Pittsburgh, PA and Washington, DC
The Foundation Mineral and Energy Law Newsletter
Pennsylvania – Mining
(Joseph K. Reinhart, Sean M. McGovern, Gina F. Buchman and Christina M. Puhnaty)
On November 1, 2023, the Commonwealth Court of Pennsylvania held that the Pennsylvania Department of Environmental Protection’s (PADEP) CO2 Budget Trading Program Regulation (RGGI Rule) is an unconstitutional tax, declared the rule to be void, and enjoined PADEP from enforcing it. See Bowfin KeyCon Holdings, LLC v. PADEP, No. 247 M.D. 2022, 2023 WL 7171547 (Pa. Commw. Ct. Nov. 1, 2023).
After a lengthy rulemaking process, the RGGI Rule was published in the Pennsylvania Bulletin. See 52 Pa. Bull. 2471 (Apr. 23, 2022). The RGGI Rule would have linked Pennsylvania’s cap-and-trade program to the Regional Greenhouse Gas Initiative (RGGI), which is the regional, market-based cap-and-trade program designed to reduce carbon dioxide emissions from fossil-fuel-fired electric power generators with a capacity of 25 megawatts or greater that send more than 10% of their annual gross generation to the electric grid.
Two days after the RGGI Rule was published, a group of stakeholders filed a petition for review of the rule and an application for preliminary injunction in the commonwealth court. The court held a hearing on the preliminary injunction on May 10 and 11, 2022, and in a July 8, 2022, opinion, the court preliminarily enjoined the regulation as an unconstitutional tax.
In its November 1 decision on the merits, the court reaffirmed its earlier July 8, 2022, opinion, holding that the RGGI Rule constitutes a tax imposed by PADEP in violation of the Pennsylvania Constitution. Undisputed facts of record established that only 6% of RGGI auction proceeds are necessary to cover the cost of administering the program and that the annual revenue anticipated from RGGI would be three times greater than the total amount allocated to PADEP from the General Fund in a single year. The court found that the money to be generated by Pennsylvania’s participation in RGGI would be “grossly disproportionate” to the costs of overseeing participation in the program and PADEP’s annual needs, and thus was an illegal tax. In coming to its ruling, the court relied on the Pennsylvania Supreme Court’s opinion in Flynn v. Horst, 51 A.2d 54, 60 (Pa. 1947), which found that it is a firmly established principle of Pennsylvania law that a revenue tax cannot be constitutionally imposed upon a business under the guise of a police regulation, and that if the amount of a “license fee” is grossly disproportionate to the sum required to pay the cost of the due regulation, it should be struck down. The commonwealth court concluded that Pennsylvania’s participation in RGGI may only be achieved through legislation duly enacted by the Pennsylvania General Assembly, and not merely through a rulemaking promulgated by PADEP and the Environmental Quality Board. The Commonwealth has not publicly stated whether it will appeal the decision, but would have until November 30, 2023, to do so.
Pennsylvania’s RGGI Working Group Concludes Work
Prior to the Commonwealth Court of Pennsylvania’s ruling discussed above, on September 29, 2023, Governor Shapiro’s office released the RGGI Working Group Memorandum and a corresponding press release announcing that the RGGI Working Group had concluded its work. See Press Release, “RGGI Working Group Concludes Its Work, Co-Chairs Hail Collaborative Process That Brought Diverse Group Together & Reached Consensus on a Number of Key Issues” (Sept. 29, 2023). Governor Shapiro established the RGGI Working Group in April 2023 and tasked it with evaluating the merits of the commonwealth’s participation in Regional Greenhouse Gas Initiative (RGGI) in the context of a three-part test: (1) protect and create energy jobs, (2) take real action to address climate change, and (3) ensure long-term, reliable, affordable power to consumers.
The RGGI Working Group was chaired by Jackson Morris of the Natural Resources Defense Council and Mike Dunleavy of the International Brotherhood of Electrical Workers Local 5 in Pittsburgh. Other members included representatives from organized labor, the energy industry (including fuel production, electric utilities, and coal, natural gas, and nuclear generation), environmental groups, and consumer advocates.
