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?

Many environmental lawyers get involved in alternative energy development projects. But some may not have the engineering or technical background to understand some of the nuances of such projects.

Recently, a local municipal corporation installed three 1.5 MW wind turbines at its wastewater treatment facility, with the attendant publicity regarding reducing its electric energy consumption from the local distribution utility. The turbines have been up for some time but are not operating. Why not? Because, prior to erecting the turbines, the corporation did not negotiate, execute and implement an interconnection agreement with the local distribution company. And it may be some time before such agreement is executed and the interconnection is made.

Meanwhile, the turbines stand erect and motionless. While some may find this visually pleasing, what most do not realize is that wind effects on a motionless turbine – even when the turbine blades are feathered – produce considerable strain on the turbine components and may result in metal fatigue or breakage sooner than anticipated, with the consequent increase in unbudgeted maintenance and replacement costs. Such costs could have a material effect on the economic viability of the project.

Sign and implement the interconnection agreement first. You have been warned.

Even as a latent issue, subsidies to the oil and gas industry have the potential to be a political hot potato.  But with President Obama putting them front and center in his recent speech at New Hampshire’s Nashua Community College, the issue joins the already crowded landscape of political fodder heading into the fall elections.  President Obama’s “all of the above” energy program covers a variety of activities, including production of oil and gas, funding renewable energy sources, and encouraging innovation of new technologies.  In the end, fossil fuels are an exhaustible source of energy that cannot be the total answer to our energy needs, as even oil and gas companies recognize.  And they come with a real set of hazards, as the recent Deepwater Horizon settlement reminds us.
 
Although not directly part of his “all of the above” energy program, President Obama is rightfully addressing government subsidies for oil and gas that could be migrating towards increasing subsidies for solar farms and wind turbines.  While fossil fuels will eventually run out, wind, solar, and biomass will not, but have yet to enjoy the level of support afforded to the oil and gas industry.  According to a recent analysis of the economics of energy by experts at the Imperial College London and the UK Energy Research Center electricity from wind power may, in five years, be less expensive than electricity from natural gas in the U.K. if current levels of government subsidies were transferred to renewable energy sources.
 
While the study is specific to the United Kingdom, there are takeaways applicable in the U.S.  First the analysis recognizes the important support that subsidies provided to oil, gas, and nuclear energy development when each were in infancy.  Through those subsidies, energy companies were encouraged to develop technologies, survey areas that were geologically ripe for oil and gas exploration, and hire workers to help build up the industry.  Second, now that oil, gas and, to a lesser extent, nuclear energy sources are more completely developed, those subsidies should be transferred to the development of renewable energy.  In addition, the gains made by the wind and solar industry should not be set aside in search of the elusive promise of cheaper oil through more drilling.  Fossil fuels will run out.  If “all of the above” is to be a real strategy, then it must provide more of an equal opportunity for all sources of energy.
           
The Department of Energy recently announced $150 million in grants under its ARPA-E program.   This money is intended for development of cutting-edge energy technologies so that they can gain the necessary traction to be self-sufficient.  The announcement follows on the heels of an additional $30 million offered under the ARPA-E program toward development of natural gas-based vehicles.  Both these numbers pale in comparison to the $4 billion in yearly subsidies for oil and gas developers.   Even shifting half of the oil and gas subsidies into renewable and developing technologies could well make a dramatic difference in our overall energy future by encouraging the build-out of wind, solar, and biomass businesses into viable and self-sufficient industries.  There will come a time for a full discussion of the value of energy subsidies as a whole, but this would provide a fair start toward creating parity with fossil fuels.
               
The Deepwater Horizon disaster is a reminder of the cost associated with use of fossil fuels.  Significant government subsidies provided to the oil and gas industry played an important part in encouraging their initial and ongoing development.  Programs such as ARPA-E can provide a jump-start for emerging energy technologies, and shifting subsidies can offer a chance for “all of the above” to be a real solution.

Just a few years ago, the price of natural gas was high enough to encourage development of liquefied natural gas (LNG) import terminals to receive LNG from foreign gas producers and then “re-gassify” such gas before sending it to existing interstate pipelines.  Three such facilities were proposed in Oregon, after a failed attempt to site an LNG terminal in California.  The presumption had been that due to the high capital cost of the terminal and related pipeline, and because of market constraints, there would be but one terminal on the West Coast. 

That dynamic has shifted with discovery of abundant domestic shale gas deposits and attendant lowering of gas prices, and LNG terminal developers are thinking “export,” instead of import.  Should this change in the LNG business model matter to anyone?

Of the proposed Oregon projects, two remain: at the Port of Coos Bay and on the Skipanon Peninsula in Youngs Bay, at the mouth of the Columbia.  The projects have generated controversy, with opponents asserting public safety concerns (i.e. uncontrolled “blast zones”), harm to aquatic habitat, creation of a terrorist target, usurpation of land owner rights along the pipeline route, and all apparently with no benefit to Oregon because the gas may only be shipped to our evil sister to the south, California.  Of course, these are all issues that the FERC and state permitting reviews are designed to uncover, assess and prescribe mitigation for and those processes are incomplete.
 
Natural gas prices have come down to the point that an LNG import facility may no longer make sense.  On the other hand, demand for natural gas in Asia is high, particularly in Japan following the Fukushima nuclear disaster, which in turn raises prices.  Thus, the two remaining Oregon LNG projects are actively considering conversion to export facilities, and there is enough global demand—and plenty of surplus Canadian and U.S. natural gas—that more than one would be needed to make much of a dent in that surplus.  This result has enraged environmental activists, as though it is somehow unfair to change the economic model on which a proposed project is based.

There is nothing about a LNG export facility that is so different—either in form or impact on land or resources—such that it should affect how the public views LNG.  The two concepts have approximately the same footprints, and to the untrained observer, would look the same.  In the case of the Skipanon Peninsula project, tanks are the most prominent structures; import and export tanks are identical, except that an export facility would require only two, whereas an import terminal requires three.  The dock/pier arrangements for import or export facilities are identical.  The two concepts have very similar (and very limited) environmental impacts, all of which will be reviewed in detail in the various state and FERC regulatory processes.  In addition, an LNG export facility would provide four times as many construction jobs (about 10,000 man-years) and almost twice the amount of long-term employment originally anticipated from the project.  The project represents a $5 billion investment in a region with no apparent industrial development alternatives on the horizon, and with property tax rates right around 1%, such a project would infuse approximately $50 million in local annual tax assessments.

There are some who suggest allowing exports of LNG would raise domestic natural gas prices and thereby place the U.S. economy at a disadvantage.  But of course the U. S. participates in a global economy and gas prices are driven by global market conditions.  A commodity will find a market, seeking the highest prices available, wherever it originates.  The U. S. exports approximately 50 million metric tons of grain every year and that probably raises U.S. domestic food prices a little, but would anybody seriously argue that we should stop grain exports?

Markets will determine whether a shift to exporting LNG makes economic sense.  Environmental effects and other public interest issues related to an LNG export terminal and related pipeline projects should be judged on their merits by the federal and state agencies charged to do so. 

According to news reports of the December 21 opinion rendered by the European Court of Justice, the ECJ’s decision upheld imposition of the European Union’s Emission Trading Scheme (“ETS”) upon non-EU airlines that take off or land at airports in an EU member state.  However, those news reports fail to note what the ECJ did not decide.

In December 2009 the Air Transport Association of American and three US member carriers brought suit in the UK against the UK Secretary of State for Energy and Climate Change to reverse inclusion of non-EU airlines in the EU ETS.  They argued that such inclusion violated the US/EU Open Skies Agreement precluding the signatories from imposing import restrictions, taxes, duties, and similar fees and charges on fuel used by air carriers in international air transport.  They also argued that such inclusion violated the Chicago Convention and the Kyoto Protocol.

The Chicago Convention provides for adoption of international standards and recommended practices on air navigation “safety, regularity, and efficiency” by the International  Civil Aviation Organization (ICAO), a United Nations specialized agency that oversees civil aviation.  The ICAO has adopted aircraft noise and engine emission standards in Annex 16 to the Convention.  The Chicago Convention also provides for resolution of signatory country disagreements over interpretation or application of the Convention and its Annexes by decision of the ICAO Council which can then be appealed to an arbitral tribunal or to the Permanent Court of International Justice (now the International Court of Justice).  The Kyoto Protocol in turn provides for signatory states to address limitations on or reductions to greenhouse gas emissions from aircraft fuels through the ICAO.

For several years member signatories to the Chicago Convention have been considering mechanisms to address greenhouse gas emissions from commercial carriers.  Spurred on by EU plans to impose its ETS on non-EU airlines, the ICAO hopes to have a mechanism in place by the end of 2012 for ICAO decisionmaking at its 2013 meeting.  At the present time a number of market based mechanisms are being considered, including some form of emission trading, carbon taxes on fuel use, levies on departing passengers and cargo, and carbon offsets.  The EU has said that it would exempt non-EU carriers from the EU ETS if they adopt “equivalent” measures.

In its decision the ECJ concluded, in the context of the UK court’s preliminary ruling, that it cannot examine the validity of the ETS under the Chicago Convention because the EU (as opposed to the EU member states who would perform their obligations under that Convention) was not a signatory to, and thus not bound by, the Chicago Convention.  It also concluded that the Kyoto Protocol provisions for addressing greenhouse gas emissions from aviation fuel through the ICAO “cannot . . . be considered to be unconditional and sufficiently precise” to be relied upon by the plaintiffs in contesting application of the EU ETS.  Thus, its rulings were limited to consideration of the Open Skies Agreement and customary international law.  With respect to the former, the ECJ concluded that the tax and fee exemption for aircraft fuel used by carriers engaged in international travel between the EU and the US does not prohibit implementation of the EU ETS.  The court likewise concluded that the EU Directive imposing the ETS was valid under customary law principles.

It remains to be seen what path the plaintiffs, or other interested countries or carriers, may choose to take regarding the court’s interpretation of the Open Skies Agreement and customary international law as they apply to the EU ETS.  Even more interesting is the question of how the ECJ interpretation relates to the decisionmaking power vested in the ICAO.  It is of course possible that the ICAO will implement “equivalent” measures for addressing greenhouse gas emissions before any further judicial decision is rendered.  Nevertheless, additional legal action is highly likely, given the number of interested parties.

Recently Japan’s nuclear accident emphasized one important aspect of where to build power plants, and now the State of New York has adopted a new power plant siting law which could be a model for other states.

After not having a law on the books since 2003, New York has adopted a siting law and created a new panel to oversee the development of new power-generating facilities in the State.  The bill, called the Power New York Act, was adopted to rare applause of both environmentalists and business groups.  Efforts to establish a new siting law in New York had stalled over the years, thereby limiting the State’s ability to build new facilities and power sources including wind and solar.

Power New York Act of 2011 is a sweeping energy bill. Section 12 of the new law reauthorizes and modernizes Article X of the Public Service Law, which expired on January 1, 2003, governing the siting and approval of power plants in New York.  The new law hopefully will create a one-stop siting decision-maker.

The law establishes a new seven-person board to oversee the development of power plants in excess of 25 megawatts of energy, which would capture wind farms and even some battery-storage facilities.  The old law limited the board’s oversight to plants with more than 60 megawatts of power, which often left local communities to decide how to handle smaller projects.

