Posted on May 10, 2013
Proposals to export liquefied natural gas (“LNG”) produced in large part from shale gas recovered by hydraulic fracturing techniques or “fracing” continue the public debate about the desirability of exports of other energy resources. This political, regulatory, environmental and trade debate engages powerful politicians, lobbyists, environmental groups, trade associations, developers, producers, state regulatory authorities, consultants, academics, and landowners, and a broad spectrum of the press and public.
On its face, the notion of substantial exports of LNG to both countries with which the U.S. has free trade agreements (FTA) in place and those it does not, seems highly attractive. Such exports would improve the balance of trade deficits, create new jobs associated with the production; and produce tax revenue. And, from the broad environmental perspective, LNG exports would lower greenhouse gas emissions (GHG) in countries with heavy reliance now and in the future on coal or oil for electric generation, or in countries with need for replacement of nuclear facilities.
Query then, what are the factors that engender the impassioned debate on energy resource export policy? Key are: (1) fears of massive development of “frac” gas, freighted with concern over impacts on water, air, and use. Analogous to the Keystone XL battle, another concern is development of the unconventional gas for the benefit of foreign interests, particularly those without an FTA in place with the U.S. (export to those countries with FTA agreements with the U.S. is deemed by law to be in the public interest). (2) A second issue in contention on LNG is the impact on domestic energy prices if significant LNG exports limit availability of natural gas for domestic industrial and other uses. (This issue harkens back to the energy crises of the 1970s when natural gas availability was tight and energy prices sky high.)
So, although not explicitly an environmental-based objection, such opponents of LNG exports find friendly bedfellows with the environmental objectors and the commercial interests concerned about their ability to rely upon and benefit from increased gas supply. Industrial interests argue that stopping exports to non-FTA countries, particularly the insatiable Asian markets, will result in an industrial renaissance with jobs and development growing significantly. And, some opponents of LNG exports to non-FTA countries ironically, (to this blogger at least) express little regard for overall environmental benefit to potential importing countries and thus the globe. Rather, the impact on the United States from development of unconventionally sourced gas supply has been their focus point. Yet, LNG is only part of the energy export debate.
Further complicating this analysis is the parallel potential increase in the export of U.S. coal to energy hungry nations, particularly in Asia. As noted above, there is a broader questioning on the entire topic of U.S. energy resources exports: LNG, oil or refined products and coal. In addition to the Keystone XL pipeline standoff, many environmentally oriented players (e.g., the Sierra Club) and political leaders have expressed reservations about the export of U.S. coal for two primary reasons – the impact on the U.S. of new infrastructure for storage, transportation and increased mining activities, and the increase in GHG emissions worldwide as a result of heavier coal-fired electric generation. And in the past months, several proposed coal export projects have been scrapped. This energy export issue makes for a complicated stew of federal, local and regional politics. What makes the entire public war of words (and the behind the scenes maneuvering) so fascinating is the question of who or what decides where and with what restrictions U.S. energy resources are to be marketed to the world – the federal agencies, the state and local governmental entities, or the market? The next few months may provide guidance on LNG and perhaps the Keystone XL pipeline, however, the national and international implications of these decisions are so important that it is unlikely that peace will settle on these matters for decades.
Posted on April 18, 2013
You may know that Washington State Governor Jay Inslee is a climate champion, first as a long-serving member of Congress and now as Governor. But you may not know that he just finished leading a bipartisan effort that succeeded in passing climate change legislation.
His climate action bill passed the State House March 25th on a bipartisan 61 to 32 vote. The bill earlier passed the Republican-controlled State Senate on a 37 to 12 vote. And a few days ago it headed to Governor Inslee’s desk for a well-earned signature.
The bill commissions an independent evaluation of climate pollution reduction programs in other states and Canadian provinces, and of opportunities for new job-producing investments in Washington relating to cleaner energy and greater energy efficiency. Then it requires the Governor and legislative leaders to use that survey data to plot out together what set of policies will get the State to hit its climate pollution limits established by earlier legislation, including a greenhouse gas emission reduction to 1990 levels by the year 2020.
