The Social Cost of Carbon Returns

The Biden Administration has elevated concerns about climate change to the center of its decision-making, signaling that the emission of greenhouse gases must be severely curtailed. President Biden, beginning on his first day in office, rejoined the Paris Agreement and issued executive orders stating, among other things, that federal agencies must “immediately commence work to confront the climate crisis.” He has appointed officials to decision-making positions who have expressed their opposition to the use of fossil fuels. For an economy that currently relies heavily on fossil fuels to create low-cost energy, a “war on carbon” could cause unnecessary disruptions.

According to EPA’s Draft Inventory of US Greenhouse Gas Emission and Sinks, 1990 – 2019, the total gross U.S. greenhouse gas emissions in 2019 were 6,577.2 million metric tons of carbon dioxide equivalent. This represented a 2.0 percent increase since 1990 but a 1.7 percent decrease from 2018. The decrease from 2018 is largely due to a decrease in CO2 emissions from fossil fuel combustion, reflecting the continued shift from coal to less carbon intensive natural gas and renewables. Emissions have decreased 12.9 percent since 2005 levels.

Despite these decreases and downward trends, President Biden on January 20, 2021 issued Executive Order 13990. In it, he explained that the “social cost of carbon” is an estimate of the monetized damages associated with incremental increases in greenhouse gas emissions which represents “changes in net agricultural productivity, human health, property damage from increased flood risk, and the value of ecosystem services.” He established the Interagency Working Group on the Social Cost of Greenhouse Gases and ordered that the IWG publish an interim SCC within 30 days.

The IWG met the deadline, issuing an interim SSC in February 2021. The IWG’s SSC was generally a reinstatement of the SSC it had developed prior to being disbanded in January 2017 by President Trump. According to the IWG, the SSC is $51 per metric ton (at a three percent discount rate) which increases to $85 per metric ton in 2050. Thus, there is a cost of $51 for every metric ton of CO2 emitted in 2020. Stated another way, preventing the emission of a ton of CO2 yields $51 in societal value or benefit.

The use of an inflated SSC tends to skew a cost-benefit analysis. For example, in the Regulatory Impact Analysis for the Clean Power Plan, issued by the Obama Administration in 2015, it was estimated that the climate benefits were $2.8 billion by 2020 (at a three percent discount rate) and, when those estimated climate benefits were added to the air quality health co-benefits, the benefits vastly outweighed the estimated compliance costs. The EPA then used that analysis to justify, in part, the issuance of the rule. The addition of costs associated with the emission of carbon will likely always generate a conclusion that the societal benefits of a proposed rule outweigh its compliance costs.

More of the type of cost benefit analysis used in the Clean Power Plan is forthcoming from EPA and other agencies. EO 13990 mandates that “agencies shall use [the interim SSC] when monetizing the value of changes in greenhouse gas emissions resulting from regulations and other relevant agency actions until final values are published.” Thus, the SSC will be used in a host of regulatory determinations over the next four years to justify agency actions. Likely, the SSC will be used to hinder, delay, or deny projects involving fossil fuels. It has been difficult enough over the years to obtain permits for natural gas pipelines, liquified natural gas facilities, and other facilities emitting greenhouse gases or at least contributing to the emission of such gases. Now, with the renewed application of a higher SSC, authorizations for such projects face an even more difficult path to a final permit.

Earlier this month we posted the five-part series, “Environmental Justice: Origins, Background, and Site Selection Considerations”. I am pleased to announce that the Washington Legal Foundation, a public interest law firm and policy center in Washington, D.C., has compiled the five-part series. You can visit or bookmark the series here at this link: https://www.wlf.org/wp-content/uploads/2021/02/2-2021King_CLN-final.pdf

Below is another five-part series concerning siting in Louisiana. The five articles can be found at these links: 

Environmental Justice: Origins, Background, and Site Selection Considerations – Part V: Considerations in Site Selection

Environmental justice is not a new concept, but it is one that promises to receive renewed and vigorous attention in the Biden Administration. On his first day in office, Mr. Biden issued an Executive Order requiring the federal government to advance and prioritize environmental justice. Mr. Biden has selected a committed advocate as the head of EPA who has promised a pronounced emphasis on environmental justice concerns.

As a result, it is a good time to understand the legal underpinnings of environmental justice claims, the current EPA approach to investigating complaints regarding environmental justice, and steps that may be taken during site selection to minimize or eliminate serious claims regarding environmental justice.

The article contains five parts:

Part I: The Statute

Part II: The Executive Order and EPA’s Regulations

Part III: EPA Guidance – The 2000 Draft Revised Investigative Guidance

Part IV: EPA Guidance – The Toolkit

Part V: Considerations in Site Selection

Part V: Considerations in Site Selection

An applicant for an environmental permit faces any number of hurdles in gaining approval to construct and operate a facility or even expand an existing facility. Environmental justice concerns add a layer of complexity and uncertainty to capital investment decisions. It is almost certain that environmental justice claims will be made during the permitting process for major facilities. While each situation is different and the level of effort should be based on the facts and needs in each case, consideration can be given to taking certain steps before and during that process to reduce the likelihood of success of any such claims.

It is important to note that there is little to no fact-checking during the public comment process, meaning that opponents to a facility can make any number of unsupported claims. Many environmental justice advocates seem to believe that any facility located near or in the vicinity of a disadvantaged community is, on its own and regardless of the facts, a basis to make a claim regarding environmental justice. In other words, the mere location of the facility creates an environmental injustice. Additionally, claims of environmental injustice can be made tactically to galvanize opposition to the facility, again without regard to facts or based on the flimsiest of evidentiary bases. Notwithstanding the rhetoric, there are legal standards and factual thresholds, based on Title VI and the case law interpreting it and EPA’s own regulations and policies, that must be met to prove an environmental justice claim.

It is also important to remember that administrative or judicial review of environmental permits is usually confined to an administrative record. It is critically important that information developed to counter environmental justice claims be placed into the administrative record during the application and public comment process. Without supporting information in the record, the agency and permittee will not be able to rely on and reference the information in a decision document, the permit decision will lack valuable supporting evidence, and a reviewing tribunal or court will lack a basis to uphold the permit decision.

