EMERGING CLIMATE CHANGE ISSUES: Impacts on Disclosure Obligations of U.S. Public Companies

Posted on November 14, 2008 by Patricia Barmeyer

 Public companies are feeling pressure to make disclosure of the risks posed by climate change. The SEC has to date declined to issue any climate change-specific guidance, but existing SEC regulations are broad enough to require disclosure, if the information would be important to the “reasonable investor.” Investors and shareholders are increasingly vocal about their desire to have that information.

            In the absence of SEC action, New York Attorney General Cuomo has used state law to obtain settlements from Xcel Energy and Dynegy that require specific disclosures regarding the financial risks from probable climate change regulation and from the physical impacts of climate change. Even more significant is the pressure coming from major purchasers. Wal-Mart, for example, is requiring all its suppliers to report on their GHG emissions and their strategies to reduce their carbon footprints. 

            The timing, scope and details of the anticipated national program to regulate GHG emissions are still unknown, making it difficult to predict the risks and implications of climate change and its regulation for any individual company, However, even in the face of these uncertainties, disclosure is increasingly the norm, rather than the exception. All public companies need to be analyzing the risks posed by climate change and, depending on the business, should be considering disclosure of those risks in their public filings.

To read the article in its entirety, please click here.

A FIRST GLIMPSE OF THE ENVIRONMENTAL AGENDA OF THE OBAMA PRESIDENCY

Posted on November 10, 2008 by Larry Ausherman

It has been a long time since an environmental issue attracted some serious attention in a presidential campaign. This is the year, and climate change is the issue. From his campaign to his election night reference to a "planet in peril", President-Elect Obama has focused on climate change. There are a few other environmental issues to watch as well.

 

Climate Change

            The issue of climate change overshadowed other environmental issues in this election, in part because it is directly linked to other high priorities of the new administration. Goals of creating 5 million green-collar jobs and a focus on renewable energy and energy conservation enlarge the profile of climate change initiatives. For example, on the Obama-Biden website, the topics of environment and energy are grouped together as one, and the initiatives of each are related. 

 

            Green house gases reduction is an important goal for President-Elect Obama. The goal to reduce greenhouse gases has many parts, but imposing an economy-wide cap and trade system is the centerpiece of the policy. The plan would require that all credits be purchased at auction by industry. Costs to purchase credits could be enormous.

 

            In addition to domestic commitments to climate change initiatives, Obama supports "re-engaging" with the United Nations and the creation of a Global Energy Forum that includes the G8+5 Nations . The initial steps of his international policy may come soon when Obama's representatives will likely visit the climate change talks in Poznan, Poland this December.

           

            The broadening Democratic majority in Congress favors Obama's climate change agenda. In addition to Democratic gains in the House and the Senate, the League of Conservation Voters reports that seven of its 2008 "dirty dozen" legislators were defeated in the 2008 election. Among environmental groups, hopes are high for the new presidency.

 

            But because Obama's objectives require heavy investment in renewable energy, regulatory compliance, and clean technology, they face difficult hurdles. High deficits and the global financial crisis challenge the ability of the federal government to spend, the capacity of private markets to invest, and the resilience of the U.S. economy and industry to weather increased costs of regulation. Great investment would be required for meeting goals for clean coal technology, biofuel development, renewable energy, and energy efficiency.

 

Other Environmental Issues

            Here are some of the other environmental issues to watch.

 

            CERCLA issues have not received great attention so far. However, Obama has suggested reinstitution of the tax on industry to pay for orphaned sites and has emphasized the concept of "polluter pays".

 

            For many years, changes to the General Mining Law of 1872 to impose royalty and/or additional regulation have been proposed and defeated. Although mining law reform has not been a significant part of the presidential campaign, the chances for its passage in the more Democratic congress has increased.

           

            Obama's past opposition to offshore drilling weakened a bit this year in the Senate as a result of a compromised effort. Obama would support offshore exploration in areas already set aside for it, but his opposition to ANWAR remains firm.

 

            It is unclear what priority the Obama administration will place on biodiversity and the Endangered Species Act. Biodiversity has received little attention in the campaign, but the campaign has opposed lessening of ESA consultation requirements.

First Regional Greenhouse Gas Initiative Auction Results: Massachusetts Gets $13.3 Million

Posted on September 30, 2008 by Seth Jaffe

The operators of the Regional Greenhouse Gas Initiative, or RGGI Inc., announced yesterday that all of the 12,565,387 CO2 allowances offered for sale in the first RGGI auction on September 25, 2008 were purchased at $3.07 per allowance. This is above the auction reserve price of $1.86 per allowance, and below recent prices on the Chicago Climate Futures Exchange. See RGGI Inc.'s press release here.

RGGI did not announce the names of the winning bidders, but noted that there were 59 participants in the auction, all from the "energy, financial and environmental sectors." In total, the bidders sought to purchase more than 51 million allowances, or approximately four times as many as were offered. The auction was administered by World Energy Solutions, Inc., and RGGI also retained an independent market monitor, Potomac Economics, to oversee the auction. Potomac Economics stated that most of the allowances were purchased by "compliance entities or their affiliates." See the Potomac Economics release here.

Massachusetts' share of the RGGI allowance proceeds came to approximately $13.3 million. In a press release issued yesterday, Governor Patrick confirmed the commitment in the Green Communities Act to use the RGGI funds for energy efficiency programs that will help individuals and municipalities address energy challenges.

