What is this NY Green Bank?

Posted on May 21, 2014 by Eileen Millett

With a heap of fanfare, in mid-February, New York’s Governor Cuomo announced that the NY Green Bank is open for business.  Cuomo began ramping up his clean energy policy last summer, with the appointment of Richard Kauffman, as New York’s chairman of energy and finance, and Chair of the New York State Energy Research and Development Authority (NYSERDA).  Kauffman was the former U.S. Energy Secretary Steven Chu’s senior advisor on clean energy finance.  NY’s energy and finance chair is making it clear that government subsidies alone have not been successful in creating a robust clean energy marketplace.  Kauffman believes that government could encourage the development of private sector capital markets by helping to foster a demand for a low carbon economy.  The creation of new Green Banks could lead to permanent, steady and reliable financing for clean energy efficiency projects, and create clean-energy jobs along the way.  It’s a win- win for everyone, ensuring a low carbon future and building long-term economic prosperity.  New York is not alone, the United Kingdom has a national Green Investment Bank, and in the U.S., Connecticut, Vermont and Hawaii, have Green banks.  New York expects that NY Green Bank will advance the state’s clean energy objectives. 

Established in June 2011, Connecticut’s Clean Energy Investment Authority was the first state green bank, the first of its kind in the country.  On the federal level, the Green Bank Act of 2014 was first introduced in April, in the U.S. House of Representatives by Congressman Chris Van Hollen of Maryland, and Senator Chris Murphy of Connecticut introduced a companion bill in the Senate, as well.  In 2009 a bill passed the House, but not the Senate.  The Green Bank Act of 2014 would establish a Federal Green Bank with a maximum capitalization of $50 billion from Green Bonds and the authority to co-fund the creation of state-level Green Banks with a low-interest loan of up to $500 million. The legislation provides for the Green Bank to be supported with $10 billion in “Green Bonds” issued by the Treasury; it will have a 20 year charter and will be able to acquire another $40 billion from Green Bonds.  Passing the Green Bank Act of 2014 would give all states the option to receive funds from the federal government to assist with financing on a local level and to encourage the movement to a clean energy future.  This appears to be yet another arena where the states will take the lead and eventually the federal government will follow.

NY Green Bank is a state sponsored investment funding institution created to attract private funds for the financing of clean energy projects.  Mainly, it is a public-private financing institution having the authority to raise capital through various means ― including issuing bonds, selling equity, legislative appropriations, and dedicating utility regulatory funds ― for the purpose of supporting clean energy and energy efficiency projects.  NY Green Bank got started with an initial capitalization of $218.5 million, financed with $165.6 million of uncommitted funds raised through clean energy surcharges on the State’s investor owned utility customers, or idle clean energy ratepayer funds, combined with $52.9 million in auction proceeds from emission allowances sales from the Regional Greenhouse Gas Initiative (RGGI). The $218. 5 is meant to be a first step in capitalizing the $1 billion NY Green Bank initiative announced by the governor in his 2013 State of the State address.  

NY Green Bank is a division of the NYSERDA, a public benefit corporation aimed at helping New York State meet its energy goals: reducing energy consumption, promoting the use of renewable energy sources, and protecting the environment.  Globally, we have seen natural gas and renewables gaining ground at the expense of crude oil and coal.  

On April 10, I had the pleasure of hearing Alfred Griffin, the President of the Green Bank, and Greg Hale, Senior Advisor to the Chairman of Energy and Finance Office of the Governor of NY, speak at a roundtable sponsored by Environmental Entrepreneurs (E2).  They explained that NY Green Bank was created in December 2013, when a Public Service Commission (PSC) order, provided for its initial capitalization.  The order was issued in response to a petition filed by NYSERDA seeking clean energy funds.  Griffin and Hale see the $1 billion dollar investment fund as breaking down barriers for projects that are currently neglected.  NY Green Bank, however, is not there to provide operating capital, it is there for project capital.  They are seeking credit worthy projects and looking to promote standardization.  These types of clean energy projects will be a bridge to private markets, eventually not requiring any public subsidy, and ultimately becoming sustainable.   NY Green Bank will need impactful deals to demonstrate market success.  In the clean tech space, investors are setting investment targets for private equity activity.  Residential rooftops are among the type of projects being considered.  The bank, for example, would work with a private partner to seed investment in a solar power company for solar panel construction at a specific site.   The money would be directed for the panels not salaries or operating expenses.  Given the global makeup of energy consumption, energy investors here and abroad are looking to leverage growth opportunities to decide where to invest growing dollars to take advantage of shifts in the energy market.  New York state, although, not first, is situated right where it should be. 

Coming Attractions: Sea-Level Rise, New IPCC Reports, and Floating Wind Power Projects

Posted on September 4, 2013 by Jeff Thaler

There has been a flood (no pun of course) of new stories this month about rising sea levels, acidifying oceans, drought-driven wildfires, and extreme weather events in the U.S. and globally. At the same time, with the official release of the eagerly-awaited Fifth Assessment Report of the Intergovernmental Panel on Climate Change due in several weeks, leaks of a draft portion of the Report are coming out in the media, indicating increasing confidence in the underlying science and in a substantial human role in warming, primarily as a result of burning fossil fuels. Additionally, as reported in the N.Y. Times, it appears that the draft projects that sea level could rise by only about 10 inches by 2100 under the “most “optimistic” scenario. But “at the other extreme,” with emissions continuing to swiftly increase, “sea-level rise could be expected to rise at least 21 inches and might increase a bit more than three feet” by the end of this century—which “would endanger many of the world’s great cities — among them New York, London, Shanghai, Venice, Sydney, Australia, Miami, and New Orleans.” Some believe that the FAR will still understate the likely forthcoming climate disruptions.

Coincidentally (or not?), those of you who still subscribe to the National Geographic Magazine would have seen in August a cover story entitled “Rising Seas”, which leads off with questions a panel of ACOEL members will (coincidentally?) in part be addressing at our Annual Meeting in Boston: “As the planet warms, the sea rises. Coastlines flood. What will we protect? What will we abandon? How will we face the danger of rising seas?” . And rising sea levels are especially of relevance to any ACOEL member living in a state on the Atlantic coast, because sea levels have been rising three to four times more rapidly off the Atlantic Coast than the global average, according to a recent study. For those of you living between the coasts, the San Francisco water supply and Yosemite National Park are both threatened by an out-of-control wildfire, while the western United States are experiencing significant drought.

And while forests burn and seas warm, acidify, and rise, one good news story was the recent launching in Maine of the first grid-connected floating wind turbine outside of Europe.

It also is the first concrete-composite floating wind turbine in the world, using advanced material systems with a unique floating hull and tower design.  The 65 ft tall turbine prototype is a one-eight-scale version of a 6 MW, 423 ft rotor diameter design.  Currently being developed by the University of Maine and beginning preliminary environmental and permitting work, Maine Aqua Ventus I had been selected by the Department of Energy early this year out of 70 competing proposals as one of 7 winners of $4 million in initial funding.  The project is now a finalist for an additional $46.6 million in funding. This project is critical, because floating offshore wind energy projects have the potential to generate large quantities of pollutant-free electricity near many of the world’s major population centers (but far enough away, in water depths up to 400’, to not be visible from shore), and thus to help reduce the ongoing and projected economic, health, and environmental damages from climate change. Wind speeds over water also are stronger and more consistent than over land, and have a gross potential generating capacity four times greater than the nation’s present electric capacity.

(Full disclosure:  I am legal counsel for the project)

What Direction Is The Wind Blowing?

Posted on August 16, 2013 by Gregory H. Smith

Ever since the shock of the oil embargo in 1973 we have been a nation in search of a comprehensive, sound energy policy. It was only a year later, in response to the proposal by Aristotle Onassis to locate an oil refinery on the coast of New Hampshire, that the New Hampshire Legislature adopted the first version of the State’s energy facility siting law.

Today, New Hampshire’s siting law, representing a balance of the need to develop new energy facilities with appropriate protection of the environment, preempts local authority and requires each project to undergo a rigorous comprehensive, consolidated evaluation before a  panel of high-ranking State officials from the several different departments having jurisdiction over all the relevant permits. To obtain all State permits and a Certificate from the siting committee, the applicant must be prepared to present the project in a consolidated process, subject to formal discovery, at an adjudicative hearing before the committee. Interested parties and municipalities may intervene and the Attorney General appoints Public Counsel for the case to represent the broad public interest. To take positions in the broad public interest, Public Counsel is charged with the responsibility to represent the interests of the public as a whole, and not simply the narrower positions adopted by intervening parties. To discharge this responsibility, which derives directly from that of the Attorney General in all other cases, the Public Counsel must take positions that balance the public interest in developing new, diversified energy facilities and the need to take into account environmental regulation.