The law creates and vests permitting authority with the New York State Board on Electric Generating Siting and the Environment.  The statute provides that two local residents will be part of the board for each proceeding.  The other five members of the board will be state officials.  The law also provides for “intervener funding” which will enable municipalities and other local parties to participate in all phases of the administrative review, including the mandated adjudicatory hearing.

The board is given authority to override local laws and ordinances if they are “unreasonably burdensome.”  Unless otherwise agreed by an applicant or extended due to a “material and substantial amendment to the application” or “extraordinary circumstances,” the board’s decisions must be rendered within a year of the application’s being deemed complete.

Article X overrides the New York State Environmental Quality Review Act which previously covered projects, and instead calls for several environmental analyses of a facility’s impacts.  These analyses include a “cumulative air quality analysis” that evaluates the combined effects from the proposed facility, other proposed sources and all existing sources; describes the demographics of the surrounding community; and sets out “reasonable and available” alternative locations.  It also requires the board to find that the project minimizes or avoids disproportionate impacts on the surrounding community.

The absence of a power plant siting law has been cited as an important reason why there has been scant development of power plants in New York in recent years, including alternative energy sources.  If the new law works in New York, it could become a model for other states.

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 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.

Perhaps the most interesting recent injection of constitutional law into environmental policy involves the use of the political question doctrine regarding common law claims. For a half decade, states and individuals have turned to common law causes of action for redress in climate litigation. See James R. May, Climate Change, Constitutional Consignment, and the Political Question Doctrine, 85 Denv. U. L. Rev. 919 (2008). Federal common-law causes of action, including those for public nuisance, provide potential—although imperfect and problematic—means for judicial cognizance of and redress for these effects. See id. Nonetheless, some federal courts have determined the seldom used “political question doctrine” bars them from “entering the climate change thicket,” reasoning the matter is consigned to the coordinate branches of government. Id. at 957-59.

This legal development is astonishing, because until recently the political question doctrine had touched only about a half dozen matters—including matters which are demonstrably committed to a coordinate branch of government, require an initial policy determination, lack ascertainable standards, or could otherwise result in judicial embarrassment—that are nonjusticiable. Baker v. Carr, 369 U.S. 186, 217 (1962). For example, the Court has recognized executive power over foreign affairs, impeachment, and treaty abrogation as political questions into which courts ought to decline jurisdiction, finding them to be consigned to the elected federal branches of government under the “political question doctrine.” James R. May, Constitutional Law and the Future of Natural Resource Protection, in The Evolution of Natural Resources Law and Policy 124, 146 (Lawrence J. MacDonnell & Sarah F. Bates eds., 2009). Climate change litigation has now entered this mix, most recently in Connecticut v. American Electric Power Co., Civ. Action No. 10-174.

In the case below, American Electric Power Co., 582 F.3d 309 (2d Cir. 2009), the Second Circuit held no aspect of the political question doctrine applied to enjoin judicial review. In particular, the circuit court found climate change is neither constitutionally consigned to the elected branches, nor prudentially left to them. The utility defendants filed a petition for certiorari to reverse the Second Circuit’s ruling, arguing (1) states and other plaintiffs lack standing, (2) federal law preempts plaintiffs’ claims, and (3) the case raises nonjusticiable political questions. Connecticut v. American Electric Power Co., Petition for Certiorari, Civ. Action No. 10-174; AEP Cert. Petition at i, 13, 20, and 26. In late August 2010, the Obama Administration filed a brief in support of the utility defendants’ petition, arguing plaintiffs lack prudential standing, and federal law displaces the need for common law causes of action for climate change. Brief for Tenn. Valley Auth. in Supp. of Pet’rs , Connecticut v. American Electric Power Co., No. 10-174. In its brief, the U.S. Solicitor General’s Office argues (i) first plaintiffs lack prudential standing under the standard articulated in the First Amendment Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1 (2004) decision—and largely for the same non-justiciability reasons defendants argue in favor of applying the political question doctrine; and (ii) second, EPA activities during the last 12 months, including the final reporting rule, the proposed tailoring, cement kiln, and light duty truck emission rules, and other activities displace the need for common law causes of action under the standards set in the Court’s Middlesex County Sewerage Auth. v. Nat'l Sea Clammers Ass'n, 453 U.S. 1 (1981) and Milwaukee v. Ill., 451 U.S. 304 (1981) decisions.

The U.S. Supreme Court has agreed to hear the case, with Justice Sotomayor recusing herself, which seems to increase the prospects of a 4-4 split. Oral argument in the case is set for April 19, 2011. Whatever the Court decides in AEP v. Connecticut is sure to rock the foundation of climate law and policy for many years – perhaps generations – to come.

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.

Last year, the U.S. Securities and Exchange Commission (“SEC”) issued interpretive guidance on climate change-related disclosure, a significant step towards focusing companies on addressing this important issue and improving the quality of the information available to investors on this subject. While this guidance caused some companies to reevaluate and improve their disclosure practices, overall disclosure of the risks and opportunities presented to companies by climate change remains inadequate.

That is the finding of Disclosing Climate Risks & Opportunities in SEC Filings: A Guide for Corporate Executives, Attorneys & Directors, a new Ceres report intended as a practical guide for companies and their advisors on how they should respond to the SEC disclosure regulations and the interpretive guidance, so that they can ensure they are disclosing all material climate-related information.

Developed with input from members of the Ceres Investor Network on Climate Risk (INCR), which includes 95 investors managing over $9 trillion in assets, the report offers the investor perspective on climate-related disclosure. It closely examines the disclosure practices of over a dozen companies across multiple sectors, highlighting some industry leaders—like electric power company AES Corp. and technology company Seimens—for disclosure that quantifies material climate issues and provides additional important details.

However, in the case of every company examined, there was room for improvement. And the report found that for many companies, disclosure was non-existent or unhelpful boilerplate. The main takeaways from the report are that companies should be doing more comprehensive analysis of climate risks and opportunities applicable to their business, compiling more consistent and quantified information, and that they should be disclosing it where investors look to find it, both in their voluntary reporting and, where material, in their annual mandatory filings.

ACOEL piece on SEC guidance available here.

Disclosure report is available here.

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.

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.
 

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.

The climate change debate soldiers on, despite set-backs at the national level. The California Air Resources Board, for example, has released the first state level cap and trade proposal, which remained open for public comment until December 15, 2010. Despite a handful of such gallant efforts to address global warming through legislative means, few, if any, political attempts to address the issue have succeeded. Perhaps this is a reflection, as recent polls suggest, of a waning public belief, at least in some circles, that global warming is man-made. Equally likely, however, is wide spread economic distress, which takes immediate precedence in the lives of many.

Since pervasive legislative solutions to global climate change do not seem to be in the offing, perhaps the time is upon us to examine and adopt an approach to carbon emissions concerns which is scientifically effective and cost-effective alike. Rather than implementing grand political initiatives such as cap and trade, perhaps we should think about implementing measures which can be implemented by individuals and communities at the local level. Measures such as painting the roofs of buildings in hot climates white, implementation of passive solar heat collection in homes and businesses, lowering thermostats in the winter and carpooling can all be implemented inexpensively or can actually save money, while at the same time having the direct effect of reducing carbon emissions. Personally, I have always been a big proponent of the use of public transportation. It makes both economic and environmental sense and certainly reduces an individual's carbon footprint.

In short, there are measures which we, as individuals, and more collectively, as communities, can do which address climate change that can be effective yet would not have negative economic consequences. While such measures will never replace legislative solutions, they are a step in the right direction while we await the enactment of more comprehensive legislative responses.

WDNR has issued “Siting Guidelines” available here to help wind project developers site projects in ways that minimize impacts and will be revising its current “Bird and Bat Study Guidelines” to provide more comprehensive information.

The WDNR report was submitted in response to 2009 Wisconsin Act 40, which required the agency to determine if its “statutory authority is sufficient to adequately protect wildlife and the environment from any adverse effect from the siting, construction, or operation of wind energy systems.”

WDNR’s legislative agenda is in development. Whether the legislature will take up these recommendations is currently unknown. While WDNR's interest in more comprehensive authority is consistent with its view of its responsibilities, the risk for project proponents and developers is that it will create new grounds for project opponents to rely on to challenge siting decisions. For many the goal of alternative energy sources -- solar, wind, biomass -- is still only desirable when it isn't in their backyard.

In response to a legislative directive, the Wisconsin Department of Natural Resources (WDNR) in November submitted a report to the Wisconsin Legislature making four recommendations to enhance its authority to protect wildlife and natural resources from wind project impacts:

1. require WDNR to prepare a formal “biological opinion” and require the Public Service Commission of Wisconsin (PSCW) to consider that opinion before PSCW approves a wind project; this opinion would 1) describe the potential impacts of the project to wildlife and natural resources; 2) identify potential conflicts with wildlife protection laws; 3) reach a conclusion as to whether the project has the potential to cause a significant adverse impact to habitat and fish and wildlife resources; and 4) reach a conclusion as to whether mitigation measures can be implemented to substantially reduce those impacts below the level of significance;
2. require a wind project developer to obtain Incidental Take Permits or Authorizations under the Wisconsin Endangered Species Law (Wis. Stat. s. 29.604) before constructing a wind project; currently, developers are encouraged but not required to obtain such authorizations;
3. expand the Wisconsin Endangered Species Law to protect endangered and threatened species habitat, to mirror the federal Endangered Species Act; currently, Wisconsin law only protects habitat if a direct take of a species will occur and an Incidental Take Permit or Authorization is required; and
4. require easements for wind facilities to authorize access to those properties for the conduct of biological studies by developers, WDNR personnel and/or authorized agents.

These recommendations reflect WDNR’s view that its standard regulatory authorities over wetland and waterway impacts don’t reach the agency’s growing concerns about protecting wildlife and habitat from turbine siting and operation. Current WDNR authority addresses impacts to waterways and wetlands from project construction, and obligates developers to implement construction site erosion control. Threatened and endangered species are protected from intentional and incidental “takes”. WDNR has implemented this authority through consultation and use of general Incidental Take Permits and Authorizations. Violations of general wildlife protection laws (Wis. Stat. ss. 23.095(1g), 29.011(1) and 29.039) are subject to enforcement, but are limited to intentional taking by unlawful activities, and WDNR does not consider them generally applicable to construction or operation of state or locally approved wind projects.

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.

As with “green washing” of products, which are subject to existing product liability law, there is an emerging area of law regarding liability for claims that a building marketed as “green” or alleged to achieve the desired platinum, gold, silver or standard Leadership in Energy and Environmental Design (LEED) certification has failed to do so.

As the LEED requirements and techniques for sustainable development become better understood and more widely adapted, more and more developers are seeking to build “green.” To the extent that the construction costs permit a manageable return on investment (ROI) and the specifications and requirements for such development are clearly spelled out in the various contractual documents, including especially the agreement with architects, we will likely see more and more claims that the resultant buildings are “green.”

Although some theories of liability will track areas in construction law, e.g., deficiencies in design, construction or installation, green buildings claims will face an additional layer of risk. Without such statutory coverage, cf strict product liability, today’s bases for liability may include breach of contract, tort, fraud and false advertising claims.

For example, in the Maryland case of Shaw Development v. Southern Builders, which was settled without an opinion, the loss of a tax credit based upon compliance with a LEED Silver certification level led to a claim of liability.