The obvious, but perhaps unrealistic, step to limit or eliminate environmental justice claims is to locate a facility in an area where no one lives in proximity to the proposed facility. These may be located in rural areas or within much larger tracts used or set aside for industrial purposes (sometimes called ‘mega-sites’). If such tracts are available, they should be given serious consideration. However, rural tracts may not meet the needs of the proposed facility, such as access to transportation infrastructure for raw materials or products, and even the larger tracts set aside for industrial purposes may have residents in some degree of proximity.

As a result, it is more likely than not that available industrial sites will be located in areas where some population resides in some degree of proximity. Determining if those sites are suitable for selection, from an environmental, economic, and environmental justice perspective, requires a searching inquiry that should begin prior to making any purchase commitments.

Site selection can be based on a number of considerations. Economic considerations, such as price, property size, local zoning or land use ordinances, proximity and access to transportation (pipelines, rail, truck, barge, or ship), and access to electrical infrastructure, are standard. Many companies make decisions based solely on these considerations.

However, environmental considerations are also important. For example, in Louisiana, an applicant and the environmental agency must give due consideration to environmental aspects of the project and an applicant cannot simply rely on business or economic considerations. See e.g., In re: Supplemental Fuels, Inc., 94-1596 (La. App. 1 Cir. 5/9/95), 656 So.2d 29, 39. Environmental considerations could include the attainment status of the area, the amount of wetlands on or adjacent to the property, the property’s location in a floodplain, the water quality standards for the waters receiving permitted discharges from the facility, the level of emissions, and the proximity of residents to the proposed facility.

Environmental justice has added a new level of complexity and considerations to site selection, especially as to the effect the environmental aspects of the facility have on any community in proximity of the proposed facility. In general terms, the demographics of the population in proximity to the proposed site can be obtained and the effects of “pollution” (such as generated waste, wastewater discharges, and air emissions) from the facility on that population can be analyzed.

In this regard, due regard should be given to the site selection team and its organization. Team members representing real estate, economics, and environmental professionals should be included, but, should the circumstances warrant it, consideration should be given to including counsel, along with a modeler, statistician, and toxicologist. The modeler, statistician, and toxicologist should be hired by counsel as consulting experts and should report only to counsel. This will assist in preserving the confidentiality of any communications from the modeler, statistician, and toxicologist regarding the effects of “pollution” on the community.

The demographics of the community in proximity, down to zip codes and census blocks, can be obtained from the US Census and other sources. Further, there may be reliable information available regarding actual impacts in a given area. For example, the Louisiana Tumor Registry compiles actual cancer incidences and mortality data for specific cancers at the census block level.

Once available data is gathered, the modeler, toxicologist, and statistician can evaluate potential impacts on a neighboring community. In these efforts, counsel and these team members should be guided by the legal and policy framework set out in the Draft Revised Investigative Guidance and Toolkit or any other guidance issued by the Biden Administration. In other words, their efforts and analysis should be shaped and guided by the “disparate impact” framework set forth in those documents.

The modeler can use air emission models to predict or identify off-site locations, or receptors, where air emissions are predicted to be located. For example, receptors can be located within the model at locations in and around the community to predict the level of emissions at that location or receptor based on the maximum levels of emissions estimated from the proposed facility. The toxicologist can utilize the predicted information from the model to determine the potential impacts on that population and the statistician can determine if that potential level of impact is statistically significant.

During the permit and public comment process, opponents are likely to insert their own information into the record to attempt to support their claims. Information such as the demographics of an area, the results of screening model runs, such as EPA’s Risk-Screening Environmental Indicators (RSEI) model, and data obtained from EPA’s EJ Screen have all been used. However, the RSEI model and EJ Screen have important caveats as to their use. For example, EPA notes that EJ Screen was developed merely to “highlight places that may be candidates for further review.” There is “uncertainty in the data” and that EJ Screen is “a screening tool and “not a detailed risk analysis.” See www.epa.gov/ejscreen/limitations-and-caveats-using-ejscreen. The applicant and its team should address and refute any comments and submissions utilizing this type of basic screening-level information.

The end result of the process should be a report that can be placed into the record for each potential site to support the decision to choose a particular site. If the analysis indicates that a particular site will not have a disparate impact, based on EPA’s own analytical framework, the site can be evaluated based on economic or environmental considerations. If the analysis indicates that a particular site will have or may have a disparate impact, that site can be ruled out, additional analysis performed to further define the extent of any impact, or perhaps there may be facts supporting a claim of substantial legitimate justification. In this way, the decision to choose a specific site has a viable and supported administrative record that should survive administrative or judicial review and should serve to counter or negate opposition and/or unsupported rhetoric in the record.

Environmental Justice: Origins, Background, and Site Selection Considerations – Part IV: EPA Guidance – The Toolkit

Environmental justice is not a new concept, but it is one that promises to receive renewed and vigorous attention in the Biden Administration. On his first day in office, Mr. Biden issued an Executive Order requiring the federal government to advance and prioritize environmental justice. Mr. Biden has selected a committed advocate as the head of EPA who has promised a pronounced emphasis on environmental justice concerns.

As a result, it is a good time to understand the legal underpinnings of environmental justice claims, the current EPA approach to investigating complaints regarding environmental justice, and steps that may be taken during site selection to minimize or eliminate serious claims regarding environmental justice.

The article contains five parts:

Part I: The Statute

Part II: The Executive Order and EPA’s Regulations

Part III: EPA Guidance – The 2000 Draft Revised Investigative Guidance

Part IV: EPA Guidance – The Toolkit

Part V: Considerations in Site Selection

Part IV: EPA Guidance – The Toolkit

On January 18, 2017, EPA issued a “Dear Colleague” letter to introduce Chapter 1 of its Compliance Toolkit and clarify existing law and policy to promote and support compliance with federal civil rights laws. After a reminder that all recipients of EPA financial assistance have an affirmative obligation to comply with federal civil rights obligations and that EPA has a duty to ensure compliance, EPA suggests that enforcement of civil rights laws and environmental laws can be achieved in a manner consistent with sustainable economic development and which ensures the protection of human health and the environment.