Specifically, the $13.3 million in proceeds from the first auction will be allocated in the following ways:

  • $3.5 million for utility-administered energy efficiency programs, primarily funding the DPU's $7 million program to work with electric and natural gas utilities to expand their consumer energy efficiency programs
  • $5 million for start-up of the Green Communities Program, created by the Green Communities Act
  • $4.3 million for additional energy efficiency efforts this winter, subject to the report of the Winter Energy Costs Task Force which is due in early October
  • $500,000 for administrative and vendor costs associated with Massachusetts' participation in RGGI and the allowance auctions

The next auction is currently scheduled to be held on December 17, 2008.

Offshore Wind Farm in the Mid-Atlantic - Will Delaware Be the First State of Offshore Wind?

Posted on September 29, 2008 by Robert Whetzel

The nation’s first offshore wind farm may soon be built off the coast of Delaware. Although climate change and clean energy issues were part of the debate over this project, the Delaware wind farm project finds its origins in energy reliability and price stability legislation. 

In 2006, consumer energy prices in Delaware increased dramatically, following the State’s deregulation of electricity generation. As part of the deregulation process, a three year freeze had been placed on energy rate increases in Delaware. When the freeze expired, energy prices across the United States were spiraling upward and rates in Delaware were adjusted to market prices. The result was a significant increase in consumer electricity prices, with the attendant public outcry and legislative demand for reform.

 

 In an attempt to stabilize prices, the Delaware General Assembly enacted the Electric Utility Retail Customer Supply Act of 2006. The Act established a bidding process for long-term purchase power agreements, and directed Delmarva Power & Light Company (“Delmarva Power”), the State’s largest electricity service territory provider, to solicit bids for such an agreement. The legislation also mandated an integrated resource planning process in order to ensure the availability of sufficient and reliable resources over time to meet customers' needs at a minimal cost. 

 

The Delaware legislation required Delmarva Power to issue a request for proposals ("RFP") for the construction of new generation resources within Delaware along with a proposed output contract for a term of no less than 10 years and no more than 25 years. The Delaware Public Service Commission (the “PSC”) and the Delaware Energy Office were tasked with ensuring that the RFP elicited and recognized the value of proposals that: (a) utilized new or innovative baseload technologies; (b) provided long-term environmental benefits to the state; (c) had existing fuel and transmission infrastructure; (d) promoted fuel diversity; (e) supported or improved reliability; and (f) utilized existing brownfield or industrial sites. The PSC, the Director of the Office of Management and Budget, the Controller General, and the Energy Office (the "State Agencies") were tasked with evaluating the bids and determining whether to approve one or more of them. 

Three bids were submitted in response to the RFP: one for an offshore wind farm, one for a combined cycle gas turbine, and one for a coal-fired integrated gasification combined cycle ("IGCC") unit. After evaluation of the bids, both Delmarva Power and an independent consultant concluded that none of the bids met the evaluation criteria because, among other things, each of them proposed prices that were projected to be above market when the new generation facilities went on-line. The State Agencies, however, fashioned a hybrid energy supply approach, and directed Delmarva Power to negotiate for a long-term agreement for wind power with Bluewater Wind, LLC (“Bluewater”) and, concurrently, for an agreement with another generator to provide back-up power. These negotiations were to take place under the oversight of an independent third-party, who would be responsible for reporting to the State Agencies on the parties’ efforts to negotiate the agreements. 

Delmarva Power and the bidders were unable to negotiate concurrent agreements for the wind farm and the “backup” generation source. The State Agencies next directed Delmarva Power and Bluewater to negotiate a final agreement for the wind farm. When the deadline for a this agreement was reached in December 2007, the parties had not agreed upon many important terms, relating to the capacity, price, and risk for the project. After reviewing the status of negotiations, the PSC staff recommended approval of the proposed terms with the condition that the cost of the wind farm be spread over all of Delmarva Power’s customer base. The PSC staff also recommended that legislation be pursued that allocated the costs of the wind farm across all energy consumers in Delaware. At that point, the State Agencies tabled the matter because there was not a consensus to approve the agreement. 

The Delaware legislature then became involved in considering the wind farm power agreement, and conducted legislative hearings regarding the agreement and alternative energy technology and market trends. A legislative committee ultimately concluded that, while wind generation should be a significant component of the State’s electricity supply portfolio, Delaware citizens should not assume the large risk or pay the large premium contemplated in the (then) proposed wind farm agreement. This conclusion was not without opposition in the legislature.

During May and June, 2008, renewed negotiations took place between Delmarva Power and Bluewater, under the ever-present threat of further regulatory or legislative action. Ultimately an agreement was reached for the purchase of power and renewable energy credits (“RECs”) from the wind farm by Delmarva Power. This agreement coincided with legislation in the State that enabled the cost of the wind farm to be spread across all of Delmarva Power’s customer base, not just residential consumers and small businesses, and that substantially increased the value attached to the RECs for the wind farm. Under the agreement, Delmarva Power will purchase energy from the wind farm equal to the amount generated by a 200 MW nameplate facility (approximately 50 percent less than in the proposed December 2007 agreement.) The wind farm, however, may produce three times this capacity (i.e., up to 600 MW), and may secure additional customers for its power. The final agreement also provides termination rights to Bluewater, including termination based upon the content of final regulations to be promulgated by the Department of the Interior with respect to the permitting and siting of offshore wind farms. 