This highly structured, energy facility permitting process is significant regionally and nationally because its standards tend to drive the design of interstate facilities. Current energy policy and its direction may be discerned from trends reflected in the written decisions of the siting committee over time.  Other states may be developing approaches to these issues.

Beginning in the late 1990s, a steady stream of energy projects have been presented to the committee. Until the mid-2000s, the majority of those projects involved fossil fuel generation, and in particular natural gas generating stations and transmission lines. As public policy, driven by concerns for global warming, has put increasing emphasis on renewable energy sources, there has been a significant increase in proposals to construct wind energy facilities. What is most striking from this perspective is that no energy project was rejected until 2013, although some facilities were subject to hundreds of conditions in their certificate.

This year, a proposed 30 megawatt wind farm in Antrim was rejected on its “aesthetics”, an indisputably highly subjective standard in search of criteria that will avoid arbitrary and capricious adjudications. Three previous wind power projects have all been approved with essentially the same characteristics, but for the first time the committee, at the urging of public counsel, has declined to approve the project rather than setting forth criteria and conditions that would bring essential predictability to this important technological advance in energy production.

The region and the nation will be well served by a steady expansion in the number of renewable energy projects, and this opportunity has the attention of large, even international, experienced and capable developers. Does the rejection of the Antrim project, despite public support, on the basis of the objections of special interests actively supported by public counsel risk a slowing down or abandonment by developers to the detriment of the region’s public interest in a diversified energy portfolio? Is it coincidence that a wind energy project was rejected recently in Maine, also on highly subjective grounds of aesthetics, a case that was referenced in the New Hampshire proceedings? And shouldn’t we ask whether advancing wind turbine technology is something we find in most places attractive, when it represents a great benefit to the environment and the public interest?

These cases bear watching. The New Hampshire case appears to be headed to the State Supreme Court. Will it turn out that these developments represent a turning away from favorable conditions promoting wind energy, so that wind energy development will decline in the years ahead? For environmentally sound economic development in this region and elsewhere we should hope not.

Cheap Natural Gas Prices: Prelude to Energy Unreliability and Price Volatility

Posted on May 14, 2013 by Michael Hockley

Cheap gas prices driven by a boom in new shale gas development, coupled with more stringent emissions controls for coal fired plants, are causing a shift from coal to natural gas as the primary source of electric power in the United States.  In the short term, most welcome this shift because natural gas produces significantly fewer greenhouse gas (“GHG”) emissions.  But it appears increasingly certain that in the long run, this shift will result in decreased energy grid reliability and significantly higher electricity costs due to natural gas price volatility.

A recent Duke University study concludes that the cost of compliance with new emissions standards could make almost two-thirds of existing coal fired plants “as expensive as natural gas even if natural gas prices rise.”  This combination of low gas prices and the high cost of coal emissions compliance already has resulted in replacement of many coal plants instead of retro-fitting them with expensive environmental controls.  Add to that the uncertainty of potential future GHG emissions standards, and construction of new coal fired power plants is at a near standstill.  

The Rocky Mountain Coal Mining Institute (“RMCMI”) estimates that these factors will combine to force closure of up to 100 gigawatts of coal plant capacity, or approximately one third of the coal-fired fleet, resulting in a net increase of 32 gigawatts of gas capacity in the next three years. By 2020, RMCMI estimates that gas generating capacity will exceed that of coal, nuclear, and hydroelectric combined.  The RMCMI further projects that the shift to natural gas generation will cause the demand for natural gas to exceed even the most rosy new shale gas production predictions, causing volatile natural gas price swings.  

Grid reliability problems and gas price volatility were highlighted by Gordon van Welie, the head of New England’s power grid, during recent testimony before Congress.  He observed that more than half of New England's electricity is generated from natural gas, which has displaced a more diversified mix of oil, coal, gas and nuclear power over the past ten years.  

He testified that even though natural gas generally is plentiful, New England’s inadequate gas pipeline capacity limits supplies during peak usage.  For example, during a recent extreme cold snap in New England, “natural gas prices in late January spiked to $34/MMBtu, in contrast to prices below $4/MMBtu across most of the country.” The high gas prices caused wholesale electricity price spikes of more than 100% in January and 300% in February 2013 compared with 2012.  There also were “multiple instances where generators could not get fuel to run,” including one instance when more than 6,000 MW were offline due to fuel shortages.  Testimony at 7.  To avoid even worse problems in the future, he urges increased construction of pipeline infrastructure, but construction of gas pipelines will take time.  In the short and intermediate term, he predicts continued price volatility and grid reliability problems during peak usage.  

In addition to pressures from increased usage of natural gas in the United States, there also is increasing support within the Obama Administration to side with those seeking to export liquefied natural gas because prices in foreign markets are much higher.  If the export of natural gas becomes a reality, then domestic gas prices likely will increase even more.  

Although the vast shale gas reserves are fueling a shift to natural gas power generation with a corresponding reduction in GHGs, over-reliance on natural gas will almost certainly have the unintended consequence of causing grid reliability problems and volatile price spikes.  This likelihood argues for a more balanced energy portfolio with a broad mix of power from renewable, hydropower, coal, oil, nuclear, and natural gas.  To insure future stable energy prices and reliable energy production, electric utilities and state and federal regulators should take a long term view when deciding whether to shift to natural gas generation and decommission existing coal and nuclear plants.

SHOULDN’T WE BE WATCHING AFRICA’S ENERGY CONSUMPTION?

Posted on March 13, 2013 by Eileen Millett

We’ve all seen the head shaking over how energy conservation efforts in the United States are dwarfed by energy consumption increases in India and China.  But, what about Africa? 
 
The African continent, with close to 600 million people, 15% of the world’s population, now consumes about 3% of world energy production.  However, Africa’s energy picture is changing rapidly due to growing investment, upgraded infrastructure, and success in tackling corruption.  Africa always rich in natural resources, is expected to replace more basic energy sources with more efficient and environmentally friendly sources like oil and gas. However, huge areas in Africa — the Sudan, Uganda and even Kenya lack national electricity grid systems.  But improving infrastructure and abundant energy resources hold promise for the future. 

Most of Africa is not flicking a switch for lights, but instead is using matches to light a kerosene lamp or igniting a charcoal stove for heating or cooking.  This will continue for the foreseeable future, which means more tree-cutting for fuel, more wood burning, and thus, more harmful air emissions.  Using kerosene lanterns and charcoal stoves correlates directly with increased respiratory disease.  Unfortunately, environmental health and safety will, in the short term, take a back seat to the need to rely on fossil fuels.

Renewables?  Why shouldn’t a continent known for its hot sun be a natural for solar power?  In Africa, questions about reliability and the lack of trained personnel are being taken seriously.  So for the foreseeable future, the more likely result is that fossil fuels will increase, and renewables will take aback seat.  The developing world views energy/environment trade-offs as part of the price for advancement, particularly in nations where energy resources and infrastructure is so underdeveloped.  Opportunities are enormous, but so are the challenges and risks.  Africa’s test will be how much financing, regulation and environmental mitigation is needed to propel the continent forward. 

Energy Department Announces New Investments in Pioneering U.S. Offshore Wind Projects

Posted on December 14, 2012 by Jeff Thaler

On December 12, 2012 U.S. Energy Secretary Steven Chu announced competitive awards of $4 million each for 7 offshore wind projects from Maine to Oregon, in 6 different states. I am the lawyer for the University of Maine's project, which involves plans to install a pilot floating offshore wind farm with two, six-megawatt direct-drive turbines on concrete, semi-submersible foundations. I am also working on permitting a smaller-scale pilot project for UMaine that would be deployed in early to mid-2013 as the first floating offshore wind project in North America.

The Department of Energy Department made the awards with the goal of beginning to speed the deployment of stronger, more efficient offshore wind power technologies and showcase innovative technologies -- helping to further lower costs and drive performance improvements.

In year 1, each project will receive up to $4 million to complete 50% of the design process, and to begin outreach, environmental studies and permitting work. DOE will in early 2014 select up to three of the projects for follow-on phases that focus on siting, construction and installation,  and aim to achieve commercial operation by 2017.The final projects will receive up to $47 million each over four years, subject to congressional appropriations.

Click HERE to read the full article from the U.S. Department of Energy.

