Friday, March 6, 2009

The costs of patchwork climate change regulation

These days it is hard to turn on your computer or watch the television without coming across a discussion of some variety on greenhouse gas (“GHG”) emissions and climate change. Some continue to question climate change or whether anthropogenic GHG emissions are a primary cause. Others point to government-backed scientific organizations and argue that the only question is how to prevent the predicted dire planetary consequences.

While these debates continue to provide coffee shop fodder, the legal reality of GHG emissions for the average American energy producer, mining company, or other large scale carbon emitting business is one of costly uncertainty. This legal reality traces back to the April 2007 United State Supreme Court decision of Massachusetts v. EPA, which concluded that that carbon dioxide and other GHGs are air pollutants under the federal Clean Air Act. In reaching that conclusion, the Supreme Court stated that the “harms associated with climate change are serious and well recognized” and that there is a causal connection between anthropogenic GHG emissions and climate change.

Decision makers across the nation from state district courts (Georgia decision), to the Environmental Appeals Board (EAB decision) have looked to Massachusetts to decide legal questions relating to GHG emissions. Since this represents the opinion of the highest court of the land, the current trend towards judicially-mandated GHG action is going to continue, at least until the Supreme Court revisits the questions or Congress and President Obama take legislative action. Of course, the early signs are that the EPA under President Obama is going to be more active on GHG regulation, not less.

The problem for American businesses is that the combination of the Massachusetts decisions and the relative inaction at the federal level has created a legal quagmire that has spurned costly court battles and administrative challenges to state and federal agency decisions. Given the current state of affairs, the closest thing to a guarantee for a company with significant energy production or needs that is entering the environmental review or permitting process is there will be a challenge to any agency decision based on GHG emissions. We now are beginning to see the effect of the regulatory uncertainty as a major planned utility plant was cancelled.

Given the trying financial times we now face, the certainty of costly litigation is just one more reason to look elsewhere for any potential project or to simply forego the project all together. There are some that may say “great, inaction is good for the environment.” But the reality is that as worldwide consumption of fossil fuels and other raw materials remains the same (or more realistically continues to increase), the notion that preventing a project here is good for the environment simply does not past muster. So long as there is demand, companies will find a way to meet that demand as cheaply as possible. In the current state of patchwork local and regional GHG “regulation” companies will face economic pressure to move potential projects to states with a more conservative approach to GHG emissions or to nations that have little to no environmental controls. When you are dealing with a “global pollutant” like GHG emissions, we do nothing to reduce emissions globally or in our backyard by simply pushing off business to another jurisdiction. In these trying times, if there is going to be GHG regulation shouldn’t it be done in a way that actually helps the environment and that does not disadvantage Minnesota businesses compared to state locations or chase American businesses outside our borders?

Submitted by Michael J. Mergens

Michael J. Mergens is an attorney at Larkin Hoffman Daly & Lindgren in Minneapolis. His practice includes a broad range of real estate matters, such as environmental permitting and litigation, land use approvals and disputes, and general real estate disputes. He has devoted much of his practice to the regulation of greenhouse gas emissions, which has begun to arise in the environmental permitting processes of various state and federal regulatory bodies. He also tracks the potential for regulations under the Clean Air Act.

Mergens serves on the Minnesota Chamber of Commerce Environmental and Natural Resources Committee. He is also involved with the Minnesota Environmental Initiative, the United States Green Building Council – Mississippi Headwaters Chapter, and the Environmental Section of the American Bar Association. He received his juris doctorate cum laude in 2002 from the University of Minnesota Law School. He is admitted to practice law in Minnesota, California and Arizona, as well as in the United States District Courts for Minnesota and the Central District of California.

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