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CLEAN AIR MARKETS GROUP v. PATAKI

April 9, 2002

CLEAN AIR MARKETS GROUP, PLAINTIFF,
V.
GEORGE E. PATAKI, IN HIS CAPACITY AS GOVERNOR OF THE STATE OF NEW YORK; MAUREEN O'DONNELL HELMER, IN HER CAPACITY AS CHAIRMAN OF THE NEW YORK STATE PUBLIC SERVICE COMMISSION; THOMAS J. DUNLEAVY, IN HIS CAPACITY AS A COMMISSIONER OF THE NEW YORK STATE PUBLIC SERVICE COMMISSION; JAMES D. BENNETT, IN HIS CAPACITY AS A COMMISSIONER OF THE NEW YORK STATE PUBLIC SERVICE COMMISSION; LEONARD A WEISS, IN HIS CAPACITY AS A COMMISSIONER OF THE NEW YORK STATE PUBLIC SERVICE COMMISSION; NEAL N. GALVIN, IN HIS CAPACITY AS A COMMISSIONER OF THE NEW YORK STATE PUBLIC SERVICE COMMISSION; DEFENDANTS.



The opinion of the court was delivered by: David N. Hurd, United States District Judge.

    MEMORANDUM-DECISION and ORDER

I. INTRODUCTION

Plaintiff Clean Air Markets Group ("CAMG") challenges the facial constitutionality of New York's Air Pollution Mitigation Law as preempted by the Federal Clean Air Act under the Supremacy Clause and as violative of the Interstate Commerce Clause. Defendant Governor George E. Pataki ("Pataki") and the Public Service Commission ("PSC") defendants Maureen O'Donnell Helmer, Thomas J. Dunleavy, James D. Bennett, Leonard A. Weiss, and Neal N. Galvin (collectively the "PSC defendants") separately move for summary judgment. CAMG opposes and cross moves for summary judgment. Oral argument was heard on June 22, 2001, in Albany, New York. Decision was reserved.

II. BACKGROUND

The background facts as set forth below are undisputed or not challenged by the parties as presenting genuine issues of fact. While it is correct that many of the following facts are not material to the disposition of the instant motions, the background is helpful to the legal analysis.*fn1

A. Environmental Problem: Acid Deposition

Acid deposition, commonly called acid rain, has long been recognized as an environmental problem. Sulfates and nitrates in the atmosphere are deposited on the earth's surface as acid deposition. The two types of acid deposition are wet deposition, in the form of rain, snow, sleet, fog, and cloud water, and dry deposition in the form of gases, aerosols, and particles.

The atomospheric sulfates and nitrates are formed from sulfur dioxide, SO2, and nitrogen oxides, NOx, respectively. Sulfur dioxide and nitrogen oxides are emitted as byproducts from the combustion of fossil fuels. Sixty-seven percent of sulfur dioxide emissions are sourced from utilities that generate electricity using fossil fuels. Sulfur dioxide is also emitted from industrial fuel combustion and other sources such as motor vehicles. Fifty-three percent of the nitrogen oxides emitted are attributable to on-and off-road vehicles, while the remainder is from electric utilities and other industrial sources. The highest emissions of SO2 and NOx emanate from sources in the Midwest and the East, including Iowa, Kansas, Illinois, Missouri, Indiana, Michigan, Minnesota, Ohio, Wisconsin, Alabama, Florida, Georgia, Kentucky, Mississippi, Tennessee, Maryland, Pennsylvania, West Virginia, Massachusetts, New Hampshire, New Jersey, and New York.

It is not surprising that acid deposition is a problem in these high-source states. Additionally, however, the atmospheric sulfates and nitrates, formed from the emissions of SO2 and NOx, can travel hundreds of miles depending upon wind conditions. It has been determined that emissions from New Jersey, Pennsylvania, Maryland, Delaware, Virginia, North Carolina, Tennessee, West Virginia, Ohio, Michigan, Illinois, Kentucky, Indiana, and Wisconsin contribute highly to acid deposition in New York State. These high-contributing states are referred to as "Upwind States."

Areas in New York State susceptible to acid deposition are the Adirondacks, Catskills, Hudson Highlands, Rensselaer Plateau, and parts of Long Island. The Adirondacks are particularly susceptible to acid deposition due to the thin, calcium-poor soils and igneous rocks. Acid deposition has negative effects upon surface water, visibility, forests, human health, and materials and structures. For example, acidification of surface water results in the loss of fish and other aquatic life, including the inability of some species to survive. Loss of fish then leads to decrease in other animal life, such as birds that would have fed on fish. It has been estimated that seventy percent of Adirondack lakes and streams are at risk for acidification due to acid deposition. Sulfate particles in the air reduce visibility and aggravate health problems such as asthma. Sulfate and nitrate deposition accelerates degradation of materials and structures, such as automobile paints, bridges, monuments, and historic buildings.