The best way to mitigate these risks is to ensure that all contractual documents are clear and consistent, project management is assured, information disclosures are accurate, and finally that insurance coverage, where available, is provided. With regard to documents, AIA form contract B214-2007 has been developed to provide some model contractual language; more than forty insurance carriers are now underwriting green building liability; and in many law firms, some of their attorneys and other technical people have become LEED accredited.

This is an area that will continue to develop as more and more green buildings are constructed. For more in-depth information on potential liability and tips to mitigate claims, see the Harvard Law School Environmental Law & Policy Clinic White Paper, “The Green Building Revolution: Addressing and Managing Legal Risks and Liabilities”.

Climate change legislation is dead for now. I won’t pretend it’s not depressing, even though I avoid the political channels and ignore the rhetoric. For those of us who haven’t refudiated climate change science, it’s a victory for the pessimists and evidence that Congress has a hard time addressing long-range problems, even if consequential.

With respect to regulation of GHG, it’s the worst of both worlds and no one should be happy (which is why I held out hope until the end that cooler heads would prevail). We’re still going to have regulation of GHG, the mechanism being EPA’s recently promulgated Tailoring Rule for GHG. One word. Ugh. Does this really make climate skeptics happy? Do they really think that they will somehow succeed in rolling back the Tailoring Rule? I don’t think so. On the other hand, we don’t have an economy-wide cap-and-trade or carbon tax regime. Are environmentalists happy? I still don’t think so. 

I’m left feeling a little like Rodney King. Certainly, the issue isn’t going to go away before the next Congress is sworn in.

As I have noted before, however, problems with climate change legislation don’t mean that Congress can’t enact legislation further regulating traditional pollutants. The three-pollutant bill now before the Senate already has a Republic co-sponsor, Lamar Alexander. Now, according to a report in E&E Daily, even Senator Inhofe is stating that he’s interested in working with Democrats to move three-pollutant legislation. Given the failure to move GHG legislation, hell is likely to get hotter before freezing over, but if Inhofe can really be brought on board, there’s no reason why legislation couldn’t pass.

Three-pollutant legislation shares one significant feature with the GHG issue. Like GHG regulation, efficient regulation is hampered by limitations in existing law, as we saw with the D.C. Circuit’s rejection of the trading regime in the CAIR regulations, and EPA’s much more limited trading program in the Transport Rule. Senator Voinovich, another Republican that three-pollutant legislation supporters would like to have with them, noted as much, saying that the transport rule would be a "stringent and inflexible regime." New legislation could provide for a more robust trading regime. We’ll see if that’s enough to bring Republicans on board.

I sure hope so. Right now, all we’ve got is a GHG regulatory program that won’t do much for climate change, but will cause my clients endless headaches, and a Transport Rule that’s probably the best EPA can do on traditional interstate pollution, but not nearly as cost-effective as it might be with new legislative authority. I remain an optimist, but sometimes it’s difficult.

The population issue has not received much comment when countries discuss ways to mitigate climate change and slow down global warming, according to Zhao Baige, Vice Minister of National Population and Family Planning Commission of China (NPFPC).

“Dealing with climate change is not simply an issue of CO2 emission reduction but a comprehensive challenge involving political, economic, social, cultural and ecological issues, and the population concern fits right into the picture,” said Zhao.

Zhao cites studies that link population growth with emissions and the effect of climate change, saying:

“Calculations of the contribution of population growth to emissions growth globally produce a consistent finding that most of past population growth has been responsible for between 40 percent and 60 percent of emissions growth,” citing the 2009 State of World Population report, released earlier by the UN Population Fund.

Although China’s family planning policy has received criticism over the past three decades, Zhao said that China’s population program has made a great historic contribution to the well-being of China’s society.

As a result of the family planning policy, China has seen 400 million fewer births, which has resulted in 18 million fewer tons of CO2 emissions a year, Zhao said. The UN report projected that if the global population would remain 8 billion by the year 2050 instead of a little more than 9 billion according to medium-growth scenario, “it might result in 1 billion to 2 billion fewer tons of carbon emissions.”

Meanwhile, she said studies have also shown that family planning programs are more efficient in helping cut emissions, citing research by Thomas Wire of London School of Economics that states: “Each $7 spent on basic family planning would reduce CO2 emissions by more than one ton” whereas it would cost $13 for reduced deforestation, $24 to use wind technology, $51 for solar power, $93 for introducing hybrid cars and $131 for electric vehicles."

Zhao admitted that China’s population program is not without consequences, as the country is entering the aging society fast and facing the problem of gender imbalance.

Whether, and, if so, how, population control should be an active part of a country’s climate control is certainly a difficult political and cultural issue – but one that fast-growing economies such as China, India, and Brazil may have to face in the coming years.

With work on financial reform almost complete, Senator Dodd announced this week that his remaining legislative priority is the enactment of the Livable Communities Act, S. 1619. There is a companion house bill, H.R. 4690. A hearing on the Senate bill will be held tomorrow.

It’s hard to be against livable communities and I may just be getting crotchety, but this legislation seems some combination of pointless and misguided. The legislative findings discuss traffic congestion, the percentage of oil used for transportation and CO₂ generated from transportation, and the need to encourage and sustain compact development and historical town centers.  And we’re going to solve this – or even make a dent – by making grants to “micropolitan” statistical areas? I don’t think so.

I agree that sprawl is a problem. I support transit-oriented development. However, there are reasons why we see development where we sit it in the United States. People still like the freedom and flexibility of personal automobile use. If we think that all that driving causes externalities – and I do – I’ve got two words for you: carbon tax. Until we make people internalize the cost of their living choices, they will continue to make those same choices and money spent on encouraging livable communities will be largely wasted. If we can’t summon the political will to tax carbon, we shouldn’t pretend that we’re solving the problem by spending money on micropolitan areas.

by Michele B. Corash and Robert L. Falk

Morrison & Foerster LLP

San Francisco, California

In the first quarter of 2010, the U.S. Securities and Exchange Commission (“SEC”) issued a potentially significant “interpretative release” providing guidance to public companies on their disclosure obligations relating to climate change (Release Nos. 33-9106; 34-61469). The release focused on recent business and legal developments regarding climate change and advised companies to more carefully evaluate the impact these developments may have on their business and whether such impact should be disclosed. 

As a technical matter, an interpretive release by the SEC does not create new legal requirements. Instead, it furthers a policy objective by “clarifying” the applicability of current SEC rules. In this case, the relevant SEC rules require the disclosure of material items associated with the impact of climate change on a business and cover a company’s risk factors, business description, legal proceedings, and management discussion and analysis. 

While the SEC’s Chair, Mary Schapiro, has carefully noted that this interpretive release should not be construed as the SEC making a statement about the facts surrounding climate change or global warning, the release does acknowledge an increase in climate-related legislation and international accords, as well as changing business trends where environmental issues have the potential to create new risks or opportunities for companies. In fact, in the release, the SEC specifically provided the following examples of areas where climate change may trigger disclosure requirements:

•  Impact of Legislation and Regulation:  When assessing potential disclosure obligations, a company should consider whether the impact of certain existing laws and regulations regarding climate change is material.  In certain circumstances, a company should also evaluate the potential impact of pending legislation and regulation related to this topic.
• Impact of International Accords:  A company should consider, and disclose when material, the risks or effects on its business of international accords and treaties relating to climate change.
• Indirect Consequences of Regulation or Business Trends:  Legal, technological, political and scientific developments regarding climate change may create new opportunities or risks for companies.  For instance, a company may face decreased demand for goods that produce significant greenhouse gas emissions or increased demand for goods that result in lower emissions than competing products. As such, a company should consider, for disclosure purposes, the actual or potential indirect consequences it may face due to climate change related regulatory or business trends.
• Physical Impacts of Climate Change: Companies should also evaluate for disclosure purposes, the actual and potential material impacts of environmental matters on their business.[1]

SEC Commissioner, Luis Aguilar, in speech discussing the SEC’s interpretive release concerning climate change, provided further guidance. He cautioned that each company “should ensure that it has sufficient information regarding [its] greenhouse gas emissions and other operational matters to evaluate the likelihood of a material effect arising from the subject legislation or regulation.”[2] Additionally, the SEC has long reminded companies that in determining whether certain information is material, the company should err on the side of disclosure.

The guidance provided in the SEC’s interpretive release is effective immediately and should be considered during the preparation of all future public company annual reports and SEC filings.

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.

By now, everyone is familiar with "Climategate", the scandal surrounding the hacked e-mails from the Climate Research Unit (CRU) at the University of East Anglia in England. The inner workings of CRU are significant because the CRU is responsible for preparing the land temperature records upon which most of the climate change studies are based and which, more importantly, form the foundation for the assessment by the Intergovernmental Panel on Climate Change (IPCC) that manmade greenhouse gas emissions are responsible for global warming. The e-mails at issue include many e-mails which had previously been requested by numerous Freedom of Information requests, but which East Anglia had refused to produce, including e-mails relating to the preparation of the IPCC 2007 Fourth Assessment Report.

The CRU Temperature "Adjustments"

Most people probably think that land temperature records are the product of the rather mundane ministerial task of collecting and reporting actual temperature readings from weather stations around the world. However, there are numerous "adjustments" to the actual temperature readings which are made by CRU. There are adjustments made to account for the different times of day that the readings are taken. In addition, it is well recognized that urban areas artificially increase the measured temperature because materials like concrete, asphalt and metal structures collect and retain heat during the day and release the heat during the night. This artifact, known as the "urban heat index" (UHI), must be accounted for in the land temperature records. The magnitude of the proper adjustments for UHI are the subject of intense scientific debate, and the extent of any adjustments made for UHI serve to reduce global warming attributed to manmade greenhouse gases. Scientists that have studied UHI have also made subjective calls as to which weather stations to include and exclude in their studies, thereby injecting another "adjustment" into the equation. Numerous Freedom of Information requests had been made to and resisted by East Anglia for the underlying raw temperature data and the UHI adjustments that CRU made to such data, as well as requests for the underlying data upon which the Director of CRU, Dr. Phil Jones, had based his previous UHI studies.
 

EPA Endangerment Finding Based Upon IPCC Assessments

As one of the foundational components of the IPCC's assessments, the accuracy of CRU's temperature records have far reaching implications. The IPCC assessments were relied upon by the United States Supreme Court in Massachusetts v. EPA, and were a cornerstone of the EPA's Endangerment Finding in response to Massachusetts.

Commonwealth of Virginia's Challenge to Endangerment Finding

Although there have been numerous challenges to EPA's Endangerment Finding, several have specifically raised Climategate as the basis for their challenges. Noteworthy are the separate challenges filed by Virginia and Texas. In its challenge, Virginia claims that the Climategate e-mails demonstrate that the, "CRU scientists questioned the reliability of their own data, the methodologies used in developing and analyzing such data, and the conclusions based thereon." Virginia maintains that the EPA had a duty to independently investigate and verify the accuracy of the CRU temperature records upon which most of the climate change research and IPCC assessments are based. In addition, Virginia claims that the, "EPA substantially ceded its obligation to make a judgment whether GHGs may endanger public health and welfare to the IPCC, an international body that is not subject to U.S. data quality and transparency standards."

State of Texas' Challenge to Endangerment Finding

Texas' 38 page Petition for Reconsideration takes the drama and intrigue to the next level, painstakingly discussing the Climategate e-mails, the context in which they were made, and the conclusions which Texas maintains should be drawn therefrom:
"Previously private email exchanges among top IPCC climatologists reveal an entrenched group of activists focused less on reaching an objective scientific conclusion than on achieving their desired outcome. The scientists worked to prevent contravening studies from being published, colluded to hide research flaws, and collaborated to obstruct the public's right to public information under open records laws."