The Working Group reached a consensus that (1) greenhouse gas (GHG) emissions reductions are both necessary and inevitable and (2) a revenue-generating cap-and-invest carbon regulation for the power sector supporting the commonwealth’s energy transition would meet Governor Shapiro’s emissions reduction goals. The memorandum did not include a recommendation as to the form that a cap-and-invest program should take.
The Working Group further reached a consensus on the following recommendations:
- Maximizing job creation and other benefits of federal funding from the Inflation Reduction Act and other appropriations;
- Initiating dialogue and cooperation with neighboring states and other PJM states;
- Legislative codification as the preferred method of implementing any initiatives;
- Creating new councils and collaboratives to guide policymaking;
- Utilizing the RGGI program to satisfy proposed federal Clean Air Act GHG emission reduction standards if the program is otherwise adopted;
- Convening a bipartisan process to evaluate the recommendations of the new collaboratives to develop a statewide energy and climate plan that addresses jobs, reliability, consumer protection, and tangible emissions reductions;
- Implementing this energy and climate plan and seeking a PJM-wide cap-and-invest program through legislation;
- Ensuring the preservation of existing nuclear generation and other clean energy resources in the commonwealth; and
- Protecting Pennsylvania energy jobs and ensuring that consumers do not unreasonably shoulder cost associated with the clean energy transition.
PADEP’s Interim Final Environmental Justice Policy Now in Effect
The Shapiro administration recently released its Interim Final Environmental Justice Policy (Interim Final Policy) and latest Environmental Justice Mapping and Screening Tool (PennEnviroScreen). The Policy took effect on September 16, 2023, when official notice of the interim final rulemaking was published in the Pennsylvania Bulletin. See 53 Pa. Bull. 5854 (Sept. 16, 2023).
The Commonwealth first adopted an environmental justice policy (EJ Policy) in 2004 to provide citizens in EJ communities enhanced public participation opportunities during certain Pennsylvania Department of Environmental Protection (PADEP) permit application processes. In 2018, PADEP circulated a draft revised policy for public comment, but ultimately withdrew the proposed revisions in 2020 following receipt of public comments. After conducting further outreach in 2021, PADEP proposed an updated policy that would refine and expand the scope of the withdrawn 2018 revisions. On March 12, 2022, PADEP released a draft of the EJ Policy for public comment, and subsequently received more than 1,200 comments during the comment period.
The Interim Final Policy is the latest version of the EJ Policy to have been released by PADEP since the comment period closed last spring. Although PADEP had previously indicated that it was working to prepare a Comment Response Document in tandem with the Interim Final Policy, it has yet to release such a document. The Interim Final Policy will likely have a tangible impact on permitting and enforcement processes for various industries going forward.
The Interim Final Policy requires use of the PennEnviroScreen tool, which will replace PADEP’s current EJ Areas Viewer tool. PennEnviroScreen is currently live and fully accessible to the public. PADEP began using the tool on September 16, 2023, to determine whether facilities are located in EJ areas based on 32 environmental, health, socioeconomic, and demographic indicators. Industry should be aware that PADEP plans to regularly update the criteria used to evaluate areas where the Interim Final Policy applies (EJ areas). To allow for a level of certainty, however, the Interim Final Policy states that “the EJ Areas in effect at the key decision point of the project will follow that project.” Interim Final Policy § III; see also id. at Appendix B, “Environmental Justice Area Criteria.”
PADEP regulated activities that are listed as “Trigger Projects” in Appendix C of the Interim Final Policy automatically require application of the Policy’s provisions. Examples include various mining permits (bituminous and anthracite underground and surface mines), waste permits (landfills, transfer stations, commercial incinerators), and air permits (new major source of hazardous pollutants or criteria pollutants). Id. at Appendix C, “Public Participation Trigger Projects.” While the 2022 Draft Policy had classified oil and gas unconventional well permits as Trigger Projects, the Interim Final Policy does not; however, various types of unconventional oil and gas projects are listed as “Opt-In Projects.” Other Opt-In Projects include resource recovery facilities, scrap metal facilities, and “other projects as identified by the community.” Id. After receiving a request from the community or a PADEP staff member to apply the Interim Final Policy to Opt-In Projects, PADEP may decide to do so using its “discretion and expertise.” Id. § V(A)(2).