The Recent Proposal to List the Lesser Prairie Chicken as Threatened and the Effect of a Final Listing on the Energy Industry

Posted on December 13, 2012 by Donald Shandy

On November 30, 2012, the United States Fish and Wildlife Service (“FWS”) announced its proposal to list the Lesser Prairie Chicken (“LPC”) as threatened under the Endangered Species Act (“ESA”).  The proposed rule resulted from a comprehensive 2011 settlement agreement approved by the D.C. Circuit in In re Endangered Species Act Section 4 Deadline Litigation 2011, whereby FWS agreed to review over 250 candidate species and make a determination as to each species whether to issue a proposed listing rule or to issue a finding that the listing is not warranted, over a six-year period.  Under the ESA, an endangered species is one that is in danger of extinction throughout all or a significant portion of its range, while a threatened species is likely to become endangered within the foreseeable future.  FWS will make a final determination on whether to list the LPC as threatened by September 30, 2013. 

The LPC is found across a five-state span, including Colorado, Oklahoma, New Mexico, Texas, and Kansas. Activities identified by FWS as threats to the species include habitat loss, fragmentation, modification, and degradation within the species’ range.  Other threats include land uses related to wind energy and transmission development.  If FWS ultimately lists the LPC as a threatened species, energy industry operations that could potentially harm the species would be affected.  Specifically, due to the species’ avoidance of tall, vertical objects, FWS has identified oil and gas wellheads and wind turbines as features that may cause habitat displacement for the bird.  Section 9 of the ESA prohibits the “take” of a listed wildlife species by a private or public entity.  Because “take” is defined quite broadly under the ESA, even activities that are not designed or intended to harm a species, but could do so indirectly, such as operation of these tall structures, could potentially constitute a violation.

Unlike endangered species, in regard to a species listed as threatened, FWS has the authority under ESA Section 4(d) to tailor the “take” prohibitions to the conservation needs of the species. The FWS may use its Section 4(d) authority to incentivize participation in conservation plans that will support recovery of the LPC.  Additionally, there are conservation plans that may be entered into by energy companies before a species is listed under the ESA.  Called Candidate Conservation Agreements with Assurances (“CCAAs”), these agreements, allow non-federal property owners to commit to implement voluntary conservation measures for a candidate species in return for regulatory assurances that additional conservation measures will not be required, and additional land, water, or resource use restrictions will not be imposed, should the species become listed in the future.  Furthermore, the proactive conservation efforts performed through CCAAs may remove or reduce threats to the covered species, so that listing the species under the ESA may become unnecessary.  CCAAs, therefore, provide a significant opportunity for a compliant energy company to potentially insulate itself from liability in the event the LPC is listed as threatened.  CCAAs have been developed for the LPC in New Mexico and Texas, and Oklahoma, under the leadership of the Oklahoma Department of Wildlife Conservation, has submitted a CCAA to FWS for review.  Notably, because the final listing determination for the LPC must be made September 30, 2013, time is of the essence for energy companies to consider entering into a CCAA.

See the FWS’s Proposed Listing
See the FWS’s News Release Regarding the Proposed Listing
See the FWS’s Facts Regarding the Proposed Listing

Balancing Act and Paradigm Shift: Joint Symposium to be held April 18, 2013

Posted on December 6, 2012 by Irma S. Russell

There is a vital need for attorneys and other professionals to understand and discuss the past, current, and future role of our public lands system  in the energy policy of the nation.  In April of 2013, ABA SEER is hosting a symposium in partnership with The Public Land and Resources Law Review (PLRLR) at The University of Montana titled Balancing Act and Paradigm Shift:  The Role of Public Lands in America’s Energy Future.  The PRLR’s 35th Public Land Law Conference and ABA SEER’s 41st National Spring Conference on the Environment will combine to create an academic symposium to discuss the role of America’s three major sources of public lands and resources: river systems, terrestrial lands, and oceans. 

If your work involves public lands, public resources or energy, this conference will be of interest to you.  If you work with law students (in J.D. or LL.M. programs) with an interest in public lands and resources, I hope you will alert them to this opportunity and encourage them to submit an article. Entries should demonstrate original thought on a question of legal and/or policy significance relating to the symposium topic of the role of public lands and resources in America’s energy future.  The topic is not confined to any particular type of public land or issue in energy or environmental law or policy.  Any relevant article, case comment, note, or essay may be submitted, including writing submitted for academic credit. Jointly authored pieces are eligible only if all authors are students and consent to submit.

The winning submissions will receive a $1,000, $500, and $250 cash prize for 1st, 2nd, and 3rd place submissions, respectively. First and second place entries will be invited to attend the symposium on April 18, 2013 in Missoula, MT, with travel support from ABA-SEER.  The first place entry will be published in the symposium edition of the Public Land & Resources Law Review in the summer of 2013.

The deadline for the student writing competition is January 14, 2013.  For full details on entry requirements, click here.    

OREGON’S AMBITIOUS 10-YEAR ENERGY ACTION PLAN

Posted on June 8, 2012 by Rick Glick

On June 6, Oregon Governor John Kitzhaber released his draft 10-Year Energy Action Plan. Written comments on the draft plan may be submitted to tenyearenergyplan@odoe.state.or.us and accepted through July 31.  Three public workshops will be held at times and places to be announced. 

The plan consists of a broad range of goals for the state government, private sector and public-private collaboration to address what the Governor calls the:

fundamental challenge—that is, to develop a comprehensive energy strategy that meets the state’s carbon reduction, energy conservation and renewable energy goals and timetables, and that balances complex needs– including affordability and reliability – while enhancing Oregon’s economic objectives.

The plan seeks to build off of existing programs and redirect funding to advance its three central strategies, the details of which are to be developed through a lot of public participation:

1.  Maximizing energy efficiency and conservation to meet 100 percent of new electric load growth.  The plan is unclear as to when this goal would be achieved, but refers to the Northwest Power and Conservation Council’s goal of using conservation to meet new electric demand by 2020.  Key to implementing this goal is creation of a new State Building Innovation Lab.  The Lab would focus initially on improving efficiency in four million square feet of state office space and then using the Lab as a model and resource for others.
2.  Enhancing clean energy infrastructure development by removing finance and regulatory barriers.  Streamlining the siting process, including use of a strong project manager to help navigate state regulatory requirements, would bring certainty to developers of facilities.  Also, conducting planning on a “landscape level” would help to ensure protection of natural resources.
3.  Accelerating the market transition to a more efficient, cleaner transportation system.  Central to this goal, over the next ten years the plan would convert 20% of large fleets to electric, compressed or liquefied natural gas or other alternative fuel vehicles.

The plan is self-congratulatory on various initiatives already in place and reads like a compendium of good ideas on how to secure a clean energy future.  So ambitious a plan requires continual commitment over a long period of time—at the highest levels of state government—to keep it from becoming yet another plan on the shelf.  Such sustained effort of course is not assured. 

In the early 1980s I was chair of the City of Portland Energy Commission whose job it was to further develop the City’s Energy Conservation Policy, which at the time was seen as cutting edge.  Then as now, energy planning was a hot topic for policy makers.  Champions arise to push forward change.  In those days it was Mayor Neil Goldschmidt and Commissioner Mike Lindberg, today it is Governor Kitzhaber.  While Portland has made progress, many of the elements of the Governor’s plan echo what we were talking about back then.  I hope that the Governor builds a governance platform to continue work on the plan after he departs the scene.

Implementation of the plan depends on new legislation and regulatory reform among several state and local agencies.  Whether the plan can develop the consensus necessary to achieve such change will depend on how the details emerge over the coming months and the enthusiasm the plan can garner. 

Will we ever have a national energy policy?

Posted on April 18, 2012 by Michael Rodburg

USEPA continues its program of death by a thousand cuts to the coal industry, but does the agency’s actions reflect a coherent national energy policy? On March 27, 2012 the EPA issued its new source performance standards for new power plants limiting CO2 emissions per megawatt-hour of produced electricity to a level about that of state-of-the-art, combined-cycle, gas-fired power plants. Importantly, industry observers claim that the level is far below what the best coal-fired power plants can achieve at least without commercially unavailable and quite expensive carbon capture technology.  While certain exceptions within the rule preclude stating that EPA has banned the use of coal in new plants, it comes pretty close.  That reminds me of an often repeated statement of an old client of mine back in the 1970’s whose recycled solvent fuel business and the EPA just didn’t get along that well—he would remark that “if coal were discovered today, EPA would never allow it to be burned.”  He appears to have been ahead of his time.

Of course one winner in this is natural gas.  With new sources of natural gas from shale and fracking having driven natural gas prices downward relative to coal and oil, old King Coal has been facing a distinct price disadvantage for years.  EPA had further disadvantaged coal and oil as a result of last year’s cross-state air pollution rule.  Last December, EPA’s MATS rule (mercury and air toxics standards) for power plants further adversely affected coal. Is EPA’s latest effort merely the coup de grace?