The future of Climategate in the courts is uncertain. It may eventually be viewed as the event that exposed the political agenda behind some of the climate change "science", or it may be viewed as a tempest in a teapot. In any event, its inclusion in these legal proceedings ensures that Climategate will for the foreseeable future be included in the ongoing climate debate and certainly that it will survive beyond the usual 24 to 72 hour news cycle.

Will environmental issues play a prominent role in the upcoming elections? It appears so, particularly if your state’s Senior Democratic Senator is up for re-election, and is also Chairman of the Agriculture Committee and a member of the Committee on Energy and Natural Resources. Senator Blanche Lincoln (D. Ark.) cast the deciding vote in the Senate for health care reform, and received the typical “big government, liberal” moniker. Seven Republicans have lined up to run against her, and her $5 million (and growing) campaign war chest. But how will the competing campaigns deal with environmental issues? Senator Lincoln has a lifetime score of 49% on environmental issues from the League of Conservation Voters, an environmental activist group she has proudly referred to as “extremists.” Of the Democratic Senators up for re-election, Sen. Lincoln ranks the lowest. Labels are easy to assign,  but are rarely very accurate.   

The school of thought at the end of 2009 was that either Congress would enact climate change legislation prior to March of 2010, or EPA would enact its own climate change rules to implement the impending endangerment rulemaking. Not so fast. Not only is there no climate change legislation, Congress is now debating S.J. Resolution 26: “Congress disapproves the rule submitted by the Environmental Protection Agency relating to the endangerment finding and the cause or contribute to findings for greenhouse gases under Section 202(a) of the Clean Air Act (published at 74 Fed. Reg. 66496 (December 15, 2009), and such rule shall have no force or effect.”

Is SJ-26 a purely partisan move, with no chance of passage? Perhaps. Just note that Senator Lincoln is a prominent co-sponsor, one of 40 senators who have signed on, one of three Democratic co-sponsors, all of whom are up for re-election (Ben Nelson, D. Neb. and Mary Landrieu, D. La.  being the others). Not all Republicans signed on—Scott Brown, newly elected from Massachusetts, passed on this one.   

Environmental groups have already started running radio attack ads in Arkansas. Even though the ads give Senator Lincoln a “dirty air” label, Senator Lincoln is likely hoping the voters are listening—hoping that she gains notoriety for opposing what she labels “job killing” climate change regulations—notoriety that may improve her standing with Arkansas voters come election time. (Again with the labels)   

SJ-26 is not Senator Lincoln’s first foray into the climate change debate. At the end of October, 2009 Senator Lincoln attached a little known rider as a last minute addition to the current budget—a rider that now prohibits EPA from spending any money to require livestock producers to report GHG emissions under the new GHG reporting rules. As Chairman of the Agricultural Committee, she could pull this one off. Cattle and pigs may be flagellant, accounting for 1.7% of all GHG emissions (more by some estimates). But for now EPA cannot make anyone count up the farts, at least not for this fiscal year (ending September 30, 2010). Whether EPA should, or should not have included livestock producers in the GHG reporting rule is a judgment call, and one that we can all disagree upon. The importance of the farm vote in Arkansas, however, cannot be over estimated. And for those who believe this is just a matter of Southern politics (or “pork”), the same budget bill included a last minute exemption for 13 Great Lakes cargo steamships from a proposed EPA rule to require lower sulfur fuel.

Is this form of Congressional veto legislation a new era of environmental regulation? Some have referred to these efforts as borrowing from the Newt Gingrich playbook. Those who have followed these issues more closely than me will have to answer that one. For now, it’s just the beginning of what will prove to be a very interesting political season. Sen. Lincoln trails the leading contenders in recent polling. 

On February 26, 2010, Dan Farber, Doug Kysar, Rob Glicksman and I will be on a panel at Georgetown about emerging issues at the intersection of Constitutional and Environmental Law. We'll puzzle over recent developments and the constitutional shape of environmental law to come. There is much to discuss. We have the limitations on judicial involvement, say, the political question doctrine and the treaty clause in the context of climate litigation. Summer suggests that Scalian standing is alive and well, and that procedural standing is hardly, er, left standing. And then there are 1:1 ratio limits to awards of punitive damages in cases involving environmental harm with which to contend under substantive due process.

Federalism could experience resurgence. Oneida and Kelo give the states an opening to do more (and do worse). Yet preemption still looms large (as with cap & trade), and sovereign immunity jurisprudence has diminished state accountability.

And of course, there is an enfeebled Congress, which behaves as if its powers are as a majority of the Supreme Court imagined them to be in 1935. While non-delegation is still in desuetude, and Raich revived rational basis review of Commerce Clause authority for the time being, it's any wonder that Congress delivers so little about national environmental challenges these days. Or anything else, for that matter. But if we're really at war, then how about Congress using its war powers to address environmental challenges that impinge upon national security, like climate change? And does Missouri v. Holland give Congress authority unbridled by the 10th Amendment to address international environmental issues, say, water pollution? Climate change?

Which brings us back to Article II separation of powers, and Chevron. For the next 2 1/2 years, all may learn to love Justice Alito's interpretive approach in last term's Kensington.

What does the future hold? Who knows, except for ineffective congressional responses and a Supreme Court that seems at least skeptical about national environmental programs. So maybe a constitutional devolution of sorts. Opportunities abound for constitutional innovation under the General Welfare and Due Process Clauses, or invocation of state (here and elsewhere) provisions that putatively provide a right to a healthy environment.

And if judicial takings are constitutionally cognizable (this term's Beach Renourishment), then why not sustainable development under the Privileges & Immunities or Equal Protection Clauses, or the 9th Amendment?

Or maybe not. It is, after all, a constitution we are expounding.

On January 21, 2010 thousands packed the auditorium at the University of Charleston in Charleston West Virginia and tuned in on television and radio for the debate between Massey Energy CEO Don Blankenship and environmentalist Robert F. Kennedy, Jr.

Asked about his primary concerns for the future of energy, Mr. Blankenship stated that they were the security of this country and improving the quality of life in this country and throughout the world. This answer became somewhat of a theme for Mr. Blankenship, as he stated his concern for the health and well-being of people, which is dependent on their quality of life, which is heavily dependant on affordable electricity, which is heavily dependent on coal.

When asked the same question, Mr. Kennedy offered several minutes of comments similar to other speeches he has given around the country concerning Appalachia and coal in which he highlighted his families’ ties to West Virginia along with his views against surface mining.

The audience, having a near equal number of supporters from both sides, was relatively subdued thanks to early pleas from University of Charleston President and event moderator Dr. Welch to hold-off applause until the end. At times, however, both debaters received loud applause for their answers to questions.

Throughout the debate, Mr. Kennedy stated the many health and environmental issues he believed to be caused by coal, while Mr. Blankenship reminded Mr. Kennedy that many of his biggest issues with coal, such as the burning of coal and its contribution to Mercury in water, are primarily caused by other countries with much a higher usage of coal, such as China and India.

Mr. Kennedy also focused a great deal on alternative energy, such as wind and solar energy, as well as West Virginia’s need to switch its focus on these alternative energy sources. Mr. Blankenship responded that if it was profitable to build solar panel fields or wind farms, without government subsidies, it would be happening at a greater rate than is occurring. Blankenship stated that his company is pouring hundreds of millions of dollars into the coal industry because that is where the investment will pay off in a free enterprise market.

While the security at the event mirrored that of international flight travel, the debate itself was a success, going off without much disturbance other than the occasional burst of applause.

When Scott Brown was elected to fill Senator Kennedy’s senate seat, news reports highlighted the impact on health care legislation and the loss of the filibuster-proof sixty vote Democratic majority in the Senate. In environmental circles, however, many commentators pointed out the potential impact on climate change legislation. 

Prior to his election, most believed that once Congress passed the health care bill, it would turn its full attention to climate change legislation and pass some form of legislation to limit green house gas (“GHG”) emissions. The loss of this key Democratic Senate seat makes the prospect of GHG legislation in the near future seem less likely, although some commentators take the contrarian view. They argue that if health care reform moves to the back burner, the chances of passing a climate bill would increase because Democrats need a major legislative victory to bolster the 2010 election efforts.

Following the United States Supreme Court’s decision in Massachusetts v. EPA, 549 U.S. 497 (2007) finding the Environmental Protection Agency (“EPA”) has the authority to regulate carbon dioxide as a pollutant under the Clean Air Act (“CAA”), some form of mandatory GHG controls, either through legislation, regulation, or a combination of both, has seemed inevitable. In response to the Massachusetts decision, EPA and Congress have been moving on parallel tracks to regulate GHG emissions. 

EPA has issued a number of proposed and final rules, including a final mandatory GHG reporting rule, 74 Fed. Reg. 56260 (Oct. 30, 2009), an Endangerment and Cause or Contribute Finding that motor vehicle GHG emissions contribute to GHG pollution and threaten public health and welfare, 74 Fed. Reg. 66496 (De. 15, 2009), and a proposed “Prevention of Significant Deterioration and Title 5 Greenhouse Gas Tailoring Rule,” 74 Fed. Reg. 55292 (Oct. 27, 2009), among others. EPA and the National Highway Traffic Safety Administration also announced a joint proposal to establish light duty vehicle GHG and mileage standards for model years 2012 through 2016.

In response to concerns expressed by both industry and environmental interests that the CAA is not the best vehicle for regulating GHGs, factions in the House and the Senate have proposed sweeping legislation to reduce GHG emissions, the Waxman-Markey Climate Change bill, H.R. 2454, “The American Clean Energy and Security Act of 2009,” in the House of Representatives, and  the Boxer-Kerry bill, the “Clean Energy Jobs and American Power Act,” in the Senate.  Both include GHG emissions reductions targets and use a cap and trade scheme to achieve those goals. In addition, they include a variety of other measures to encourage investment in alternative energy sources and energy efficiency. 

In recent months, efforts to move forward with this legislation seems to have been eclipsed by efforts to pass comprehensive  health care legislation, but the conventional wisdom was that some form of legislation would be passed once health care was put to rest. Now that the Democrats have lost a filibuster-proof super majority, prospects for climate change legislation seem to be dimming.

On the EPA regulatory front, Senator Lisa Murkowski (R-Alaska) has been on the attack, trying to prevent EPA from promulgating GHG regulations that limit emissions from major sources. Most recently, she filed a “disapproval resolution” on January 22, 2010, seeking to retroactively veto EPA’s endangerment and cause or contribute findings that GHGs endanger public health and the environment, thereby .blocking EPA’s GHG regulations. 

A disapproval resolution is a procedural mechanism that prohibits executive branch agency rules from taking effect. It only requires 51 votes and is not subject to filibuster rules. Senator Murkowski claims to have the backing of 39 other senators, including three Democrats, Sen. Blanche Lincoln (D-Ark.), Sen. Ben Nelson (D-Neb., and Sen. Mary Landrieu (D-La.). She introduced this resolution on the heels of Scott Brown’s election, and she does not expect this resolution to reach the floor for a vote before Scott Brown is sworn into office.