Generally, the Toolkit attempts to explain what constitutes intentional discrimination and disparate impact and the proof necessary to establish such claims based on the case law cited therein. Unlike the 2000 Draft Revised Investigative Guidance, which detailed EPA’s investigation and decision-making process and procedures, the Toolkit is primarily a summary of legal standards which EPA will use in investigating and resolving complaints.

EPA defines intentional discrimination (or different treatment) as occurring when a recipient intentionally treats individuals differently or otherwise knowingly causes them harm because of their race, color, national origin, disability, age or sex. Intentional discrimination requires a showing that a challenged action was motivated by an intent to discriminate but does not require showing bad faith, ill will, or evil motive.

To determine if such discrimination exists, EPA will evaluate the “totality of the relevant facts” including direct, circumstantial, and statistical evidence to determine whether intentional discrimination has occurred, citing Washington v. Davis, 426 U.S. 229, 242 (1976). EPA acknowledges that direct proof is often unavailable and, as a result, EPA will consider such evidence as statements by decision makers, the historical background of the events in issue, the sequence of events leading to the decision in issue, a departure from standard procedure (e.g., failure to consider factors normally considered), legislative or administrative history (e.g., minutes of meetings), the foreseeability of the consequences of the action, and a history of discriminatory or segregated conduct, citing Village of Arlington Heights v. Metropolitan Housing Redevelopment Corp., 429 U.S. 252, 266-68 (1977).

EPA also stated that intentional discrimination can be based on a showing of disparate impact coupled other evidence of motive, such as the evidence noted above. EPA relied on Elston v. Talladega County Board of Education, 997 F.2d 1394, 1406 (11th Cir. 1993), which stated: “Discriminatory intent may be established by evidence of such factors as substantial disparate impact, a history of discriminatory official actions, procedural and substantive departures from the norms generally followed by the decision-maker, and discriminatory statements in the legislative or administrative history of the decision.” Thus, disparate impact is “not irrelevant” and can be used with other pertinent facts to prove intentional discrimination. Arlington Heights, 429 U.S. at p. 265.

EPA also suggested that it may analyze claims of intentional discrimination using the “burden shifting analytic framework” utilized in Title VII cases and explained in McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973). Under that framework, the complainant must carry the initial burden of establishing a prima facie case of racial discrimination, which EPA stated may be done by showing that: the complainant is a member of a protected class; the complainant was eligible for the recipient’s program, activity or service; the complainant was excluded from that program, activity or service or was otherwise treated in an adverse manner; and an individual who was similarly situated with respect to qualifications, but was not in the complainant’s protected group, was given better treatment. If shown, the burden then shifts to the recipient to establish a legitimate, non-discriminatory reason for the challenged policy or decision and the different treatment.

EPA defines disparate impact (or discriminatory effect) as occurring when a recipient uses a facially neutral procedure or practice that has a significantly adverse (harmful) and disproportionate effect based on race, color, or national origin. In a disparate impact case, the focus is on the consequences of the recipient’s policies or decisions, including the failure to take action, rather than the recipient’s intent.

EPA provides only cursory discussion of a disparate impact analysis, saying that EPA must establish a prima facie case by identifying the specific policy or practice at issue; establishing adversity or harm; establishing disparity; and establishing causation.

Adversity exists when “a fact specific inquiry determines that the nature, size, or likelihood of the impact is sufficient to make it an actionable harm.” The Toolkit does not define what harms many be actionable. To analyze disparity, EPA analyzes whether a disproportionate share of the adversity/harm is borne by individuals based on their race, color, or national origin. A general measure of disparity compares the proportion of persons in the protected class who are adversely affected by the challenged policy or decision and the proportion of persons not in the protected class who are adversely affected. When demonstrating disparity using statistics, the disparity must be statistically significant.

If the prima facie case is established, EPA must then determine whether the recipient can articulate a “substantial legitimate justification” for the challenged policy or practice and determine whether there are any comparably effective alternative practices that would result in less adverse impact (that is, are there less discriminatory alternatives?).

The Toolkit also makes two important points. First, it makes clear that compliance with a NAAQS “would be insufficient … to find that no adverse impacts are occurring for purposes of Title VI.” Thus, the rebuttable presumption established by Select Steel and the 2000 Draft Revised Investigative Guidance was eliminated. Second, complainants do not bear the burden of proving adversity. EPA assumes the responsibility for conducting an investigation of the allegations to determine if there is an adverse impact.

Environmental Justice: Origins, Background, and Site Selection Considerations – Part III: EPA Guidance – The 2000 Draft Revised Investigative Guidance

Environmental justice is not a new concept, but it is one that promises to receive renewed and vigorous attention in the Biden Administration. On his first day in office, Mr. Biden issued an Executive Order requiring the federal government to advance and prioritize environmental justice. Mr. Biden has selected a committed advocate as the head of EPA who has promised a pronounced emphasis on environmental justice concerns.

As a result, it is a good time to understand the legal underpinnings of environmental justice claims, the current EPA approach to investigating complaints regarding environmental justice, and steps that may be taken during site selection to minimize or eliminate serious claims regarding environmental justice.

The article contains five parts:

Part I: The Statute

Part II: The Executive Order and EPA’s Regulations

Part III: EPA Guidance – The 2000 Draft Revised Investigative Guidance

Part IV: EPA Guidance – The Toolkit

Part V: Considerations in Site Selection

Part III: EPA Guidance – The 2000 Draft Revised Investigative Guidance

EPA defines environmental justice as the fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income, with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies. The goal of environmental justice will be achieved when everyone enjoys the same degree of protection from environmental and health hazards, and equal access to the decision-making process to have a healthy environment in which to live, learn, and work. See www.epa.gov/environmentaljustice. To determine whether the goal has been achieved in individual situations, EPA has issued various guidance documents over the years which govern EPA’s investigation of environmental justice complaints.