The Department of the Interior proposed regulations on July 9, 2008, and comments were due by September 8, 2008. The American Wind Energy Association, of which Bluewater is a member, submitted comments arguing against a provision that would require developers to pay 2 percent of their operating revenue to the government. Bluewater has stated that such a provision will not be a “deal killer” for the Delaware project, but has also recognized as problematic the impending expiration of federal renewable energy subsidies.

EPA PROPOSES CO2 STORAGE RULES

Posted on July 22, 2008 by Rick Glick

On July 15, EPA announced new rules for underground injection of carbon dioxide (CO2). The rules are intended to provide a measure of regulatory certainty for carbon capture and storage (CCS) implementation.  CO2  STORAGE RULES. CCS is the technology for capturing CO2 as it is released from coal-fired power plants, oil refineries or other large scale sources of CO2 emissions, and then transporting the gas for injection into a suitable underground geologic formation. EPA estimates that CCS could account for as much as 30% of CO2 emissions by 2050, which has obvious implications for climate change.

NEW CLASS OF UIC WELLS

Under the Safe Drinking Water Act, EPA administers the Underground Injection Control (UIC) program. The program is designed to protect drinking water aquifers from industrial injection of fluids into deep geologic formations for purposes such as enhanced oil or gas recovery. CO2  storage presents special challenges as it is buoyant, can be corrosive and would be spread over a large area and held indefinitely. Therefore, EPA proposes a new Class VI well specific to storage. 

NO PRESCRIPTIVE STANDARDS

EPA proposes performance-based standards, as opposed to prescriptive requirements. In general, an injection and operations plan must be included with the application that demonstrates drinking water would be protected. Permit holder would have to monitor and periodically report back to EPA to ensure that model predictions as to the size of the CO2  plume and injection pressures prove true. Permittees would be required to demonstrate financial responsibility for post-injection site care for 50 years; that time period could be shorter or longer, depending on the residual risk to drinking water aquifers based on monitoring data.

PLENTY OF ROOM FOR STATE REGULATION

Note that the rules do not address the capture and transportation of CO2. Further, the new rules do not address property rights, liability or other siting regulatory concerns, so we can expect the states to assert jurisdiction. 

For more information, see full article here.

Climate and the Courts

Posted on February 4, 2008 by Lee A. DeHihns, III

The Supreme Court ruled last term that climate change can be regulated under federal law. But will the continuing lack of action by Congress, the En­vironmental Protection Agency, and most states be replaced by new litiga­tion by activist states and public inter­est organizations against government agencies and private parties? Is this an area where litigation will, or alternatively should, fill a void left by meaningful government activity? When EPA separately receives a record-breaking 100,000 comment letters on the request by California to waive the Clean Air Act’s barrier to state regulation of greenhouse gases from motor vehicles, one realizes that the public’s demand for concrete action is urgent. A legitimate fear, how­ever, is that these petitions and lawsuits could produce a patch­work response to global warm­ing where a comprehensive na­tional strategy is called for.

 

Without federal legislation setting out a clear and compre­hensive policy on GHGs, what is certain is that court cases to address alleged damages from global warming emissions will continue under authorities liti­gants claim are in the CAA or under public nuisance and oth­er common law torts. Whether seeking federal statutory pre­emption of state action or af­firmation that the claimants’ is­sues are non-justiciable political questions, cases that would bar some of those assertions are now squarely before two federal appeals courts. The stakes in those cases — which I expect will go to the Supreme Court — are high. At issue are the responsibilities and rights of both the federal government and the states in en­vironmental policymaking as well as the role that courts play in resolving the special issues, such as causation, injury, and standing, raised by global warming.

The Supreme Court’s holding in Massachusetts v. EPA, decided April 2, 2007, has already had a tre­mendous impact on climate change policy develop­ment and litigation in the United States. In Massa­chusetts, 13 states, 3 cities, 13 environmental orga­nizations, and American Samoa asked for review of EPA’s denial of a petition for rulemaking to regulate GHGs — in this case four specific gases, including carbon dioxide — from new motor vehicles under Section 202(a)(1) of the CAA. That section requires that EPA “shall by regulation prescribe . . . standards applicable to the emission of any air pollutant from any class . . . of new motor vehicles . . . which in [the administrator’s] judgment cause[s], or contribute[s] to, air pollution . . . reasonably . . . anticipated to endanger public health or welfare.” The act defines air pollutant to include any physical or chemical substance emitted into the ambient air.

EPA’s denial of the petition reasoned that the CAA does not authorize it to issue mandatory regu­lations to address GHGs, especially when, as argued by the federal government, there is no science firmly linking emissions with an increase in global surface air temperatures. From a political perspective, EPA also reasoned that regulating new motor vehicles would conflict with President Bush’s comprehensive, voluntary strategy and undermine his ability to conduct foreign policy with developing countries over their emissions. EPA’s denial was not without sup­port: 10 states and 6 trade associations filed briefs against the petition.

Although the agency claimed that Massachusetts had failed to demonstrate an injury that could be tied to GHG emissions, the Court found that the state had standing to pursue review of EPA’s denial of its petition. The Court held that carbon dioxide and other GHG emissions do meet the definition of air pollutant under the CAA. The Court next held that the CAA requires EPA to regulate GHGs from new motor vehicles if it forms a judgment that such emissions under Section 202(a) “may reasonably be anticipated to endanger public health or welfare.” Welfare under the CAA includes effects on climate. EPA can only avoid regulatory action if it is appar­ent that GHGs from new motor vehicles do not contribute to climate change. Because of the Court’s linking of GHGs with the definition of air pollutant under the CAA, future litigation and other actions to reduce emissions will be strengthened.

