Bowfin KeyCon Holdings, LLC v. PA DEP & PA EQB ( 2023 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Bowfin KeyCon Holdings, LLC; :
Chief Power Finance II, LLC; :
Chief Power Transfer Parent, LLC; :
KeyCon Power Holdings, LLC; :
GenOn Holdings, Inc.; Pennsylvania :
Coal Alliance; United Mine Workers :
of America; International Brotherhood :
of Electrical Workers; and International :
Brotherhood of Boilermakers, Iron Ship :
Builders, Blacksmiths, Forgers and :
Helpers, :
:
Petitioners :
:
v. : No. 247 M.D. 2022
: Argued: November 16, 2022
Pennsylvania Department of :
Environmental Protection :
and Pennsylvania Environmental :
Quality Board, :
:
Respondents :
BEFORE: HONORABLE RENÉE COHN JUBELIRER, President Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE ELLEN CEISLER, Judge
HONORABLE LORI A. DUMAS, Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE WOJCIK FILED: November 1, 2023
Before the Court are the cross-applications for summary relief (cross-
ASRs) filed on behalf of Bowfin KeyCon Holdings, LLC, Chief Power Finance II,
LLC, Chief Power Transfer Parent, LLC, KeyCon Power Holdings, LLC, GenOn
Holdings, Inc., Pennsylvania Coal Alliance, United Mine Workers of America,
International Brotherhood of Electrical Workers, and International Brotherhood of
Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers (collectively,
Petitioners), and the Pennsylvania Department of Environmental Protection (DEP)
and the Pennsylvania Environmental Quality Board (EQB), regarding the April 25,
2022 Petition for Review (PFR) filed in our original jurisdiction by Petitioners
seeking declaratory and injunctive relief. The PFR relates to Pennsylvania’s
participation in the Regional Greenhouse Gas Initiative (RGGI) based on regulations
promulgated by DEP and EQB, referred to as the “Trading Program Regulation”
(Rulemaking). Following careful review, we grant in part, and dismiss in part, the
cross-ASRs,1 and grant the requested declaratory and injunctive relief in part.
1
In considering the cross-ASRs, it is appropriate for this Court to take judicial notice of
our prior memorandum opinions and orders in this matter in Bowfin KeyCon Holdings, LLC v.
Pennsylvania Department of Environmental Protection (Pa. Cmwlth., No. 247 M.D. 2022, filed
July 8, 2022) (Bowfin), and in the related matter in Ziadeh v. Pennsylvania Legislative Reference
Bureau (Pa. Cmwlth., No. 41 M.D. 2022, filed January 19, 2023) (Ziadeh), and the various filings
on the dockets of these cases. See, e.g., Pa.R.E. 201(b)(2) (permitting courts to take judicial notice
of facts that may be “determined from sources whose accuracy cannot reasonably be questioned”);
Moss v. Pennsylvania Board of Probation and Parole, 194 A.3d 1130, 1137 n.11 (Pa. Cmwlth.
2018) (“[T]his Court may take judicial notice of information contained in the publicly[ ]available
docket of [the underlying proceedings],” and “‘[i]t is well settled that this Court may take judicial
notice of pleadings and judgments in other proceedings . . . where, as here, the other proceedings
involve the same parties.’”) (citations omitted); Elkington v. Department of Corrections (Pa.
Cmwlth., No. 478 M.D. 2018, filed May 27, 2021), slip op. at 9 n.4 (“Although not introduced by
the parties, the underlying criminal proceedings are directly related to the claims made here and
are referenced throughout the pleadings, and this Court may take judicial notice of the dockets of
other courts of the Commonwealth.”) (citations omitted); see also Pa.R.A.P. 126(b)(1)-(2) (“As
used in this rule, ‘non-precedential decision’ refers to . . . an unreported memorandum opinion of
the Commonwealth Court filed after January 15, 2008. . . . Non-precedential decisions . . . may
be cited for their persuasive value.”).