EPA issued Interim Guidance in February 1998 which provided an internal framework for EPA’s processing of complaints alleging discrimination in environmental permitting. After a series of public meetings and evaluation of public comments on the Interim Guidance, EPA issued the Draft Revised Guidance for Investigating Title VI Administrative Complaints Challenging Permits (the Draft Revised Investigative Guidance). 65 Fed. Reg. 39650 (June 27, 2000). [1]

The Draft Revised Investigative Guidance was developed to address the application of Title VI to alleged adverse disparate impacts caused by environmental permitting. It does not address other applications of Title VI in the environmental context, such as unequal enforcement or public participation. It also does not address discriminatory intent.

The Draft Revised Investigative Guidance provides detailed information regarding EPA’s process and procedures for investigating Title VI complaints related to permitting, including acceptance and rejection of complaints, investigation procedures, informal resolution, and providing ‘due weight’ to a recipient’s submittals in an investigation. Importantly, though, the Draft Revised Investigative Guidance provides EPA’s adverse disparate impact analytical framework and the recipient’s justification of any adverse disparate impact.

EPA’s framework for an adverse disparate impact analysis consists of six steps:

  1. Assess Applicability (determine the type of permit action at issue);
  2. Define Scope of Investigation (determine the source or sources of an alleged impact and which of the sources should be included in an analysis);
  3. Conduct Impact Assessment (determine if the activities of the permitted entity, either alone or in combination with other relevant sources, are likely to result in an impact);
  4. Make Adverse Impact Decision (determine whether the estimated risk or measure of impact is significantly adverse);
  5. Characterize Populations and Conduct Comparisons (determine whether a disparity exists between the affected population and an appropriate comparison population); and
  6. Make Adverse Disparate Impact Decision (determine whether the disparity is significant).

The evaluation in most of the steps could result in the termination of the investigation. For example, EPA could determine in Step 1 that the permit action decreases emissions, in which case EPA would likely close the investigation. Additionally, EPA could determine in Step 4 that any impact is not adverse and if so, “the allegation will not form the basis of a finding of non-compliance.” 65 Fed. Reg. 39676 (June 27, 2000).

In the Step 3 impact assessment, EPA assesses whether the alleged discriminatory act may cause or is associated with one or more impacts. EPA will review whether the entity emits or releases pollutants or substances (called stressors by EPA) that could be the source of the alleged impacts and whether there is a plausible exposure route. For example, the entity could release fine particulate matter into the air and the alleged impact is respiratory ailments or asthma. In this step, EPA reviews, among other things, any direct links to potential impacts, the risks associated with compounds, and concentration levels.

Assuming there is an impact, EPA will determine in Step 4 whether an estimated risk or measure of impact is significantly adverse. EPA would evaluate the risk or measure of impact compared to benchmarks for significance provided under any relevant environmental statute, EPA regulation, or EPA policy and if the risks or other measure of potential impact meet or exceed a relevant significance level, the impact generally would be recognized as adverse under Title VI.

EPA provided an example of potential outcomes of this Step 4 evaluation using a range of risk values. EPA would expect that cumulative cancer risks of less than 1 in 1 million (10-6) would be very unlikely to support a finding of adverse impact while cumulative cancer risks above 1 in 10,000 (10-4) would likely support a finding of adverse impact. EPA may make an adverse impact finding when the risks fall in between those ranges.

EPA also provided guidance on the role of the National Ambient Air Quality Standards (NAAQS) in a finding of adverse impact. NAAQS are set at levels that are protective of human health and the environment with an adequate margin of safety. As such, air quality that adheres to such standards “is presumptively protective of public health in the general population” and “emissions of that pollutant should not be viewed as ‘adverse’ within the meaning of Title VI.” 65 Fed. Reg. 39680 (June 27, 2000). However, this presumption may be overcome, or rebutted, “if the investigation produces evidence that significant adverse impacts may occur.” Id.

This “rebuttable presumption” originated in an EPA decision in 1998 on a Title VI complaint regarding Select Steel Corporation. However, in 2013, EPA stated that it would “eliminate application of the rebuttable presumption when investigating allegations about environmental health-based thresholds.” 78 Fed. Reg. 24740 (April 26, 2013). Although compliance with a health-based threshold “is a serious consideration in an evaluation of whether adverse disparate impact exists” and “strongly suggests that the remaining risks are low and at an acceptable level,” applying the presumption “may not give sufficient consideration to other factors that could also adversely impact human health.” 78 Fed. Reg. 24740-24741 (April 26, 2013). EPA did eliminate application of the rebuttable presumption on January 18, 2017 when it issued its Compliance Toolkit (discussed in Part IV).

EPA would then, in Step 5, determine whether a disparity exists between the affected population and an appropriate comparison population. The affected population is one which suffers the adverse impacts of the stressors from assessed sources. The comparison population would be drawn from those who live within a reference area and may include the general population or the non-affected population for the reference area.

Disparity will be assessed using comparisons both of the different prevalence of race, color, or national origin of the two populations and comparisons of the level of risk of adverse impacts experienced by each population. There is no one formula or analysis to be applied and EPA will “use appropriate comparisons to assess disparate impact depending on the facts and circumstances of the complaint.” 65 Fed. Reg. 39681 (June 27, 2000). EPA could compare the demographic characteristics of most likely affected to the least likely affected or the average risk or measure of

adverse impact by demographic group within the general population or within an affected population.

EPA will then determine in Step 6 whether the disparity is significant. EPA will review the comparisons in Step 5 to determine if the results are consistent across the various comparisons made. Further, EPA announced that disparity “would normally be statistically evaluated to determine whether the differences achieved statistical significance to at least 2 to 3 standard deviations.” 65 Fed. Reg. 39682 (June 27, 2000). EPA will also consider uncertainties, such as the accuracy of predicted risk levels. Regardless, EPA made clear that the significance of a given level of disparity may vary depending upon the facts and circumstances of the complaint.