Even if she is able to garner 51 votes in the Senate, the House must pass a similar resolution, and it must be signed by the President to go into effect. Even if it does not succeed, it signals a widespread lack of support, even among Democrats, for legislation controlling GHG emissions this year.  Scott Brown’s election should make it more difficult to enact climate change legislation, especially with an election season just around the corner because his election is being interpreted by many to signal the electorate’s disapproval of the Obama agenda. 

In the meantime, if there is no climate change legislation passed, EPA likely will continue to move down the regulatory path of limiting GHG emissions using its authority under the CAA.

In the past several decades, due in large measure to the persistence of innovative independent oil and gas operators, advancements in drilling and completion technology and the increased demand for natural gas during the expanding economic times that existed prior to year-end 2008, a paradigm shift occurred in the domestic natural gas market that will have significant impact in areas of the U.S. that, heretofore, were not significant producers of the commodity. Prior to this development, supply tightness and price volatility were characteristic features of the natural gas market. Now, due to these " Mega" shale and tight sands gas plays, there will be increased environmental scrutiny of this sector's activities, in addition to the dampening of price swings.

            The U.S. gas supply currently is predicted to be at least 150 years at use levels similar to those existing in 2008. Only a few short years ago, forecasters were predicting the need for massive imports of liquefied natural gas to meet predicted near term demand. This change in conditions has very significant implications politically and certainly presents interesting opportunities on a variety of fronts for environmental attorneys.

            One particularly interesting aspect of these newly found natural gas reserves is the fact that a significant portion of this exploration, production, processing and transmission activity will be occurring in areas of the U.S. that have had limited exposure to such activity. The last ten (10) years of rapid expansion of natural gas activity in the Barnett Shale area of Texas, i.e., North Central Texas and the Dallas-Ft. Worth metroplex, is a forerunner for what is likely to occur as the resource development expands to other known shale deposits.

            Needless to say, there is opportunity for tremendous growth in local tax base, ample employment opportunities for certain skill sets, increased income to property owners, and, most certainly, a variety of allegations of environmental harm from anti-drilling opposition. Much of the latter in the very recent past in the Barnett Shale area has been directed at perceived increases in emissions of air contaminants, e.g., VOCs and "toxic" constituents. To date, snapshot air quality sampling has not confirmed any problem. (see January 12, 2010, Texas Environmental Quality Press Release – Oil and Gas Air Tests in Ft. Worth find "No Cause for Concern".) However, on the same date, the Mayor of Dish, a rural community of less than 200 residents, was appearing before another state agency, the Texas Railroad Commission, seeking a cessation to all natural gas drilling, production, processing and transmission activity with the contention that this community was besieged by toxins and odors emanating from nearby natural gas activity. (Additional TCEQ air sampling results from recent tests in that rural setting are due to be released this month.) 

           Numerous other environmental related contentions relative to the development of the Barnett Shale reserve have generally been directed at the well completion phase where large volumes of fresh water with additives are utilized in hydraulic fracing (pressurized mixture for breaking apart the formation rock to allow for the natural gas to flow), the disposal of wastewater and the specifics of the proprietary formulas for the additives. In addition, there are a variety of claims relative to general safety, increased truck traffic and disturbances of property for the placing of associated gathering and transmission lines.           

            This paradigm shift in the natural gas reserve potential should afford many in our profession an excellent opportunity to provide sound advice and counsel utilizing the experiences we have gained in addressing similar issues in the past.

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

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.

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.

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.

On June 29, 2009, Department of the Interior (DOI) Secretary Ken Salazar announced several initiatives to aid development of solar energy facilities on federal lands in the Western U.S. Working with Western leaders, the DOI initiative would:

• Designate prime zones for utility-scale solar development
• Open new Bureau of Land Management (BLM) offices to facilitate permit processing
• Expedite project proposals. 

Twenty-four tracts of BLM land were designated as Solar Energy Study Areas, upon which projects of 10 megawatts or greater would, under this initiative, be eligible for priority processing. This “priority processing” is commonly referred to as “fast-tracking.” In early November 2009, Secretary Salazar announced the fast-tracking of six renewable energy facilities located on federal land in the State of California. 

Fast-tracking is not intended to circumvent any environmental or other process, but rather to facilitate the identified projects identified by the federal agencies involved (most commonly the BLM), giving priority to those that are marked as fast-tracked projects. Nevertheless, several fast-tracked projects, and fast-tracking in general, has come under criticism by some members of the environmental community and others.

This criticism is misplaced to the extent that it suggests that fast-tracked projects are not subject to the same rigorous scrutiny as non-fast-tracked projects. Every utility-scale project on federally-owned land is subject to review under the National Environmental Policy Act (“NEPA”). NEPA mandates thorough review of all environmental aspects of any utility-scale energy project on federal land. 

The NEPA process does not allow for “short cuts” or circumvention of any part of the process on projects upon which NEPA applies. Accordingly, fast-tracking of renewable projects does not result in a less meticulous or careful environmental review, just an expedited one. Efficiency does not equate to inadequacy, and such criticisms are misplaced.

Obama’s EPA finds itself embroiled in a controversy that recalls the Bush Administration: trying to control what the agency’s employees can say about climate change. Today’s controversy is more limited, and more nuanced, than earlier ones. EPA is no longer asking its employees to deny that climate change exists. Instead, EPA has asked two of its attorneys to stop identifying themselves as EPA experts when they publicly criticize a cap-and-trade system for regulating greenhouse gases. Still, I wonder why EPA cares.

EPA previously allowed the attorneys to criticize cap-and-trade as private citizens. The two wrote letters and opinion pieces claiming cap-and-trade doesn’t work, primarily because companies can buy “offsets” that allow them to continue operations without reducing their emissions. They claim a carbon tax would work better than cap-and-trade.

Their writings have not had much effect on the debate in Congress and elsewhere. So the two recently switched from the written word to YouTube, posting a carefully produced video in which they more assertively cite their EPA credentials and experience to justify their critique of cap-and-trade. And as Grist recently noted, EPA took the bait.

EPA should stop worrying about the two attorneys. The two fail to recognize that cap-and-trade works fine when it’s done right. In fact, EPA itself runs one of the most successful cap-and-trade programs in the world. Several years ago, EPA needed to reduce smog in the eastern US. Instead of using typical command-and-control regulations, EPA created the NOx Budget Trading Program. Just last month, EPA released a report on the results achieved by that program. According to EPA, “summertime NOx emissions from power plants and large industrial sources were down by 62 percent compared to year 2000 levels and 75 percent lower than in 1990.”

And the emitters were able to achieve these reductions at a lower cost by trading with other emitters who had cheaper options for compliance. Smithsonian magazine reported a recent estimate that businesses paid only $3 billion to achieve emission reductions that would have cost them $25 billion under traditional command-and-control regulation.

The two attorneys don’t even need to worry about companies finding ways to avoid compliance with the system. Last year, only two emitters failed to comply out of 2,568, even then by only a modest amount. This is not a system full of loopholes.

Finally, the two attorneys ignore the fact that their own agency, under the Obama administration, will get to write the rules for how companies comply with a carbon cap-and-trade system. Both the Waxman-Markey and Boxer-Kerry bills require EPA to write rules regulating how companies can use “offsets” to comply with the system. Surely the agency can write rules that make this cap-and-trade system work as well as the NOx system the agency already runs.

And one more thing: As Grist reports, many experts think that the alternative — a carbon tax — may not achieve the emission reductions we need. We can only guess what carbon price might lead to the right amount of emission reductions. We’ll get the tax revenues we predict, but not necessarily the carbon reductions.

So the two attorneys should lighten up on their criticisms. But even if they don’t, EPA should stop worrying about them so much.

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 5^th 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.

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

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.

On July 8, 2009, at the meeting of G8 world leaders, the United States agreed to a benchmark to limit climate change. It joined some other industrialized countries by agreeing that the globe should not warm up more than 2º Celsius (that is 3.6º Fahrenheit). A limit of 2º Celsius arose out of a scientific consensus. Scientists assembled by the United Nations in 2007 said that the world could face significant dangers if we warmed it up more than 2º Celsius. But David Archer at the University of Chicago said that it’s not a hard and fast danger point, more of a judgment call.

The results left some Western leaders cheering. British Prime Minister Gordon Brown called the group’s statement a “historic agreement.” Germany Chancellor Angela Merkel said it was “a clear step forward.” However, White House Press Secretary Robert Gibbs was a little less definite, saying: “I think in many ways success for us is going to be getting something through Congress and to [the President’s] desk. It puts in place a system, a market-base system, that lessens the amount of greenhouse gases in the air. Look, that’s going to be the true measure of things.” 

So what was agreed to on July 8? Michael Forman, Obama’s chief negotiator at the Summit said: [The G8 countries] pledged to confront the challenges of climate change and committed to seek an ambitious global agreement. They agreed to join with other countries to achieve a 50% reduction in global emission by 2050 and a goal of 80% reduction by developed countries by 2050.” 

But, we should realize that there is a hitch. The 50%and 80% reductions do not refer to the same starting number. The language in the G8 declaration is that there will be an 80% reduction from 1990 or later years. In other words, nations could pick their own starting point. In the United States, emissions have increased nearly 16% since 1990 so there is quite a bite of room in deciding where to start. Also, much of the world’s population is in non-G8 countries. China, India, Mexico and Brazil feel the better-established nations are not doing enough in the short term. They also worry that major reduction commitments on their parts, even if below the 80% target of rich nations, would hamper their economic growth.

But, it would certainly appear that the G8 accord is probably an incremental success. Until now, the United States has resisted embracing a target because it implied a commitment to dramatically change the way the world generates electricity, fuels its cars and builds its houses. The long range goals over the coming decades may be easier to agree upon when what the short-term action should be to start moving in the right direction. We all need to hope for the best.

With the May 2009 enactment of comprehensive energy legislation, Kansas joined a majority of states establishing renewable and clean energy requirements. Although a significant step in the development of renewable energy, the story receiving the most attention was that the new law, ironically, resurrected a presumed-dead coal-fired power plant project. That project, which involved two proposed 700 megawatt coal-fired generating units, had previously been denied a construction permit solely due to concerns over the climate change impact of perceived excessive emissions of carbon dioxide. The legislature further enacted limitations on the broad regulatory authority relied on by the state environmental agency to deny the coal plant project a permit. The question now being asked is whether the complex political compromise that enabled the passage of the legislation was a “win-win” or a “no-win” result.

Biofuels are the subject of much recent interest and investment, as indicated by a recent Wall Street Journal article on biomass fueled power plants. Given the increasing scrutiny that is being given to “green” marketing claims by the Federal Trade Commission and various citizen groups (and the potential for SEC scrutiny of similar claims in public offering prospectuses), care should be taken to analyze and document the basis for any claims of carbon neutrality or other environmental benefits associated with particular biofuels.  

 Advantages cited by biofuel proponents include reduction of greenhouse gas (GHG) emissions as compared to fossil fuels, energy security, benefits from domestic production and green job creation. Downsides of biofuels production can include displacement of food crops and increased food prices, deforestation and conversion of grasslands to crop lands, GHG emissions associated with growing and converting biofuels, and other environmental impacts such as nutrient runoff and water consumption.
 

While all biofuels are renewable energy sources, this category includes a variety of liquid and solid fuels with a variety of sources and uses. For example, power plants can utilize biomass, generally in the form of wood or municipal solid waste. In the transportation arena, fuel can be made from corn and cellulose-based ethanol, or oils from soybeans, palm oil or animal wastes that can be used directly or chemically processed into biodiesel. Additional types of biofuels include syngas and algae-derived fuels. 