Don’t get me wrong.  I’m not a coal apologist.  One need not be a fan or sworn enemy of either natural gas or coal, of free markets or environmental regulation, to realize that something is going on that is important to our national energy situation with no one particularly in charge.  After all, coal mining, transportation and existing uses drive tens of thousands of jobs and the economy of such disadvantaged states as West Virginia.  Presidents and presidential candidates have decried our lack of a national energy policy for 30 years with meager results. 

My point is otherwise: What does the overall national interest—economic, energy and environment—have to say about the relative use of coal vs. natural gas vs. petroleum vs. nuclear power?  Should EPA’s rule, based on concerns for global warming and not immediate health and safety, trump everything else?  Should we increase our reliance on natural gas at the expense of coal?  Should we be at the mercy of market forces without regard to our long term, sustainable future?  Should we simply use a bumper sticker (“Drill, baby, drill”) instead of reasoned policy? 

What passes as policy is a series of regulatory silos each with its own raison d’etre—FERC, NRC, EPA, DOE. And, of course, Congress, some of whose members can’t wait to kill alternative energy policies (solar), decry subsidization for renewables while rejecting as nearly immoral attempts to eliminate out of date tax subsidies for oil and gas (Subsidies at today’s prices?  Give me a break!). EPA’s new rule, in isolation from everything else, is merely another example of our lack of a coherent national policy on energy.  It may be a good environmental rule, but is it good for the country?

Does the Wisdom of An Idea Depend on Its Source? Senate Republicans Propose Merging EPA and DOE

Posted on May 10, 2011 by Seth Jaffe

E&E Daily reported today that Senate Republicans are preparing legislation to combine EPA and the Department of Energy. The list of Senators identified as supporting the proposal is a virtual who’s who of conservatives, including Jim DeMint, a favorite of the Tea Party. Accordingly to Richard Burr (R. N.C.), the measure would reduce waste by eliminating duplicative programs in EPA and DOE.

Why is this even a story? Perhaps because Democratic Governor Deval Patrick did the same thing in Massachusetts in 2007, forming what has been considered a very successful Executive Office of Energy and Environment. Perhaps because newly elected Democratic Governor Dannell Malloy recently did the same thing, creating the Department of Energy and Environmental Protection in Connecticut (and naming my friend and law school classmate Dan Esty to be first Commissioner of the combined agency).

So, is this a progressive idea to ensure that energy development, which is a very big part of our economy, is considered together with environmental protection, or is this a regressive idea, intended to eliminate spending? 

Perhaps, just perhaps, it’s simply a good idea.

Politics would determine whether the combined agency leadership would pursue an aggressive environmental protection and clean energy agenda or whether it would instead avoid new regulatory programs in order to facilitate an aggressive program of developing traditional energy resources. Either way, it makes sense to house these two functions under one roof.

For those of us who follow politics as the blood sport it’s become, it will be interesting to see if this idea gets any traction and, if so, where Congressional Democrats line up. Are they going to try to tar this as a simple-minded conservative idea? If so, will the President’s friend Governor Patrick be caught in a Mitt Romney-like dance, trying to argue that it was a good idea for Massachusetts but would not be a good idea nationally? 

Serious kudos to the first liberal Democrat who unambiguously supports this proposal.

Rhode Island Statewide Planning for Renewable Energy Projects

Posted on April 20, 2011 by Richard Sherman

Rhode Island may be in the forefront of regulation on a statewide basis of the siting of renewable energy projects. The State just announced plans for a statewide siting plan that would in effect determine licensable locations of renewable energy projects (wind, solar, etc.).

This type of planning has been used in the past for conventional energy projects (both fossil fuel and nuclear), but is now being expanded because of local opposition to alternative energy projects. The effect will be to override local zoning, but it will also add another bureaucratic layer to the licensing process as well as the attendant additional time and expense.

One would expect that other states with comparable population densities may seek to follow Rhode Island’s lead, but whether any choose to do so is anyone’s guess.

Connecticut Energy and Environmental Policy Developments

Posted on March 17, 2011 by David Platt

On rare occasions, change comes even to the "land of steady habits". New Connecticut Governor Dannel Malloy (D) has proposed consolidating the energy and environmental functions of his administration into a new, integrated department. Ignoring for the moment the questionable new acronym that will result, the Department of Energy and Environmental Protection or "DEEP", this earth shattering (for Connecticut, anyway...) proposal seems to make a tremendous amount of sense, and will bring Connecticut into line with a number of other states who already have recognized the inextricable link between the environmental protection and energy policy functions.

 

Subject to the "never a slam dunk" approval of the Connecticut legislature, the energy policy and Department of Public Utility Control units will be combined with the Department of Environmental Protection's existing regulatory natural resource conservation and management units. On its face, this proposal makes sense, as it acknowledges the inescapable overlap between environmental and energy policies, and seeks to ensure that policy decisions take into account and make sense given the two often competing sectors. Examples of key energy policy issues with environmental implications include repowering of aged generation units, incentives for alternative fuels and energy efficiency initiatives, and the ongoing "generation vs. transmission" debates. The integration of these energy functions, which currently are spread among a number of agencies including the Office of Policy and Management, with the traditional environmental regulatory functions will not necessarily be seamless, as the varied duties of the new agency will include regulation of oil dealers, control of state building construction standards, responses to energy emergencies and the monitoring of energy prices.

 

To head DEEP, Governor Malloy has proposed the appointment of Daniel Esty as the new Commissioner. Esty, a Professor at the Yale School of Forestry and Environmental Studies and the Yale Law School, is a nationally renowned expert on environmental and energy policies, and in the past has worked in various senior positions at the Environmental Protection Agency. A frequent author, including his latest book "Green to Gold: How Smart Companies Use Environmental Strategy, to Innovate, Create Value, and Build Competitive Advantage", Esty's talents also reach into the economic aspects of the environmental and energy worlds. With his "deep" resume, Esty would add instant credibility and expertise to the new super agency.

 

Esty will be tasked by Governor Malloy to help lead Connecticut's continuing efforts toward economic recovery. Among other challenges, Connecticut currently has among the nation's highest rates for electricity, a problem that has very real effects on the business climate of the state. Like most other states, Connecticut also has faces the daunting task of dealing with an elephant-sized budget deficit, currently projected to be in the range of over $3 billion. Esty, who appears to have wide-spread support from both the business and environmental communities, most certainly will have his work cut out for him, but there are many constituents here in Connecticut pulling for him.

Secretary Salazar Announces New Guidance for Development of Renewable Energy on Public Lands

Posted on February 18, 2011 by Paul D. Phillips

On February 8, 2011, Secretary of the Interior Ken Salazar announced a number of long-anticipated initiatives designed to address development of renewable energy on public lands. The draft guidance from the United States Fish and Wildlife Service (“FWS”) and the final guidance from the Bureau of Land Management (“BLM”) provide direction to the agencies and industry on navigating the many permitting and compliance requirements faced by solar and wind energy developers. These guidance documents will have significant implications for renewable energy development on public lands throughout the nation.

 

The FWS released two draft guidance documents for public comment. The first, “Draft Land-Based Wind Energy Guidelines,” is designed to provide wind energy developers with information to consider in selecting sites for wind energy facilities to avoid and minimize negative effects to fish, wildlife, plants, and their habitats. Click here to view these guidelines on the FWS website. The second, “Draft Eagle Conservation Plan Guidance,” explains the FWS approach to issuing programmatic eagle “take” permits under the Bald and Golden Eagle Protection Act (“BGEPA”), and provides guidance on conservation practices and adaptive management recommended to facilitate issuance of these permits and compliance with BGEPA. Click here to view this guidance on the FWS website. Both draft guidance documents are subject to public comment for 90 days following publication in the Federal Register.

 

Both the Eagle Conservation Plan Guidance and the Land-Based Wind Energy Guidelines create significant new requirements for wind energy developers planning wind facilities on public lands. The new guidance calls for increased consultation with the FWS and greater planning to avoid and minimize impacts to fish, wildlife, plants, and their habitats at all stages of wind energy development and operation. Wind energy developers, renewable energy proponents, environmental groups and others concerned about the potential consequences of the new guidance, both on renewable energy development and the environment, should carefully review and consider commenting on these significant proposals. Click here for a more detailed summary of both FWS draft guidance documents.