Based on the above analysis, EPA may make a finding that an impact is both adverse and borne disproportionately by a group of persons. That, however, does not end the inquiry. The recipient may be able to show that the impact is justified. To do so, the recipient must show “that the challenged activity is reasonably necessary to meet a goal that is legitimate, important, and integral to the recipient’s institutional mission.” 65 Fed. Reg. 39683 (June 27, 2000). Such a showing could include such interests as economic development “if the benefits are delivered directly to the affected population and if the broader interest is legitimate, important, and integral to the recipient’s mission.” Id.

Environmental Justice: Origins, Background, and Site Selection Considerations – Part II: The Executive Order and EPA’s Regulations

Environmental justice is not a new concept, but it is one that promises to receive renewed and vigorous attention in the Biden Administration. On his first day in office, Mr. Biden issued an Executive Order requiring the federal government to advance and prioritize environmental justice. Mr. Biden has selected a committed advocate as the head of EPA who has promised a pronounced emphasis on environmental justice concerns.

As a result, it is a good time to understand the legal underpinnings of environmental justice claims, the current EPA approach to investigating complaints regarding environmental justice, and steps that may be taken during site selection to minimize or eliminate serious claims regarding environmental justice.

The article contains five parts:

Part I: The Statute

Part II: The Executive Order and EPA’s Regulations

Part III: EPA Guidance – The 2000 Draft Revised Investigative Guidance

Part IV: EPA Guidance – The Toolkit

Part V: Considerations in Site Selection

Part II: The Executive Order and EPA’s Regulations

Although there were several executive orders issued over the years which generally directed federal agencies to implement Title VI, President Clinton’s issuance of Executive Order No. 12898 (EO 12898) in February 1994 ushered in the modern era of environmental justice considerations. 59 Fed. Reg. 7629 (February 16, 1994). For the first time, federal agencies were mandated to focus on the environmental effects of federal programs on minority and low-income populations.

EO 12898 mandates that “each Federal agency shall make achieving environmental justice part of its mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of its programs, policies, and activities on minority populations and low-income populations.” Federal agencies were directed to develop an “agency-wide environmental justice strategy” that identified and addressed “disproportionately high and adverse human health or environmental effects of its programs, policies, and activities on minority populations and low-income populations.” Among other things, the strategy should promote enforcement of all health and environmental statutes in areas with minority and low-income populations and ensure greater public participation.

EO 12898 specifically tasks each federal agency with a responsibility: “Each Federal agency shall conduct its programs, policies, and activities that substantially affect human health or the environment, in a manner that ensures that such programs, policies, and activities do not have the effect of excluding persons (including populations) from participation in, denying persons (including populations) the benefits of, or subjecting persons (including populations) to discrimination under, such programs, policies, and activities, because of their race, color, or national origin.” Thus, while EO 12898 does not define environmental justice, presumably environmental justice is achieved when a federal program does not exclude persons from participation, does not deny persons the benefits of the federal program, and does not subject persons to discrimination under the federal program because of their race, color, or national origin.

While EO 12898 is broad and issues sweeping directives for federal agencies, there are limitations to its scope set forth in the order. First, the order is to be implemented “consistent with, and to the extent permitted by, existing law.” Thus, it clearly did not attempt to impose on federal agencies greater requirements or duties than those imposed by Title VI itself. Indeed, federal agencies were required to act “consistent with” Title VI.

Further, EO 12898 was not intended to create any right or benefit “enforceable at law or equity by a party against the United States, its agencies, its officers, or any person.” Further, it did not create any “right to judicial review involving the compliance or noncompliance” with the order. Courts have generally found that the order does not allow a person to sue to enforce its requirements. See e.g., Coliseum Square Association, Inc. v. Jackson, 465 F.3d 215, 232 (5th Cir. 2006): “The Order does not, however, create a private right of action”; see also, Hausrath v. US Department of the Air Force, — F.Supp. 3d —, 2020 WL 5848094, p. 14 (D. Id. 2020): “There is thus no cause of action created by Executive Order 12898.”

Finally, President Clinton issued a Memorandum along with EO 12898. In discussing the responsibilities of federal agencies noted above, the Memorandum states that each federal agency “shall analyze the environmental effects … of Federal actions, including effects on minority communities and low-income communities, when such analysis is required by the National Environmental Policy Act of 1969 (NEPA).” Thus, when EO 12898 and the Memorandum are read together, they could be read to limit the scope of the environmental justice analysis required under EO 12898 to those federal efforts requiring “analysis” under NEPA, such as major Federal actions significantly affecting the quality of the human environment. 42 U.S.C. §4332(2)(C); 42 CFR §1502.3.

In accordance with Section 602, EPA has long had regulations implementing Title VI. 40 CFR Part 7. The regulations apply “to all applicants for, and recipients of, EPA assistance in the operation of programs or activities receiving such assistance.” 40 CFR §7.15. The definition of “program or activity” in Part 7 is similar to the definition in Title VI.

Part 7 contains general and specific prohibitions. It generally prohibits the exclusion from participation in, denial of benefits of, and discrimination under any program or activity receiving EPA assistance on the basis of race, color, or national origin. 40 CFR §7.30.

It also contains specific prohibitions relating to recipients of EPA assistance. 40 CFR §7.35. A recipient shall not use criteria or methods of administering its program or activity which have the effect of subjecting individuals to discrimination. 40 CFR 7.35(b). Further, a recipient “shall not choose a site or location of a facility that has the purpose or effect of … subjecting [persons] to discrimination under any program or activity to which this part applies on the grounds of race, color, or national origin.” 40 CFR §7.35(c).

Although these prohibitions apply, relief for violations by a recipient is somewhat limited. The Supreme Court has found that “Title VI [does not] display an intent to create a freestanding private right of action to enforce regulations promulgated under § 602. We therefore hold that no such right of action exists.” Alexander v. Sandoval, 532 U.S. 275, 293, 121 S. Ct. 1511, 1523, 149 L. Ed 2d 517 (2001).

