Posted on July 20, 2016
Among the most dramatic impacts of global warming is Arctic change. On the one hand, we are witnessing the unprecedented melting of ice and snow, loss of habitat for globally unique species, and threats to centuries-old patterns of human livelihood. On the other, as the Arctic becomes more accessible, there is a rush to satisfy the global thirst for natural resources creating yet greater environmental jeopardy for the region.
The popular press has raised the specter of possible conflict among nations as this newest wave of resource exploitation accelerates. These concerns have been exacerbated as tensions have increased between NATO countries and Russia over Ukraine, among other geo-political issues. In fact, there are several examples of Arctic countries increasing military presence in their Arctic territories.
However, from my vantage point, the Arctic is unlikely to erupt into a new zone of conflict as nations pursue resource development. That’s because, there have been few instances of dispute over actual territory, with the most significant ones involving only Canada, the United States, and Denmark. While Russian claims regarding the Arctic Ocean seabed are much discussed in the media, other “Arctic nations” are making similar claims. These claims are all subject to resolution pursuant to the United Nations Convention on the Law of the Sea. (To some there is irony in the fact that United States’ failure to accede to this Convention means that the United States may be unable to perfect its Arctic seabed claims.
Despite increased accessibility, exploiting natural resources in the Arctic region will continue to be dangerous and difficult. Governmental cooperation in governance of the Arctic region will be essential to provide the platform for Arctic economic activity to advance in an environmental, social, and economically sustainable manner
Since 1996, The Arctic Council, consisting of the eight Arctic countries, permanent participants representing indigenous people, and observers, has been the focal point for developing the science necessary to meet this challenge. Under the leadership of the US Government, currently the Chair of the Council, a Task Force is considering stronger measures to assure that the recommendations of the Council are implemented. In a recent paper published by The Polar Record I addressed issues key to strengthening Arctic governance, especially in the marine environment. http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=10379682&fulltextType=RC&fileId=S0032247416000462 At this juncture, Arctic countries, including Russia, are positively exploring options for achieving such cooperation.
This summer a tourist vessel with over a thousand passengers is crossing the Canadian Arctic, through seas where a ship one-tenth that size recently ran aground, requiring evacuation of all passengers and crew. While Shell aborted future hydrocarbon exploration in the Bering and Chukchi Seas following numerous accidents and missteps in the summer of 2012, robust development continues elsewhere in the Arctic. And distant water fleets are moving ever northward in pursuit of fish. Without strong mechanisms for cooperation on governance of the region by the Arctic countries, these and other activities pose meaningful environmental threats to the Arctic beyond the climate change narrative. With strong cooperation, however, they can be made to be sustainable not just for the natural resources of the region but also for the people of the Arctic.
Posted on June 23, 2016
In April, I reported on Supreme Court Judge Julio Mendez’ 65-page Opinion upholding the authority of the New Jersey Department of Environmental Protection (“NJDEP”) to construct dunes along the shoreline in Margate City, New Jersey – “absent an appeal.”
Well, after three years of legal challenges, the fat lady has finally sung and Margate’s Commissioners have unanimously thrown in the proverbial beach towel by deciding not to appeal Judge Mendez’ opinion. The US Army Corps of Engineers has announced its plan to award a contract in July and commence construction in the fall. Once completed, the “missing link” will complete Absecon Island’s 8.1 mile dune project and finally respond to Hurricane Sandy’s damage to New Jersey’s beachfront.
Posted on April 20, 2016
Last month when the Ocean County, NJ challenge to the New Jersey Department of Environmental Protection’s (“NJDEP”) authority to implement dunes for shore protection was dismissed, I wrote that the decision could very well be precedential for similar challenges in other New Jersey counties.
And so it was. In a 65-page opinion, Superior Court Judge Julio Mendez also upheld the DEP’s authority to construct dunes in the City of Margate (Atlantic County) as being neither “arbitrary or capricious” nor an “abuse of power.” The opinion recognized the US Army Corps of Engineers’ (“Corps”) 6-year study and the need to be better prepared for coastal storms such as Hurricane Sandy in 2012. With this ruling – absent an appeal – the DEP will proceed to obtain the necessary easements through the eminent domain process (a prior attempt to do so via an administrative order having failed) with the appropriate compensation paid to the affected beachfront owners.
