Chapter 2: Environmental Law - A Structural Overview

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 Madison v. Ducktown Sulphur, Missouri v. Illinois, and Citizens to Preserve Overton Park v. Volpe

Transboundary air pollution and state nuisance law p. 87 (5^th edition):

State nuisance law also was the basis for North Carolina's successful effort to require new controls on transboundary air pollution from coal-fired power plants in Tennessee and Alabama.  North Carolina v. Tennessee Valley Authority, 593 F.Supp. 812 (W.D.N.C. 2009).

Private right of action for damages and Exxon Valdez oil spill p. 101 (5^th edition):

Two months after it decided Oullette, the Supreme Court held that neither the Clean Water Act nor the Marine Protection, Research, and Sanctuaries Act of 1972 (Ocean Dumping Act) created an implied private right of action for damages.  The Court in Middlesex County Sewerage Authority v. National Sea Clammers Assn., 453 U.S. 1 (1981) further concluded that the federal common law of nuisance has been fully preempted in the area of water pollution by the Clean Water Act and, to the extent that ocean waters not covered by the Clean Water Act are involved, by the Ocean Dumping Act.

In response to the Exxon Valdez oil spill, Exxon spent $2.1 billion in cleanup costs, paid a civil fine of $900 million to the federal government, and settled private damages actions for $303 million.  A jury hearing other claims against Exxon by a class of 32,000 plaintiffs awarded $507.5 million in compensatory damages and assessed $5 billion in punitive damages for reckless conduct by Exxon.  After years of post-trial litigation, the U.S. Court of Appeals for the Ninth Circuit reduced the punitives damages award to $2.5 billion. In Exxon Shipping Co. v. Baker, 128 S.Ct. 2605 (2008), the U.S. Supreme Court held that federal maritime law limits punitive damages to the amount of compensatory damages, slashing the $2.5 billion punitive damages award to $507.5 million. 

In the litigation following the Exxon Valdez oil spill, Exxon claimed that the Clean Water Act preempted private claims for punitive damages for water pollution caused by reckless conduct.  The Supreme Court rejected this position in Exxon Shipping Co. v. Baker, 128 S.Ct. 2605 (2008).  The Court stated that: "All in all, we see no clear indication of congressional intent to occupy the entire field of pollution remedies, nor for that matter do we perceive that punitive damages for private harms will have any frustrating effect on the CWA remedial scheme, which would point to preemption." 128 S.Ct., at 2619.  In a footnote the Court then distinguished Milwaukee II and National Sea Clammers as cases "where plaintiffs' common law nuisance claims amounted to arguments for effluent-discharge standards different from those provided by the CWA." 128 S.Ct., at 2619 n.7.  The "private claims for economic injury" in the Exxon Valdez litigation "do not threaten similar interference with federal regulatory goals," the Court explained.

The court hearing North Carolina's successful effort to require greater controls on transboundary pollution cited the Clean Air Act's savings clause, 42 U.S.C. §7604(e), in determining that the Act did not preclude a federal court from applying the common law of source states.  North Carolina v. Tennessee Valley Authority, 549 F.Supp.2d 725, 729 (W.D.N.C. 2008).

Federal Preemption of state products liability lawsuits p. 104 (5^th edition):

Some industry groups have lobbied for greater federal preemption of state products liability lawsuits.  While they found a sympathetic ear in the administration of President George W. Bush, efforts to have the federal Food and Drug Administration (FDA) preempt such lawsuits reached mixed results.  In Riegel v. Medtronic, Inc., 128 S.Ct. 999 (2008) the U.S. Supreme Court ruled that the Medical Device Amendments preempt state product liability lawsuits for FDA-approved medical devices.  However, in Wyeth v. Levine, 129 S.Ct. 1187 (2009) a narrow majority of the Court rejected an effort to broaden preemption to cover pharmaceutical drugs approved by the FDA.   The Court found that Congress did not intend to pre-empt state law failure-to-warn lawsuits for drugs approved by FDA under the federal Food, Drug & Cosmetic Act.  While noting that an agency regulation can preempt conflicting state requirements, the Court concluded that an agency's mere assertion that state law is an obstacle to achieving statutory objectives was insufficient to overcome congressional silence.