Instead of a private right of action, Part 7 establishes a complaint process. Any person “who believes that he or she or a specific class of persons has been discriminated against” may file a complaint. 40 CFR §7.120(a). The complaint “must be filed within 180 calendar days of the alleged discriminatory acts,” unless EPA waives the “time limit for good cause.” 40 CFR §7.120(b)(2). EPA must “promptly” investigate all such complaints. 40 CFR §7.120.

Once a complaint is filed, EPA will “immediately initiate [its] complaint processing procedures” and conduct a “preliminary investigation” to determine if it will accept, reject, or refer the complaint to the appropriate agency. 40 CFR §7.120(d). If EPA accepts the complaint, it will notify the recipient of the allegations and allow the recipient to submit a response to the complaint. If EPA decides that there is “no violation,” it will dismiss the complaint. 40 CFR §7.120(g).

Once accepted, EPA will attempt to resolve the complaint informally. 40 CFR §7.120(d)(2). If the complaint cannot be resolved informally, EPA may issue a preliminary finding of noncompliance, which the recipient can agree with or contest. Ultimately, based on the investigation and information submitted by the recipient, EPA will make a final determination of either compliance or noncompliance.

The finding of noncompliance should include the actions EPA proposes to undertake. 40 CFR §7.130(b). EPA “may terminate or refuse to award or to continue assistance” and “may also use any other means authorized by law to get compliance.” 40 CFR §7.130(a). Such a finding allows the recipient to request a hearing to contest EPA’s determination. Ultimately, the decision “shall be limited to the particular applicant or recipient who was found to have discriminated, and shall be limited in its effect to the particular program or activity or the part of it in which the discrimination was found.” 40 CFR §7.130(b)(4).

Interestingly, the remedies available to EPA for non-compliance with Part 7 (that is, terminate or refuse to award or continue assistance) are similar to, if not identical with, those set forth in Section 602. The statute allows compliance to be “effected” by “the termination of or refusal to grant or to continue assistance under such program or activity” and “any other means authorized by law.” 42 USCA §2000d-1. This similarity would seem to be in keeping with the provisions of EO 12898 requiring that agencies implement the order “consistent with” existing law. Thus, it seems there is no authority under Section 602 or Part 7 to address, overturn, or revise the terms and conditions of an individual permit issued by an agency that is the subject of a complaint or EPA investigation. [1] Indeed, EPA has stated that “the filing or acceptance of a Title VI complaint does not suspend an issued permit. Title VI complaints concern the programs being implemented … and any EPA investigation … primarily concerns the actions of recipients rather than permittees.” 65 Fed. Reg. 39651 (June 27, 2000).

Section 602 regulations generally encompass both intentional discrimination and discrimination based on disparate impacts. As set forth in Sandoval, Section 601 “prohibits only intentional discrimination.” Sandoval, 532 U.S. at p. 280. Section 602 authorizes agencies to promulgate regulations “to effectuate the provisions of” Section 601. 42 USCA §2000d-1. Based on that, questions have been raised over the years as to whether regulations promulgated pursuant to Section 602 may address disparate impact.

In Sandoval, the Supreme Court assumed, for the purposes of that decision, “that regulations promulgated under §602 of Title VI may validly proscribe activities that have a disparate impact on racial groups, even though such activities are permissible under §601.” Sandoval, 532 U.S. at p. 281. Justice Scalia noted that “no opinion of this Court has held that” and that discussions in prior cases “are in considerable tension with the rule of Bakke and Guardians that §601 forbids only intentional discrimination.” Sandoval, 532 U.S. at pp. 281-282, mentioning Guardians Association v. Civil Service. Commission of New York City, 463 U.S. 582 (1983) and Alexander v. Choate, 469 U.S. 287 (1985) as the cases creating that tension. As Justice O’Connor noted in her concurring opinion in Guardians: “If … the purpose of Title VI is to proscribe only purposeful discrimination …, regulations that would proscribe conduct by the recipient having only a discriminatory effect … do not simply ‘further’ the purpose of Title VI; they go well beyond that purpose.” Guardians, 463 U.S. at p. 613.

Environmental Justice: Origins, Background, and Site Selection Considerations – Part I: The Statute

Environmental justice is not a new concept, but it is one that promises to receive renewed and vigorous attention in the Biden Administration. On his first day in office, Mr. Biden issued an Executive Order requiring the federal government to advance and prioritize environmental justice. Mr. Biden has selected a committed advocate as the head of EPA who has promised a pronounced emphasis on environmental justice concerns.

As a result, it is a good time to understand the legal underpinnings of environmental justice claims, the current EPA approach to investigating complaints regarding environmental justice, and steps that may be taken during site selection to minimize or eliminate serious claims regarding environmental justice.

The article contains five parts:

Part I: The Statute

Part II: The Executive Order and EPA’s Regulations

Part III: EPA Guidance – The 2000 Draft Revised Investigative Guidance

Part IV: EPA Guidance – The Toolkit

Part V: Considerations in Site Selection

Part I: The Statute

The Civil Rights Act of 1964 contains multiple titles designed to address discrimination based on race, color, and national origin. Title VI, codified at 42 U.S.C. §2000d, et seq., has been invoked to support claims of discrimination in environmental permitting. Generally, Title VI prohibits discrimination in programs and activities receiving federal financial assistance and contains two main provisions: Section 601 and Section 602.

Section 601 simply states: “No person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.” 42 U.S.C. §2000d.

The United States Supreme Court has reviewed Section 601 over the years and has made two important points. First, it is “beyond dispute that private individuals may sue to enforce §601.” Alexander v. Sandoval, 532 U.S. 275, 280, 121 S.Ct. 1511, 1516, 149 L.Ed.2d 517 (2001). Second,

Section 601 “prohibits only intentional discrimination.” Sandoval, 532 U.S. at p. 280. Indeed, “Title VI itself directly reach[es] only instances of intentional discrimination.” Sandoval, 532 U.S. at p. 281, citing Alexander v Choate, 469 U.S. 287 (1985).