PADEP plans to form an Enforcement and Compliance Team to
prioritize inspection and monitoring at sites which have multiple authorizations, multiple on-record complaints, habitual violations sites with high volume generation or unique permit conditions, EJ communities, and sites of significant geographic location and to ensure timely and appropriate responses to violations, implement an efficient criminal referral protocol, and ensure effective collaboration.
Id. § VI(B)(1). The Interim Final Policy also indicates that PADEP interprets impacts to the environment or the public health and safety at an EJ area to be a relevant factor in the calculation of penalties for violations, and may include a dollar figure in the penalty amount for such a violation “provided there is adequate evidence to support a factual finding that the violation caused harm and the penalty amount fits within the statutory limits.” Id. § VI(B)(2).
The Interim Final Policy’s publication date was also the start of a formal public comment period that ran until November 30, 2023. Receipt and review of public comments on the Interim Final Policy will be yet another “critical benchmark towards the final EJ Policy,” which is due from PADEP in 2024.
PADEP Finalizes General Operating Permit for Coal-Mine Methane Enclosed Flares
On September 23, 2023, PADEP published in the Pennsylvania Bulletin notice that the agency finalized its General Plan Approval and/or General Operating Permit for Coal-Mine Methane Enclosed Flares (GP-21). See 53 Pa. Bull. 6005 (Sept. 23, 2023). New or modified coal-mine methane enclosed flares in Pennsylvania are now subject to GP-21. Coal-mine methane enclosed flares with actual emission rates less than the following are exempted from GP-21’s permitting requirements:
- 4 tons per year (tpy) of carbon monoxide (CO) from a single enclosed flare or 20 tpy of CO from multiple enclosed flares;
- 1 tpy of nitrogen oxides (NOx) from a single enclosed flare or 5 tpy of NOx from multiple enclosed flares;
- 1.6 tpy of the oxides of sulfur (Sox) from a single enclosed flare or tpy 8 of the SOx from multiple enclosed flares;
- 0.6 tpy of particulate matter with a diameter of 10 microns or less (PM10) from a single enclosed flare or 3 tpy of PM10 from multiple enclosed flares;
- 1 tpy of volatile organic compounds (VOCs) from a single enclosed flare or 5 tpy of VOCs from multiple enclosed flares; and
- 0.5 tpy of a single hazardous air pollutant (HAP) from a single enclosed flare or 1 tpy of multiple HAPs from multiple enclosed flares. The HAPs may not contain Polychlorinated Biphenyls (PCBs), Chromium (Cr), Mercury (Hg), Lead (Pb), Polycyclic Organic Matter (POM), Dioxins, or Furans.
Those coal-mine methane enclosed flares that are not exempt from GP-21’s requirements will have to meet the best available technology (BAT) compliance requirements established in GP-21. These requirements include operating the enclosed flare to (1) limit NOx emissions to less than or equal to 0.08 lb/MMBtu, (2) limit CO emissions to less than or equal to 0.30 lb/MMBtu, and (3) limit visible emissions to periods not to exceed an aggregate total of 60 seconds during any 15-minute period. GP-21 also requires that permittees sample and conduct a fractional gas analysis at the “inlet gas stream to the enclosed flares” on a quarterly basis to determine VOC, methane, and ethane concentrations, and the heat content of the inlet gas stream.
The Pennsylvania Department of Environmental Protection (PADEP) issued GP-21 in accordance with section 6.1(f) of Pennsylvania’s Air Pollution Control Act, 35 Pa. Stat. § 4006.1(f), and 25 Pa. Code ch. 127, subch. H. Industry groups have appealed PADEP’s issuance of GP-21 to Pennsylvania’s Environmental Hearing Board.
Copyright © 2023, The Foundation for Natural Resources and Energy Law, Westminster, Colorado