 

In addition, BLM issued three final policy memoranda to provide guidance to field managers in evaluating, screening, and processing applications for utility-scale solar and wind energy projects on BLM-managed lands. Click here to view these memoranda on the Bureau of Land Management website. Instruction Memorandum No. 2011-059, “National Environmental Policy Act Compliance for Utility-Scale Renewable Energy Right-of-Way Authorizations,” reiterates and clarifies existing BLM National Environmental Policy Act (“NEPA”) policy for analyzing the potential environmental impacts of utility-scale renewable energy projects. Instruction Memorandum No. 2011-60, “Solar and Wind Energy Applications – Due Diligence,” provides updated guidance on the due diligence requirements of right-of-way applicants for solar and wind energy development projects on BLM-managed lands. Finally, Instruction Memorandum No. 2011-061, “Solar and Wind Energy Applications – Pre-Application and Screening,” provides updated guidance on the pre-application and screening processes BLM will employ in review of right-of-way applications for solar and wind energy development projects on BLM-managed lands. These policies – developed in response to “lessons learned” from last year’s fast-track renewable energy initiatives – are not subject to review and comment.

 

Paul Phillips (with full credit to Sandi Snodgrass & Andy Irvine) all of Holland & Hart LLP.

Fight Over Bill to Bar EPA Regulation of GHG to Slow 2011 Approval of Appropriations Bill?

Posted on February 18, 2011 by Michael Hockley

On February 2, 2011, representatives Fred Upton (R–MI) and Ed Whitfield (R–KY) released Discussion Draft Bill, H.R.____ “Energy Tax Prevention Act of 2011” (the Bill) which would amend the Clean Air Act to prohibit EPA from regulating greenhouse gas (GHG) emissions. In general, the Bill prohibits EPA from taking action to regulate GHG emissions to address climate change and would repeal certain rules and previous EPA actions, including EPA’s December 15, 2009 GHG endangerment findings under the Clean Air Act, the Prevention of Significant Deterioration (PSD) GHG Tailoring Rule, the authority to issue PSD permits containing GHG emissions limitations, or any other federal action applying a stationary source permitting requirement for GHG emission standards relating to climate change concerns.


The House Energy and Commerce Committee’s Subcommittee on Energy and Power quickly moved the Draft Discussion Bill to a hearing on February 9. The testimony included many supporters of the Bill, but predictably, EPA administrator Jackson testified in opposition.
In her testimony, Administrator Jackson came out swinging, stating that the Bill is part of an effort by Congress “to delay, weaken, or eliminate Clean Air Act protections of the American public.” Moreover, she pointed out that in passing this bill, politicians would be overruling scientists on a “scientific question” by repealing the GHG endangerment finding that GHGs contribute to endangerment of American’s health and welfare. Although the Republicans may have sufficient votes to pass the Bill out of the House, it is clear from the Administrator’s reaction that if presented to the President for signature, it will be vetoed.


This veto likelihood raises the specter of whether the GOP will attempt to include the Bill or similar prohibitions against regulation of GHG emissions as a part of the pending 2011 budget authorization bill. If a budget authorization bill is not passed or extended by March 4, 2011, all federal funding will be cut off, and the federal government will be forced to close for business until an authorization bill is signed. Including a provision prohibiting EPA from regulating GHG emissions would force the President’s hand on whether to sign the bill and keep the government’s doors open, or veto it and shut down the government.


In a February 11, 2011 interview, representative Mike Simpson (R–Idaho), the head of the House Interior and Environment Appropriations Subcommittee, said that he doubts whether spending legislation would be held up if it does not include language preventing EPA regulation of GHGs. E&E News PM (02/11/2011). Nevertheless, other Republican colleagues, including some freshmen, may offer amendments to insert such prohibitions when the appropriations bill comes to the House floor because including provision prohibiting regulation of GHG emissions to the appropriations bill could reduce the likelihood of a Presidential veto. Id.


For now, it seems more likely that any bill limiting EPA’s authority to regulate GHG emissions will move through the normal committee process responsible for environmental legislation. Whatever the result, however, the fight between the GOP to limit GHG regulation and the current administration’s efforts to regulate GHGs promises to be a no holds barred donnybrook.
 

Hydraulic Fracturing: The Media Campaign and Federal Initiatives

Posted on February 9, 2011 by Pamela Giblin

The natural gas boom generated by advances in drilling technology making economic production of unconventional resources like shale gas possible has generated increasing public attention as environmental advocacy groups and the media continue to attack the process and point to hydraulic fracturing as the cause of everything from natural methane migration to earthquakes. These dramatic allegations take center stage in the documentary, Gasland, by director Josh Fox. With its recent academy award nomination, Gasland continues to push hydraulic fracturing issues into the national and international spotlight.


Hydraulic fracturing is an oil and gas production service that involves injecting a mixture — comprised primarily of water and sand — into a targeted geologic formation at pressures sufficient to create small fractures in the rock thousands of feet below ground. These fractures are held open by the sand or other “proppants” used in the fracturing fluid and allow the natural gas to more effectively flow out from the hard rock formation and into the wellbore. Small concentrations of chemical additives are used in fracturing fluids in enhance the fluid performance. Hydraulic fracturing is only one part of the exploration, drilling and production process. It occurs after the well is drilled but before the well is completed and begins production. Hydraulic fracturing has been labeled the “technological key” to recovery of unconventional oil and gas resources like shale, coalbed methane and tight sands. Experts estimate that 90% of all oil and gas wells utilize hydraulic fracturing. Without hydraulic fracturing, efficient and economic development of the nation’s vast shale gas reserves would be impossible.
 

In the past few years, hydraulic fracturing has seemingly become the target for all environmental and health impacts associated with exploration and production activities. In response to heightened public concern — particularly fears that the fluid mixtures used in hydraulic fracturing could seep or migrate upward into underground sources of potable water — the federal government began taking steps to increase its oversight and regulation of the process. The last Congress introduced bills in both the House and Senate to enact the Fracturing Responsibility and Awareness of Chemicals Act  (the “FRAC Act”), which would have subjected hydraulic fracturing to federal regulation under the Safe Drinking Water Act Underground Injection Control (UIC) program and required full disclosure of chemicals used in hydraulic fracturing fluids. Whether proponents of the FRAC Act or other similar legislation will introduce such legislation in the 112th Congress remains unclear.


In the meantime, the U.S. Environmental Protection Agency (EPA) has taken several steps to increase its oversight of hydraulic fracturing. First, at the direction of Congress, EPA has initiated a study of hydraulic fracturing and drinking water resources. EPA recently announced its selection of experts for the study review panel, which notably excluded all experts nominated by industry or environmental advocacy groups, resulting in a purely academic review panel. The Agency plans to submit the draft study plan to the Science Advisory Board for peer review in early 2011 and expects to have initial study results by late 2012.


Second, the EPA announced by way of a website posting  that it would regulate hydraulic fracturing utilizing diesel additives under the Safe Drinking Water Act. The website posting indicated that “Any service company that performs hydraulic fracturing using diesel fuel must receive prior authorization from the UIC program. Injection wells receiving diesel fuel as a hydraulic fracturing additive will be considered Class II wells by the UIC program.” Industry groups have challenged the website posting as an improper rulemaking without notice or comment.


Most recently, on December 7, 2010, EPA issued an Emergency Administrative Order (the “Order”) to a natural gas company to take measures intended to mitigate methane contamination in drinking water supplies in Parker County, Texas, near Fort Worth, in the Barnett Shale area. According to the Order's cover letter, EPA "ha[d] data to indicate" that at least two private drinking water wells were impacted by methane contamination "directly related to oil and gas production facilities." The Order was an unprecedented use of the “imminent and substantial endangerment” authority the Agency has under Section 1431 of the Safe Drinking Water Act, 42 U.S.C. § 300(i) and has been followed by a January 2011 suit to enforce the Order and an appeal of the Order by the company. The Order was issued while a concurrent investigation of the matter is still pending before the state agency charged with oversight of oil and gas operations in Texas. The company has maintained that there is no connection between its operations and the methane detected in the water wells. The outcome of EPA’s exercise of authority in the case remains uncertain.


In the midst of heightened attention on hydraulic fracturing and drilling operations from the federal government, state governments have moved quickly to amend, promulgate, enact or revise state laws and regulations on hydraulic fracturing in order to preempt the need for any federal regulation of oil and gas production operations, which traditionally have been primarily governed by state law. For example, the New York State Department of Environmental Conservation (NYSDEC) is currently in the process of completing a “Supplemental Generic Environmental Impact Statement on the Oil, Gas and Solution Mining Regulatory Program: Well Permit Issuance for Horizontal Drilling and High-Volume Hydraulic Fracturing to Develop the Marcellus Shale and Other Low-Permeability Gas Reservoirs” (“SGEIS”). After receiving extensive public comment on the initial draft SGEIS, the NYSDEC was ordered by then-Governor Paterson to issue a revised draft SGEIS on or about June 1, 2011 and conduct an additional public comment period. In the interim, the NYSDEC has taken the position that it may not issue any permits for horizontal drilling or high-volume hydraulic fracturing until the SGEIS is finalized — creating a de facto moratorium on Marcellus Shale developments in New York. Other states have moved forward in efforts to update their existing oil and gas regulations to address key issues such as well construction standards and hydraulic fracturing chemical disclosure requirements.