Establishing discriminatory intent or purpose “demands a sensitive inquiry into such circumstantial and direct evidence of intent as may be available.” Village of Arlington Heights v. Metropolitan Housing Development Corporation, 429 U.S. 252, 266 (1977). Disproportionate impact is “not irrelevant, but it is not the sole touchstone of an invidious racial discrimination.” Arlington Heights, 429 U.S. at p. 265, citing Washington v. Davis, 426 U.S. 229 (1976). Importantly, “impact alone is not determinative, and the Court must look to other evidence.” Arlington Heights, 429 U.S. at p. 266. Other factors or evidence can include: the historical background of the decision, the specific sequence of events leading up to the decision, departures from the normal procedural sequence, departures from the normal substantive standards, and the legislative or administrative history of the decision. Arlington Heights, 429 U.S. at pp. 267 – 268.

Section 602 states that each Federal department and agency which extends Federal financial assistance to any program or activity “is authorized and directed to effectuate the provisions of section 2000d of this title with respect to such program or activity by issuing rules, regulations, or orders of general applicability.” 42 U.S.C. §2000d-1. However, the Supreme Court has found a very important limitation. In Sandoval, the Supreme Court held: “Neither as originally enacted nor as later amended does Title VI display an intent to create a freestanding private right of action to enforce regulations promulgated under §602.” Sandoval, 532 U.S. at p. 293. Thus, unlike Section 601, a private litigant does not have the right of a private right of action to enforce regulations promulgated pursuant to Section 602.

Although Congress provided the authority to issue regulations, it also identified the method of enforcement of “any requirement adopted pursuant to this section.” 42 U.S.C. §2000d-1. Initially, no action may be taken until the Federal department or agency providing the assistance “has advised the appropriate person or persons of the failure to comply with the requirement and has determined that compliance cannot be secured by voluntary means.” Then, there must be “an express finding on the record, after opportunity for hearing, of a failure to comply with such requirement.” Only then may the Federal department or agency providing the assistance terminate, refuse to grant, or refuse to continue assistance under such program or activity. There is a catch-all allowing compliance to be affected by “any other means authorized by law.” 42 U.S.C. §2000d-1.

Section 606 defines “program or activity” as, among other things, “all of the operations of … a department, agency, special purpose district, or other instrumentality of a State or of a local government … any part of which is extended Federal financial assistance.” 42 U.S.C. §2000d-4a. Under this provision, the operations of a state environmental protection agency would be included within the definition of “program or activity.” Further, the operations of the whole agency are a “program or activity” if “any part” of the agency “is extended Federal financial assistance.”

Finally, Title VI was amended in 1986 to remove claims of sovereign immunity by a State. A State “shall not be immune … from suit in Federal court for a violation of … title VI of the Civil Rights Act of 1964.” 42 U.S.C. §2000d-7. In other words, a State can be sued in federal court under Title VI. Remedies available for a violation by a State are available to the same extent as a claim against any public or private entity other than a State.

A Return to Regulation?

The prospect of a Biden Administration signals the likely return to active and aggressive regulation of environmental matters. In a fashion similar to the Trump Administration’s approach to Obama-era regulations, the Biden Administration has already vowed to not only reverse Trump-era de-regulation but go beyond the Obama Administration’s regulatory efforts.

Perhaps the most glaring example is addressing what the Biden-Harris Transition web-site calls the “existential threat of climate change.” Mr. Biden promises to “recommit the United States to the Paris Agreement on climate change” and to “go much further than that” by “lead[ing] an effort to get every major country to ramp up the ambition of their domestic climate targets.” Indeed, Mr. Biden pledges to “put the United States on an irreversible path to achieve net-zero emissions, economy-wide, by no later than 2050.”

The Paris Agreement calls for “holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 °C above pre-industrial levels” through nationally determined contributions (NDC) to carbon emission reductions. The United States’ NDC was a 26-28 per cent reduction below its 2005 level by 2025. According to EPA, gross GHG emissions were reduced between 2005 and 2018 from 7,392 MMT CO2 Eq. to 6,677 MMT CO2 Eq.

It is unknown at this time to what extent Mr. Biden will “ramp up” the United States’ already ambitious climate targets or exactly how Mr. Biden intends to achieve the “ramp up.” He has stated that he would invest billions in clean energy development, that he would transition away from the oil industry by 2050, and that he would phase out or end fracking on federal lands. It is also likely that Mr. Biden would reverse the Trump Administration’s roll-back of the oil and gas sector methane rule.

Another example relates to environmental justice. Mr. Biden states that he wants to “ensure that environmental justice is a key consideration in where, how, and with whom we build” the clean energy infrastructure and go about “righting wrongs in communities that bear the brunt of pollution.” EPA defines environmental justice as the “fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income, with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.”

Mr. Biden does not provide specifics but does state that a Biden Administration will create “good, union, middle-class jobs in communities left behind,” presumably in clean energy endeavors. The creation of jobs in the clean energy sector may be how he intends to right the wrongs in potentially over-polluted communities, but it is more likely that there will be a greater push to limit or restrict industrial development in such areas.

There are numerous other Trump-era executive orders and regulations that a Biden Administration will likely address. As to the executive orders, they are easily reversed and Mr.; Biden has signaled he plans to do so. As to promulgated regulations, EPA must proceed through the notice-and-comment requirements imposed by the Administrative Procedure Act. However, regulations that are finalized in the last days of the Trump Administration may be subject to repeal under the Congressional Review Act, which was used in 2017 to repeal several Obama-era regulations. Although there is much speculation at this time, it is likely that the de-regulatory agenda pushed by the Trump Administration will be replaced with a re-regulatory agenda under a Biden Administration. To ensure some growth opportunities remain, industrial concerns will have to oppose the Biden agenda as assertively as the environmental groups opposed the Trump agenda.

The End of Regulation by Guidance Document?

