By Jocelyn Hill

Philadelphia, PA

There is scientific consensus that climate change is occurring and that global warming is caused by emissions of greenhouse gases.  Various plaintiffs, including individuals, environmental groups and state and local governments have instituted global warming litigation targeting corporations as defendants. 

In 2004, eight states and New York City filed the first climate change liability action against private corporations--the six power companies purported to be the largest emitters of greenhouse gases in the United States.  Connecticut v. American Electric Power Company (“Connecticut v. AEP”) was dismissed on the grounds that it presented non-justiciable political questions.

There have been a number of climate change lawsuits filed since that first climate change case, including Comer v. Nationwide Mutual Insurance Company, California ex rel. Lockyer v. General Motors Corporation, and most recently, Native Village of Kivalina v. ExxonMobil Corporation.  Like Connecticut v. AEP, both Comer and General Motors were dismissed on the grounds that the cases presented non-justiciable political questions.  Indeed, the courts in Comer and General Motors relied on Connecticut v. AEP in rendering their decisions to dismiss.  Both Comer and General Motors are now on appeal.  As for Kivalina, there is a motion to dismiss currently pending in that action.

This past week, the US Court of Appeals for the Second Circuit reversed the district court's decision in Connecticut v. AEP.  The appellate court’s decision that there is no need for courts to wait for a definitive policy statement from the legislative branch on global warming means that we seem to be one step closer to seeing global warming lawsuits decided on the merits.  This decision may also have a “domino effect” on the Comer and General Motors appeals, as well as on the Kivalina motion to dismiss.  It seems that causation battles loom on the horizon.  

Connecticut v. AEP also raises some interesting political questions.  The Connecticut v. AEP appeal was argued on June 7, 2006 before a three-judge panel that included then-Second Circuit Judge Sonia Sotomayor.  Because the case was ultimately decided by a two judge panel of the Second Circuit, and given the unique political circumstances of Justice Sonia Sotomayor's elevation to the U.S. Supreme Court after her role in the argument and before decision (There had been some speculation that Sotomayor held off rendering a decision to reduce the amount of potential fodder in her confirmation hearings), the most likely next step for this case is a motion for rehearing en banc.  This course is likely to add at least some time to the case’s trajectory.

If and when the case is appealed to the Supreme Court, the eventual outcome is a toss up.  Depending on how long it takes to get before the Supreme Court, President Obama may have had the opportunity to appoint one or more new justices to the bench.  This may bode more favorably for the plaintiffs in light of the Supreme Court’s record on environmental cases this term.  In any event, now that Sotomayor has been confirmed, if the case is appealed to the Supreme Court, there is also the question of whether Sotomayor would have to recuse herself. 

While there is still debate as to whether or not Congress will pass climate change legislation before the end of the year, other branches of government are moving ahead on the climate change front.  The U.S. Environmental Protection Agency ("EPA") issued its final mandatory greenhouse gas (“GHG”) emissions reporting rule (“Reporting Rule”) on September 22, 2009.[1]  The authority for this rulemaking stems from a directive in the fiscal year 2008 Consolidated Appropriations Act.  The Reporting Rule targets approximately 85% of the total U.S. GHG emissions, by requiring monitoring and reporting by 10,000 facilities in 31 diverse sectors that go well beyond the power industry and extend beyond direct emitters.   

Generally, upstream and downstream sources who emit 25,000 metric tons of carbon dioxide equivalent (“CO2e”) per year (the equivalent of annual GHG emissions from the energy use of approximately 2,300 homes or 4,600 passenger vehicles) will be required to collect and report data at the facility level.  However, certain suppliers of fossil fuels and industrial GHGs as well as vehicle and engine manufacturers are required to report at the corporate level.  Vehicle and engine manufacturers (mobile sources) are required to use existing certification and test protocols.   

Upstream sources include suppliers of the following products: coal-based liquid fuels, petroleum products, natural gas and natural gas liquids, industrial GHGs, and carbon dioxide.  Upstream sources are required to report based on the GHG content of the fuels or gases they supply into the market, as opposed to the GHG emissions that would occur from the use of their products.  Downstream sources include a broad range of entities, including but not limited to: general stationary fuel combustion sources, electricity generation, aluminum production, ammonia manufacturing, cement production, glass production, chemical producers, iron and steel production, lead production, lime manufacturing, petrochemical production and petroleum refineries, pulp and paper manufacturing, silicon carbide production, soda ash manufacturing, titanium dioxide production, zinc production, municipal solid waste landfills, and manure management.  Downstream sources are required to report their CO2e emissions even if they do not exceed the generally applicable 25,000 metric ton threshold.  Some entities that were originally among the covered sources in the proposed rule (issued in March) are no longer required to report including, for example, electronics manufacturers, manufacturers of light-duty vehicles and passenger trucks, food processors, industrial landfills, coal suppliers and underground coal mines, and wastewater treatment facilities. 