2
This Court has previously summarized the stipulated facts in this matter
as follows:
The Rulemaking establishes a program to limit the
emission of [carbon dioxide (CO2)] from fossil fuel-fired
electric generating units (EGUs) located in the
Commonwealth with a nameplate capacity equal to or
greater than 25 [megawatts]. The Rulemaking requires the
EGUs to obtain allowances for each ton of CO 2 emitted
and imposes permitting, monitoring, reporting, and
record-keeping requirements on them. It is the position of
[the] DEP Secretary[], DEP, EQB, [and proposed
intervenors] “that CO2 is a ‘pollutant’ that can be regulated
under Pennsylvania’s [Air Pollution Control Act
(APCA).2]
Under the Rulemaking, Pennsylvania will distribute
CO2 allowances available to each EGU through quarterly
regional allowance auctions. The Rulemaking contains a
declining CO2 allowance trading budget that would
incrementally reduce the number of CO2 allowances
allocated by DEP to the air pollution reduction account for
sale via an allowance auction. The Rulemaking would
enable DEP to participate in a multistate CO2 allowance
auction, such as [RGGI], provided that participation could
provide benefits to the Commonwealth that meet or
exceed the benefits conferred on Pennsylvania through its
own Pennsylvania-run auction process. Eleven other
states currently participate in RGGI, namely Connecticut,
Delaware, Maine, Maryland, Massachusetts, New
Hampshire, New Jersey, New York, Rhode Island,
Vermont, and Virginia.
To become a “Participating State” in RGGI, a state
is required to (1) develop a regulation sufficiently
consistent with the RGGI Model Rule and (2) sign a
contract between the state agency and RGGI, Inc., to
engage RGGI, Inc.’s services. RGGI, Inc., is a [Section]
501(c)(3) non-profit corporation created to facilitate
2
Act of January 8, 1960, P.L. (1959) 2119, as amended, 35 P.S. §§4001-4015.
3
administrative and technical support services to
Participating States in RGGI. . . . In developing the
Rulemaking, DEP performed certain modeling that was
designed to forecast, among other things, the economic
and environmental impacts that would result from the
Rulemaking. . . . Any proceeds received by DEP from
RGGI auctions and civil fines and penalties for excess
emissions will be deposited into the Clean Air Fund.
***
On April 18, 2022, the Legislative Reference
Bureau submitted the Rulemaking to its contractor for
publication in the April 23, 2022 issue of the Pennsylvania
Bulletin. On April 23, 2022, the Rulemaking was
published in the Pennsylvania Bulletin. The Rulemaking
will be codified in the Pennsylvania Code at Title 25,
Chapter 145, Subchapter E, which will be entitled “CO2
Budget Trading Program.” Codification of the
Rulemaking is anticipated in the July 2022 supplement to
the Pennsylvania Code.
Bowfin, slip op. at 4-6, 8. The Rulemaking is codified at Sections 145.301 through
145.409 of DEP’s regulations, 25 Pa. Code §§145.301-145.409.
In considering the instant cross-ASRs3 with respect to the merits of the
first claim in the PFR, in granting a preliminary injunction, we previously observed:
Petitioners assert that the Rulemaking is
unconstitutional because it usurps the authority of the
General Assembly to levy taxes under the Pennsylvania
Constitution and is not otherwise statutorily authorized.
3
Pa.R.A.P. 1532(b) states, in relevant part: “At any time after the filing of a petition for
review in an . . . original jurisdiction matter, the court may on application enter judgment if the
right of the applicant thereto is clear.” Judgment may be entered “‘if a party’s right to judgment
is clear and no material issues of fact are in dispute.’ ‘In ruling on [ASRs], we must view the
evidence of record in the light most favorable to the non-moving party and enter judgment only if
there is no genuine issue as to any material facts and the right to judgment is clear as a matter of
law.’” Eleven Eleven Pennsylvania, LLC v. State Board of Cosmetology, 169 A.3d 141, 145 (Pa.
Cmwlth. 2017) (citations omitted).
4
The power to levy taxes is specifically reserved to
the General Assembly. P[a]. C[onst]. art. II, §1;[4]
Thompson v. City of Altoona Code Appeals Board, 934
A.2d 130, 133 (Pa. Cmwlth. 2007) (“It is well[ ]settled that
‘[t]he power of taxation . . . lies solely in the General
Assembly of the Commonwealth acting under the aegis of
the Constitution.’”) (quoting Mastrangelo v. Buckley, 250
A.2d 447, 452-53 (Pa. 1969)). While the General
Assembly may delegate the power to tax, such as to a
municipality or political subdivision, any such delegation
must be “plainly and unmistakably conferred . . . and the
grant of such right must be strictly construed and not
extended by implication.” Mastrangelo, 250 A.2d at 453
(emphasis in original); see also P[a]. C[onst]. art. III, §31
(placing restrictions on General Assembly’s right to
delegate its taxing authority). The Senate states that there
has been no such delegation here under the APCA, the
statutory authority relied upon by [] DEP in enacting the
current Rulemaking.