In reaction to Massachusetts, and the lack of any decisions on GHG regulation by the agency since the decision last April, there are a variety of efforts underway to force EPA or other federal agencies to formulate a national approach to GHG regulation. Unfortunately, such an approach has to be taken up piecemeal since there is no single authority in the Clean Air Act that is a logical target. As a result, U.S. climate policy could become a crazy-quilt of differing standards and regulations across the country.

More Unanswered Petitions

In a lawsuit pending while Massachusetts’s petition for a rulemaking was on its journey, on September 12, 2007, another New England state received a favorable response to its separate petition to regu­late GHGs from motor vehicles in a federal trial court — although the final result will depend on the outcome from yet another state petition. In Green Mountain Chrysler Plymouth Dodge Jeep v. Crombie, a case brought by a group of car dealers, manufacturers, and their associations, a U.S. district court found that the state of Vermont’s regulations adopting California’s GHG standards for new automobiles were not pre­empted by either the CAA or the Energy Policy and Conservation Act of 1975, as amended. EPCA autho­rizes the Department of Transportation to set mileage standards for new cars and light trucks.

Section 202 of the CAA, the object of Massachusetts, requires the agency to establish standards for air pol­lutants emitted by new motor vehicles. Section 209(a) preempts a state from adopting its own motor vehicle emission standards, while Section 209(b) requires EPA to waive the preemption barrier for standards that meet certain conditions. The most important condition, of course, is that the state adopt the same regulations as California, which because it suffers from the worst air pollution in the country and was already legislating emissions reductions before the national government can receive a waiver to adopt standards stricter than federal regulations. Other states may adopt California standards for which a waiver has been granted if they do so at least two years before commencement of a new automotive model year.

California adopted GHG standards for new vehi­cles to begin in model year 2009, and asked EPA for a waiver of federal preemption in 2005, the same year as Vermont enacted its standards. It is this request that en­gendered the 100,000 comment letters, the most ever received on any regulatory petition. The federal agency is expected to act on California’s waiver request after it reviews the letters. However, California has decided not to wait on EPA to act on its request. On November 5, 2007, the state sued the agency in federal court to compel it to act on the petition. California Attorney General Edmund G. Brown Jr. said, “We have waited two years and the Supreme Court has ruled in our fa­vor. What is the EPA waiting for?” California pointed particularly to the fact that 16 other states have adopt­ed California standards or will do so soon. The ruling in Green Mountain Chrysler Plymouth allows Vermont’s petition to go forward, where it will have to await EPA’s decision on the California petition.

The Green Mountain decision draws support from Massachusetts, because the Supreme Court commented that despite the overlap between EPCA and the CAA, EPA must act to carry out its obligations without re­gard to what DOT does under EPCA. The Supreme Court held that “EPA has been charged with protect­ing the public’s health and welfare . . . a statutory obli­gation wholly independent of DOT’s mandate to pro­mote energy efficiency.” While recognizing that those emissions contribute to global warming, the district court recognized that Vermont’s attempt to regulate GHGs from cars is part of its comprehensive strategy to reduce GHG emissions statewide. Vermont is un­dertaking its motor vehicle program and other actions through its participation in the Regional Greenhouse Gas Initiative, an agreement among nine northeastern and mid-Atlantic states to adopt a regional cap-and-trade program for GHGs associated with large station­ary sources such as power plants.

One other interesting issue raised in the Vermont case is the allegation that the state’s regulations intrude upon the foreign affairs prerogatives of the president and the Congress and that they interfere with U.S. pursuit of international agreements to reduce GHGs. Again relying on Massachusetts, the district court said that the Supreme Court had dismissed EPA’s similar contention that regulating GHGs under the CAA might impair the president’s ability to negotiate with developing nations to reduce greenhouse gas emis­sions. Based on the evidence before it, the district court concluded that there was no demonstration that Ver­mont’s regulations would have a recognizable intrusion in the field of foreign affairs. The district court weighed the burden that the automotive industry bears to show that the Vermont regulations are beyond its ability to meet, and concluded that “the court remains uncon­vinced automakers cannot meet the challenges of Ver­mont and California’s greenhouse gas regulations.”

Staying in the world of motor vehicle emissions, on November 15, 2007, the Ninth Circuit reversed and remanded NHTSA’s corporate average fuel economy standards for light trucks for model years 2008–2011 issued under EPCA in Center for Biological Diversity v. National Highway Traffic Safety Administration. The standards were challenged by 11 states, the District of Columbia, the city of New York, and four public inter­est organizations. Emissions from light trucks make up about 8 percent of annual U.S. greenhouse gas emis­sions. NHTSA claimed it weighed all of the benefits of improved fuel savings, concluding that “there is no compelling evidence that the unmonetized benefits would alter our assessment of the level of the standard for [model year] 2011.” The appeals court found that NHTSA “assigned no value to the most significant benefit of more stringent CAFE standards: reduction in carbon emissions” and thus will have to promulgate new CAFE standards that take GHGs into account.