“The Governor’s climate action bill keeps our state in the game – requiring leaders to map out a strategy to grow our clean energy economy and reduce climate pollution,” said Joan Crooks, executive director of Washington Environmental Council.
And here — in sharp contrast to the other Washington — Republicans and conservative Democrats agreed.
Posted on April 3, 2013
Two items hit my inbox on the same day:
(1) The U.S. is predicted to become the world's largest oil producer and North America to become a net petroleum-exporting region according to the International Energy Agency, and
(2) The Obama Administration is renewing its commitment to wean U.S. cars off of petroleum.
Some might argue that it makes sense to wean cars off petroleum even if we have a lot of it because of the threat of global climate change, but instead the stated justification was “to create jobs and help lower energy costs for middle class families.”
Then came the news that the operating unit of China's largest solar panel company, Suntech Power, recently filed for bankruptcy. Meanwhile, the Obama Administration proposes the creation of a $2 billion Energy Security Trust, funded by revenues from offshore oil leases matching those provided by the Chinese, to subsidize investments in this supposedly vital emerging field.
The disparity between such news and the government actions being taken started me questioning whether it is possible for governments to manage a field as dynamic and ever changing as future energy supplies. "Regulatory lag" has long been a familiar concept in utility rate regulation: by the time regulators get around to approving new rates, the situation has changed. And human beings are justly famous for "winning the last war": by the time that we understand something well enough to develop a broadly-shared consensus, the situation has changed.
This is nothing personal against the Obama Administration or support for renewable energy. I have been teaching a course at the Yale Law School this semester on the history of energy policy in the U.S. since World War II. A theme that runs throughout the course is how policies designed to manage energy supply, regardless of political outlook, lag as much as a decade or two behind the times. For example, Nixon's 1971 oil price freeze lasted until 1981; Eisenhower's 1959 oil import quotas lasted until 1973. In both instances, government policy did a lot of unnecessary harm because the energy supply situation changed much faster than government policies do.
I often wonder why environmental law and energy law are so different. One difference is that environmental problems tend to stand still (or get worse) long enough for us to mobilize the slow processes of government to solve them. We studied and debated acid rain for over a decade before the 1990 amendments to the Clean Air Act, which mandated a 50% reduction in sulfur dioxide emissions over the following decade. Energy markets change within months as new sources of supply and technologies come on line. It makes one wonder whether government policy will inevitably be a day late and a dollar short when it tries to manage future energy sources.
Posted on March 13, 2013
We’ve all seen the head shaking over how energy conservation efforts in the United States are dwarfed by energy consumption increases in India and China. But, what about Africa?
The African continent, with close to 600 million people, 15% of the world’s population, now consumes about 3% of world energy production. However, Africa’s energy picture is changing rapidly due to growing investment, upgraded infrastructure, and success in tackling corruption. Africa always rich in natural resources, is expected to replace more basic energy sources with more efficient and environmentally friendly sources like oil and gas. However, huge areas in Africa — the Sudan, Uganda and even Kenya lack national electricity grid systems. But improving infrastructure and abundant energy resources hold promise for the future.
Most of Africa is not flicking a switch for lights, but instead is using matches to light a kerosene lamp or igniting a charcoal stove for heating or cooking. This will continue for the foreseeable future, which means more tree-cutting for fuel, more wood burning, and thus, more harmful air emissions. Using kerosene lanterns and charcoal stoves correlates directly with increased respiratory disease. Unfortunately, environmental health and safety will, in the short term, take a back seat to the need to rely on fossil fuels.
Renewables? Why shouldn’t a continent known for its hot sun be a natural for solar power? In Africa, questions about reliability and the lack of trained personnel are being taken seriously. So for the foreseeable future, the more likely result is that fossil fuels will increase, and renewables will take aback seat. The developing world views energy/environment trade-offs as part of the price for advancement, particularly in nations where energy resources and infrastructure is so underdeveloped. Opportunities are enormous, but so are the challenges and risks. Africa’s test will be how much financing, regulation and environmental mitigation is needed to propel the continent forward.