The APCA specifically permits the imposition of
fees to cover the costs of administering any air pollution
control program authorized by the statute. Specifically,
Section 6.3(a) of the APCA “authorizes the establishment
of fees sufficient to cover the indirect and direct costs of
administering the air pollution control plan approval
process, operating permit program required by Title V of
the [federal] Clean Air Act,[5] other requirements of the
Clean Air Act and . . . to support the air pollution control
program authorized by this act and not covered by fees
required by [S]ection 502(b) of the Clean Air Act.[6]” 35
4
Article II, section 1 of the Pennsylvania Constitution, Pa. Const. art. II, §1, states: “The
legislative power of this Commonwealth shall be vested in a General Assembly, which shall
consist of a Senate and a House of Representatives.” See also article III, section 10, Pa. Const.
art. III, §10, which states: “All bills for raising revenue shall originate in the House of
Representatives, but the Senate may propose amendments as in other bills.”
5
42 U.S.C. §§7661-7661f.
6
42 U.S.C. §7661a(b).
5
P.S. §4006.3(a).[7] Additionally, Section 9.2(a) of the
APCA allows for the collection and deposit of “fines, civil
penalties and fees into . . . the Clean Air Fund.” 35 P.S.
§4009.2(a).[8]
This Court has previously considered the question
of what constitutes a proper regulatory fee as opposed to a
tax. We have stated:
A licensing fee, of course, is a charge which
is imposed pursuant to a sovereign’s police
power for the privilege of performing certain
acts, and which is intended to defray the
expense of regulation. It is to be
distinguished from a tax, or revenue
producing measure, which is characterized
by the production of large income and a high
proportion of income relative to the costs of
collection and supervision.
Simpson v. City of New Castle, 740 A.2d 287, 292 (Pa.
Cmwlth. 1999) (emphasis added) (quoting Greenacres
Apartments, Inc. v. Bristol Township, 482 A.2d 1356,
1359 (Pa. Cmwlth. 1984)).
We cannot . . . agree with [DEP] Secretary
McDonnell’s argument that the allowance auction
proceeds do not constitute a tax. First, it is undisputed that
the auction proceeds are remitted to the [P]articipating
[S]tates. Senate Ex[hibit] 22 (52 Pa.B. at 2482 (“The CO2
allowances purchased in the multistate auctions generate
proceeds that are provided back to the [P]articipating
[S]tates, including the Commonwealth, for investment in
initiatives that will further reduce CO2 emissions.”)).
Secretary McDonnell’s position is unpersuasive where it
is undisputed that the auction proceeds are to be deposited
into the Clean Air Fund, are generated as a direct result of
the Rulemaking, and [] DEP anticipates significant
monetary benefits from participating in the auctions. In
7
Added by the Act of July 9, 1992, P.L. 460.
8
Added by the Act of October 26, 1972, P.L. 989.
6
addition, and importantly, it is unclear under what
authority [] DEP may obtain the auction proceeds for
Pennsylvania allowances purchased by non-Pennsylvania
covered sources not subject to [] DEP’s regulatory
authority and which are not tethered to CO2 emissions in
Pennsylvania.
Second, the Rulemaking record, namely [] DEP’s
2020 modeling, estimated that only 6% of the proceeds
from the CO2 allowances auctions would be for
“programmatic costs related to administration and
oversight of the CO2 Budget Trading Program (5% for
[DEP] and 1% for RGGI, Inc.).” 52 Pa.B. at 2508. The
remaining proceeds from the CO2 allowance[s] auctions
will be deposited into an air pollution reduction account
within the Clean Air Fund maintained by [] DEP, with the
use of such proceeds exclusively limited to the elimination
of air pollution. See 52 Pa.B. at 25[2]5, 2545 (Rulemaking
§§145.343 and 145.401).
Third, Secretary McDonnell acknowledged that
from 2016 to 2021, the Clean Air Fund annually
maintained between $20 million and $25 million in funds,
the total expenditures exceeded the receipt of funds by $1
million for the years 2016 to 2020, but with the inclusion
of anticipated CO2 [allowance auction] proceeds, the
estimated receipts for the 2022-23 budget year exceed
$443 million. [Notes of Testimony] 5/10/2022, at 132-35.
In fact, [] DEP’s total budget for the 2021-22 fiscal year,
i.e., the total funds appropriated to [] DEP from the
General Fund, was slightly in excess of $169 million. See
Pennsylvania Treasury, General Fund Current Fiscal
Year Enacted Budget: Appropriated Departments,
https://www.patreasury.gov/transparency/budget.php
(last visited June 23, 2022).