In yet another petition to EPA, on October 2, 2007, California Attorney General Brown joined three national environmental organizations in asking the agency to adopt strict regulations for GHGs from ocean-going vessels under the CAA — “and to begin the process immediately.” Brown said that ocean-going vessels emit more CO2 emissions than any nation in the world except for the United States, Russia, China, Japan, India, and Germany. The petition asserts that ocean-going vessels over 100 tons are estimated to emit up to 3 percent of the total world inventory of GHGs, while by comparison in Massachusetts v. EPA the Court found that the contribution of the U.S. transportation sector to the worldwide GHG total is about 6 percent. California asserts that such a large sectoral contribution to global warming is “vital to regulate.”

California has also turned to litigation and legisla­tion. Its case against the automobile manufacturers un­der federal common law and state law was dismissed on September 18 when the district court refused to entertain the federal common law claim, ruling that it comprises a nonjusticiable political issue, and then re­fused to exercise supplemental jurisdiction under state law. But the state is moving on its own: On September 27, 2007, Governor Arnold Schwarzenegger signed a bill that establishes a comprehensive program of regu­latory and market mechanisms to achieve GHG re­ductions.

The Question of Political Questions

Another issue facing current and future liti­gants concerns a political question, as decid­ed by the Southern District of New York in Connecticut v. American Electric Power Com pany. In that case, Connecticut and seven other states, the city of New York, and environmen­tal groups sued a number of electric utilities, includ­ing American Electric Power Company, the Southern Company, TVA, Xcel Energy, and Cinergy Corpora­tion under federal common law to abate the public nuisance of global warming. The complaint alleged that the defendants were the five largest emitters of car­bon dioxide in the United States, constituting approxi­mately one fourth of the electric power sector’s carbon dioxide emissions, and that U.S. electric power plants are responsible for 10 percent of worldwide carbon di­oxide emissions from human activities.

As in the California suit against the automakers, the court held that filing nuisance suits against utilities to abate emissions that allegedly contribute to global warming raises non-justiciable political questions that are beyond the limits of a court’s jurisdiction. The court concluded that “the scope and magnitude of the relief plaintiff’s seek reveals a transcendentally legislative na­ture of this litigation. Plaintiff asks this court to cap carbon dioxide emissions and mandate annual reduc­tions of an as-yet-unspecified percentage.” The court found that a case is “justiciable in light of the separa­tion of powers ordained by the Constitution only if the duty asserted can be judicially identified and its breach judicially determined and protection for the right ju­dicially molded.” The district court then went through an analysis of the six situations recognized as indicating the existence of a non-justiciable political question, cit­ing two U.S. Supreme Court cases, Baker v. Carr, de­cided in 1962, and Vieth v. Jubelirer, decided in 2004.

Among the factors in the Vieth v. Jubelirer case, which concerned gerrymandering, is whether a court faces “the impossibility of deciding [the case] without an initial policy determination of a kind clearly for nonjudicial discretion.” In Connecticut, the district court was honestly puzzled. It struggled with a variety of policy determinations concerning whether the cost of GHGs would be borne just by the defendants, the entire electricity generating industry, or all industries. It also struggled with the economic implications of making these choices, not to mention the effect on the country’s energy policy. In the end, the court conclud­ed it is the judicial branch that decides when a political question is raised, but “looking at the past and current actions (and deliberate inactions) of Congress and the executive within the United States and globally in re­sponse to the issue of climate change merely reinforces my opinion that the questions raised by plaintiffs’ complaints are non-justiciable political questions.” The decision was appealed to the U.S. Court of Appeals for the Second Circuit. Oral argument on appeal was held before the Massachusetts decision and although the Sec­ond Circuit sought additional briefing in light of the decision, it has not yet ruled in the case.

Another court decision that addressed the non-jus­ticiable political question issue is Comer, et al. v. Mur­phy Oil USA Inc., et al., decided last August by the U.S. District Court for the Southern District of Mississippi. This case, brought in the aftermath of Hurricane Ka­trina, was a putative class action on behalf of Mississip­pi citizens against defendants which included named oil company defendants (plus an additional 100 oil companies licensed to do business in Mississippi), in­surance firms, utilities, and chemical companies. The allegation was that these businesses emit GHGs, which changed the environment so as to cause more frequent and intense hurricanes over the past 30 years, result­ing in, among other things, Hurricane Katrina and the damages suffered by the plaintiffs.

Interestingly the plaintiffs did not ask the court to regulate global warming or change national global warming policy, but instead they sought damages for direct action by the defendants in contributing to the cause of Hurricane Katrina. The plaintiffs, similarly to those in the Connecticut v. American Electric Power Company case, said in a class action complaint, “To the extent that this complaint raises political issues, those issues are subordinate to the plaintiffs’ physical and monetary damages. Furthermore, although global warming causes tremendous damage to the environ­ment, public health, and public and private property every year, there is a dearth of meaningful political ac­tion in the United States to address global warming problems. Thus, to the extent that the political process has failed to provide people harmed by global warm­ing with means to recover for their injuries, the courts must execute their constitutional mandate embodied in Article III of the U.S. Constitution.”

Motions to dismiss were filed in the case, following arguments, similar to those made in Connecticut, that the case presented a non-justiciable political question and must be dismissed. In an opinion that received little notice, the district court found that the plaintiffs did not have standing to assert claims against any of the defendants and that their claims were nonjudiciable pursuant to the political question doctrine. An appeal has been docketed with the U.S. Court of Appeals for the Fifth Circuit.

