Pennsylvania’s Climate Change Initiatives Entering 2023
In 2022, Pennsylvania advanced significant regulatory and executive initiatives, the fate of which will be decided in 2023. Some of these actions focus on greenhouse gases (GHGs) generally, while others are more specific to particular GHGs, such as CO2 or methane.
Regional Greenhouse Gas Initiative (RGGI)
In 2022, the Pennsylvania Commonwealth Court enjoined a final rulemaking titled “CO2 Budget Trading Program,” which would have allowed Pennsylvania to join as the newest member of the Regional Greenhouse Gas Initiative (RGGI). The rulemaking remains enjoined while litigation proceeds in the Pennsylvania appellate courts. the courts are likely to decide the rulemaking’s fate in 2023.
RGGI is an intergovernmental organization consisting of ten member-states (CT, DE, ME, MD, MA, NH, NJ, NY, RI, VT) that has established a market-based cap-and-trade program for CO2 emissions from fossil fuel-fired power plants that have 25 megawatts or more of nameplate capacity and send at least 10 percent of their gross generation to the grid. The rulemaking would aim to reduce CO2 emissions from RGGI sources by 25.5 percent between 2022 and 2030. Based on an analysis conducted by a consultant retained by the Pennsylvania Department of Environmental Protection (PADEP), most emission reductions are expected to come from reductions in coal use, while a smaller percentage would come from natural gas. Pennsylvania itself would expect to see a total statewide emissions reduction of 183 million tons of CO2 by 2030, but approximately 96 million of that 183 million tons of CO2 emissions would be shifted (i.e., leaked) to other states within PJM territory. PJM is a regional transmission organization that coordinates the movement of electricity in Pennsylvania, all or parts of 12 other states, and the District of Columbia. Specific to natural gas, nearly all the anticipated reductions in natural gas emissions and generation in Pennsylvania are expected to be leaked to other PJM states.
PADEP expects the auctions of RGGI credits to yield hundreds of millions of dollars in revenues through 2030. The Air Pollution Control Act requires that all auction proceeds be directed to the Clean Air Fund “for the use in the elimination of air pollution,” and PADEP would intend to develop a reinvestment plan for the auction revenues including reinvestment in energy efficiency, renewable energy, and greenhouse gas abatement. Although PADEP has taken the position that the allowances amount to fees that are authorized under the Air Pollution Control Act, opponents of the final rulemaking argue that the anticipated revenue from the auctions exceeds an authorized fee and instead amounts to an unauthorized tax.
A number of members of the Pennsylvania General Assembly, unions, and powerplants appealed the rulemaking to the Commonwealth Court and sought an injunction. On July 8, 2022, the Commonwealth Court issued an order enjoining the implementation of the rulemaking. In its opinion, the Court suggested that PADEP and the Environmental Quality Board had the authority under the Air Pollution Control Act to issue the rulemaking, but the Court ultimately suggested that the RGGI allowance auction proceeds amounted to an unauthorized tax. PADEP appealed that decision to the Pennsylvania Supreme Court (Docket Nos. 79 MAP 2022 and 80 MAP 2022). That appeal has been briefed and should be scheduled for argument in 2023. Meanwhile, on November 16, 2022, the Commonwealth Court held en banc argument on cross-motions for summary relief, and a decision on those motions is expected in 2023.
During 2022, PADEP had a rocky road of sorts with respect to implementation of two rulemakings related to reduction of volatile organic compound (VOC) emissions from both conventional and unconventional oil and gas operations. The rulemakings, one of which was issued as an emergency regulatory action on November 30, 2022, seek to simultaneously target significant methane emissions from the oil and gas industry. Sources subject to regulation include natural gas-driven continuous bleed pneumatic controllers, natural gas-driven diaphragm pumps, reciprocating compressors, centrifugal compressors, fugitive emissions components and storage vessels installed at conventional well sites, gathering and boosting stations and natural gas processing plants, as well as storage vessels in the natural gas transmission and storage segment. These regulations require operators to identify and stop leaks in their equipment that can allow methane and VOCs to escape into the atmosphere. While the regulations specifically target VOCs, PADEP believes that by reducing leaks of natural gas from wells and pipelines, that it will ensure a significant reduction of methane emissions as a co-benefit.
PADEP was required to adopt reasonably available control technology (RACT) requirements and RACT emission limitations for conventional and unconventional oil and natural gas sources in order to address VOC emission limitations and other RACT requirements consistent with the United States Environmental Protection Agency’s (EPA) recommendations in the 2016 “Control Techniques Guidelines for the Oil and Natural Gas Industry,” (2016 Oil & Gas CTG), which addresses control requirements to meet the 2008 and 2015 ozone National Ambient Air Quality Standards. The regulations incorporating the requirements of the 2016 Oil & Gas CTG were originally required to be incorporated into the Commonwealth’s State Implementation Plan (SIP) by June 16, 2022 in order to avoid imposition of federal sanctions under the Clean Air Act.
Of note to the rulemaking process, PADEP originally proposed a final rulemaking, which contained regulations applicable to both conventional and unconventional oil and natural gas sources of VOC emissions. However, after the final rulemaking was submitted to the Independent Regulatory Review Commission (IRRC) for final consideration, the House Environmental Resources and Energy Committee voted to send a letter to IRRC disapproving the regulation. The Committee’s primary concern centered on language in Act 52 of 2016, which the Committee believed required DEP to submit two rulemaking packages – one that applies only to conventional oil and natural gas sources and the other which would cover all other sources in the rulemaking.
Thus, PADEP embarked upon splitting the rulemaking into two separate rules. Due to the delays in the rulemaking processes and splitting of the rulemaking into two separate rules, the Commonwealth was subject to federal sanctions as of June 16, 2022, which included an increase in emission reduction offset ratios (from 1.3:1 to 2:1) for regulated facilities triggering non-attainment New Source Review permitting. A second more substantial deadline loomed for the imposition of federal highway funding sanctions (estimated at over $800 million) in the event that PADEP did not finalize the regulations and submit a SIP revision by December 16, 2022. Thus, the PADEP worked feverishly through the regulatory processes, which culminated in the final rulemakings being published on December 10, 2022, and subsequent submission of a SIP revision to the EPA on December 12, 2022.
EPA lifted offset sanctions and staved off what could have been a disastrous imposition of federal highway funding sanctions that were set to otherwise take effect on December 16, 2022. Implementation of the two oil and gas rulemakings will continue in earnest moving forward.
Last year, we reported that in October 2021, PADEP prepared a draft proposed rulemaking that would amend PADEP’s Clean Vehicles Program at 25 Pa. Code Chapter 126, Subchapter D, by establishing a requirement for automakers that would adopt the California Air Resource Board (CARB) Zero Emission Vehicle (ZEV) program by adding a sales percentage requirement for Program-eligible light duty vehicles as part of their model offerings beginning for model year 2026 and requiring motor vehicle manufacturers to demonstrate compliance with the already adopted CARB greenhouse gas (GHG) fleet average requirement. During 2022, the proposed rulemaking did not advance beyond the advisory committee review stage and has yet to be presented to the Environmental Quality Board (EQB) for review and adoption. This proposed rulemaking no longer appears on PADEP’s current regulatory agenda; however, this may be due to recent major amendments to CARB’s Advanced Clean Cars II regulations, which require all new passenger vehicles sold in California to be zero emissions by 2035. Based on the changes in California, it appears that PADEP would need to propose a new rulemaking to incorporate all or part of California’s low-emission and zero-emission vehicle regulations. Previously, PADEP indicated that it did not intend to eliminate the use of internal combustion engines. This will be one to watch closely during 2023.