Numerous “clean tech” companies as well as established energy multinationals have invested in biofuels production. Examples include Mascoma Corporation and Verenium Corporation (cellulosic ethanol), Changing World Technologies (biodiesel from animal waste), GreenFuel Technologies (algae-based fuel) and Biogas Energy and Harvest Power (methane from agricultural wastes). Large energy and waste management companies are also investing heavily in biofuels, including Covanta (biomass-fired power plants), BP, Chevron, and Shell Oil (bio-ethanol and biodiesel), and Waste Management (landfill gas). The market for biofuels is sensitive to oil prices and demand for transportation fuels, as evidenced by recent bankruptcies and economic distress in the corn-based ethanol industry.

Biofuels are supported by a variety of federal and state mandates, subsidies and tax credits. For example, the Energy Policy Act of 2005 established a renewable fuel standard, and this standard was increased by the Energy Independence and Security Act of 2007. Further, the Food, Conservation, and Energy Act of 2008 provides financial assistance to biorefineries, funding for advanced biofuels and biomass research, biomass crop assistance, and tax credits for cellulosic ethanol production, among other measures. In addition, the American Recovery and Reinvestment Act of 2009 provides for loan guarantees, tax credits, and Department of Energy research related to biofuels and biomass energy.   Ethanol proponents are pressing Congress to further increase the mandate for ethanol use in transportation fuels, but many groups are simultaneously opposing such an increase.

Biofuels are often claimed to be “carbon neutral” (i.e., producing no net GHG emissions), because the plants from which they are derived only emit the same amount of carbon they would have released if they naturally died and decomposed, as compared to fossil fuels that release carbon stored in the earth’s crust that would not have been emitted. But not all biofuels are equal and generic claims of carbon neutrality need further scrutiny. 

Recently, a number of studies have attempted to assess the lifecycle GHG emissions of various biofuels. For example, several studies, including a leading study by the University of Minnesota and a California study performed in association with its low-carbon fuel standard, have concluded that corn-based ethanol may result in minimal net GHG emission reductions or even net GHG increases. This conclusion has been supported by scientists from The Nature Conservancy in a study published in Science that examines the GHG emissions and other environmental impacts of land use changes involved in the production of various biofuels. They conclude that there are significant differences in the “carbon footprint” of different biofuels based on how and where the underlying crops are grown.    In its recent proposed regulations for the National Renewable Fuel Standard, EPA has proposed to require evaluation of GHG emissions over the full lifecycle of various biofuels and to establish life cycle GHG emission reduction thresholds as compared to a lifecycle emissions analysis of baseline petroleum fuels – a requirement that is opposed by corn-based ethanol proponents.

It is clear that advanced biofuels, such as cellulosic ethanol and some types of biodiesel, hold great promise to reduce GHG emissions from transportation and other fuel uses. Such biofuels are clearly part of the solution in mitigating climate change and developing a sustainable energy economy, but careful scrutiny is needed to ensure that the full life cycle GHG emissions and other environmental impacts of biofuels are considered by policymakers and investors.

Posted by Christopher P. Davis, Goodwin Procter LLP

On May 2, 2009, Secretary of the Department of the Interior, Ken Salazar held a public meeting just outside Las Vegas, in the Red Rock Canyon National Recreation Area, to announce the opening of four new BLM offices to handle renewable energy permitting. The offices will be located in Nevada, Arizona, California and Wyoming, and have been designed to address the backlog of pending renewable energy project applications. The DOI estimates that 200 solar applications and over 25 wind projects are pending with the BLM in the western states.

            I was one of the 25 or so attendees lucky enough to have the honor and privilege to be invited to a meeting with Secretary Salazar prior to the public meeting where this announcement was made. This earlier meeting was attended by developers of solar, wind and geothermal projects and others in the renewable energy industry. I was impressed by Secretary Salazar’s level of knowledge about both renewable projects and the BLM permitting process, as demonstrated by his comments and questions. Secretary Salazar also announced that $305 million in American Recovery and Reinvestment Act(ARRA) monies will be used for BLM projects to restore landscapes, spur renewable energy development on public lands, and create jobs. I left the meeting with confidence in the Secretary’s commitment to renewable energy and to the implementation of changes, policies and programs that will convert renewable energy from a noble goal to a reality.

Linda M. Bullen

ACES & Eights? Swaps and Other Derivatives in Climate Change Legislation

By

Stephen M. Bruckner

            On May 21, 2009, the House Energy and Commerce Committee approved H.R. 2454, the American Clean Energy & Security Act (ACES), by a 33-25 vote. As the Committee touts its efforts on the much-examined markup of H.R. 2454 (aka, “Waxman-Markey discussion draft”), coalitions from each side of the ideological spectrum assail the legislation as toothless and watered-down, or a disaster for the American economy.  The bill has a long way to go, including review by other House committees and, of course, the Senate, so it may be premature for Committee Chairman Henry Waxman to bestow the mantle of “decisive and historic action.”

Buried within ACES’ cap-and-trade emissions plan are a series of provisions that detail how big banks, hedge funds, and traders can use complex securities and derivatives to profit from the new carbon allowance market.  We all watched aghast as “credit default swaps” and similar financial alchemy led to the melt down of Wall Street and the credit markets. Do these types of investments have a proper role in climate change and energy legislation?  In a bill that already has plenty of political and policy hurdles, why add financial regulation?

Title III, Subtitle D of ACES, entitled “Carbon Market Assurance”, amends the Federal Power Act to create a financial instrument known as a “regulated allowance derivative”, which can include a “swap agreement”, and directs the Federal Energy Regulatory Commission to establish regulations for these financial vehicles.  Title III, Subtitle E of ACES, entitled "Additional Market Assurance", addresses transactions in derivatives involving energy commodities such as coal, gasoline, and natural gas. These provisions open the door for financial institutions to partake in the new market created by ACES’ emission allowances.  It allows companies, funds, and traders to purchase and trade emission allowances, and to devise complex derivative instruments to sell and trade, picking up commissions and charging fees along the way.  As a result, the theoretical value of the allowances and their derivatives will be determined, in large part, by the manipulation and speculation of financial parties with little or no concern for carbon emission standards or federal climate policy beyond immediate monetary gain. 

Simply put, the emerging market for new carbon allowances created by the bill could be (at best) undermined or (at worst) commandeered by financial contrivances that are already partially responsible for the nation’s current financial instability.  The fundamental value of the new cap-and-trade 'products' will necessarily fluctuate as the emissions market adjusts and stabilizes.  If big banks and hedge funds can use puts, swaps, options and other speculative instruments, which the federal government has yet to capably regulate, the stability of emissions allowances and carbon trading could be placed at risk.  The chaos visited upon the economy at large by these and other financial instruments should cause hesitation and serious consideration as to whether they belong in Congress' first attempt at comprehensive climate change legislation. 

In the desert of New Mexico, the effect of another of the new Administration's shifts in previous federal environmental policy is being felt. As difficulties in permitting and building new coal-fired power plants have become more substantial, many power plant projects across the United States that were on the drawing board several years ago have fallen off of it. A notable exception is the Desert Rock Energy Plant, a joint project of the Navajo Nation's Diné Power Authority and Houston-based Sithe Global LLC that would be built on lands of the Navajo Nation. A significant step forward for that project had been EPA's issuance of the PSD permit in July of 2008. But recently, that step forward in air permitting has been followed by an administrative step back.

The Desert Rock Energy Project would involve construction of a 1500 megawatt coal-fired power plant on the Navajo Reservation. EPA's Region 9 had issued a final PSD permit for the project on July 31, 2008. The plant incorporates sophisticated, state of the art air pollution control technology, but it does not employ the coal gasification process known as "integrated gasification combined cycle" technology. Opponents to the project filed petitions with EPA's Environmental Appeals Board for review of the decision issuing the final PSD permit. The opponents raised greenhouse gas issues as well as other air quality and endangered species issues. Project opponents included the State of New Mexico.

In January, Region 9 filed its brief responding to the issues raised by the petitioners except the issue of whether the permit must contain an emissions limit for carbon dioxide. It withdrew the permit's response to comments explaining the basis for not evaluating carbon dioxide emissions in the BACT analysis. Region 9 requested the opportunity to file a Surreply Brief by April 27, 2009 to give EPA officials under the Obama Administration opportunity to consider more fully the positions previously advocated by EPA under the Bush Administration.

The EPA Administrator's office requested that Region 9 reconsider its permitting decision with respect to use of PM₁₀ as a surrogate for PM_2.5 to satisfy PSD requirements; consideration of IGCC in the BACT analysis; ESA consultation issues; MACT analysis for hazardous air pollutants; and the sufficiency of additional impact analysis. In response, on April 27, 2009, Region 9 asked the Environmental Appeals Board to remand the PSD permit for reconsideration and development of additional information by EPA. If the motion to remand is granted, the PSD permit will be sent back to EPA for further analysis, which could take many months and trigger another round of public comment.

The request for voluntary remand of this key permit for the high profile Desert Rock Energy Project is evidence of the degree to which the EPA under the current administration is reevaluating previous policy. In the case of Desert Rock, the EPA seeks to reevaluate a permit that it had already issued and defended in an appeal by opponents to permit issuance. If EPA's request for remand is granted, the extent to which EPA changes its permit decision remains to be seen. But the process itself presents the prospect for significant delays and additional public comment at a minimum.

A report discussed at the March 31st meeting of the Midwestern Governors Association that highlights significant "leakage" if a regional GHG cap-and-trade program were adopted in the Midwest may be the beginning of the end for the Midwest GHG cap-and-trade program.  Essentially, the report notes the likelihood of significant increases in GHG emissions ("leakage") in other parts of the country that would result from a proposed regional cap-and-trade program.  According to a report cited in Carbon News, a companion publication of Inside EPA, the issue of leakage undermines the Midwest effort and attenuates the level of enthusiasm among state officials for a regional program. 

The report, “Cap-and-Trade Modeling: Initial Policy Run Results,” presented by the Pew Center on Global Climate Change, projects that more than half of the planned GHG emissions cuts would be offset by GHG emissions increases in other states.  Since only six states signed the Midwest Accord, the model assumes that the Midwest program would apply only to power generators within these six states, leading to an increase in electricity imported from non-participating border states.  The governors of Illinois, Iowa, Minnesota, Wisconsin, Kansas and Michigan (along with the Canadian province of Manitoba) signed onto the Midwest Accord in November 2007.  Ohio, Indiana, South Dakota and Ontario are observers to the process. The final meeting of the accord’s advisory group is May 11-12.  

Another factor that strongly contributes to a stalled Midwest GHG effort is the increasing likelihood that Congress will pass a national GHG cap-and-trade program.  On April 2, the House Energy and Environment Committee released a discussion draft of “The American Clean Energy and Security Act of 2009” (the Waxman-Markey bill).  While many important details have been left for future discussion, this comprehensive legislation promotes renewable sources of energy, carbon capture and sequestration technologies, energy efficiency, and would establish a national GHG cap-and-trade program.   The draft bill would apply to all sources greater than 25,000 tons per year and set aggressive reduction targets of 3% below 2005 level by 2012, 20% below by 2020, 42% below by 2030 and 85% below by 2050.  It has been projected that such reductions would virtually eliminate the use of carbon base fuels in the United States.  According to Rep. Waxman, D-California, a final draft of the bill will be sent to the floor for debate by Memorial Day.   

