In a decision that will have far-reaching consequences for the Massachusetts economy, Massachusetts’ highest court has ruled that the Global Warming Solutions Act (GWSA), passed in 2008, mandates the imposition of annual, declining limits on greenhouse gases (GHG) emissions.  In Kain vs. Dept. of Environmental Protection (SJC-11961, May 17, 2016), the Massachusetts Supreme Judicial Court (SJC) ruled that the regulatory programs that the Massachusetts Department of Environmental Protection (MassDEP) had relied on to comply with the GWSA mandate were insufficient.

At issue in the case was an allegation that MassDEP failed to adopt “regulations establishing a desired level of declining annual aggregate emission limits for sources or categories of sources that emit greenhouse gas emissions.”  M.G.L. c. 21N, § 3(d).  The GWSA required that these regulations be promulgated by January 1, 2012, with an effective date of January 1, 2013.  When MassDEP did not promulgate regulations by the statutory deadline, citizens filed a petition proposing regulations establishing GHG emission limitations.

In response, MassDEP concluded that several existing state programs met the statutory requirement in Section 3(d).  Specifically, MassDEP cited its regulations limiting sulfur hexafluoride leaks, a state low emissions vehicle (LEV) incentive program, and Massachusetts’ ongoing participation in the regional CO2 cap and trade program (known as the Regional Greenhouse Gas Initiative or RGGI).  A lawsuit ensued, resulting in a trial court ruling that deferred to MassDEP’s interpretation regarding its compliance with the statutory mandate in Section 3(d).

The appeal bypassed the intermediate appellate court and proceeded directly to the SJC, the state’s highest court of revew.  The SJC concluded that the statutory language in Section 3(d) was “unambiguous” and rejected MassDEP’s interpretation that the sulfur hexafluoride leak regulations, the LEV program and state participation in RGGI satisfied the statutory mandate.  The Court ruled that MassDEP must promulgate regulations that “address multiple sources or categories of sources of greenhouse gas emissions, impose a limit on emissions that may be released, limit the aggregate emissions released from each group of regulated sources or category of sources, set emission limits for each year, and set limits that decline on an annual basis.”

The adoption of the requisite regulations is undoubtedly a major regulatory task.  The SJC remanded the matter to the trial court to enter a judgment enforcing its ruling.  A significant unanswered question is the amount of time that the trial court will allow MassDEP to comply with this ruling, and whether the trial court will retain jurisdiction over the case until the regulations are promulgated.  Drafting regulations of this complexity, conducting the appropriate stakeholder outreach and public comment process, and finalizing the regulations in the ordinary course could easily take several years.

Another interesting aspect of this case is its timing relative to various ongoing renewable energy policy debates in Massachusetts. After a lengthy and contentious debate, the Legislature recently passed a bill raising the public and private solar net metering caps from 5% of the utilities’ peak load to 8% and from 4% of utilities’ peak load to 7%, respectively.  That bill also establishes a process to gradually reduce the solar industry’s reliance on ratepayer subsidies.

In addition, the Legislature is currently debating a bill filed by the Baker Administration to promote the transmission of Canadian hydro-electric power to Massachusetts for the express purpose of meeting the GHG reduction mandates in the GWSA.  And while the Baker Administration recently concluded that the Commonwealth is on track to meet the GHG reduction goal in the GWSA of 25% by 2020, this determination has been questioned by public interest groups, including those involved in the Kain case.

So, there will be considerable scrutiny focused on MassDEP as it complies with the Kain decision and promulgates regulations imposing annual, declining emissions limitations on GHG sources or categories of sources.  Counterbalancing that legal mandate will be concerns about limiting the economic impacts to businesses in the Commonwealth.  MassDEP will need to identify those sources or categories of GHG sources (e.g., mobile sources, industrial plants, commercial and residential buildings) that must be targeted, and then ensure that the GHG emissions for those sources are reduced over time based on an annual schedule in order to achieve the GHG reduction goals in the GWSA.  This regulatory program will presumably include GHG source monitoring (or an alternative means of compliance verification for regulated sources) and enforcement if those regulated sources fail to meet the promulgated GHG reduction rates.