Posted on December 19, 2012
The attached article will be published in the upcoming issue of the Lewis & Clark Law School Environmental Law Review. The article is among the first to integrate current climate change science, particularly ongoing impacts and predicted impacts, with a detailed roadmap for substantial reform of our environmental processes for reviewing proposed renewable energy projects.
Most existing articles either focus only on climate science or on minor modifications to the regulatory system. Using offshore wind power as a case study, this article demonstrates how, in an increasingly carbon-constrained world, our existing environmental laws and regulatory process no longer achieve their underlying goals of long-term ecosystem conservation. To the contrary, these laws and regulations are supporting a system with increasing greenhouse gas emissions that is annually costing trillions of dollars.
We have little time left to create a practical path to achieving an 80% reduction in greenhouse gases by 2050—with failure resulting in average global temperatures rising more than the internationally-agreed targeted ceiling of 2°C. After examining the obstacles confronting a potential developer of offshore wind, this article clearly lays out why and how the existing regulatory process should be quickly reformed so that offshore wind and other clean renewable energy sources can help us escape the escalating consequences of our carbon-intensive economic system.
Posted on December 14, 2012
On December 12, 2012 U.S. Energy Secretary Steven Chu announced competitive awards of $4 million each for 7 offshore wind projects from Maine to Oregon, in 6 different states. I am the lawyer for the University of Maine's project, which involves plans to install a pilot floating offshore wind farm with two, six-megawatt direct-drive turbines on concrete, semi-submersible foundations. I am also working on permitting a smaller-scale pilot project for UMaine that would be deployed in early to mid-2013 as the first floating offshore wind project in North America.
The Department of Energy Department made the awards with the goal of beginning to speed the deployment of stronger, more efficient offshore wind power technologies and showcase innovative technologies -- helping to further lower costs and drive performance improvements.
In year 1, each project will receive up to $4 million to complete 50% of the design process, and to begin outreach, environmental studies and permitting work. DOE will in early 2014 select up to three of the projects for follow-on phases that focus on siting, construction and installation, and aim to achieve commercial operation by 2017.The final projects will receive up to $47 million each over four years, subject to congressional appropriations.
Click HERE to read the full article from the U.S. Department of Energy.
Posted on December 13, 2012
On November 30, 2012, the United States Fish and Wildlife Service (“FWS”) announced its proposal to list the Lesser Prairie Chicken (“LPC”) as threatened under the Endangered Species Act (“ESA”). The proposed rule resulted from a comprehensive 2011 settlement agreement approved by the D.C. Circuit in In re Endangered Species Act Section 4 Deadline Litigation 2011, whereby FWS agreed to review over 250 candidate species and make a determination as to each species whether to issue a proposed listing rule or to issue a finding that the listing is not warranted, over a six-year period. Under the ESA, an endangered species is one that is in danger of extinction throughout all or a significant portion of its range, while a threatened species is likely to become endangered within the foreseeable future. FWS will make a final determination on whether to list the LPC as threatened by September 30, 2013.
The LPC is found across a five-state span, including Colorado, Oklahoma, New Mexico, Texas, and Kansas. Activities identified by FWS as threats to the species include habitat loss, fragmentation, modification, and degradation within the species’ range. Other threats include land uses related to wind energy and transmission development. If FWS ultimately lists the LPC as a threatened species, energy industry operations that could potentially harm the species would be affected. Specifically, due to the species’ avoidance of tall, vertical objects, FWS has identified oil and gas wellheads and wind turbines as features that may cause habitat displacement for the bird. Section 9 of the ESA prohibits the “take” of a listed wildlife species by a private or public entity. Because “take” is defined quite broadly under the ESA, even activities that are not designed or intended to harm a species, but could do so indirectly, such as operation of these tall structures, could potentially constitute a violation.