Some regulators and environmental groups have begun to better understand the science involved in defining the risk of environmental impacts associated with hydraulic fracturing. With this understanding, they have shifted their focus away from the idea of subsurface upward migration of fracturing fluids to surface spill prevention and well construction requirements. Nevertheless, the media frenzy and NGO campaign against hydraulic fracturing remains strong and will continue to place the process and the oil and gas industry in both the public and regulatory spotlight.

Should We Go Nuclear - Again?

Posted on November 29, 2010 by Rodney Brown, Jr.

The US hasn't licensed a new nuclear power plant in a quarter-century. Most people have forgotten the plants even exist – but they might be coming back. In the last couple of years, the Nuclear Regulatory Commission has received more than twenty new plant applications.

Are we ready to go nuclear again?

 

 

The US has about 100 nuclear plants in operation today, generating around 20% of the nation's electricity. Most plants were built in the 1960s and 1970s, and will need to be replaced before too long. Far more plants have been built abroad, and many of them will need to be replaced too.

 

 

Replacing worn-out nuclear plants with new ones is very controversial, at least in the US. Our colleague, Michael Gerrard, will explore the controversy by hosting a debate on nuclear power at Columbia Law School on Monday, November 29th from 7 to 9 PM. The debate will be webcast live, and a video will be posted on the website of the Center for Climate Change Law. Contact Ashley Rossi at arossi@law.columbia.edu for more info.

 

 

In the meantime, how can we learn what to believe — and what not to? Fortunately, in 2007 the Keystone Center conducted a "joint fact-finding" to identify facts upon which people with different policy goals could absolutely agree. The participants came from all over, ranging from utilities like Exelon and Entergy to environmental groups like Environmental Defense and the Natural Resources Defense Council. They may continue to disagree on the values implicit in their various policy goals. But it turns out that they can agree on a foundation of facts.

 

 

For example, all agreed nuclear power is in fact a low-carbon energy source that can help fight climate change. They also agreed that the global nuclear industry would in fact need to embark on a massive construction program if nuclear power is to provide even 1 gigatonne of carbon reductions (equal to just one "wedge" from the famous Sokolow & Pacala climate stabilization wedges. Here's the specific factual finding:

 

"The NJFF participants agree that to build enough nuclear capacity to achieve the carbon reductions of a Pacala/Socolow wedge (1 GtC/year or 700 net GWe nuclear power; 1,070 total GWe) would require the industry to return immediately to the most rapid period of growth experienced in the past (1981-90) and sustain this rate of growth for 50 years."

 

On another point, the participants agreed that nuclear power probably would cost between 8 and 11 cents per kilowatt/hour (kW/h) delivered to the grid. This compares to current natural gas costs of about 5 to 6 cents per kW/h. (Wind power's costs fall somewhere in between.)

 

 

On the controversial topic of using new technologies to "reprocess" nuclear fuel, participants agreed it wasn’t likely to prove economically viable:

 

"No commercial reprocessing of nuclear fuel is currently undertaken in the U.S. The NJFF group agrees that while reprocessing of commercial spent fuel has been pursued for several decades in Europe, overall fuel cycle economics have not supported a change in the U.S. from a “once-through” fuel cycle. Furthermore, the long-term availability of uranium at reasonable cost suggests that reprocessing of spent fuel will not be cost-effective in the foreseeable future. A closed fuel cycle with any type of separations program will still require a geologic repository for long-term management of waste streams."

 

Agreement on all the true facts might make it easier to resolve the debate over nuclear power's role in our energy future. To learn more about them download the Keystone Center's executive summary or the report in full.

Energizing Brownfields

Posted on May 7, 2010 by George von Stamwitz

It has always amused me how many people are involved with Brownfields work as compared to how few projects have been completed. It is tough to make the economics work on a Brownfield development in the best of times. Thanks to clean energy rules and incentives this may be changing.

 

Brownfields and clean energy have several synergies. Brownfields are often in industrial corridors, with great infrastructure and proximity to electrical grids. Biomass projects in particular need access to efficient transportation networks in order to move large volumes of material. Clean energy projects such as solar, wind and biomass plants work well with risk based remediation and institutional controls required for cost effective risk management at a Brownfields sites.



Add to these synergies a vast array of incentives, mandatory quotas and grants for clean energy and we just may have a path to economic viability for some Brownfields projects. EPA has a task force known as ER3 to help facilitate such projects. Keep your eye on a project in Charlotte, North Carolina known as ReVenture Park which seems destined to put wind energy, wastewater treatment and a biomass plant on a large, complex CERCLA/RCRA site.

STATE OF MAINE IDENTIFIES OFFSHORE WIND DEMONSTRATION SITES FOR FIRST-IN-NATION DEEPWATER TECHNOLOGIES

Posted on December 16, 2009 by Jeff Thaler

On December 15, Governor John Baldacci received from the Maine State Planning Office and Maine Department of Conservation the results of a search process to identify demonstration sites for offshore wind technology located in Maine coastal waters. The team from the State agencies traveled up and down the coast of Maine over the last four months talking with fishermen, citizens, local officials and others to determine the best areas to take advantage of Maine’s amazing offshore resources. Three sites were identified by the process: The sites are off Monhegan Island, Boon Island and Damariscove Island.

The site off Monhegan Island will be used by a consortium led by Dr. Habib Dagher and his team at the University of Maine, to which I am legal counsel. The consortium was recently awarded an $8 million grant from the U.S. Department of Energy for this project. The consortium includes more than 30 partners, including private companies interested in offshore wind development. This will be the first deep-water test site in the United States; as Dr. Dagher said, “We have a national responsibility here to lead the country in that direction."

 

Maine has been increasingly active in the past several years with wind energy development. There are currently 300 megawatts operating or under construction in Maine, with another 450 megawatts of wind in various stages of development throughout the State. Already, Maine is home to 95 percent of the operating on-shore wind capacity in New England.

 

The Governor said that the potential of our offshore wind resources is even greater, estimated at 100 gigawatts, or three-to-four times the current peak demand for all of New England.

Maine has the greatest renewable protfolio standard in the country, and has established a bold vision of reducing the State’s consumption of liquid fossil fuels by at least 30 percent by 2030. Maine has set ambitious but achievable targets for development of wind power. A State Task Force on offshore energy, with which I have been involved this year, is prepared to recommend this month that Maine have as a goal the production, by 2030, of at least 5 gigawats of deepwater wind power.

 

“The willingness to move forward is a significant investment in this State’s future as a leader in renewable energy,” said Governor Baldacci. “Clean energy development will reap investments and jobs right here in Maine.”

 

The University has the goal for the first demonstration turbine to be operating in the water in 2011. The remaining two sites that are available for demonstrations of offshore wind or wave energy technology are available to developers, who must begin the process by obtaining an expedited permit through the Department of Environmental Protection.

More information, including maps of the demonstration sites, is available at www.maine.gov/doc/initiatives/oceanenergy/oceanenergy.shtml or by contacting Jeff Thaler at jthaler@bernsteinshur.com

Carbon Offset Credits Available Now

Posted on December 15, 2009 by Patrick Dennis

Despite the widespread publicity surrounding the actions being undertaken by EPA and in Congress to address greenhouse gas emissions and the potential for a cap and trade program at the federal level, few lawyers are aware that rigorously verified carbon offset credits are currently available for purchase by third parties. Generally, carbon offset credits are issued in exchange for a project proponent’s (e.g., a property owner or other participating entity) implementation of practices and programs which sequester carbon or otherwise reduce greenhouse gas emissions. 

In some types of projects, CO2 (carbon dioxide) is sequestered in the leaves, trunks and roots of trees on the property, converted into carbon, and held in the vegetation and soil on the property. By growing a forest or managing a forest in such a way that it sequesters more carbon than would otherwise be held on the property, the project proponent becomes eligible for carbon offset credits, which can then be sold or optioned to third parties.

Carbon offset credits are issued not just for forest projects, but also for greenhouse gas reduction projects involving coal mine methane, landfill gases, livestock gases, and nitric oxide emissions. The carbon offset market incentivizes greenhouse gas sequestration and reduction, and provides a product to third parties looking for a way to offset their carbon emissions or otherwise satisfy regulatory requirements.