The Special Standing of States

Another issue that has not been developed further since Massachusetts v. EPA is stand­ing to challenge government GHG inaction. As a backdrop to its decision, the Supreme Court was careful to explain that it was de­ciding whether GHGs should be regulated based on the wording of the CAA. The justices explained that “Article III of the Constitution limits federal court ju­risdiction to cases and controversies.” In other words, federal courts address “questions presented in an adver­sary context . . . capable of resolution through the judi­cial process.” The justices were also clear that “no justi­ciable controversy exists when parties seek adjudication of a political question.” In the Court’s view, “While it does not matter how many persons have been injured by the challenged action, the party bringing suit must show that the action injures him in a concrete and per­sonal way. This requirement is not just an empty for­mality. It preserves the vitality of the adversarial process by assuring both that the parties before the court have an actual, as opposed to professed, stake in the out­come, and that the legal questions presented . . . will be resolved, not in the rarefied atmosphere of a debating society, but in a concrete factual context conducive to a realistic appreciation of the consequences of judicial action.”

The Supreme Court took an additional step in rec­ognizing that the state of Massachusetts had a special position in the case. The Court said that “when a state enters the union, it surrenders certain sovereign prerogatives. Massachusetts cannot invade Rhode Is­land to force reductions in greenhouse gas emissions, it cannot negotiate an emissions treaty with China or India, and in some circumstances the exercise of its police powers to reduce in-state motor-vehicle emis­sions might well be preempted.” The Court stated that EPA had an obligation to protect all U.S. citi­zens under the CAA and the agency’s refusal to act presented a risk that Massachusetts had to sue to protect. The Court found that “the rise in sea levels associated with global warming has already harmed and will continue to harm Massachusetts. The risk of catastrophic harm, though remote, is nevertheless real. That risk would be reduced to some extent if petitioners received the relief they seek.”

The standing conclusion in Massachusetts needs to be used carefully in future cases due to the strong dissent written by Chief Justice John Roberts, who argues that the granting of special standing to a state has no precedent. He worries that the Article III stand­ing threshold has been lowered for all future litigants: “The good news is that the Court’s ‘special solicitude’ for Massachusetts limits the future applicability of the diluted standing requirements applied in this case. The bad news is that the Court’s self-professed relax­ation of those Article III requirements has caused us to transgress ‘the proper-and-properly limited-role of the courts in a democratic society.’ ”

Is Climate Change Material?

A final outgrowth of Massachusetts takes a completely different tack in reducing GHGs. Buoyed by the removal of barriers to EPA regulation of climate change, on September 18, 2007, a coalition of share­holders, environmental groups, and state officials filed a petition with the Securities and Exchange Commis­sion requesting that it issue an interpretive release clari­fying that material climate-related information must be included in corporate disclosures under existing law. The petition is notable because it calls for disclosures beyond the types of generic climate impacts that have been the subject of disclosures in the past and it alleges that the voluntary disclosures to date are insufficient. The petition seeks evaluation of the risks in three cat­egories: physical risk, financial risk, and legal proceed­ings. In citing Massachusetts v. EPA and pending federal legislation, the petition makes as its central point that “the transition to a carbon-constrained economy is underway, and public access to material information concerning the risks and opportunities that companies face, and their means of addressing those risks and op­portunities, is vital to investors.”

All of the efforts described in this article, some in and some out of courts, tell us that a chaotic path lies ahead for those seeking satisfactory solutions to global climate change. •

 

Lee A. DeHihns III, is the Chair of the American Bar Association’s Section of Environment, Energy and Resources for the 2007–2008 term, is a Partner in the Environmental and Land Use Group at Alston+Bird LLP in Atlanta, Georgia.

*This article originally appeared in The Environmental Forum January/February 2008 issue. For information regarding the Environmental Law Institute please visit their website at www.eli.org.

Wind Power Project Permitting: Demonstrating a Need for Clean Power and Evaluating the Economic and Wildlife Impacts of Wind Farms

Posted on November 30, 2007 by Jeff Thaler

Structure/Cause

Total Bird Fatalities

Vehicles

60-80 million

Buildings and windows

98-980 million

Power lines

10,000 – 174 million

Communications Towers

4-50 million

Agricultural Pesticides

67 million

Housecats

100 million

Wind Generation Facilities

10,000 – 40,000

There have been few studies on bat mortality. Most have focused on Virginia and West Virginia where there are more caves as well as largely deciduous forest habitats. Outside of a study at Searsburg, Vermont (P. Kerlinger 2002), which failed to document any bird or bat mortality, there are currently no published studies of bat mortality for wind power facilities in New England. For facilities located on temperate forest ridges in the Southeast and Mid-Atlantic, fatality rates range from 15.3 to 41.1 bats per megawatt (MW) of installed power, per year.[16]    Bat fatalities appeared to be greater at turbines nearer to wetlands (Jain et al 2007). Wind turbines on higher, more windy and sub-alpine ridgelines are expected to have far fewer bat fatalities.

The primary reason for very low rates of bird and bat mortality is that they migrate at altitudes wellabove the rotor-swept area. All post-2004, published (59) and unpublished (72) studies to date have consistently documented that birds and bats fly well above (i.e., 1000 to 2000 feet above) the turbine blades during migration periods.