Unlike endangered species, in regard to a species listed as threatened, FWS has the authority under ESA Section 4(d) to tailor the “take” prohibitions to the conservation needs of the species. The FWS may use its Section 4(d) authority to incentivize participation in conservation plans that will support recovery of the LPC. Additionally, there are conservation plans that may be entered into by energy companies before a species is listed under the ESA. Called Candidate Conservation Agreements with Assurances (“CCAAs”), these agreements, allow non-federal property owners to commit to implement voluntary conservation measures for a candidate species in return for regulatory assurances that additional conservation measures will not be required, and additional land, water, or resource use restrictions will not be imposed, should the species become listed in the future. Furthermore, the proactive conservation efforts performed through CCAAs may remove or reduce threats to the covered species, so that listing the species under the ESA may become unnecessary. CCAAs, therefore, provide a significant opportunity for a compliant energy company to potentially insulate itself from liability in the event the LPC is listed as threatened. CCAAs have been developed for the LPC in New Mexico and Texas, and Oklahoma, under the leadership of the Oklahoma Department of Wildlife Conservation, has submitted a CCAA to FWS for review. Notably, because the final listing determination for the LPC must be made September 30, 2013, time is of the essence for energy companies to consider entering into a CCAA.
See the FWS’s Proposed Listing
See the FWS’s News Release Regarding the Proposed Listing
See the FWS’s Facts Regarding the Proposed Listing
Posted on December 6, 2012
There is a vital need for attorneys and other professionals to understand and discuss the past, current, and future role of our public lands system in the energy policy of the nation. In April of 2013, ABA SEER is hosting a symposium in partnership with The Public Land and Resources Law Review (PLRLR) at The University of Montana titled Balancing Act and Paradigm Shift: The Role of Public Lands in America’s Energy Future. The PRLR’s 35th Public Land Law Conference and ABA SEER’s 41st National Spring Conference on the Environment will combine to create an academic symposium to discuss the role of America’s three major sources of public lands and resources: river systems, terrestrial lands, and oceans.
If your work involves public lands, public resources or energy, this conference will be of interest to you. If you work with law students (in J.D. or LL.M. programs) with an interest in public lands and resources, I hope you will alert them to this opportunity and encourage them to submit an article. Entries should demonstrate original thought on a question of legal and/or policy significance relating to the symposium topic of the role of public lands and resources in America’s energy future. The topic is not confined to any particular type of public land or issue in energy or environmental law or policy. Any relevant article, case comment, note, or essay may be submitted, including writing submitted for academic credit. Jointly authored pieces are eligible only if all authors are students and consent to submit.
The winning submissions will receive a $1,000, $500, and $250 cash prize for 1st, 2nd, and 3rd place submissions, respectively. First and second place entries will be invited to attend the symposium on April 18, 2013 in Missoula, MT, with travel support from ABA-SEER. The first place entry will be published in the symposium edition of the Public Land & Resources Law Review in the summer of 2013.
The deadline for the student writing competition is January 14, 2013. For full details on entry requirements, click here.
Posted on June 8, 2012
On June 6, Oregon Governor John Kitzhaber released his draft 10-Year Energy Action Plan. Written comments on the draft plan may be submitted to firstname.lastname@example.org and accepted through July 31. Three public workshops will be held at times and places to be announced.
The plan consists of a broad range of goals for the state government, private sector and public-private collaboration to address what the Governor calls the:
fundamental challenge—that is, to develop a comprehensive energy strategy that meets the state’s carbon reduction, energy conservation and renewable energy goals and timetables, and that balances complex needs– including affordability and reliability – while enhancing Oregon’s economic objectives.
The plan seeks to build off of existing programs and redirect funding to advance its three central strategies, the details of which are to be developed through a lot of public participation:
1. Maximizing energy efficiency and conservation to meet 100 percent of new electric load growth. The plan is unclear as to when this goal would be achieved, but refers to the Northwest Power and Conservation Council’s goal of using conservation to meet new electric demand by 2020. Key to implementing this goal is creation of a new State Building Innovation Lab. The Lab would focus initially on improving efficiency in four million square feet of state office space and then using the Lab as a model and resource for others.