While some semblance of a Midwest GHG model rule may continue, it appears that any such effort under the Accord would serve simply as a prototype for a federal GHG cap-and-trade program (as would the Western Climate Initiative program).  Others argue that if the federal government fails to enact climate policy reasonably soon, the Midwestern Accord could serve as a “backstop,” but the more likely scenario would be the on-going effort at the EPA to regulate GHGs under the Clean Air Act.

Roger Walker
George von Stamwitz
Armstrong Teasdale LLP
 

Wind energy is a centerpiece of the Obama Administration’s renewable energy resources program, and coastal wind development offers enormous potential yet faces severe challenges. On April 2, 2009 Secretary of the Interior Ken Salazar spoke of major findings from a report he had commissioned from Interior scientists.  Secretary Salazar said, “More than three-fourths of the nation’s electricity demand comes from coastal states and the wind potential off the coast of the lower 48 states actually exceeds our entire U.S. electricity demand.” 

While the National Renewal Energy Laboratory has identified more than 1,000 gigawatts of wind potential off the Atlantic Coast and more than 900 gigawatts of wind potential off the Pacific Coast, the Interior Report finds the Atlantic Coast to have greater feasible potential for wind energy due to its relatively shallow ocean depths and proximity to population centers.  By contrast, the deeper waters of the West Coast are less ideal for wind power, while Alaska’s high wind and shallow waters create an excellent potential power source-- but it sits too far from the lower 48 states’ consumers.

However, two major obstacles loom for the major renewable energy goals of Secretary Salazar and President Obama:  insufficient electrical transmission grid capacity to bring the power to market, and “environmental sensitivities” such as visual impact complaints.  Each obstacle presents different issues, yet each obstacle can – and MUST – be swiftly solved.

                With respect to transmission siting issues, there are several battles raging in the Courts and Congress at this time.  On February 18, 2009 the Fourth Circuit of the United States Court of Appeals ruled in the case of Piedmont Environmental Council v. FERC, No. 07-1651, 2009 U.S. App. LEXIS 2944 (4^th Cir. Feb. 18, 2009), rejecting arguments by the Federal Energy Regulatory Commission (FERC) that the 2005 Policy Act had permitted FERC to order “National Interest” Transmission Projects to go forward even if State Utility Commissions had not approved those projects.  In this case, the New York and Minnesota Utilities Commissions had denied such projects, but those denials were overruled by FERC.  By a 2-1 decision, the 4^th Circuit ruled against FERC. 

However, several weeks later, two leading United States Senators-- Senate Majority Leader Harry Reid (D-Nev.) and Senator Jeff Bingaman (D-N.M.)-- each proposed legislation expanding FERC’s authority over the siting of new transmission lines.  Both Senate bills would require all permit decisions and related environmental reviews under applicable federal laws to be completed “not later than 1 year” from the date FERC deems an application to be complete.  Both bills also would provide FERC with siting authority over new interstate transmission lines; FERC would serve as lead agency to coordinate any federal authorizations and environmental reviews; and state and regional permitting entities would be required to develop “interconnection-wide green transmission plans” to be submitted within 1 year to FERC for approval, or else FERC would complete the plan itself.  State Utility Commissioners have testified against these legislative proposals, not surprisingly.

With respect to the environmental “sensitivities” advocated by opponents to many different on- shore and some off-shore wind project proposals in recent years, the two primary issues have been visual impact and wildlife (including marine mammals for off-shore) impacts.  However, frequently missing from the list is the fundamental overriding environmental concern –global warming or climate change.  Very recent scientific work shows that the Noble-Prize winning Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment Report issued in 2007 is already out-of-date.  For example, carbon dioxide is being emitted into the atmosphere faster than the IPCC had forecast just two years ago.  Moreover, recent studies find that the Arctic and Antarctic regions are warming faster than previously thought, and further find larger-than-expected pools of carbon in Arctic permafrost, which when released will accelerate levels of greenhouse gases in the atmosphere.  Moreover, since the 2007 IPCC report was issued, unexpectedly rapid melting of the vast Greenland Ice Sheet indicates that sea levels around the world could rise roughly 3 to 6 ½ feet by the end of the Century – almost triple that of the 2007 projections. 

Ocean and terrestrial plant and wildlife habitats already are being damaged by climate change, with the result that many of the birds, mammals, plants, trees and fish which are the subject of concern for some groups opposing wind projects will – in the absence of immediate and rapid facilitation of the siting and construction of clean energy projects – either be driven extinct or forced to move hundreds of miles northward in the United States or into Canada in order to survive during the lifetimes of our children and grandchildren.  Likewise, the environmental “concern” of scenic impact from wind turbines will – again in the absence of rapid facilitation of the siting and development of clean energy projects – be adversely impacted by accelerating climate changes that include greater presence of pests capable of destroying forest species and certain plant life.

                In Maine, an Ocean Energy Task Force has been hard at work over the past five months to meet the Governor’s Executive Order to increase our energy independence and security, reduce our substantial reliance upon fossil fuels, and substantially reduce our greenhouse gas emissions by, in part, developing a strategy to identify and recommend solutions to overcome “potential economic, technical, regulatory, and other obstacles to vigorous and expeditious development of grid-scale wind energy generation facilities in Maine’s coastal waters and adjacent federal waters.”  Tidal and wave power options are also being considered.  Sometime this month the Task Force will preliminarily forward to the Maine Legislature proposed legislation that would create a “General Permit” for off- shore wind energy demonstration projects at certain designated sites along the coast of Maine.

In conclusion, global warming, ocean energy, and our electrical grid system are each critical components to the urgent environmental and economic mandates requiring us to engage in a race, akin the 1960s’ race to the moon, to achieve what previously many may have thought to be unachievable – independence from foreign sources of fuel, independence from use of fossil fuels, and a deceleration of global warmer changes upon our hometowns, states, country and world.

 By: Rick Glick and David Blasher of Davis Wright Tremaine, LLP

Many postings on this site have featured local and regional climate change policy initiatives. Oregon is no exception, but at the center of Governor Ted Kulongoski’s climate change strategy is making the state a hub of green technology development. Thus, the Governor seeks to combine greenhouse gas reductions with economic recovery. To that end, the state has used tax and other incentives to lure foreign clean technology investment to the state. Early signs are positive. The German solar cell company Solar World has recently taken over a stilled chip fabrication plant in the Portland suburbs and Sanyo is opening a solar cell facility in Salem. Vestas American Wind Technology, the largest manufacturer of wind turbines in the world, has announced plans to construct a 400,000 to 600,000 headquarters building near downtown Portland. As Governor Kulongoski declared in his 2009 State of the State address, “There is a green revolution stirring in America, and Oregon is the beating heart of that revolution.” 

To this end, the Governor is jockeying Oregon into a favorable position with President Obama's agenda of creating jobs that foster and incorporate sustainable energy projects. In order to maximize funds that Oregon will receive from the federal stimulus package, the Governor has established a state council called the Oregon Way Advisory Group. The Group is comprised of private business leaders and public officials who have an interest in developing sustainable energy proposals that will highlight Oregon’s green expertise. The Governor believes that by developing innovative projects to encourage job creation in green technologies, Oregon will have a leg up in the race for stimulus cash. “This approach will ensure that Oregon remains a leader in the green revolution,” the Governor said.

The Governor has proposed a legislative package for the current session that will address green energy and climate issues. Central among the Governor’s endeavors is an expansion of the Business Energy Tax Credit in order to attract new green industries to Oregon. The new green bills in the legislature include the following:

·        SB 80 will establish a cap-and-trade system to reduce greenhouse emissions by encouraging innovation and efficiency among Oregon’s industries. 

·        SB 79 is designed to increase energy efficiency in buildings by giving performance certificates to business to enable them to monitor efficiency in new and remodeled buildings. The ambitious goal is to reach zero net emissions by 2030, and in so doing, set Oregon as a leader in creating green building techniques.

·        SB 168 encourages energy independence of the state government by allowing energy efficiency projects on state lands and buildings, thus helping the state government to operate entirely on renewable power.

·        SB 201 is designed to provide an additional $4 million to weatherize and retrofit the homes of 400 low-income families each year, cutting energy costs for families by an average of $314 a year.   

·        SB 603 would stop Oregon from building any new dirty coal power plants and would require new power sources to be at least as clean as natural gas plants. 

·        HB 2120 will reflect the priority of providing more transportation choices for Oregonians in order to reduce emissions and traffic, to improve health, and to cut gas costs. 

·        HB 2121 will encourage the development of solar energy by directing the PUC to integrate up to 17 megawatts of solar energy into Oregon's electricity mix. Oregon launched the nation’s first solar highway at the I-5/I-205 interchange last year. Using Oregon manufacturers for the solar panels and emerging small Oregon businesses to install the solar system will supply jobs and renewable energy today and into the future.

·        HB 2180 would create an Oregon Renewable Energy Fund to provide grants to smaller community renewable energy projects. This bill also seeks to expand the Business Energy Tax Credit to provide a fifty percent tax credit for large-scale energy efficiency investments by businesses. The bill will also encourage sustainable bioenergy such as biofuels that do not compete with good supplies. Finally, HB 2180 will give the Oregon Department of Energy the flexibility to adjust tax credit incentives to encourage the development of the next generation of low and zero emission vehicles.

·        HB 2181 will give local governments bonding authority to provide loans to residential and business energy efficiency projects.

·        HB 2186 authorizes the citizen-comprised Environmental Quality Commission to develop reduction strategies including a low carbon fuel standard and restrictions on the unnecessary idling of trucks and commercial vehicles.

Governor Kulongoski views the current economic crisis as an opportunity to embrace sustainable energy projects that will make Oregon a leader in the future of green industries. As the Governor put it, “My message should be unmistakable – and it is the same message I conveyed to business and government leaders in Japan and China: Oregon is open for business. Especially green business.”

TAKE ACTION ON PHANTOM LOADS:

The One-Watt Initiative is a fairly simple regulatory program proposed for eliminating unnecessary electricity losses from electronic equipment in standby mode, known as phantom loads. The European Union, Canada, Korea, Japan and China have all taken action. The United States needs to step up to action through the federal government or the states. President Obama's administration should be urged by all of us to adopt a policy in 2009. Because of the diverse pressures on the Federal government, simultaneous pressure should be exerted on all states to adopt the One-Watt policy.

WHAT IS THE STANDBY POWER PROBLEM:

Chances are that even environmental lawyers ignore the high energy costs of “phantom load.” But, now is the time to get regulation started.

Phantom load is the electricity consumed by a device when it is turned OFF.[1] Devices that have a phantom load are sometimes referred to as “vampires.”   For example, a television consumes electricity as it waits for the “on” button on the remote to be hit. Heavy phantom load users include the “power brick” adaptors that charge or operate cell phones, laptop computers, cordless drills, answering machines, radios, incheck printers and many other residential devices. These adapters are actually small transfers, turning AC electricity from the wall outlet into the DC electricity for use by the device. While one of these devices may only consume a small amount of power (e.g., 3-20 watts), a dozen or so of them running simultaneously and continuously, consume a significant amount of energy. What is worse is that even when not charging the cell phone or the battery for the cordless drill, that AC adapter may continue to consume power just because it is plugged into the wall.

HOW LARGE IS THE PHANTOM LOAD:

In the United States, the phantom load make up about six percent of the total, and around ten percent of residential consumption. 