Bowfin, slip op. at 25-28 (emphasis in original and footnotes omitted).
Upon further review and consideration, we reaffirm our determination
in this regard, and now hold that the Rulemaking constitutes a tax that has been
7
imposed by DEP and EQB in violation of the Pennsylvania Constitution. Indeed, as
the Pennsylvania Supreme Court explained long ago:
No principle is more firmly established in the law
of Pennsylvania than the principle 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 of the
business the “license fee” act will be struck down. The
courts interfere with the discretion of the legislature in
such matters only “where the regulations adopted are
arbitrary, oppressive, or unreasonable.” The regulations
in question when tested by this standard require judicial
interference with the legislative act creating them.
Flynn v. Horst, 51 A.2d 54, 60 (Pa. 1947) (citation omitted).9
As outlined above, in this case, it is undisputed that: (1) DEP and EQB
anticipate significant monetary benefits from participating in the auctions, the
proceeds obtained thereby are to be deposited into the Clean Air Fund, and they are
generated as a direct result of the Rulemaking; (2) there is no cited authority under
which DEP and EQB may obtain or retain the auction proceeds for Pennsylvania
allowances that are purchased by non-Pennsylvania covered sources, which are not
subject to DEP’s and EQB’s regulatory authority, and which are not tethered to CO2
emissions in Pennsylvania; (3) only 6% of the proceeds from the auctions would be
attributable to “programmatic costs related to administration and oversight of” the
program, with a mere 5% going to DEP and EQB; and (4) the estimated moneys
9
See also Sunrise Energy, LLC v. FirstEnergy Corp., 148 A.3d 894, 907 (Pa. Cmwlth.
2016), appeal denied, 169 A.3d 1025 (Pa. 2017) (“[A]n agency cannot confer authority upon itself
by regulation. Any power exercised by an agency must be conferred by the legislature in express
terms. Aetna Casualty and Surety Company v. [Insurance Department, 638 A.2d 194, 200 (Pa.
1994)] (stating that an agency can only exercise powers ‘conferred upon it by the Legislature in
clear and unmistakable language’) (citation omitted).”).
8
received by DEP and EQB from the auctions in a single budget year will exceed the
total funds appropriated to DEP from the General Fund by nearly threefold. Where,
as here, the moneys generated and received by the Commonwealth’s participation in
the auctions are “grossly disproportionate” to the costs of overseeing participation
in the program or DEP’s and EQB’s annual regulatory needs, and relate to activities
beyond their regulatory authority, the regulations authorizing Pennsylvania’s
participation in RGGI are invalid and unenforceable.
Stated simply, to pass constitutional muster, the Commonwealth’s
participation in RGGI may only be achieved through legislation duly enacted by the
Pennsylvania General Assembly, and not merely through the Rulemaking
promulgated by DEP and EQB. As a result, we will grant Petitioners’ ASR in part.10
10
Based on our disposition of the ASR on this PFR claim, all remaining ASRs and
applications filed by the parties are dismissed as moot. Moreover, any claims raised by amici that
are not raised by the parties will not be addressed by this Court in this matter. As the Pennsylvania
Supreme Court has explained:
[A]micus briefs cannot raise issues not set forth by the parties.
Hosp[ital] & Healthsystem Ass[ociatio]n of Pennsylvania v.
Dep[artmen]t of Pub[lic] Welfare, [888 A.2d 601, 606 n.10 (Pa.
2005)]; 4 Am.Jur.2d Amicus §7 (2005) (“[A]n amicus must accept
the case before the court with the issues made by the parties.
Accordingly, an amicus curiae ordinarily cannot inject new issues
into a case which have not been presented by the parties.”).
Banfield v. Cortes, 110 A.3d 155, 172 n.14 (Pa. 2015).
9
Accordingly, we grant Petitioners’ ASR asserting that the Rulemaking
is an invalid tax; we declare that the Rulemaking is void; and we enjoin DEP and
EQB from enforcing its provisions.
MICHAEL H. WOJCIK, Judge
Judge Covey did not participate in the decision of this case.
Judge Fizzano Cannon did not participate in the decision of this case.
Judge Wallace did not participate in the decision of this case.