2. Enhancing clean energy infrastructure development by removing finance and regulatory barriers. Streamlining the siting process, including use of a strong project manager to help navigate state regulatory requirements, would bring certainty to developers of facilities. Also, conducting planning on a “landscape level” would help to ensure protection of natural resources.
3. Accelerating the market transition to a more efficient, cleaner transportation system. Central to this goal, over the next ten years the plan would convert 20% of large fleets to electric, compressed or liquefied natural gas or other alternative fuel vehicles.
The plan is self-congratulatory on various initiatives already in place and reads like a compendium of good ideas on how to secure a clean energy future. So ambitious a plan requires continual commitment over a long period of time—at the highest levels of state government—to keep it from becoming yet another plan on the shelf. Such sustained effort of course is not assured.
In the early 1980s I was chair of the City of Portland Energy Commission whose job it was to further develop the City’s Energy Conservation Policy, which at the time was seen as cutting edge. Then as now, energy planning was a hot topic for policy makers. Champions arise to push forward change. In those days it was Mayor Neil Goldschmidt and Commissioner Mike Lindberg, today it is Governor Kitzhaber. While Portland has made progress, many of the elements of the Governor’s plan echo what we were talking about back then. I hope that the Governor builds a governance platform to continue work on the plan after he departs the scene.
Implementation of the plan depends on new legislation and regulatory reform among several state and local agencies. Whether the plan can develop the consensus necessary to achieve such change will depend on how the details emerge over the coming months and the enthusiasm the plan can garner.
Posted on June 1, 2012
How can each of us leave the world to our children and grandchildren at least as healthy as when we were born? How can we more quickly move from fossil-driven economies to ones more based on renewable sources, in an increasingly carbon-stressed world? And how can policy makers, at various governmental levels, make changes in how energy projects are evaluated and developed before we use up too much of the atmosphere’s and oceans’ capacities to safely absorb carbon dioxide?
These and similar questions were tackled at two recent conferences in which I participated: a small climate change justice forum at Chicago Law School, and the much larger World Renewable Energy Forum in Denver. In Chicago, participants tackled approaches to bridging the who-pays-how-much gap between developing and developed nations – should it be per capita, or total carbon shares based on past emissions (if so from when), or a polluter-pays approach bridging past and future (next 20 years) CO2 emissions? Some say the US should pay less than China and India, others say more. Ultimately, all agreed that human-induced climate change is the single greatest threat facing human society—not just environmental, but also posing huge economic, public health, and military security costs.
Denver discussions focused on how to quickly increase the amount of renewable energy used for electricity, heat and transportation. My presentation, “U.S. Renewable Law and Policy: Catch Up or The Clock Strikes Midnight”, provided an overview of existing and predicted impacts from the still-increasing carbon dioxide emissions accumulating in our air and oceans; a comparison of the direct and indirect costs of different fossil and renewable energy sources; a summary of the permitting and regulatory hurdles facing renewable energy projects; and a roadmap to level the regulatory playing field to help renewables catch up.
Brief high (or low) lights: In April 2012, the International Energy Administration warned that, under current policies, energy use and CO2 emissions will increase by a third by 2020, and almost double by 2050 – sending global temperatures at least 6⁰C higher. What would the world look like with such an increase?
What are the “true” costs of energy to be factored into pricing? In 2009, the National Research Council’s “Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use” estimated in 2005 dollars (higher now) that non-climate damages from our use of fossil fuels exceed $120 billion, with climate damages possibly being equally as large – and both numbers exclude ecosystem, infrastructure, insurance, and national security costs.
Those bucks stop with each of us and this generation.
Posted on April 18, 2012
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?
Posted on April 12, 2012
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.
Posted on March 9, 2012
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.
Posted on February 6, 2012
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.
Posted on December 29, 2011
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.
Posted on September 22, 2011
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.
Posted on May 10, 2011
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.
Posted on April 20, 2011
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.
Posted on March 25, 2011
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.
Posted on March 17, 2011
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.
Posted on March 14, 2011
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.
Posted on February 18, 2011
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.
Posted on February 18, 2011
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.
Posted on February 9, 2011
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.
Posted on December 29, 2010
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.