Judge Mendez acknowledged that the dunes on the oceanfront would not resolve flooding concerns to the bayfront properties nor obviate some protection afforded by seawalls and bulkheads. Interestingly, he found that the dunes in the adjacent City of Ventnor had not only protected Ventnor’s beaches but also expanded the beaches in Margate, and that the dunes in Margate would be protective of its coastal properties and was therefore not arbitrary or capricious.
Posted on April 19, 2016
Last month, while New Jersey Superior Court Judge Julio Mendez was considering Margate’s challenge to the authority of the New Jersey Department of Environmental Protection (“DEP”) to condemn City-owned lots on which to build dunes, New Jersey Superior Court Judge Marlene Lynch Ford dismissed a similar challenge by 28 oceanfront property owners in Ocean County, NJ.
In her decision, she ruled that (1) DEP’s condemnation activities were authorized to “protect the state’s fragile coastal system and [afford] public access” and (2) the taking of the requisite coastal acreage to do so was as a lawful use of that authority, provided that the eminent domain process of compensating affected property owner was followed, which she found to be the case in this instance.
Although it would appear likely that this decision should have significant precedential effect on the other pending challenges, it should be pointed out that the theory in other cases includes not only a challenge to DEP’s authority, but the reasonableness of constructing dunes on the beachfront as opposed to other “shore protection projects.” In fact, although she dismissed the challenge to DEP’s authority to condemn, Judge Ford granted a hearing to other homeowners who claim that DEP acted arbitrarily because their sea walls eliminated the need for dunes.
And so, although the authority of DEP to use eminent domain for shore protection would appear to be judicially blessed, the manner in which it is does so remains subject to challenge.
So, as always, stay tuned.
Posted on February 3, 2016
In my last blog, I summarized the substantive arguments made by the City of Margate’s attorneys in their countersuit against the New Jersey Department of Environmental Protection’s eminent domain proceedings, which were filed in state court—the federal court overturned DEP’s attempts to proceed via administrative orders. The court will have to consider: (a) is dune construction a reasonable use of the state’s “taking” powers; or (b) were alternative storm protections – e.g., sea walls and wooden bulkheads – more reasonable?
While awaiting a ruling by the court after the upcoming February 4th hearing, there have been two new developments:
1. Seventeen residents of Point Pleasant Beach in Ocean County have filed a suit against DEP, claiming the agency’s taking of their beaches was a “land grab” of the residents’ private property destined to require future maintenance expenses and possible development of boardwalks, public restrooms, etc. These cases are scheduled for hearings next month.
2. The super storm/blizzard over the January 22-24th weekend again left Margate’s streets flooded. Governor Christie took a “serves you right” position, whereas Margate officials blamed the flooding on the bay, not the ocean.
As I “go to press,” we’ll soon see whether the plaintiffs’ “we don’t need dunes” position “holds water” (pardon the pun).
Posted on February 1, 2016
New York participates in the cap-and-trade system operated by 9 northeastern and mid-atlantic states known as the Regional Greenhouse Gas Initiative that limits carbon dioxide (CO2) emissions from fossil-fuel burning power plants. These plants must purchase allowances at auction for each ton of CO2 they emit. An efficient gas-fired plant that produces 225 MWs of electricity emits approximately 1.2 million tons of CO2 a year.
During the adoption process for New York’s final RGGI rule in 2008, power generators predicted serious adverse consequences. These included increased electricity costs for consumers, added operating costs for generators who would never recoup all CO2 allowance costs from the sale of electricity, and concerns about longer term energy transactions due to the uncertainty of allowance prices.
In comments on a draft RGGI rule, generators requested the State to establish a price cap of $0.75 on the cost of a CO2 allowance to protect consumers from significant price increases and a sunset provision in the event a federal cap-and-trade program were established. The generators also expressed concern about the lack of available control technology for CO2 emissions.
Fast forward: at the last allowance auction in December 2015, the cost of a CO2 allowance was $7.50. New York generators purchased almost 6 million allowances reaping revenue of more than $44 million for the New York RGGI fund. At the previous auction in September, almost 10 million allowances were purchased at a cost of $59 million. Despite these high allowance costs, the lights are still on in New York. According to data published by the New York State Energy Research and Development Authority, updated as of January 16, the monthly average retail prices of electricity in the residential, commercial and industrial sectors have decreased between 2008 and 2015, attributable to the success of energy conservation and efficiency programs, the availability of more renewable energy, and the low price of natural gas and oil.