EPA has issued a final rule governing its issuance of guidance documents, declaring that the Rule will lead to enhanced transparency and help ensure that guidance documents are not improperly treated as legally binding requirements by the EPA or by the regulated community. In many instances over the years, guidance documents were issued without public input, even though the policy or interpretation in the guidance document created binding requirements applicable to the regulated community. This Rule ends that practice.

On October 9, 2019, President Trump issued an executive order, “Promoting the Rule of Law Through Improved Agency Guidance Documents.” It declared that agencies sometimes used guidance documents “to regulate the public without following the rulemaking [that is notice and comment] procedures of the” Administrative Procedure Act. It directed that agencies must treat guidance documents as non-binding both in law and in practice, take public input into account in formulating guidance documents, and make guidance documents readily available to the public.

According to EPA, the Rule meets these requirements, and more. The Rule provides definitions of “guidance document” and “significant guidance document,” minimum requirements for a “guidance document” and additional requirements for “significant guidance documents,” procedures for the public to petition the Agency for modification or withdrawal of guidance documents, and an online portal (the EPA Guidance Portal) to identify EPA guidance documents for the public.

A “guidance document” is a statement of general applicability, intended to have future effect on the behavior of regulated parties, that sets forth a policy on a statutory, regulatory, or technical issue, or an interpretation of a statute or regulation. There are a few exclusions form this broad definition, such as rules subject to notice and comment and rules of agency procedure and practice or internal guidance not intended to have substantial future effect on the behavior of regulated parties. Generally, a “significant guidance document” is one that may reasonably be anticipated to lead to an annual effect on the economy of $100 million or more.

All guidance documents must, among other things, include the term “guidance,” include the citation to the statute or regulation to which the guidance document applies or which it interprets, and avoid mandatory language such as ‘shall’ or ‘must.’ Further, it must include a disclaimer that the contents do not have the force and effect of law and that it does not bind the public in any way. Importantly, any guidance document issued by an EPA Regional Office must receive concurrence from an appointed EPA official at EPA headquarters. A significant guidance document must adhere to these requirements, plus it must be subject to notice and comment before finalization.

EPA also included a provision allowing any member of the public to petition EPA for the modification, withdrawal, or reinstatement of a guidance document. EPA will make information about petitions received available to the public and indicated that it should respond to a petition in no more than 90 calendar days after receiving the petition.

Finally, the Rule requires that all guidance documents be included in the EPA Guidance Portal. The Portal currently exists (www.EPA.gov/guidance) and contains the documents meeting the definition of a “guidance document.” The web-page contains the disclaimer that EPA’s guidance documents lack the force and effect of law agency and that it may not cite, use, or rely on any guidance that is not included in the Portal. The executive order and the Rule allow the issuance and use of guidance documents while providing public input and access and general procedures for issuance. Of greater significance and importance to the regulated community, there is some relief from the use of binding guidance documents issued without public knowledge or input.

EPA Announces Major Changes In Oil and Gas Regulations

With the election looming, EPA has finalized a three-year effort to revise, amend, or repeal the 2012 and 2016 new source performance standards regulating volatile organic compound and methane emissions from the oil and gas production, processing, and transmission and storage segments. EPA has issued two rules that make sweeping changes to these Obama-era regulations.
The 2012 rule established NSPS for VOC emissions from these three segments of the oil and natural gas industry. The 2016 rule established NSPS for the three segments for greenhouse gases in the form of limitations on methane. In the 2012 and 2016 rules, EPA interpreted the source category to also include the natural gas transmission and storage segment. Prior to that, it only had included the production and processing segments.
In the current rules, EPA takes aim at the expansion of regulation to the natural gas transmission and storage segment, the regulation of methane from all three segments, and numerous VOC requirements in the oil and gas production and processing segments. To accomplish this, EPA issued two rules. The Policy Rule addresses the regulation of the natural gas transmission and storage segment and the regulation of methane from all three segments. The Technical Rule addresses VOC requirements in the oil and gas production and processing segments.
The Policy Rule contains three main parts. First, it finalizes a proposed rule that the source category includes only the production and processing segments of the industry. EPA reviewed the original scope of the source category published in 1979 and found that it did not include this segment. Instead, the natural gas transmission and storage segment is its own source category. EPA explained that, under CAA Section 111, it can only list a source category for regulation by making a cause-or-contribute-significantly and endangerment finding, which EPA has never done. As a result, EPA rescinded the standards (VOC and methane) applicable to the transmission and storage segment of the industry.
Second, EPA rescinded the methane requirements of the NSPS applicable to sources in the production and processing segments. EPA concluded that the methane requirements are redundant with the existing NSPS for VOC and, thus, establish no additional health protections. EPA stated that rescinding the methane requirements while leaving the VOC emission requirements in place will not affect the amount of methane emission reductions.
Third, EPA included an interpretation of CAA Section 111 which requires thatEPA must make a finding that emissions of an air pollutant from the source category cause or contribute significantly to air pollution which may endanger public health or welfare prior to newly regulating any air pollutant that the EPA did not consider when initially regulating the source category. While seemingly innocuous, this interpretation would seemingly require a finding that methane would ‘cause or contribute’ prior to re-regulating methane from the transmission and storage segment, an unlikely finding under the current administration.
The Technical Rule is somewhat more straightforward and applies to existing requirements applicable in the oil and gas production and processing segments. In general, they address a range of technical and implementation issues in response to administrative petitions for reconsideration and other issues brought to EPA’s attention, including fugitive emissions requirements, provisions to apply for the use of an alternative means of emission limitation, pneumatic pump standards, storage vessel standard applicability determinations, and engineer certifications.
The Policy Rule is effective when published in the Federal Register and the Technical Rule is effective sixty days after publication. With the election pending, the provisions of the Congressional Review Act may play a role in the survival of the two rules. In general terms, the Act allows Congress to vote to disapprove of the regulation (thus preventing it from going into effect) within 60 days after Congress receives the rule.
Taken together, the two rules free the transmission and storage segment from NSPS regulation, establish a framework for regulating new source categories, and substantially revise existing regulations in the production and processing segments. However, it remains to be seen whether these rules will survive a change in administration.