 Regulatory Options: Designing a National Greenhouse Gas Control Program p. 126 (5^th edition):

As the Obama administration presses Congress to adopt a national program to control emissions of greenhouse gases, the question of whether a carbon tax or a cap-and-trade approach should be used is being debated.  Consider the advantages and drawbacks of each of these approaches as described by the Congressional Research Service:

Market-based mechanisms that limit greenhouse gas (GHG) emissions can be divided into two types: quantity control (e.g., cap-and-trade) and price control (e.g., carbon tax or fee). To some extent, a carbon tax and a cap-and-trade program would produce similar effects: Both are estimated to increase the price of fossil fuels, which would ultimately be borne by consumers, particularly households. . . .

If policymakers had perfect information regarding the market, either a price (carbon tax) or quantity control (cap-and-trade system) instrument could be designed to achieve the same outcome. Because this market ideal does not exist, preference for a carbon tax or a cap-and-trade program ultimately depends on which variable one wants to control—emissions or costs. Although there are several design mechanisms that could blur the distinction, the     gap between price control and quantity control can never be completely overcome.

A carbon tax has several potential advantages. With a fixed price ceiling on emissions (or their inputs—e.g., fossil fuels), a tax approach would not cause additional volatility in energy prices. A set price would provide industry with better information to guide investment decisions: e.g., efficiency improvements, equipment upgrades. Economists often highlight a relative economic efficiency advantage of a carbon tax, but this potential advantage rests on assumptions—about the expected costs and benefits of climate change mitigation—that are uncertain and controversial. Some contend that a carbon tax may provide implementation advantages: greater transparency, reduced administrative burden, and relative ease of modification.

The primary disadvantage of a carbon tax is that it would yield uncertain emission control. Some argue that the potential for irreversible climate change impacts necessitates the emissions certainty that is only available with a quantity-based instrument (e.g., cap-and-trade). Although it may present implementation challenges, policymakers could devise a     tax program that allows some short-term emission fluctuations, while progressing toward a long-term emission reduction objective. Proponents argue that short-term emission fluctuations would be preferable to the price volatility that might be expected with a cap-and-trade system.

Although a carbon tax could possibly face more political obstacles than a cap-and-trade program, some of these obstacles may be based on misunderstandings of the differences between the two approaches or on assumptions that the tax would be set too low to be effective. Carbon tax proponents could possibly address these issues to some degree, but there remains considerable political momentum for a cap-and-trade program.

Jonathan L. Ramseur & Larry Parker, Carbon Tax and Greenhouse Gas Control: Options and Considerations for Congress (Feb. 23, 2009).

QUESTIONS: Which approach do you favor and why?  Why do you think most politicians favor a cap-and-trade program?  Why do most economists prefer a carbon tax?

As the Obama administration presses Congress to adopt a national program to control emissions of greenhouse gases, the question of whether a carbon tax or a cap-and-trade approach should be used is being debated.  Consider the advantages and drawbacks of each of these approaches as described by the Congressional Research Service:

Market-based mechanisms that limit greenhouse gas (GHG) emissions can be divided into two types: quantity control (e.g., cap-and-trade) and price control (e.g., carbon tax or fee). To some extent, a carbon tax and a cap-and-trade program would produce similar effects: Both are estimated to increase the price of fossil fuels, which would ultimately be borne by consumers, particularly households. . . .

If policymakers had perfect information regarding the market, either a price (carbon tax) or quantity control (cap-and-trade system) instrument could be designed to achieve the same outcome. Because this market ideal does not exist, preference for a carbon tax or a cap-and-trade program ultimately depends on which variable one wants to control—emissions or costs. Although there are several design mechanisms that could blur the distinction, the     gap between price control and quantity control can never be completely overcome.