CO2 emissions from the power sector have decreased by more than 40% in the RGGI states since 2009 due to reductions in the regional CO2 cap. New York has been a significant contributor to those reductions. Revenue from the program of over $1 billion has been invested by the RGGI states in energy conservation and efficiency efforts, clean and renewable energy, direct bill assistance to households and greenhouse gas abatement. Importantly, RGGI also has the potential to assist states in meeting the CO2 reduction goals in EPA’s Climate Action Plan.
However, a report issued on January 20, 2016 by Synapse Energy Economics and the Sierra Club, entitled The RGGI Opportunity, states that RGGI's current requirements are not enough to get the RGGI states to their climate goals in 2030 and beyond (40% reduction in carbon pollution from 1990 levels) and it encourages more energy efficiency programs, increased levels of wind and solar projects, and adding 10 million battery electric vehicles, all of which will result in job creation.
The RGGI program has been a clear revenue and greenhouse gas reduction success, but there is potential in New York for RGGI funds to be diverted to the general fund. This last occurred in 2015 when the legislature approved a budget that moved $41 million of RGGI revenue to the general fund to be used for other environmental programs. Environmentalists considered this action a threat to the program. Since RGGI was adopted by executive action, not by statute as was the case in the other RGGI states, the environmentalists’ view is that RGGI funds can only be used for program purposes. The 2015 transfer of RGGI funds to the general fund could subject the program to challenge as a tax on electricity levied without the legislature’s approval. In contrast, the State’s 2016 budget does not include a raid on RGGI funds.
Would similar cap-and-trade programs work as well in other regions of the country? Yes, but the political will to establish such programs will depend in part on a region’s fuel mix. Since coal-fired power plants emit almost twice as much CO2 as gas-fired plants, the allowance costs for coal plants will be higher, thereby increasing the cost of the electricity they produce and making such facilities less competitive in regions that also have more efficient facilities. That said, if the programs’ revenues are pumped into energy conservation and efficiency programs, consumers could use and pay for less electricity.
Posted on January 26, 2016
In 2010 the U.S. Securities and Exchange Commission issued interpretive guidance titled Commission Guidance Regarding Disclosure Related to Climate Change on how to apply existing SEC disclosure requirements concerning the risks of climate change to public companies, material climate-related trends, legal proceedings, legislation and other climate associated matters that could affect those companies. Specifically, the SEC's interpretative guidance highlighted the following areas as examples of when climate change may trigger SEC disclosure requirements:
- Impact of Legislation and Regulation: When assessing potential disclosure obligations, a company should consider whether the impact of certain existing laws and regulations regarding climate change is material. In certain circumstances, a company should also evaluate the potential impact of pending legislation and regulation related to this topic.
- Impact of International Accords: A company should consider, and disclose when material, the risks or effects on its business of international accords and treaties relating to climate change.
- Indirect Consequences of Regulation or Business Trends: Legal, technological, political and scientific developments regarding climate change may create new opportunities or risks for companies. For instance, a company may face decreased demand for goods that produce significant greenhouse gas emissions or increased demand for goods that result in lower emissions than competing products. As such, a company should consider, for disclosure purposes, the actual or potential indirect consequences it may face due to climate change related regulatory or business trends.
- Physical Impacts of Climate Change: Companies should also evaluate for disclosure purposes the actual and potential material impacts of environmental matters on their business.
Although the SEC advised it would “monitor” the impact of its interpretive guidance on company filings, the SEC has yet to engage in any significant enforcement actions regarding climate change disclosures in light of its 2010 guidance. However, the New York Attorney General Eric T. Schneiderman has taken up the charge. On November 8, 2015, Peabody Energy Corporation, the world’s largest private-sector coal company, entered into a settlement agreement with the Attorney General with respect to Peabody’s statements regarding climate change in its SEC filings and other public statements. This settlement may well mark the first chapter in greater scrutiny of the substance of the climate change disclosures by companies.
Using the Martin Act (a New York state securities law that grants the Attorney General broad authority to investigate financial fraud and misleading disclosures) the Attorney General, in 2013, commenced an investigation into Peabody’s climate change disclosures. The November 8th settlement found that Peabody made two misleading public statements. First, Peabody’s statement in its annual reports filed with the SEC that it could not “reasonably predict the future impact of any climate change regulation on its business” was found to be misleading to investors. Peabody, in conjunction with its consultants, had prepared market projections of the potential impact of certain proposed climate change regulations and failed to disclose such projections. The market projections forecasted that “certain potential regulatory scenarios could materially and adversely impact Peabody’s future business and financial condition.”
