The U.S. Supreme Court has agreed to hear a case this term that will tackle the controversial question of whether states can impose curbs on greenhouse gas emissions by utility companies for their contributions to climate change.
Should the court side with the states, it could open up many industrial and manufacturing companies to climate change and emissions litigation. Trent Taylor, a partner at law firm McGuire Woods, says, “It's going to be one of the most significant environmental cases in decades,” regardless of the outcome.
The implications of the Court's decision extend well beyond the utilities industry. “The number of industry sources that are affected are countless,” says Peter Hsiao, a partner at Morrison Foerster and head of the firm's land use and environmental law group. If the Supreme Court agrees with Connecticut, the plaintiff in the case, the decision will affect the heaviest emitting sectors, including oil and gas, chemical companies, automakers, agricultural companies, and others.
The case, American Electric Power v. State of Connecticut, dates back to 2004, when eight states (California, Connecticut, Iowa, New Jersey, New York, Rhode Island, Vermont, and Wisconsin) and New York City sued five electric utility companies over allegations that their greenhouse gas emissions created a “public nuisance” and contributed to global warming.
Following the precedent of earlier decisions, a New York district court first dismissed the case on the grounds that the lawsuits raised questions of a political nature that couldn't be resolved by the courts. The Second Circuit Court of Appeals, however, reversed that ruling in September 2009, reinstating the lawsuit and remanding it back to the district court for further proceedings.
Since then, the defendant utility companies—American Electric Power, Southern Co., Xcel Energy, Cinergy, and the Tennessee Valley Authority—have urged the Supreme Court to reverse the appeals court decision and dismiss the lawsuit.
“The ramifications of this holding, if it is allowed to stand, are staggering,” Peter Keisler, a partner at law firm Sidley Austin, wrote in a brief on behalf of the utility companies. “Virtually every entity and industry in the world is responsible for some emissions of carbon dioxide and is thus a potential defendant in climate change nuisance actions under the theory of this case.”
The EPA estimates roughly 6 million industrial facilities are responsible for greenhouse gases emissions in the United States. Bringing such public nuisance lawsuits against individual companies is like “cutting grass one blade at a time,” says Hsiao.
“Virtually every entity and industry in the world is responsible for some emissions of carbon dioxide and is thus a potential defendant in climate change nuisance actions under the theory of this case.”
—Peter Keisler,
Partner,
Sidley Austin
In a friend-of-the-court brief, 12 states additionally urged the Court to dismiss the lawsuit. Those states are Indiana, Arkansas, Hawaii, Kansas, Kentucky, Nebraska, North Dakota, Ohio, Pennsylvania, South Carolina, Utah, and Wyoming.
“The theory of liability being advanced here has no limiting principle,” Indiana Solicitor General Thomas Fisher wrote in the brief on behalf of the states. “It would permit federal courts to impose carbon dioxide emission limits on any entity in the country, and one might reasonably expect that the major economic actors of each state, not to mention state government entities themselves, would be on a list of potential defendants.”
Several business groups, including the Business Roundtable and the National Association of Manufacturers, petitioned the Supreme Court in support of the utility companies. They argue that any limits on emissions shouldn't be based on court rulings but rather on government legislation and regulations from the Environmental Protection Agency. Even the Obama Administration has filed a petition supporting the utility companies.
If the Supreme Court rules in favor of the utilities, companies still face the potential for increased regulation of greenhouse gasses. The EPA announced in December that it will propose standards for new and refurbished power plants in July 2011 and for refineries in December 2011 to regulate greenhouse gasses under the Clean Air Act. Final standards for new plants would come in 2012, and for existing plants sometime after that.
EPA FACT SHEET
The following information is in regard to the EPA's settlement agreements to address greenhouse gas emissions from electric generating units and refineries:
The Environmental Protection Agency (EPA) entered into two proposed settlement
agreements to issue rules that will address greenhouse gas emissions from certain
fossil fuel-fired powerplants--electric generating units (EGUs)--and refineries.
For natural gas, oil, and coal-fired EGUs: these rules would establish new source
performance standards (NSPS) for new and modified EGUs and emission guidelines
for existing EGUs. Under today's agreement with the States of New York,
California, Connecticut, Delaware, Maine, New Mexico, Oregon, Rhode Island,
Vermont, and Washington, the Commonwealth of Massachusetts, the District of
Columbia, and the City of New York; Natural Resources Defense Council (NRDC),
Sierra Club, and Environmental Defense Fund (EDF), EPA would commit to issuing
proposed regulations by July 26, 2011 and final regulations by May 26, 2012.