10
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Bowfin KeyCon Holdings, LLC; :
Chief Power Finance II, LLC; :
Chief Power Transfer Parent, LLC; :
KeyCon Power Holdings, LLC; :
GenOn Holdings, Inc.; Pennsylvania :
Coal Alliance; United Mine Workers :
of America; International Brotherhood :
of Electrical Workers; and International :
Brotherhood of Boilermakers, Iron Ship :
Builders, Blacksmiths, Forgers and :
Helpers, :
:
Petitioners :
:
v. : No. 247 M.D. 2022
:
Pennsylvania Department of :
Environmental Protection :
and Pennsylvania Environmental :
Quality Board, :
:
Respondents :
ORDER
AND NOW, this 1st day of November, 2023, the Application for
Summary Relief (ASR) filed by Petitioners in the above-captioned matter is
GRANTED in part, in accordance with the foregoing Memorandum Opinion. The
regulations promulgated by the Pennsylvania Department of Environmental
Protection (DEP) and the Pennsylvania Environmental Quality Board (EQB)
referred to as the “Trading Program Regulation” (Rulemaking), and found at 25
Pa. Code §§145.301-145.409, are DECLARED VOID. DEP and EQB are
ENJOINED from enforcing the Rulemaking. All outstanding ASRs and
applications filed in this case are DISMISSED as moot.
__________________________________
MICHAEL H. WOJCIK, Judge
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Bowfin KeyCon Holdings, LLC; :
Chief Power Finance II, LLC; :
Chief Power Transfer Parent, LLC; :
KeyCon Power Holdings, LLC; :
GenOn Holdings, Inc.; Pennsylvania :
Coal Alliance; United Mine Workers :
of America; International :
Brotherhood of Electrical Workers; :
and International Brotherhood of :
Boilermakers, Iron Ship Builders, :
Blacksmiths, Forgers and Helpers, :
Petitioners :
:
v. : No. 247 M.D. 2022
:
Pennsylvania Department of :
Environmental Protection :
and Pennsylvania Environmental :
Quality Board, :
Respondents : Argued: November 16, 2022
BEFORE: HONORABLE RENÉE COHN JUBELIRER, President Judge
HONORABLE PATRICIA A. McCULLOUGH, Judge
HONORABLE MICHAEL H. WOJCIK, Judge
HONORABLE ELLEN CEISLER, Judge
HONORABLE LORI A. DUMAS, Judge
OPINION NOT REPORTED
DISSENTING OPINION
BY JUDGE CEISLER FILED: November 1, 2023
I must respectfully dissent from the majority’s conclusion that Petitioners
Bowfin KeyCon Holdings, LLC; Chief Power Finance II, LLC; Chief Power
Transfer Parent, LLC; KeyCon Power Holdings, LLC; GenOn Holdings, Inc.;
Pennsylvania Coal Alliance; United Mine Workers of America; International
Brotherhood of Electrical Workers; and International Brotherhood of Boilermakers,
Iron Ship Builders, Blacksmiths, Forgers and Helpers (collectively Petitioners), are
entitled to summary relief regarding whether the Regional Greenhouse Gas Initiative
(RGGI) administrative rule (Rulemaking) is a tax as opposed to a fee. I do so because
there are genuine issues of material fact at this stage regarding whether the
Rulemaking establishes a tax or a fee, which deprives all of the parties to this matter
of the ability to obtain summary relief on this point.
Section 6.3(a) of the Air Pollution Control Act
authorizes the establishment of fees sufficient to cover the
indirect and direct costs of administering the air pollution
control plan approval process, operating permit program
required by Title V of the Clean Air Act, [42 U.S.C. Ch.
85, Subch. V,] other requirements of the Clean Air Act[,
id. §§ 7401-7675,] and the indirect and direct costs of
administering the Small Business Stationary Source
Technical and Environmental Compliance Assistance
Program, Compliance Advisory Committee and Office of
Small Business Ombudsman. This section also authorizes
the [Environmental Quality Board] by regulation to
establish fees to support the air pollution control program
authorized by this act and not covered by fees required by
[S]ection 502(b) of the Clean Air Act[, id. § 7661a(b)].
35 P.S. § 4006.3(a).1 Respondents Pennsylvania Department of Environmental
Protection (DEP) and Pennsylvania Environmental Quality Board (collectively
Respondents) argue, in relevant part, that this language authorizes the establishment
of the emissions allowance auction process and creates a fee, whereas Petitioners
assert that this auction process produces nothing more than a tax in fee’s clothing.
The question of whether an enactment is a tax or
regulatory measure is determined by the purposes for
which it is enacted and not by its title. City of Wilkes-Barre
v. Ebert, . . . 349 A.2d 520 ([Pa. Cmwlth.] 1975).