 

There are currently few organizations that issue any type of evaluation and registration for carbon offset credits. One of these organizations, the Climate Action Reserve is a non-profit based in Los Angeles, California which has registered a variety of types of greenhouse gas projects and is currently issuing carbon offset credits to project participants. The Chicago Climate Exchange also provides a cap and trade system for six greenhouse gases, with global affiliates and projects worldwide. There are other, regional and specialized programs that are much more narrow in their applicability and the types of emissions they verify.  

The Climate Action Reserve’s carbon offset credits are the result of a rigorous, third-party verification process to quantify and verify the net greenhouse gas emissions sequestration on projects based upon hundreds of pages of protocols which address details ranging from the modeling of carbon stored in live trees, dead wood and wood products, to annual monitoring requirements to determine reversals of carbon sequestration.  In the case of forest projects, covenants and contracts require that the project proponent (e.g. the property owner) abide by the protocols and sequester carbon for at least 100 years. 

A variety of legal issues arise about how best to document a project proponent’s commitments over the 100 year period, whether that be through contracts, covenants, restrictive easements, conservation easements, mortgages or some combination thereof. While California’s statutory scheme is relatively clear about what types of recorded documents run with the land, other States provide less guidance. See, e.g., California Civil Code 1460 et seq. Likewise, legal documentation must address a variety of issues including subordination to future encumbrances; future transfers of any subject property; reversals or significant carbon loss in the event of natural disasters (e.g., forest fires, earthquakes, etc.); and remedies in the event of intentional acts in violation the project proponent’s commitments (e.g., failure to sequester adequate carbon stocks).

After a project proponent complies with the documentation requirements, registers its project with the applicable entity and been issued carbon offset credits, it is then available to sell or option such credits to third parties. The market for these credits is growing. Currently, corporations and entities who have made voluntary greenhouse gas reduction commitments have purchased these credits to help fulfill such commitments. Obviously, if a mandatory cap and trade system is implemented either in California or on a nationwide basis, then such carbon offset credits will become more valuable. Likewise, if federal, state and local authorities, courts or other jurisdictions require project developers to mitigate their greenhouse gas emissions, carbon offset credits are likely to become more expensive.

Gibson, Dunn & Crutcher provides pro bono representation to the Climate Action Reserve. Posting submitted by: Patrick W. Dennis, Charles H. Haake and Shireen B. Rahnema of Gibson, Dunn & Crutcher.

Carbon Offset Credits Available Now

Posted on December 15, 2009 by Patrick Dennis

Despite the widespread publicity surrounding the actions being undertaken by EPA and in Congress to address greenhouse gas emissions and the potential for a cap and trade program at the federal level, few lawyers are aware that rigorously verified carbon offset credits are currently available for purchase by third parties. Generally, carbon offset credits are issued in exchange for a project proponent’s (e.g., a property owner or other participating entity) implementation of practices and programs which sequester carbon or otherwise reduce greenhouse gas emissions. 

In some types of projects, CO2 (carbon dioxide) is sequestered in the leaves, trunks and roots of trees on the property, converted into carbon, and held in the vegetation and soil on the property. By growing a forest or managing a forest in such a way that it sequesters more carbon than would otherwise be held on the property, the project proponent becomes eligible for carbon offset credits, which can then be sold or optioned to third parties.

Carbon offset credits are issued not just for forest projects, but also for greenhouse gas reduction projects involving coal mine methane, landfill gases, livestock gases, and nitric oxide emissions. The carbon offset market incentivizes greenhouse gas sequestration and reduction, and provides a product to third parties looking for a way to offset their carbon emissions or otherwise satisfy regulatory requirements.

 

There are currently few organizations that issue any type of evaluation and registration for carbon offset credits. One of these organizations, the Climate Action Reserve is a non-profit based in Los Angeles, California which has registered a variety of types of greenhouse gas projects and is currently issuing carbon offset credits to project participants. The Chicago Climate Exchange also provides a cap and trade system for six greenhouse gases, with global affiliates and projects worldwide. There are other, regional and specialized programs that are much more narrow in their applicability and the types of emissions they verify.  

The Climate Action Reserve’s carbon offset credits are the result of a rigorous, third-party verification process to quantify and verify the net greenhouse gas emissions sequestration on projects based upon hundreds of pages of protocols which address details ranging from the modeling of carbon stored in live trees, dead wood and wood products, to annual monitoring requirements to determine reversals of carbon sequestration.  In the case of forest projects, covenants and contracts require that the project proponent (e.g. the property owner) abide by the protocols and sequester carbon for at least 100 years. 

A variety of legal issues arise about how best to document a project proponent’s commitments over the 100 year period, whether that be through contracts, covenants, restrictive easements, conservation easements, mortgages or some combination thereof. While California’s statutory scheme is relatively clear about what types of recorded documents run with the land, other States provide less guidance. See, e.g., California Civil Code 1460 et seq. Likewise, legal documentation must address a variety of issues including subordination to future encumbrances; future transfers of any subject property; reversals or significant carbon loss in the event of natural disasters (e.g., forest fires, earthquakes, etc.); and remedies in the event of intentional acts in violation the project proponent’s commitments (e.g., failure to sequester adequate carbon stocks).

After a project proponent complies with the documentation requirements, registers its project with the applicable entity and been issued carbon offset credits, it is then available to sell or option such credits to third parties. The market for these credits is growing. Currently, corporations and entities who have made voluntary greenhouse gas reduction commitments have purchased these credits to help fulfill such commitments. Obviously, if a mandatory cap and trade system is implemented either in California or on a nationwide basis, then such carbon offset credits will become more valuable. Likewise, if federal, state and local authorities, courts or other jurisdictions require project developers to mitigate their greenhouse gas emissions, carbon offset credits are likely to become more expensive.

Gibson, Dunn & Crutcher provides pro bono representation to the Climate Action Reserve. Posting submitted by: Patrick W. Dennis, Charles H. Haake and Shireen B. Rahnema of Gibson, Dunn & Crutcher.

Be Careful What You Wish For

Posted on December 11, 2009 by Lee A. DeHihns, III

On December 7, 2009, EPA Administrator Lisa Jackson stated that greenhouse gases (GHGs) “threaten the public health and welfare of the American people”. This CAA endangerment finding was what everyone had expected due to the strong proposed finding and the inevitable result of legislation that the Obama administration has been supporting.  

Now that the U.S. has a position to take to Copenhagen - either EPA or Congress will tackle and reduce GHGs - so count on the U.S. to do its part. Despite all the discussions about the costs of the U.S. policy on the U.S. economy, which are not close to being resolved, where will the money come from to help the 3rd World countries? Amounts of $10B a year and upwards of hundreds of billions of dollars are used like the money is easily available in today’s economy. 

If GHGs are a serious threat, reductions are necessary and need to start soon. However, let’s be very careful to not to solve the problem by pushing the cost of energy so high that most of the world will eventually enjoy clearer skies and air, while sitting in the dark or shivering during the winter months.   

In shifting to cleaner fuel sources like natural gas (or solar or wind) as preferred sources of energy we need to be certain that the supply system can be created in a cost-effective manner and in time to meet the GHG emissions reduction goals. We also need to be sure that siting such generation facilities meets with the expectations of the host communities.

 

Connecticut v. AEP Decision Supports Public Nuisance Actions Aimed at GHGs

Posted on October 23, 2009 by Gregory Sharp

In Connecticut v. AEP, the Second Circuit upheld the right of state and municipal governments and private land preservation groups to pursue public nuisance claims against electric generating facilities with significant greenhouse gas emissions (GHGs), including those operated by TVA,. The plaintiffs alleged that facilities operated by five of the six defendants were the largest emitters of carbon dioxide in the country and among the largest in the world.

 

A recent ACOEL blog by Bob Wyman and Mike Romey touched on the decision in the context of the similar issues raised in the Fifth Circuit’s Comer decision and the Northern District of California’s decision in Kivalina. This blog will focus on some of the specific issues raised in the AEP decision.

 

 

 

The 139 page opinion exhaustively analyzes the numerous issues raised in the appeal, which was taken by the plaintiffs from a dismissal of their complaints by the District Court. The trial court held that the claims were non-justiciable as raising political questions.

The Second Circuit held that the district court erred in dismissing the complaints on political question grounds, that all of the plaintiffs have standing , that the federal common law of nuisance governs their claims, that plaintiffs have stated claims under the federal common law of nuisance, that the claims have not been displaced by Congressional action, and that the TVA’s alternate grounds for dismissal were without merit.

 

The decision turns in large part on the Supreme Court’s landmark “one man, one vote” decision in Baker v. Carr in 1962, which laid out six factors for determining when a complaint raises a non-justiciable political question based on the separation of powers doctrine.

