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Stevenson v. Delaware Department of Natural Resources and Environmental Control

Superior Court of Delaware, Sussex

September 22, 2014

David R. Stevenson, R. Christian Hudson, John W. Moore, and Jack Peterman
v.
Delaware Department of Natural Resources and Environmental Control, and Collin O'Mara

Date Submitted: June 13, 2014

Dear Counsel:

Before the Court is the Motion to Dismiss as a Matter of Law filed by Defendants Delaware Department of Natural Resources and Environmental Control ("DNREC") and Collin O'Mara ("Secretary O'Mara") (collectively "Defendants") against Plaintiffs David R. Stevenson, R. Christian Hudson, John W. Moore, and Jack Peterman ("Plaintiffs"). For the reasons explained below, this Motion is DENIED.

Facts & Procedural Background

This Motion relates to an action for declaratory relief Plaintiffs brought regarding certain state regulations. Plaintiffs are individual residents of the State of Delaware (the "State") and customers of the utilities Delmarva Power ("Delmarva") or Delaware Electric Cooperative, Inc. ("DEC").[1] DNREC is an agency of the State which oversees issues concerning its natural resources, public health, and environment. Secretary O'Mara was formerly the agency's administrator and department head.

The following facts are taken from Plaintiffs' Complaint. In December 2005, the State entered into a Memorandum of Understanding (the "MOU") with six other states in the northeast region. The MOU related to a concerted effort for the reduction of greenhouse gases. Former Governor Ruth Ann Minner executed the MOU, which the other six states approved.[2]

Under the MOU, the signatory states promised to propose for legislative or regulatory consideration programs in accordance with the agreement by January 1, 2009. The MOU sought to establish a carbon dioxide ("CO2") trading program for electric-generating facilities. It also set caps for each signatory's emissions of CO2, which would remain constant through 2014, and then drop by 2.5% and proceed unchanged from 2015 to 2018.[3] The agreement further provided that each signatory would allocate allowances for the emissions which would not exceed the caps, and conduct an evaluative review of the established programs in 2012.

For its part under the MOU, the Delaware General Assembly enacted the Regional Greenhouse Gas Initiative Act (the "RGGI Act" or the "Act").[4] Under the Act, CO2 was declared an "air contaminant" subject to regulation. It also established a "cap and trade" allowance program to control CO2 emissions, and stated that, in order to emit CO2, Delaware electric-generating facilities would be required to purchase government-issued "CO2 allowances."[5] These allowances would only last for a certain number of years, and then require being re-purchased. DNREC sets the price for the allowances and has sold them to Delaware electric-generating facilities. Plaintiffs claim that because no facility can operate without these allowances, the allowances constitute permits.

After the RGGI Act was adopted, Secretary O'Mara adopted regulations (the "RGGI regulations" or "regulations"). These regulations were supposedly consistent with the MOU, and issued by the Secretary pursuant to his authority under the Act.[6]On November 19, 2013, DNREC issued an order from the Secretary containing these regulations. The order was published on December 1, 2013, and effective as of December 11, 2013. The regulations concerned the size and structure of the CO2 caps, and the price of the CO2 allowances.[7]

According to Plaintiffs, these regulations decrease the State's CO2 caps below levels provided for in the MOU. Also according to Plaintiffs, the regulations establish a higher pricing floor for the allowances and a new method for their trade, without any approval from the General Assembly. This price increase, Plaintiffs claim, is a violation of Article VIII, § 10 of the Delaware Constitution[8] and a grievance to them per se. They also claim injury in the form of increased rates Plaintiffs must pay, which they claim are caused by the lowering of the CO2 caps. These lowered caps, Plaintiffs argue, will increase the costs of the mandatory CO2 permits, which will inevitably be passed along to the ultimate consumers.[9]

Plaintiffs also assert that the regulations are illegal under the principles of legislative delegation. DNREC and Secretary O'Mara only could have acted with the authority granted to them by the RGGI Act. Thus, because the regulations did not conform with the Act, in that the newly established CO2 caps were not consistent with the MOU, the regulations should be rendered invalid.

This Motion was originally submitted to the Court, along with the parties' arguments, on February 20, 2014. On May 1, 2014, Plaintiffs' counsel requested oral argument to be scheduled. Alternatively, it was requested that the Court permit the parties to submit supplemental memoranda before the Court rendered a decision. On May 16, 2014, after reviewing the parties' arguments, the Court requested supplemental memoranda addressing only the issue of Plaintiffs' standing to bring this action. Specifically, the Court instructed the parties to address how Plaintiffs, as mere consumers of electricity, had standing to challenge regulations relating to a statute that did not directly target them.

The parties timely submitted their responses to the Court's request. Based on those responses and the parties' original papers, ...


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