Monitoring is to commence on January 1, 2010, with the first annual reports (reporting 2010 data) due by March 31, 2011.[2]  In order to assist in the transition to this program, from January through March 2010, facilities are allowed to use of best available data in lieu of the required monitoring methods.  Entities are required to maintain their reporting records for 3 years.     

Similar to other existing EPA programs under the Clean Air Act, the Reporting Rule does not require third-party verifications, instead requiring covered entities to self-certify the data they submit to the EPA.  Facilities are required to designate a representative who will certify all emission reports, formally designating such individual at least 60 days before submitting any applicable emissions report.  Consistent with most EPA programs, the EPA may take enforcement action against facilities that fail to comply with the monitoring and reporting requirements.

There are incentives for facilities that reduce their emissions below certain levels.  Specifically, the EPA has established triggers that allow entities to leave the monitoring and reporting program.  After 5 consecutive years of reporting emissions below 25,000 metric tons CO2e per year, a facility may cease reporting.  Similarly, if a facility reports emissions below 15,000 metric tons CO2e per year for 3 consecutive, it may cease reporting.  Finally, if the facility’s processes or operations that emit GHG are shut down, the facility may cease reporting. 

As for the cost, the EPA estimates that the cost to be incurred by the private sector for compliance with the Reporting Rules will be: $115 million for the first year and $72 million in annualized costs in later years.

Emissions data is not to be withheld as confidential business information, but instead will be publicly available.  Note, however, that the EPA will have a separate notice and comment process in 2010 to address confidential treatment of data that facilities may consider confidential business information.

While covered facilities are required to report CO2e emissions data directly to the EPA, the Agency intends to coordinate with state and regional programs and voluntary reporting entities, such as the Climate Registry, with regard to sharing verified emissions data.  The goal is to develop a data exchange standard in order to allow for the data to be shared and ease the reporting burden imposed on covered facilities.  However, because the data reported in other GHG monitoring programs is different in form and scope than the data required by the EPA’s Reporting Rule, entities who are members of a voluntary reporting program or a state or regional compliance program need to carefully review the requirements of the EPA’s Reporting Rule, not assume that the same data and reports may be re-formatted to meet the Reporting Rule.

Although independent from other regulatory action recently taken by the EPA, the Reporting Rule, viewed in tandem with pronouncements such as the EPA’s Proposed Endangerment and Cause or Contribute Findings for GHG Under the Clean Air Act (issued in April 2009 and previously discussed at www.climatelawyers.com), further lays a foundation for the EPA to regulate GHG emissions using its existing authority, even if Congress does not pass comprehensive climate change legislation. 

The bottom line is that many outside the power sector, who were never required to think about GHG emissions, are now required to ascertain whether the EPA’s recently announced GHG Reporting Rule applies, then monitor and report their emissions. 

The U.S. Court of Appeals for the Second Circuit issued a decision this week that reinstates a lawsuit challenging the emission of greenhouse gases from major power plants on a novel application of the federal common law of public nuisance.

The lawsuit, known as Connecticut v. American Electric Power Co. Inc., was originally filed in 2004 in U.S. District Court in Manhattan by eight States and New York City against six electric power companies that own and operate fossil-fuel-fired power plants in 20 states. 

Four years ago this month, the district court dismissed the case, concluding that the Plaintiffs’ claims presented a non-justiciable political question.  The lower court reasoned that since neither the Congress nor the President of the U.S. had acted to address global warming, the courts could not act on the climate change impacts of greenhouse gas emissions without an initial policy determination of the executive or legislative branches of government.

On appeal, Plaintiffs argued that the political question doctrine should not close the courthouse doors to their claims; that they have standing to assert their claims; that they have properly stated claims under the federal common law of nuisance; and that their claims are not displaced by federal statutes. The power company defendants responded that the district court’s judgment should be upheld, either because the complaints present non-justiciable political questions or on a number of alternate grounds: lack of standing; failure to state a claim; and displacement of federal common law.

The Second Circuit Court held that the district court erred in dismissing the complaints on political question grounds; that all of Plaintiffs have standing; that the federal common law of nuisance governs their claims; that Plaintiffs have stated claims under the federal common law of nuisance; and that their claims are not displaced by federal statutes.  The court returned the case to the district court for further proceedings.

