The Nickel Report

On June 4, 2020, the Massachusetts Attorney General’s Office (AGO) filed a Petition requesting the Massachusetts Department of Public Utilities (DPU) to open an investigation into potential changes to natural gas distribution operations to support the Commonwealth’s legislatively mandated greenhouse gas (GHG) emission limit reductions (the Petition).

On September 6, Assistant Secretary of Energy for Electricity Bruce Walker issued an order under Section 202(c) of the Federal Power Act declaring an emergency shortage of electric generation and directing the California Independent System Operator (CAISO) to require the dispatch of electrical output from specified electric generating units, if the CAISO determines the generation is necessary to meet demand.  The order applies during afternoon and evening hours from September 6 through September 13, 2020.

The US Securities and Exchange Commission (SEC) has adopted amendments to modernize its Regulation S-K and thereby change the rules related to environmental disclosure requirements and increase the reporting threshold for disclosure of actual or potential environmental penalties.[1]  In doing so, the SEC is updating rules that have not been revised significantly in 30 years.  Proposed last year as part of the SEC’s Disclosure Effectiveness Initiative, [2] the amended rules, which were adopted on August 26, 2020, are intended to improve disclosure for investors and simplify compliance for registrants.  As described in the rule preamble, the amendments are “intended to improve the readability of disclosure documents, as well as discourage repetition and disclosure of information that is not material.” [3]

As I have reported previously, the US Court of Appeals for the DC Circuit issued a significant decision in September 2019 on EPA’s implementation of the so-called “Good Neighbor Provision” of the federal Clean Air Act (CAA). That is the CAA’s principal provision addressing what is often termed “interstate transport,” the physical process in which emissions from cars, trucks, factories, power plants, and myriad other sources—and the resulting air pollution—are carried by prevailing winds across state borders. The main purpose of the Good Neighbor Provision (section 110(a)(2)(D)(i)(I) of the CAA) is to prevent “significant contribution” by “upwind” states’ emissions to violations of national ambient air quality standards (NAAQS) in “downwind” states. Although states have the principal responsibility to implement this provision, EPA periodically has invoked its CAA authority to impose requirements to curb interstate transport when it determines upwind states have not adopted adequate controls.

Determining which areas constitute habitat for listed species has important consequences under the Endangered Species Act (“ESA” or “Act”), yet “habitat” is not currently defined by the Act or its implementing regulations.  On August 5, 2020, the US Fish and Wildlife Service and the National Marine Fisheries Service (jointly, “the Services”) proposed a rule to define “habitat” for purposes of designating “critical habitat” under section 4 of the Endangered Species Act.  See 85 Fed. Reg. 47,333 (Aug. 5, 2020).  The Services’ proposal responds to the Supreme Court’s November 27, 2018, unanimous holding in Weyerhaeuser Co. v. U.S. Fish & Wildlife Service, 139 S. Ct. 361 (2018), that an area is eligible for designation as critical habitat under the ESA only if the area is actually habitat for that species.  Accordingly, a final rule defining “habitat” would determine which areas of land and water are eligible for designation as critical habitat.  Such designations can affect projects that require federal agency permits or funding, because ESA section 7 consultation requires federal agencies to ensure that their actions are not likely to adversely modify or destroy designated critical habitat.  The result for federally approved or funded projects can be increased permitting costs and risks, and longer timelines.  The proposal’s comment period ended on September 4.  Over 160,000 comments were submitted.  Stakeholders now await a final rule.

As we have previously reported, in July 2020, the Council on Environmental Quality (CEQ) published its highly anticipated final rule to improve its National Environmental Policy Act (NEPA) regulations, the first comprehensive revision of the NEPA implementing regulations in over forty years.  The final rule, which has generated much controversy and spurred numerous lawsuits, goes into effect today.  This post provides a brief update on the pending litigation and implementation of the new rule.

In March of this year, we provided an update regarding how lower courts were applying the Supreme Court’s landmark decision in Kisor v. Wilkie, 139 S. Ct. 2400 (2019), which addressed the question of whether the Court should overrule the Auer doctrine, named after the 1997 Supreme Court case Auer v. Robbins.  The Auer doctrine rests on the premise that agencies are in a better position than courts to interpret their own regulations.  Under the doctrine, courts generally defer to an agency’s reasonable readings of its own “genuinely ambiguous” regulations.  In a 5-4 decision, the Court declined to abandon the Auer doctrine on grounds of stare decisis but seemed to outline restrictions on the scope and applicability of the doctrine, including the rule that deference to an agency’s interpretation of an ambiguous regulation is not appropriate if the interpretation does not reflect the “fair and considered judgment” of the agency.  This means that deference may not be appropriate if the interpretation creates “unfair surprise,” such as when the agency’s interpretation conflicts with a prior interpretation or upends a party’s reliance on established practices.  Kisor, 139 S. Ct. at 2417-18.

On August 11, the US Department of Justice (DOJ) released a new report that promotes constructive recommendations to modernize and improve the Administrative Procedure Act (APA).  In 1946, Congress enacted the APA to establish procedures as a check on administrative power, and to provide the public with some degree of due process in the face of regulatory action.  As it relates to the Clean Water Act, Clean Air Act, Endangered Species Act, and other relevant environmental regulatory programs, the APA provides the framework under which federal agencies develop and promulgate regulations to implement these programs.  Since Congress passed the APA over 70 years ago, the size and scope of federal regulatory authority has ballooned in size, leading at times to inefficiencies in the rulemaking process and a lack of accountability.  To address these shortcomings, DOJ hosted a summit in December 2019 that brought together leading regulatory practitioners, scholars, and policymakers to discuss possible reform.  Although legislative action in the near future is unlikely given the polarized political climate in Congress, the report puts forward a “rich menu of options” for Congress to revise the APA.

Flaring has the attention of RRC, Producers and Stakeholders

Flaring has the attention of the Texas Railroad Commission (RRC), oil and natural gas companies and stakeholders such as royalty owners, investors and environmental groups. Requests for RRC authorization of flaring has been on the increase in the Permian Basin. As a result, a number of interested parties are looking at regulatory changes. Some interested parties voice concern that a valuable resource is being wasted, others state that the definition of natural gas 'waste' is too limited, still others are concerned about methane emissions and some all of the above. Though the interested parties may not always be aligned, there is a general sense that regulatory amendments are needed.

For over 40 years, one of the Clean Water Act’s (CWA’s) key regulatory programs has not functioned as Congress originally intended, producing, over time, significant inefficiencies in the federal permitting process that increase costs and delays for developers and hinder environmental review and protection. Today, renewed efforts at both the state and federal levels seek to achieve the objectives established by Congress in 1977. In particular, the U.S. Environmental Protection Agency (EPA) recently announced that it intends to revise long-standing regulations that have derailed state implementation of the program. EPA’s approach to this rulemaking, and whether it can adequately address critical barriers to state assumption, has the potential to transform the regulatory landscape and produce substantial benefits for states, the public, the regulated community, and the environment.