—EPA is coordinating this action on GHGs with a number of other required
regulatory actions for traditional pollutants including the Utility MACT rule, the
Transport Rule and New Source Performance Standards for criteria
pollutants. Together, EGUs will be able to develop strategies to reduce all
pollutants in a more efficient and cost-effective way than addressing these
pollutants separately.
For refineries: EPA has entered into a separate agreement with the States of New
York, California, Connecticut, Delaware, Maine, New Hampshire, New Mexico,
Oregon, Rhode Island, Vermont, and Washington, the Commonwealth of
Massachusetts, the District of Columbia, and the City of New York; Natural
Resources Defense Council (NRDC), Sierra Club, and Environmental Integrity
Project that establishes a different schedule for the Agency to issue regulations
addressing greenhouse gases from refineries.
—This settlement agreement establishes a comprehensive approach of
simultaneously addressing different types of air pollution (GHG, toxics and
“criteria” pollutants) from different points at the refinery at the same time and
in accord with EPA's Clean Air Act obligations to control emissions from this
sector.
—In addition to an NSPS for new and modified refineries, and emission
guidelines for existing refineries, EPA commits to conduct a risk and
technology review of current air toxic standards for refineries.
—As part of this settlement agreement, EPA also commits to resolve the issues
raised in an August 25, 2008 petition for reconsideration of the refinery NSPS.
EPA would propose regulations to address all these issues by December 15,
2011 and finalize regulations by November 15, 2012.
—Before proposing these new regulations, EPA will conduct additional data
collection from refineries.
In addition, beginning in early 2011, EPA intends to conduct public and stakeholder
outreach in the form of listening sessions
A notice of these proposed settlement agreements will be published in the Federal
Register and a 30-day public comment period will follow publication.
For more information about the settlement agreements, please contact Susan Stahle
(202)564-1272 regarding refineries and Elliott Zenick (202)564-1822 regarding
utilities.
For a copy of the settlement agreement and more information about the current new
source performance standards for EGUs visit http://www.epa.gov/ttn/atw/nsps/electric/elecgenpg.html
For a copy of the settlement agreement and more information about the current new
source performance standards for refineries, visit http://www.epa.gov/airquality/ghgsettlement.html
Source
EPA Fact Sheet on Greenhouse Gas Emissions.
Possible Outcomes
If the Court sides with the states, some say it could open the floodgates for copycat lawsuits. Similar “public nuisance” lawsuits are already pending.
In one such case, Native Village of Kivalina v. ExxonMobil, the governing bodies of an Alaskan tribal village sued 24 oil, coal, and power companies over allegations that climate change contributed to the erosion of ice in the Arctic Sea, and forced them to relocate their village. The plaintiffs are seeking compensation for relocation costs.
In another case, Comer v. Murphy Oil USA, Mississippi coastal residents and landowners filed a class-action lawsuit against several oil, coal, and chemical companies, alleging the utilities' greenhouse gas emissions contributed to global warming and increased the severity of Hurricane Katrina.
As in the lawsuit against American Electric Power, the defendants in the Kivalina and Comer cases successfully moved to dismiss the claims on the grounds that the lawsuits raised questions of a political nature that couldn't be resolved by the courts. The appeal to the Ninth Circuit in Kivalina is still pending.
What effect the decision could have if the Court reverses the Second Circuit decision, however, is up for debate. According to Taylor, a reversal is “really going to drive a stake through the heart of climate change litigation.”
Joanne Zimolzak, a partner with McKenna, Long & Aldridge, doesn't believe that to be the case. “We think it would definitely slow things down in the short term, until the plaintiffs' bar can regroup and find a new cause of action,” she says.
Taylor says another possible outcome may be that more and more environmental claims will end up being filed under a federal or state statute.
The Supreme Court last addressed climate change in 2007 when it concluded by a 5-4 decision in Massachusetts v. EPA that the Clean Air Act required the EPA to consider whether carbon dioxide and other greenhouse gases were air pollutants within the meaning of the Act.
Public nuisance claims, particularly, are “such a convoluted area of the law that I really think it pays from a legal standpoint to do your homework on it early and start thinking now about possible defenses,” says Taylor. Keep a record of the statements your company has made about climate change, and don't wait until a lawsuit has been filed before you assess your exposure level, he adds.
The Supreme Court is expected to hear the case this spring, with a ruling due in June.
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