At issue in the case is the States’ claim that global warming, to which the power companies contribute as the “five largest emitters of carbon dioxide in the United States and . . . among the largest in the world,” by emitting 650 million tons per year of carbon dioxide, is causing and will continue to cause serious harms affecting human health and natural resources. The court noted that the States argued that carbon dioxide acts as a greenhouse gas that traps heat in the earth’s atmosphere, and that as a result of this trapped heat, the earth’s temperature has risen over the years and will continue to rise in the future. Pointing to a “clear scientific consensus” that global warming has already begun to alter the natural world, Plaintiffs predict that it “will accelerate over the coming decades unless action is taken to reduce emissions of carbon dioxide.”  The States are seeking to force the power companies to cap and then reduce their carbon dioxide emissions.

The court’s 139-page opinion is available at this link: http://www.ca2.uscourts.gov/decisions/isysquery/ec808c76-fa70-4e06-ab56-7aa2cd2758b9/3/doc/08-4122-cv_opn.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/ec808c76-fa70-4e06-ab56-7aa2cd2758b9/3/hilite/

As Congressional action stalls on pending climate change and renewable energy legislation that could adopt a national renewable portfolio standard and mandate greenhouse gas reductions, the U.S. Department of Energy is accelerating its funding announcements under this year’s stimulus legislation.

On Tuesday, DOE Secretary Steven Chu announced $500 million in cash assistance awards for wind and solar clean energy projects in eight states, providing upfront capital and funding the creation of green jobs.

Under Section 1603 of the American Recovery and Reinvestment Act, enacted in February, the program is ultimately scheduled to provide more than $3 billion for direct cash grants in lieu of renewable energy tax credits to support biomass, solar, wind and other types of renewable energy facilities all over the country.  The Treasury Department released the applications for these grants on July 31 and, in announcing the funded projects Tuesday, DOE made the first awards in half the mandated 60 day time frame.

“The Recovery Act is investing in our long-term energy needs while creating jobs in communities around the country,” said Treasury Secretary Tim Geithner in a press release. “This renewable energy program will spur the manufacture and development of clean energy in urban and rural America, allowing us to protect our environment, create good jobs and revitalize our nation’s economy.”

Chu said, “The initiative will help double our renewable energy capacity over the next few years and make sure America leads the world in creating the clean energy economy of the future.”

One knew it was only a matter of time before a green building was no longer green. (What is the metaphor:  brown? wilted?). And it is not just a single building, a whole crop of buildings is not meeting the promise (some would say hype) that accompanied their opening. 

In an article in Sunday's New York Times, Some Buildings Not Living Up to Green Label, Mireya Navarro reports on a federal office building in Youngstown, Ohio which, with its white reflecting roof and lots of natural light, is LEED certified. But it also can't qualify for the EPA's Energy Star program. The General Services Adminstration's audit noted that its LEED points included native landscaping but not structural energy-saving features.

This finding is consistent with research by the New Buildings Institute, which concluded that nearly a quarter of LEED certified buildings do not meet the energy efficiency predicted by their design. Worse, many of those buildings use more energy than non-LEED certified comparable existing building stock.  Click here for PDF.

This is not just an issue of heating bills.  Tax credits, grants and loans, marketing and financing may all be tied up with the assertion that the building is green.  If it is not, it can jeopardize the viability of the entire project.  So what is an owner to do? 

Unfortunately, the right question may be what should an owner have done?  If a building does not perform, it is likely that the cost-effective remedy should have been implemented even before the design was complete, by which I mean the contract language.  Mary Jane Augustine (full disclosure:  Ms. Augustine is my partner) in a cutting edge presentation for the Practising Law Institute addresses the contract issues concerning achievement of LEED certification.  Her writing, Project Owner Strategies for “Greening” Design and Construction Contracts (PLI Green Real Estate Summit, Mar. 20, 2009), is required reading and her ideas are easily adapted to a situation where the green building, even if LEED certified, is no longer meeting those criteria.

The key is a set of provisions that confirm the centrality of achieving "green".  The contracts with the architect and contractor need to be explicit about what the green goal is.  There should be representations that the design and construction professionals are competent in the "green" area, that the key employees will remain on the job and that the owner has relied on the architect's and contractor's competence in entering into the respective contracts.  The design and construction professionals need to agree to perform their jobs in accordance with Green Building principles and practices and provide performance-based remedies (e.g., agreement to return to the project during a run-in or trial period in order to ensure the achievement of the green goal). One may not be able to obtain an express warranty that the building will be green, but one should be able to de-construct the contract into component parts that make a contract remedy for a green building's failure more achievable.

All that being said, two things must be remembered.  First, a building, like your car, must be kept up.  No contract language can prevent inadequate performance if the equipment is not maintained.  Second, performance is not non-conforming if the use of the building differs from the basis on which it was designed.