 

One of the central issues was whether the federal common law was inapplicable because Congress had displaced common law rights through legislative action. On the displacement issue, the Second Circuit relied in part on Milwaukee I&II, noting that if Congress does not adopt statutes which cover a plaintiff’s claims and provide a remedy for them, then the plaintiff is free to bring its claims under the federal common law of nuisance. The Second Circuit concluded that Congress had not done so with respect to GHGs.

 

The Court concluded that all plaintiffs satisfied the injury in fact test for federal standing. The states alleged current injury from an increase in carbon dioxide levels that has caused rising temperatures and climate change resulting in reduced snowpack and related harms. The states also alleged future catastrophic injuries from continued increases in temperature, including a catastrophic change in climate when a tipping point is reached.

 

The land trusts alleged no current injury, but alleged future injuries and increased risk of harm. The Court found these injuries constitute “special injuries” to the land trust plaintiffs’ property interests, which are different in kind from injuries sustained by the general public.

In its conclusion, the Court found that, as to air pollution, and GHGs in particular, this case fits the same niche occupied by Milwaukee I with respect to water pollution. Paraphrasing the concluding words of Milwaukee I, the opinion notes: “’It may happen that new federal laws and new federal regulations may in time pre-empt the field of federal common law of nuisance. But until that comes to pass, federal courts will be empowered to appraise the equities of the suits alleging creation of a public nuisance’ by greenhouse gases.”

 

In an interesting footnote, the decision notes that Justice Sonia Sotomayor was originally a member of the panel, but was elevated to the Supreme Court in August, so the appeal was determined by the remaining two members of the panel.

 

As with the recent 5th Circuit decision in Comer, the decision can be expected to increase pressure on Congress to act to develop a comprehensive greenhouse gas emission regulatory program, unless the Supreme Court reverses before Congress acts.

TWO NEW GHG NUISANCE CASES GO DIFFERENT DIRECTIONS

Posted on October 20, 2009 by Robert Wyman

Following on last month's Second Circuit decision in Connecticut v. AEP, two recent climate change decisions show that the federal courts continue to grapple with whether to allow nuisance suits against emitters of Greenhouse Gases (GHGs). It will likely take some time -- and a trip to the Supreme Court -- before this area of the law is settled. 

 Just last week in Comer v. Murphy Oil, the Fifth Circuit gave the green light to a class action brought by property owners along the Mississippi Gulf Coast against oil and chemical companies and utilities. Plaintiffs' alleged that GHG emissions from the defendants' operations contributed to global warming, heated the oceans, raised sea levels and made Hurricane Katrina stronger than it would have been. The court held that the plaintiffs had Article III standing to assert state law nuisance and trespass claims for the resulting damage to their property and that the political question doctrine did not apply to this "ordinary tort suit."

 

On September 30 the Northern California district court hearing Native Village of Kivalina v. ExxonMobil went the other way and granted the defendants' motion to dismiss. The court found that the Eskimo village who brought the suit could not establish that the threat to its existence from rising sea levels was "fairly traceable"

to the defendants' GHG emissions and thus lacked standing. The court also found that the plaintiffs' federal common law nuisance suit intruded on the separate political branches as it "seeks to impose liability and damages on a scale unlike any prior environmental pollution case . . . ."

Both cases cited AEP, where the Court rejected similar standing and political question challenges and allowed the plaintiffs, including eight states, to sue a group of electric power companies. The Fifth circuit lauded AEP's "careful analysis" of the political question doctrine and sharply criticized the AEP trial court's "serious error of law." Judge Saundra Brown Anderson's decision in Kivalina, on the other hand, found little to like in the AEP decision: "neither Plaintiffs nor AEP offers any guidance as to precisely what judicially discoverable and manageable standards are to be employed in resolving the claims at issue."

So what can we take away from this trio of cases?

The appellate courts are clearly more comfortable with taking these cases than the trial courts. In each of these three cases, the District courts dismissed the suits. Odds are good that the Ninth Circuit in Kivalina will agree with her sister circuits making it a clean sweep.

Cases like Comer which assert state common law claims in diversity and seek only damages for past conduct are bound to run into less trouble than cases like AEP and Kivalina which assert federal common law claims and seek to enjoin future emissions OR ALLEGE potential future injury.

The latter cases more directly call into question the limits of the power of the federal judiciary to make common law, the traceability of the harm to the defendants' emissions and the prerogatives of the legislative and federal branches and their ability to displace federal common law. On the other hand, state common law claims seeking damages for past injury are, as the Comer court said, just "'ordinary tort suits." The court applies easily discernable state law and is not asked to promulgate emissions standards.

It is worth remembering that the issues the courts in AEP, Comer and Kivalina grappled with are issues that are specific to the federal courts -- federal common law, Article III standing, and federal separation of powers. It remains to be seen whether plaintiffs will assert these same cases in the state courts and avoid the uncertainty that will continue to exist in the federal system for some time.

However interesting the procedural issues presented by these cases might be, they are nothing in comparison to the complex and difficult issues presented by the merits of these cases. Liability, causation and damages still must be proven.

Finally, the green light given to the federal judiciary by the Second and Fifth Circuits, combined with the EPA's recent steps to regulate GHGs under the Clean Air Act, will place additional pressure on Congress and the relevant stakeholders to pass a comprehensive climate change law. If not, federal courts (and juries) could soon be in the business of climate change regulation.

 

Authored by: Robert Wyman and Michael Romey of Latham & Watkins, LLP

MIXED RESULTS FOR OREGON CLIMATE CHANGE LEGISLATION

Posted on August 3, 2009 by Rick Glick

In my February 23, 2009 posting, I described Oregon Governor Ted Kulongoski’s ambitious agenda for state action to reduce green house gases (GHG). But then the tumbling economy got in the way and GHG lost its position at center stage. Still, some things did get done in the session that ended last month.

 

Oregon had already adopted renewable energy portfolio standards (RPS) for its electric utilities, adopted California automotive emissions standards and had the nation’s most generous business energy tax credit (BETC). This year the plan was to add a GHG cap and trade program and establish fuel standards, among other things.   Some of it passed, some didn’t, and the Governor has said little as to which he will sign into law.

 

SB 80 would have established the cap and trade program, in line with the Western Climate Initiative, but failed. The principle reason seems to be that a federal bill may be imminent. That legislation, the Waxman-Markey bill (HR 2454) passed the House on June 26 by a razor thin vote along party lines (219-212). The bill includes a provision pre-empting state legislation. Its fate is in the Senate, where it will need at least 60 votes to survive a filibuster, and the final shape of the bill is anyone’s guess. If it appears a federal cap and trade bill is not achievable or indefinitely delayed, SB 80 is likely to be reintroduced in Oregon in some form.

Other climate bills did pass. 

 

  • SB 38 authorizes a rulemaking to require registration and reporting for import to the state of electricity or fossil fuels. 
  • SB 101 establishes a GHG standard for electricity generation and prohibits utilities from long-term financial commitments for resources that do not meet the standard, effectively banning import of coal fired plant output. 
  • HB 2186 calls for development of a standard to reduce GHG emissions from transportation fuel 10% by 2020 and to conduct a study on retrofitting of trucks to make them more efficient; this element was proposed as mandatory, but a compromise calling for the study was adopted. This provision is intended to piggy-back on a California study of improving existing truck efficiency. HB 2186 also established a task force to look at reducing GHG emissions through integrated land use and transportation planning. 
  • HB 3039 promotes solar energy and provides a 2:1 RPS credit for each kWh produced from a qualifying facility operational before January 1, 2016 and that generates at least 500 kW. The bill sets a limit of 20 MW of capacity for the RPS credit. 

 

  • HB 2940 allows RPS credits for biomass facilities in place before 1995, capped at 100 MW. There are 8 biomass plants and one garbage burner in the state. This controversial bill was not proposed by the utilities, rather it was driven by the Oregon forest products industry in the interest of maintaining jobs and to provide a source of income for declining mills. Thought the bill had broad bi-partisan support among legislators, many observers see it as inappropriate to give RPS credits to old generating plants, predicting that existing hydropower will be right behind. The concept behind RPS for many is to offer an incentive for new development of renewable resources, not to reward existing ones. As of this writing the Governor has not acted on the bill but is known to be considering a veto.

 

  • HB 2472 modifies the BETC to include manufacture of electric vehicles among the industries eligible for the credit, along with renewable energy facilities and manufacturers of equipment for renewable energy production. The BETC was reduced to match budget concerns, and the Governor is also considering a veto of this bill in the interest of keeping Oregon competitive to attract clean tech business.

All eyes now shift to the U. S. Senate to see if there will be federal GHG controls enacted. It may take a while, these things take time.