A carbon tax has several potential advantages. With a fixed price ceiling on emissions (or their inputs—e.g., fossil fuels), a tax approach would not cause additional volatility in energy prices. A set price would provide industry with better information to guide investment decisions: e.g., efficiency improvements, equipment upgrades. Economists often highlight a relative economic efficiency advantage of a carbon tax, but this potential advantage rests on assumptions—about the expected costs and benefits of climate change mitigation—that are uncertain and controversial. Some contend that a carbon tax may provide implementation advantages: greater transparency, reduced administrative burden, and relative ease of modification.

The primary disadvantage of a carbon tax is that it would yield uncertain emission control. Some argue that the potential for irreversible climate change impacts necessitates the emissions certainty that is only available with a quantity-based instrument (e.g., cap-and-trade). Although it may present implementation challenges, policymakers could devise a     tax program that allows some short-term emission fluctuations, while progressing toward a long-term emission reduction objective. Proponents argue that short-term emission fluctuations would be preferable to the price volatility that might be expected with a cap-and-trade system.

Although a carbon tax could possibly face more political obstacles than a cap-and-trade program, some of these obstacles may be based on misunderstandings of the differences between the two approaches or on assumptions that the tax would be set too low to be effective. Carbon tax proponents could possibly address these issues to some degree, but there remains considerable political momentum for a cap-and-trade program.

Jonathan L. Ramseur & Larry Parker, Carbon Tax and Greenhouse Gas Control: Options and Considerations for Congress (Feb. 23, 2009).

QUESTIONS: Which approach do you favor and why?  Why do you think most politicians favor a cap-and-trade program?  Why do most economists prefer a carbon tax?

The Regulatory Process: The response to Bush’s “midnight regulations “ p. 149 (5^th edition):

Because it requires either the President's signature on a disapproval resolution or its enactment by super-majorities in both Houses of Congress, the CRA, as a practical matter, is most suited for use by a new administration to repeal regulations issued by an outgoing one. Thus, it is not surprising that the only time it has been used successfully was shortly after the first change of administration that occurred after its enactment. 

The Obama administration has been able to rescind some of the most egregious of the Bush administrtion's "midnight regulations" without resort to the CRA.  The Bush administration sought to make it harder to undo its "midnight regulations" by directing federal agencies to complete them more than 60 days before the end of the administration.  In an effort to meet this self-imposed deadline, the  Interior Department assembled a team of 15 lawyers who were given 32 hours to read through more than 200,000 comments on a proposal to weaken Endangered Species Act (ESA) regulations,  AP, "Feds Rush to Ease Endangered Species Rules,"  Oct. 21, 2008, an average of nearly seven comments a minute.  Rather than resort to the CRA, Congress added a provision to the 2009 Omnibus Appropriations Act that specifically authorized the Secretaries of Interior and Commerce to revoke the rule, which had rescinded consultation requirements under the ESA. On April 28, 2009, the Secretaries exercised this authority to revoke the regulations.

A more unusual strategy prevented the issuance of some leases for oil drilling on public lands near national parks.  When the leases were auctioned off by the Bureau of Land Management (BLM) on December 19, 2008, environmental protester Tim DeChristopher wandered into the auction and outbid prospective drillers for 12 parcels totaling 22,000 acres. After word spread that DeChristopher might be prosecuted for bidding on leases he could not afford, he subsequently raised $45,000 in donations to help pay for the leases, which he had no intention of using. A federal district judge ultimately blocked the issuance of these and other leases in response to a lawsuit claiming that inadequate environmental reviews had been conducted prior to the auction.  After President Obama took office, the leases were  rescinded by Secretary of Interior Ken Salazar.

Presidential Oversight of Rulemaking p. 153 (5^th edition):

President Obama has announced plans to take a fresh look at the process for presidential review of rulemaking.  On January 30, 2009, he signed Executive Order 13497, 74 Fed. Reg. 6113 (2009), which revoked two executive orders (E.O. 13258 and E.O. 13422) issued by President George W. Bush that attempted to give OMB greater control over regulatory decisions.  The effect of the Obama action is to restore regulatory review for now to the process that operated during the Clinton administration, which is governed by E.O. 12,866.  President Obama simultaneously issued a memorandum directing agencies to "revisit" the principles outlined in EO 12866 and to develop recommendations for a new executive order on presidential review of rulemaking.