1. WASHINGTON 1101 Pennsylvania Ave. NW Suite 600 Washington, D.C. 20004 Office: (202) 756-0297 COLUMBUS 410 Main Street Columbus, MS 39701 Office: (662) 240-9744 JACKSON The Pinnacle Building Suite 100 190 East Capitol Street Jackson, MS 39201 Office: (601) 948-3101 BILOXI 727 Howard Avenue Suite 401 Biloxi, MS 39530 Office: (228) 435-1198 SUE AND SETTLE: A Current Update and Significant EPA Regulatory Proposals Mississippi Manufacturers Association Environmental Conference October 15, 2015 John E. Milner Brunini, Grantham, Grower & Hewes, PLLC Jackson, MS Mississippi Manufacturers Association Environmental Counsel

2. Agenda 1. What is Sue and Settle? 2. Problems with Sue and Settle 3. Possible Solutions 4. Current Cases and Issues

3. What is Sue and Settle? Environmental advocacy group files suit against a federal regulatory agency, i.e. EPA, U.S. Fish and Wildlife, etc. The advocacy group and the regulatory agency meet and negotiate a settlement agreement. The advocacy group and the regulatory agency file a consent decree or settlement agreement with the Court. Consent Decree or Settlement Agreement is finalized by the Court, effectively binding the regulatory agency to its rulings. New regulations are issued based on the terms of settlement.

4. U.S. Chamber of Commerce, Sue-and-Settle: Regulating Behind Closed Doors (8/5/15)

5. William Kovacs, Keith Holman & Jonathan Jackson, U.S. Chamber of Commerce, Sue-and-Settle: Regulating Behind Closed Doors (2013)

6. Problems Caused By Sue and Settle Tactics The regulated community and the public in general has no opportunity to participate in the settlement negotiations. States are effectively shut out of the decision-making process. Special interest environmental groups are able to dictate environmental policy and regulation. Expansion of federal regulation. Poor regulations on the regulated community. Stricter regulations on the regulated community; shorter timelines in which to comply. Increased costs and expenses.

7. U.S. Chamber of Commerce, Sue-and-Settle: Regulating Behind Closed Doors (8/5/15)

8. Solutions to Sue and Settle Tactics Sunshine for Regulatory Decrees and Settlements Act of 2015 – promotes greater transparency and reporting. Provide more notice and an opportunity for public comment. The Environmental Protection Agency (EPA) now lists Intents to Sue on its website; other agencies should do the same. Senate Bill 1109 – requires agencies to disclose the terms of any proposed settlement that would require new rulemaking activity, or which sets a new deadline for a current rule.

9. More Involvement Needed From the States and Regulated Community Current Case Examples Oklahoma v. U.S. Dept. of the Interior: On March 17, 2014, the State of Oklahoma sued the U.S. Department of the Interior, taking aim at the U.S. Fish and Wildlife Service’s habit of settling large cases with environmental non-governmental organizations. Why is this lawsuit significant? 1.This is the first time that a state has taken legal action to break the sue- and-settle cycle. 2.The lawsuit puts a new issue on the table: the impact on State economies and autonomy. 3.Active legislation is pending in Congress to modify sue-and-settle practices – it has passed the House and is currently in a Senate Subcommittee. Oklahoma’s lawsuit will serve to enhance public awareness of the issue.

10. Other Recent Sue and Settle Cases Michigan et al v. Environmental Protection Agency et al 135 S. Ct. 2699 (2015) Question Did the Environmental Protection Agency unreasonably refuse to consider costs in determining whether it was appropriate to regulate electric utility steam generating units? Yes. The Court held that federal administrative agencies must engage in “reasoned decision making,” which requires the agency to consider all relevant factors. Because the cost to power plants is certainly a relevant factor when deciding whether to regulate electric utility steam generating units (EGUs), the Environmental Protection Agency (EPA), should have considered the cost to power plants in making its decision. The EPA erred in interpreting the “appropriate and necessary” requirement of the Clean Air Act because it was unreasonable to interpret the phrase as not requiring the EPA to consider all relevant factors, including cost to power plants.

11. Environmental Protection Agency et al v. EME Homer City Generation, L.P. et al, 134 S.Ct. 1584 (April 29, 2014) State and local governments, joined by industry and labor groups, petitioned for review of the EPA’s Transport Rule, which called for a cost- effective allocation of emission reductions among upwind states to improve air quality in polluted downwind areas under good neighbor provisions of the Clean Air Act (CAA). The U.S. Supreme Court ruled that the states were not provided with a second opportunity to file a state implementation plan (SIP) after the EPA had quantified the state’s good-neighbor obligations. The good neighbor provisions delegated authority to the EPA to determine how to allocate responsibility for a downwind state’s excess pollution. Decision: Establishes that cost expenses can and should be considered in environmental regulation.

12. Manufacturers’ Regulatory Agenda Ozone Clean Power Plan Waters of the U.S. (WOTUS)

14. Clean Power Plan The Regulation: Final Clean Power Plan (8/15) requires states to reduce GHG emissions from electric power sector to 32 percent below 2005 levels by 2030. Each state has different requirements, depending on its current fleet and available reductions. Regional cap-and-trade plans are encouraged. Final 111(b) standard requires 1,000 lbs/MWh for new natural gas, 1,400 lbs/MWh for new coal Implementation Schedule: States must submit initial plans by Fall 2016; extensions may be granted but substantial progress must be shown. Final plans due Fall 2018 Each state has an emissions reduction target in 2022, declining via a “glide path” to 2030.

15. Clean Power Plan cont’d State GHG emission rate targets vary greatly. 8 states (IL, IA, KS, MN, MT, ND, WI, WY) must reduce GHG emissions rate by 41-47 percent. 17 states (AR, CO, GA, IN, KY, MD, MI, MO, NE, NM, OH, SC, SD, TN, UT, WA, WV) must reduce GHG emissions rate by 34-41 percent. 8 states (AL, AZ, LA, NC, OK, PA, TX, VA) must reduce GHG emissions rate by 27-34 percent. Remaining 14 covered states have GHG emissions rate reductions of 27 percent or less. However, only 4 (CA, CT, ID, ME) have cuts of 10 percent or less. However, state GHG reductions by mass are much clearer. Texas has far and away the largest total reductions by mass. After Texas, the rust belt (IL, IN, KY, OH, PA) is hit hardest, followed by MI, MO and WV.

16. Clean Power Plan cont’d 5-10 states will refuse to submit plans. IN, LA, OK, WV, WI are indicating they will not file plans. Those states plus AL, AR, AZ, KS, KY, NE, OH, SC, SD, UT and WY have all filed legal challenges already, with more expected. However, few will adopt “just say no” approach. EPA will impose a federal plan for states that do not comply. All other states will submit plans – but they will vary greatly in form, timing and substance. Some will propose using existing trading platforms (e.g. AB 32). Some will attempt to devise state-specific plans. Some may even submit plans that are intentionally deficient. Regardless of content, some plans will require approval by state legislature or Governor. Some states are limited in terms of compliance options due to existing state policies.

17. Questions and Comments

18. Contact Information John E. Milner Brunini, Grantham, Grower & Hewes, PLLC Telephone: (601) 948-3101 Email: jmilner@brunini.comjmilner@brunini.com