn asserted the granting of a Section 126(b) petition should be a matter of last recourse. The Third Circuit upheld the agency’s direct rule against GenOn after finding that Section 126(b) contains “no temporal limitation on a [downwind] state’s right to petition the EPA” to address an upwind state’s air pollution and no requirement to allow an upwind state to first amend its SIP. The Third Circuit distinguished the Section 126 process from the Section 110 “SIP call” process that was under consideration in a recent D.C. Circuit decision: EME Homer City v. EPA, No. 11-1302 (D.C. Circuit). The EME Homer City decision vacated the EPA’s Cross-State Air Pollution Rule.
  
  
• D.C. Circuit Orders Maryland to Respond to Power Plant’s Air Permit Application. On July 19, the D.C. Circuit ordered the Maryland Department of the Environment (DEP) to respond to Dominion Transmission’s air permit application after finding that DEP’s failure to act on the application is “inconsistent with federal law.” Dominion Transmission v. Summers, No. 13-1019. Dominion is required to obtain an air permit from DEP before it can begin construction on a planned natural gas compressor station in Myersville, Maryland. Dominion submitted its air permit application in February 2012, which was denied because DEP found the compressor station plans did not comply with Myersville’s zoning regulations. In December 2012, the Federal Energy Regulatory Commission (FERC) issued Dominion a certificate of convenience and public necessity authorizing Dominion to build the compressor station. Subsequent to FERC’s action, Dominion re-applied to DEP for the air permit and again, DEP denied the air permit. Dominion then petitioned the D.C. Circuit to review DEP’s denial. The Natural Gas Act (NGA) authorizes expedited judicial review of federal or state action or inaction that deprives a company from building a FERC-certified natural gas facility. After finding that it had jurisdiction to hear Dominion’s petition under the NGA, the D.C. Circuit found that DEP must apply the FERC standard to either “determine which of Myersville’s zoning and land use requirements are preempted by the NGA, and which remain applicable to Dominion’s compressor station” or approve Dominion’s air permit application.
  
  
• D.C. Circuit Upholds EPA’s 2008 Ozone NAAQS. In a July 23 decision that rejected state, environmental and health groups’ petitions, the D.C. Circuit upheld EPA’s health-based ozone NAAQS standards, which the agency set in 2008. Mississippi v. EPA, No. 08-1200. The petitioners argued that EPA failed to adequately explain its reasons for deviating from the Clean Air Scientific Advisory Committee’s (CASAC) recommendations to set the ozone NAAQS between 60 parts per billion (ppb) and 70 ppb, when the agency set the standard at 75 ppb. The court dismissed this argument, finding that the CASAC itself did not clearly explain the basis for its recommendation. The court also dismissed arguments by the State of Mississippi and industry groups that the 75 ppb standard is too stringent. However, the court remanded the agency’s welfare-based secondary ozone standard after finding that the EPA did not adequately explain its decision to set the standard at the same 75 ppb. It is unclear what effect this ruling will have because the EPA is currently reviewing the 2008 ozone NAAQS standard under the CAA requirement instructing the agency to review and revise the NAAQS every five years. The EPA is expected to release a proposed rule tightening the standard in 2014.
  
  
• Tenth Circuit Upholds EPA Federal Plan to Control Oklahoma Power Plant Emissions. On July 19, the U.S. Court of Appeals for the Tenth Circuit (Tenth Circuit) upheld EPA’s enactment of a Federal Implementation Plan (FIP) to control SO₂ from two Oklahoma coal-fired power plants. Oklahoma v. EPA, No. 12-9526. EPA imposed the FIP on Oklahoma after the agency found that the state’s SIP inadequately protected visibility at some national parks and wildlife areas because it did not include require scrubbers to remove SO₂ emissions at the two power plants. The CAA imposes a duty on EPA to establish a FIP if the agency finds a SIP does not satisfy the minimum criteria established under the CAA. Rejecting the petitioners’ arguments that the EPA impermissibly imposed a more stringent FIP on Oklahoma, the Tenth Circuit found that “EPA has authority to review the state’s plan and that it lawfully exercised that authority in rejecting it and promulgating its own.”
  
  
• Tenth Circuit Upholds EPA’s Determination to Issue Title V Permit. On July 23, the Tenth Circuit upheld EPA’s decision to deny an environmental group’s petition challenging a CAA Title V operating permit issued by the Colorado Department of Public Health and Environment (CDPHE) to the Public Service Company of Colorado (PSCC) for one of PSCC’s coal-fired power plants. WildEarth Guardians v. EPA, No. 11-9559. The environmental group argued that the permit needed to include a plan to bring the power plant into compliance with the CAA’s Prevention of Significant Deterioration (PSD) requirements because the facility underwent major modifications. WildEarth presented a Notice of Violation (NOV) issued by the EPA in 2002 to PSCC as evidence of the facility’s noncompliance. The EPA subsequently upheld CDPHE’s decision to issue the permit. The Tenth Circuit found that the EPA did not act “arbitrarily or capriciously in holding that Plaintiff had not demonstrated noncompliance” because the agency reasonably found that “issuance of an NOV and reference to information contained therein are not sufficient to satisfy the demonstration requirement.”
  
  
• Federal Circuit Affirms Decision Allowing Reclamation Fees on Coal Bound for Export. On July 22, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) upheld a lower court’s ruling approving the Department of the Interior’s (Interior) decision to assess reclamation fees on coal that is eventually exported. Aracoma Coal Company v. United States, No. 12-5090. Under the Surface Mining Control and Reclamation Act of 1977, coal companies are required to pay fees on coal produced to support the Abandoned Mine Reclamation Fund. The plaintiffs in the case—more than 60 coal companies—argued that the fees violate the U.S. Constitution’s Export Clause because they are imposed on domestically produced coal bound for export. The Federal Circuit affirmed the U.S. Court of Federal Claims’ finding that the fees are legally imposed when the coal is extracted, not when the coal is in the export stream.  

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