As the United States Department of Energy stated: 

“Many appliances continue to draw a small of power when they are switched off. These “phantom” loads occur in most appliances that use electricity, such as VCRs, televisions, stereos, computers and kitchen appliances. In the average home, 75% of electricity used to power home electronics is consumed while the products are turned off. This can be avoided by unplugging the appliance or using the power strip and using the switch on the power strip to cut all power to the appliance.”

The British Government’s 2006 Energy Review found that standby modes on electric devices accounted for 8% of all British domestic power consumption. A similar study in France in 2000 found that standby power accounted for 7% of total residential consumption. Further studies have come to similar conclusions in other developed countries, including the Netherlands, Australia and Japan. Some countries estimates the proportion of consumption due to standby power as high as 13% in some countries. 

one-watt initiative:

The One-Watt Initiative is an energy saving proposal by the International Energy Agency to reduce standby power in all appliances to just one watt. The One-Watt Initiative was launched by the IEA in 1999 to promote, through international cooperation, that by 2010, all new appliances sold in the world would only use one watt in standby mode. On July, 2005, at the Gleneagles Summit in Scotland, the G8 countries signed an endorsement to, among other things, "promote the application of the IEA's 1 Watt Initiative". It is estimated that, if implemented, leaking electricity would be cut by as much as 75% when the existing stock of appliances is replaced. Further savings would occur as the number of vampire appliances increase.

INTERNATIONAL PROGRESS ON THE ONE-WATT PLAN:

An international group of experts was assembled to define standby power and establish a common test procedure. An internationally sanctioned definition and test procedure was adopted by the International Electrotechnical Commission (IEC 62301).

On January 9, 2009, the European Commission adopted a regulation laying down energy efficiency requirements, which is intended to cut the standby electricity consumption by almost 75% by 2020. As of 2010, the standby power consumption of new products has to be less than one watt or two watts. These values will be lowered in 2013 to 0.5 watt and one watt, which is close to the levels achievable with the best available technology.

NR Canada by Regulation is proposing that the Tier 1 energy efficiency performance standards for certain standby power will apply to products manufactured after June 1, 2009. The effective date for the Tier 2 standards will be applied to products manufactured after June 1, 2011.

Both South Korea and Australia have introduced the one watt benchmark in all new electrical devices, and according to the IEA, other countries, notably Japan and China, have undertaken “strong measures” to reduce standby power use. 

one-watt initiative in the united states:

So far the United States government's only action has been Executive Order 13221 signed by President George W. Bush in 2001. The Executive Committee states that every governmental agency “when it purchases commercially-available, off-the-shelf products that use external standby power devices, or that contain an internal standby power function, shall purchase products that use no more than one watt in a standby power-consuming mode.”

The State of California currently has an Appliance Efficiency Regulation which includes standby power limits for three consumer audio and video equipment categories (compact audio products, televisions and DVD players and recorders). A few other states have announced intentions to follow the California regulations for standby power limits but have not done so.

CONCLUSION:

This is an excellent issue to be pushed by any environmental group or generally concerned citizens. With the backing it has internationally, lobbying should garner little resistance. The United States or individual states should take action in 2009.

President Obama has pressed Congress this week to enact an economic stimulus package that would “double our capacity to generate alternative sources of energy like wind, solar, and biofuels . . . and build a new electricity grid that lay down more than 3,000 miles of transmission lines to convey this new energy from coast to coast.”[i] On Wednesday, January 28, 2009, the House passed the American Recovery and Reinvestment Act of 2009 (H.R. 1), which contains nearly $15 billion in capital investments and loan guarantees for renewable energy projects and new electric transmission lines, and $18.5 billion for energy efficiency programs.  The Administration’s stated goal is to spend this money in the next 18 months. This may be possible for the energy efficiency projects such as weatherizing homes and government buildings.  But for dozens of new wind farms and thousands of miles of transmission lines, it is not, and a good part of the reason is that those projects have yet to undergo environmental review or receive necessary permits.

Typically, siting a transmission line, wind farm, or other major energy facility involves obtaining a long list of environmental permits, each of which has a review process that can be used by opponents of the project to delay and sometimes defeat it. Moving infrastructure projects forward quickly will only be possible if Congress and the Administration speed up the environmental review and permitting process.  

In a January 26, 2009, report, the Congressional Budget Office estimates that it will take up to seven years to spend the money that H.R. 1 dedicated to expanding alternative energy. Experience teaches that this estimate may be overly conservative. For example, the Arrowhead-Weston Transmission Project, a 220 mile transmission line from Wisconsin to Minnesota, took nine years to permit and construct, even though all but 50 miles of it were in existing transmission line corridors. Southern California Edison’s Tehachapi Transmission Project, a 250 mile transmission project to deliver electricity generated from wind farms in Southern California, took over 10 years to design, permit, and begin construction. Indeed, portions of the project are still undergoing environmental review by the U.S. Forest Service and others.

Recently, California Governor Arnold Schwarzenegger requested up to $44 billion for transportation, energy and water projects in California, claiming that these projects will create as many as 800,000 new jobs.  Knowing that traditional environmental review would slow short-term job creation, Governor Schwarzenegger asked the Obama Administration to “waive or greatly streamline National Environmental Protection Act requirements consistent with our statutory proposals to modify the California Environment Quality Act for transportation projects.”

The proposal drew immediately fire from environmental groups. In a January 13, 2009, letter to House and Senate Democratic leaders, the Environmental Defense Fund, the Natural Resources Defense Council, the League of Conservation Voters and Environment California called Governor Schwarzenegger’s proposal “unproductive and harmful” to the federal debate over reviving the economy.  “Inevitably, in the course of congressional consideration, special interests will assert that we cannot afford the NEPA process in a time of national urgency,” they said.  “The truth is that we cannot afford that kind of leap-before-you-look rashness.” 

The new Administration must navigate this tension – quickly addressing the economic crisis while maintaining the integrity of the environmental review process. Doing so will require identifying ways that environmental review and permitting can be streamlined and modernized, alongside the infrastructure system.  We ought to be able to get wind farms and bridges and light rail built in a time frame that provides the short-term stimulus our economy needs, and also allow for sufficient environmental review to make sure our resources are protected.   This article lays out some of the options the new Administration may wish to consider as it seeks to balance job creation with environmental stewardship.

Approaches for Streamlining the Environmental Review Process

Use Existing Provisions Allowing Temporary Waivers

Many environmental regulatory statutes contain waivers of applicable requirements in response to natural disasters or other emergency conditions.  For example, the Stafford Disaster Relief and Emergency Assistance Act authorizes NEPA waivers to facilitate prompt responses to natural disasters.[1]  Similarly, the White House Council of Environmental Quality (CEQ) is authorized to approve “alternative arrangements” allowing federal agencies to modify or limit NEPA review in response to natural disasters.[2]  Other federal environmental laws with emergency response provisions include the Clean Water Act[3] and CERCLA.[4]

In response to Hurricane Katrina, CEQ approved expedited NEPA review procedures for certain U.S. Army Corps of Engineers flood control projects.  EPA temporarily waived certain Clean Water Act, Clean Air Act, and other environmental regulations in Katrina’s wake.  Both Louisiana and Mississippi issued similar emergency administrative orders, temporarily suspending certain environmental regulations to facilitate clearing hurricane debris and other emergency response actions.

Waivers Based on Grounds of National Security

In 2002, after the Natural Resources Defense Council obtained a preliminary injunction halting the U.S. Navy’s use of a low-frequency, active, surveillance towed array sonar system,[5] President Bush issued a “Presidential Exemption from the Coastal Zone Management Act,”[6] in order to “ensure effective and timely training of the United States naval forces in anti-submarine warfare using mid-frequency active sonar.”  The Presidential exemption allowed the Navy to train and certify strike groups capable of deployment “in support of world-wide operational and combat activities, which are essential to national security.”

The United States Supreme Court upheld the President’s action, finding that the public interest in adequately training the Navy’s antisubmarine forces “plainly outweighs” conservationists’ interests in studying marine mammals that may be injured by sonar exercises.[7]

Legislative Exemptions for Specific Projects

Congress has also periodically either limited or exempted review under NEPA and other environmental statutes for specific projects or categories of projects.  For example, the Energy Policy Act of 2005 modified the environmental compliance requirements for a broad range of energy-related projects.  The modified environmental compliance measures included:

• Establishing a rebuttable presumption that certain oil and gas projects conducted on federal land are categorically exempted from NEPA review (§ 390);
• Exempting hydraulic fracturing in aid of oil, gas, and geothermal energy extraction from certain requirements in the Safe Drinking Water Act (§ 322);
• Exempting oil and gas exploration, production, and transportation construction projects from the Clean Water Act’s construction stormwater regulations (§ 323);
• Requiring EPA and federal land management agencies in Western states to develop a pilot project to expedite environmental review and permitting under NEPA, the ESA, the Clean Water Act, and other federal statutes (§ 365);
• Expediting the permitting process for natural gas facilities located on federal lands (§ 366); and
• Shortening the time frame for appealing permitting decisions under the Coastal Zone Management Act (§ 381).

Congress has also exempted or provided limited NEPA review for other projects, for example:

·        The TransAlaska Pipeline was exempted from NEPA review after completion of the initial EIS (43 U.S.C. § 1625(d));

·        Certain actions taken pursuant to the Clean Air Act are exempted from NEPA review (15 U.S.C. § 793(c)(1));

·        Department of Energy decisions to grant or deny exemptions from regulations governing fuel use at coal-fired power plants are exempted from NEPA review (42 U.S.C. § 8473);

·        For certain retrievable radioactive waste storage projects, an Environmental Assessment (as opposed to an EIS) constitutes sufficient compliance with NEPA (42 U.S.C. § 10155(c)(2)(A));

·        Alternate environmental review procedures have been established for determining surface transportation rights-of-way in the Arctic National Preserve (42 U.S.C. § 410hh(4)(d); and

·        Certain Department of Housing and Urban Development funding decisions are exempt from NEPA review, based on certification of compliance with state and local laws (42 U.S.C. § 3547(2)).

Using Streamlined Environmental Review to Address Economic Conditions

While legislative, regulatory, and executive precedent exists for either waiving or limiting environmental review, those precedents have rarely been used to justify waiving environmental review on the grounds of an economic crisis.[8]  But precedent exists for using “alternative arrangements” for environmental review in response to economic concerns.  In 1980, after General Motors threatened to build a new manufacturing facility outside the city limits unless the city cleared and delivered an appropriate site for the facility, the City of Detroit declared a state of emergency based on an economic crisis.  In September 1980, CEQ approved an “alternative arrangement” under NEPA allowing the Department of Housing and Urban Development to release loan guarantee funds prior to the completion of NEPA review.[9]

The challenge for the new Administration and Congress is to strike a balance between expediting environmental review while maintaining sufficient oversight to prevent bad decision making.  Options to achieve that goal include: (1) expediting funding for “shovel ready” projects which already have undergone federal and state environmental review and obtained necessary permits; (2) using programmatic environmental review of project categories that would obviate the need for project-specific (and often redundant) environmental reviews; (3) providing limited exemptions or streamlined environmental review for specific categories of projects; and (4) limiting judicial review of final agency approvals for projects funded by the stimulus bill, while providing for oversight, review, and approval by CEQ.

For more information, please contact Bradley Marten