No one disagrees that acid deposition is insidiously deleterious anywhere. Moreover, it is extraordinarily destructive to the Adirondacks.

B. Legislative Solutions

In response to the environmental problems caused by acid deposition, legislative solutions have been formulated at both the state and federal levels. The Federal Clean Air Act was first promulgated in 1955 and underwent substantial revisions in 1977 and again in 1990. See generally 42 U.S.C. § 7401-7671q (codifying the Clean Air Act as amended). New York's Environmental Conservation Law was enacted in 1972, to consolidate prior laws from as early as 1952 regarding the development, use, control, and conservation of the State's natural resources. See generally N.Y. Envtl. Conserv. L. §§ 1-0101 to 72-end (codifying state conservation laws); see also N.Y. Pub. Serv. L. § 66-k (codifying the New York Air Pollution Mitigation Law enacted in 2000). At issue here are the 1990 amendments to the Federal Clean Air Act and New York Air Pollution Mitigation Law.

1. Clean Air Act Amendments of 1990

Title IV of the Clean Air Act Amendments of 1990 is directed toward the control of acid deposition. See 42 U.S.C. § 7651-76510. Under Title IV, the reduction of sulfur dioxide and nitrogen oxides emissions by electric utilities would be accomplished in two phases.

Phase I, effective January 1, 1995, applied only to the 263 electricity generating units ("units") with the highest emissions. Sulfur dioxide emissions were to be reduced using a "cap and trade" system. A cap on SO2 emissions was set: approximately 5.7 million tons of SO2 emissions by the 263 units would be permitted in 1995. Additional units participated voluntarily, bringing the total emissions permitted to 8.7 million tons by 445 units in 1995. Reductions in the permissible amount of emissions were made annually so that in 1999, the 398 participating units were allowed 6.99 million tons.

Only 2.65% of the original 5.7 million-ton cap applied to units in New York State. In contrast, 72.1% of the cap applied to units in Upwind States.

The rules proposed by the Environmental Protection Agency ("EPA") to implement Title IV of the 1990 Amendments provided for nationwide free trading of allowances. New York State objected, preferring regionally restricted trading. New York argued that allowances should not be traded to the Upwind States, as they are a significant source of acid deposition in New York. New York's concern was that the Upwind States would not reduce emissions; rather, they would continue to emit pollutants at current rates and meet the requirements of Title IV by purchasing allowances from units located elsewhere. New York's argument was rejected, however, and the final regulations provided for free nationwide trading of allowances.

In addition to being bought, sold, or traded, allowances could be "banked" for use in a later year. In other words, 1995 vintage year allowances could be banked for use in 1996 or later years. Banking allowances may be advantageous as emissions allocations are reduced annually. Utilities could also speculate about the price of the allowances, selling at a higher price and waiting for a lower price at which to purchase the allowances that would be needed to cover its emissions.

At the end of each calendar year, a unit must surrender to the EPA a number of allowances equal to the SO2 emitted by the unit in that year. Allowances are allocated by the EPA on a thirty year rolling basis, so that vintage year 2031 allowances were allocated in 2001. Although future vintage year allowances are now available for sale and trade, they cannot be used to surrender for emissions in earlier years. In other words, a vintage year 2010 allowance cannot be used for 2001 emissions. In this way, past vintage years' allowances and future vintage years' allowances are bought, sold, and traded by the utilities in order to most efficiently and cost-effectively meet the emissions reductions required by the Clean Air Act. The utilities must balance current and future SO2 emissions reductions with the price of different vintage year allowances to best meet their individual unit requirements. Phase II, effective January 1, 2000, applied to virtually all existing units and all new units, bringing more than 2,000 units within its ambit. Approximately 9.2 million allowances, permitting the emission of 9.2 million tons of SO2, were allocated for the year 2000. Again, annual reductions were set, with a permanent cap of 8.95 million tons of SO2 emissions permitted for the year 2010 and annually thereafter. The permanent cap reflects a fifty percent reduction from 1980 emission levels.

Rather than a cap and trade system for NOx, an emission rate for each source was set. Utilities were permitted to average emissions across its boilers, but ...


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