Conclusions

Not only environmental lawyers, but all concerned decision-makers and citizens must confront the largest threat to our public’s environment, health, and property in decade: climate change from global warming due to greenhouse gas emissions. This century’s realities require prompt and decisive action on many fronts, only one of which is the expedited permitting and construction of clean, renewable, and indigenous sources of power for our homes and businesses. It is critical that we help advocate not only for individual projects, but also for modernized policy- and decision-making that balances traditional environmental wildlife concerns with the new threats to wildlife, forest,  coastal habitats, and our way of life. The need is urgent. The time is now.



[1] As of December 2007 there are three proposed wind farms that have received some regulatory review, totaling 243 MW. Studies suggest there is significantly more wind capacity developable in Maine, and of course many more times that across the United States.

[2]   The Task Force web site has a wealth of information, including a number of presentations, and is at: http://www.maine.gov/doc/mfs/windpower/summaries.shtml

[3] The October 30, 2007 presentation can be found at: http://www.maine.gov/doc/mfs/windpower/meeting_summaries/103007_summary_files/Grace_Wind_Task_Force_103007.pdf

[4] A recent presentation by Maine DEP Commissioner David Littell summarizing wind power and its

greenhouse gas and air quality benefits is at: ttp://www.maine.gov/doc/lurc/minutes/080107/Littellpresentation.pdf

[5] The general IPCC website is at:     http:www.ipcc.ch/   A summary of the Synthesis Report can be found at: http://www.ipcc.ch/pdf/assessment-report/ar4/syr/ar4_syr_spm.pdf     

[6]   For the NECIA report see:  

http://www.climatechoices.org/assets/documents/climatechoices/confronting-climate-change-in-the-u-s-northeast.pdf    For the NECIA link to specific reports in individual states, go to:   http://www.climatechoices.org/ne/resources_ne/nereport.html

[7] http://www.climatechoices.org/assets/documents/climatechoices/maine_necia.pdf   

[8] http://www.earthscape.org/r1/r1/epa06/MAINE.PDF

[9] “Analysis: Economic Impacts of Wind Applications in Rural Communities”, National Renewable Energy Laboratory and M. Pedden

[10] Poletti and Associates, Inc. Real Estate Study

[11] http://www.aceny.org/pdfs/misc/effects_windmill_vis_on_prop_values_hoen2006.pdf.

12http://www.crest.org/articles/static/1/binaries/wind_online_final.pdf)

 

[13] Erickson, W.P. et al, “Avian Collisions with Wind Turbines”, 2001.

[14] This study, by Jain et al., can be found at:

www.mapleridgewind.com/documents/06-25-07_MapleRidgeAnnualReport2006.pdf

[15] National Research Council, 2007, “Environmental Impacts of Wind Energy”, based upon Mid-Atlantic Highlands region, http://books.nap.edu/catalog.php?record_id=11935#toc; also see generally Erickson et al. 2001; Klem 1991; Pimental and Acquay 1992; Coleman and Temple 1993;

[16] Kunz et al. Frontiers in Ecology and the Environment Issue 6, Vol. 5: August 2007.

[15] National Research Council, 2007, “Environmental Impacts of Wind Energy”, based upon Mid-Atlantic Highlands region, http://books.nap.edu/catalog.php?record_id=11935#toc; also see generally Erickson et al. 2001; Klem 1991; Pimental and Acquay 1992; Coleman and Temple 1993;

[16] Kunz et al. Frontiers in Ecology and the Environment Issue 6, Vol. 5: August 2007.

Carbon Capture and Sequestration Issues and Debate

Posted on November 27, 2007 by Jeff Thaler

The proposed construction of a 700-megawatt coal-and-biomass-fuel power plant on the site of a former nuclear power plant in Maine has sparked a great deal of analysis into current issues and technologies associated with carbon sequestration, including but not limited to coal power plants. The Twin River Energy Center in Maine proposed an innovative technology to convert coal and wood biomass to a nearly sulfur-and particulate-free gas that would be burned to drive steam turbines, as well as to create a small amount of diesel fuel. 

            As in many parts of the country, the project proposal kindled debate about the use of America’s substantial coal resources in a time of climate change and greenhouse gas concerns.   Consequently, a large conference was recently held by the Chewonki Foundation with participation of experts from around the country, as well as Twin River representatives, to discuss carbon capture and storage technologies and opportunities. The Twin River project would have the technology to capture carbon, but no ready sequestration site nearby presently exists. 

            The general consensus from conference presentations was that (1) carbon capture and sequestration will need to play an important role in reducing carbon dioxide emissions, not only in the United States, but especially in China, India and other parts of the world; (2) at the present time, there is insufficient geological information -- both on land and below the ocean floor -- about the potential for carbon dioxide storage not only in Maine but in the Northeast in general; and (3) it is imperative that government, industry and environmental groups work together in exploring the viability of carbon sequestration. 

            Maine is a member of the Regional Greenhouse Gas Initiative (RGGI), the nation’s first carbon-and-trade program, which involves all Northeast states from Maine to Maryland, with the exception of Pennsylvania. Commencing January 1, 2009, it required reduction of pollution from the region’s largest power plants by 10% by 2019. However, while the region itself is not heavily dependent upon coal-fired generation, it is heavily dependent upon fossil-fuel generation, as well as being downwind of substantial coal-generated power to the west and south.

            During the Chewonki conference, findings were presented from the MIT Future of Coal Study; the U.S. Department of Energy presented on the priorities and challenges of carbon capture and storage; several speakers focused on technological issues of producing low-greenhouse gas liquid fuels, as well as the monitoring and site characterization for carbon storage; and a presentation was made by a Twin River consultant on the mine-to-wheels analysis of projected carbon dioxide emissions from the proposed plant. 