1
Act of January 8, 1960, P.L. (1959) 2119, as amended, added by Act of July 9, 1992, P.L.
460.
EC - 2
Taxes have been defined as “burdens or charges imposed
by the legislative power upon persons or property to raise
money for public purposes, and to defray the necessary
expenses of government.” Woodward v. City of Phila[.], .
. . 3 A.2d 167, 170 (1938). This Court has previously noted
that:
The common distinction is that taxes are revenue-
producing measures authorized under the taxing
power of government; while license fees are
regulatory measures intended to cover the cost of
administering a regulatory scheme authorized under
the police power of government.
[City of] Phila[.] v. [Se. Pa. Transp. Auth.], 303 A.2d 247,
251 ([Pa. Cmwlth.] 1973). In National Biscuit Co. v. [City
of] Philadelphia, . . . 98 A.2d 182 ([Pa.] 1953), the
Supreme Court identified the features of a license fee:
The distinguishing features of a license fee are (1)
that it is applicable only to a type of business or
occupation which is subject to supervision and
regulation by the licensing authority under its police
power; (2) that such supervision and regulation are
in fact conducted by the licensing authority; (3) that
the payment of the fee is a condition upon which the
licensee is permitted to transact his business or
pursue his occupation; and (4) that the legislative
purpose in exacting the charge is to reimburse the
licensing authority for the expense of the
supervision and regulation conducted by it.
Id. at 615, 98 A.2d at 188.
White v. Med. Pro. Liab. Catastrophe Loss Fund, 571 A.2d 9, 11 (Pa. Cmwlth.
1990). “A license fee is a sum assessed for a privilege, and to be valid the fee must
be proportionate to the cost of administering the licensing ordinance. If the fee
exceeds the reasonable cost of administration, it becomes an illegal tax which the
law will not allow.” Martin Media v. Hempfield Twp. Zoning Hearing Bd., 651 A.2d
1171, 1173 (Pa. Cmwlth. 1994); accord Costa v. City of Allentown, 153 A.3d 1159,
1165 (Pa. Cmwlth. 2017) (“A municipality cannot impose a tax upon a business
EC - 3
under the guise of exercising its police power, and, therefore, a license fee will be
struck down if its amount is ‘grossly disproportionate to the sum required to pay the
cost of the due regulation of the business.’ Flynn v. Horst, . . . 51 A.2d 54, 60 ([Pa.]
1947).”).
This Court, at the preliminary injunction stage, concluded that there is a
reasonable likelihood that Rulemaking creates a tax for a number of reasons,
including because “the auction proceeds are remitted to the participating states[;]”
the proceeds of the Rulemaking will far exceed the cost of administering the CO2
budget trading program; and those proceeds will swell the coffers of DEP’s Clean
Air Fund to more than twice the General Assembly’s total budget appropriations to
DEP for the 2021-2022 fiscal year. See Bowfin KeyCon Holdings, LLC v. Pa. Dep’t
of Env’t. Prot. (Pa. Cmwlth., No. 247 M.D. 2022, filed July 8, 2022), slip op. at 25-
28 (Wojcik, J., single judge op.). Petitioners now echo that reasoning, arguing that
the emissions allowance auction creates a tax, rather than a fee, because the proceeds
from the auctions will grossly exceed the cost to the DEP of administering the
underlying regulatory scheme, may not actually return funds in some instances to
the DEP, and does not actually provide licenses to affected emitters. See Petitioners’
Br. at 21-22.
Even so, there is still a persuasive argument to be made that the emissions
allowance auction process does not establish a tax. Respondents assert in their brief
that the Rulemaking creates fees, because the auction proceeds will be put towards
both administering and supporting DEP’s air pollution control programs; the auction
process creates emissions allowance credits, the value of which is set by the market,
not the government; the allowance credits pertain to a voluntary act (i.e., emission
of CO2); and the Rulemaking allows for CO2 emitters to purchase such credits from
EC - 4
other states and apply them to emissions made in this Commonwealth. See
Respondents’ Br. at 13-21.
Based upon the record before us, it does not seem that the emissions allowance
auction process would impose what could be deemed fees in the traditional sense,
but, by the same token, it is not entirely clear that the proceeds raised thereby would
constitute a tax. Given this, there is a genuine issue of material fact regarding the
question of whether the Rulemaking establishes a tax or a fee. Accordingly, I would
deny summary relief regarding this issue to both Petitioners and Respondents, and
dissent from the majority’s decision to the contrary.
__________________________________
ELLEN CEISLER, Judge
EC - 5