            A link to the carbon capture and storage presentations can be seen here.   After the presentation, local voters in Wiscasset rejected a change in the zoning ordinance concerning height of structures. The project developer is still intending to pursue the project following some refinements.

           In full disclosure, the author is lead environmental permitting attorney for the Twin River project, and his firm generally represents Twin River. For more information on the author, including contact information, please see firm website here.  

Regional Governors Sign On to Progressive Climate Change Agreement

Posted on November 27, 2007 by Linda Bochert

 On November 15, 2007 the Midwest Governors Association held the Energy Security and Climate Change Summit in Milwaukee, WI. The Summit provided Midwest leaders with the opportunity to come together on an issue of global importance and sign onto the Midwestern Greenhouse Gas Reduction Accord (the Accord). Full signatories to the Accord include Wisconsin, Minnesota, Illinois, Iowa, Michigan, Kansas, and the Canadian Province of Manitoba. Indiana, Ohio, South Dakota signed on as observer states, and although Nebraska and North Dakota did not sign onto the Accord, they did adopt the accompanying Energy Security and Climate Stewardship Platform (the Platform).  

          The Accord cites the lack of national leadership on climate change issues and asserts that Midwestern States are well positioned to take a leadership role in climate change policy. Several specific goals were put forth along with an aggressive timeframe within which to accomplish them. Of particular importance will be establishing targets for GHG emission reductions and implementing a regional cap and trade program.

          The Platform provides policy options and measurable goals to help facilitate the transition to a lower-carbon energy economy. Among its top priorities are the development of widespread energy efficiency programs, utilization of bio-based products and transportation, increased development of local renewable electricity, and increased support for advanced coal technologies. 

More information about the Midwestern Governors Association, the Accord and the Platform is available online here.

The IOGCC Issues Its Model Program For The Geologic Sequestration of CO2

Posted on November 27, 2007 by David Flannery

 On September 25, 2007, the Interstate Oil and Gas Compact Commission (IOGCC) issued its model program for the storage of carbon dioxide in geologic formations. The full text of the model program can be found here.

          OVERVIEW - Even though USEPA has announced that it will undertake the development of regulatory program for such activities under the Safe Drinking Water Act, the IOGCC model program is premised on the belief that the regulation of CO2 geological storage should be left to regulation by the states, rather than USEPA. Equally significant is the IOGCC view that the storage of CO2 in geological formations should be viewed as the storage of a commodity - not waste disposal. While the IOGCC proposes its CCS program in anticipation of a national program that would constrain the emission of CO2 to the atmosphere, the IOGCC avoids making recommendations about how CO2 should be constrained.

          PROPERTY RIGHTS - The model program provides that an applicant for any such project should acquire the property rights to use pore space in the geologic formation for storage. While much of the IOGCC’s model program addresses the need to acquire property rights through negotiation, eminent domain or unitization of oil and gas rights, the model program specifically states that the IOGCC is less concerned about what mechanism is used to acquire those rights and is more concerned that all necessary property rights be acquired by valid, subsisting and applicable state law. The IOGCC goes on to recognize that states might develop alternative mechanisms to acquire property rights, such as adapting the concept of the forced unitization of oil and gas industry rights to other property interests. An applicant must demonstrate that a good-faith effort has been made to obtain the consent of a major of owners "having property interest affected by the storage facility." The program provides for an applicant to have the power of eminent domain and provides that an applicant will be deemed to have necessary property rights to the extent that the applicant has initiated unitization or eminent domain proceedings and have thereby gained the right a of access to the property.

          COVERED FACILITIES - The definition of "storage facility", includes the reservoir, wells and related surface facilities but apparently not pipelines used to transport carbon dioxide from capture facilities to the storage and injection site. The IOGCC has stated its intent to consider over the next year, how its model program might best be expanded to include pipelines.

          LIABILITY RELEASE - Following completion of the project an operator would be obligated to monitor the project to assure its integrity. At the completion of that period, title to the facility would be transferred to the state and the operator and all generators of CO2 injected would be released for all regulatory liability and any posted performance bonds would also be released. Over the next year, the IOGCC has stated that it will consider the possibility of expanding the liability release to include common law tort liability. As part of the inducement for a state to allow liability transfer, the program establishes a trust fund which would assess a fee on each ton of CO2 injected. The trust fund provides the financial resources for the state to take title to project at the end of its operating life.

          COOPERATIVE AGREEMENTS - Cooperative agreements are authorized for use in connection with projects that extend beyond state boundaries.

          EOR PROJECTS - Enhanced Oil Recovery projects are not covered by the model program, although agencies are encouraged to develop rules on how enhanced recovery operations would be converted to carbon dioxide storage projects.

          PERMIT REQUIREMENTS - The program provides detailed requirements for completing an application for approval of a CCS project. Among other things maps accompanying a permit application would be required to identify existing oil and gas and coal mining operations. Public notice is completed upon mailing. The agency shall issue a permit to drill and operate once it has completed a review of the application. The permit would expire within twelve months from the date of issuance if the permitted well had not been drilled or converted. The program also sets forth detailed well operational standards, including requirements for safety plans, leak detection, and corrosion monitoring and prevention.

This article was authored by David M. Flannery, Jackson Kelly PLLC. For more information on the author see here.