Second, in several of Peabody’s SEC filings, Peabody’s disclosure regarding the International Energy Agency’s (“IEA”) projections of future coal demand failed to note the IEA’s less-favorable projections. Peabody’s discussion of the IEA’s projections misled investors by cherry picking the high case for coal usage, which “assumes that governments do not implement any recent commitments that have yet to be backed-up by legislation and will not introduce other new policies bearing on the energy sector in the future, even those that are likely to be implemented by various nations.” The IEA’s projections also include a low case for coal usage and a central position and, while the IEA does not endorse any particular scenario, Peabody omitted both the low case and central position in several of its SEC filings.
Pursuant to the settlement agreement, Peabody agreed (i) to include specific disclosures in its next quarterly report with the SEC and (ii) that in future SEC filings or communications with shareholders, the financial industry, investors, the general public and others (a) it will not represent that it cannot reasonably project or predict the range of impacts that any future laws, regulations and policies relating to climate change would have on Peabody’s markets, operations, financial condition or cash flow or (b) any citation to the IEA’s projections will include an explanation of the IEA’s various scenarios.
The NY Attorney General is also reported to be investigating ExxonMobil, under the Martin Act, over its climate change statements. While the Peabody settlement agreement reflects the Attorney General’s increased attention to climate change disclosures by energy companies, the effect may well ripple into other industries. In addition, members of the House and Senate have requested an update on the SEC’s efforts to implement the SEC’s 2010 guidance. Nonetheless, questions remain as to whether the obligation to disclosure climate change associated risks will, in fact, be action-forcing so as to result in a change in the behavior of public companies. Will those companies and the public take substantive steps to address the root causes and impacts of climate change or just continue to write detailed disclosures of the potential risks that pass muster with the regulators? Will those enhanced disclosures result in increased investor pressures sufficient to cause those companies to undertake serious, significant, and potentially costly, measures to reduce greenhouse gas emissions and become low-carbon?
Posted on December 11, 2015
In my latest blog, I related that New Jersey Superior Court Judge Julio Mendez had taken under advisement the City of Margate’s request for an evidentiary hearing on the reasonableness of the state’s condemnation of easements on 87 City-owned lots. The request had stressed the public’s express opposition to dunes (2 referenda) and the alleged superiority of bulkheads and seawalls for both bay and ocean front properties.
Well, the Judge ruled on Tuesday, December 8, to grant Margate’s Motion to hear its argument in a February hearing on alleged abuse of the state’s eminent domain power. Margate also challenged the Corps of Engineers’ reliance on a 20-year old study, claiming that the study was outdated and its beach protections were as good as, if not better than, dunes.
If Margate’s arguments are successful, Governor Christie’s 127 mile Sandy Relief Act program would have an approximate 1½ mile gap in continuity (its neighbors Ventnor and Longport have agreed to give the state easements to build dunes).
Next month look for the lowdown on Judge Mendez’ decision in Part 8 of my series, “Doin the Dunes.”
Posted on November 30, 2015
As we left off, the New Jersey Supreme Court ruled that in obtaining easements to build dunes, the amount of compensation for the partial loss of ocean view would have to take into account a credit for the benefit afforded by the dunes’ protection.
When the New Jersey Department of Environmental Protection, in carrying out Governor Christie’s program to construct a $3.5 billion dune system to protect its 127 mile coastline, decided to acquire the necessary easements by administrative actions, the City of Margate in Atlantic County challenged the failure to proceed by eminent domain: U.S. District Judge Bumb agreed with Margate and invalidated this mechanism, ordering the Department to proceed with eminent domain in state court.
Ten months later, New Jersey Superior Court Judge Mendez took under consideration two issues: (1) the reasonableness of the use of eminent domain to acquire easements from 10 private lot owners and 87 city-owned lots, and (2) instead of his making a summary ruling, the need to allow Margate to have an evidentiary hearing, citing the two referenda in which Margate’s voters voted to oppose the dunes.
Once Judge Mendez rules, I will update this matter, keeping in mind that the author owns a 10th floor condominium in Margate, the Municipality Governor Christie calls the most “selfish” municipality in New Jersey.
Posted on April 22, 2014
Apart from a relatively mild editorial in the New York Times, the April 13, 2014 report of the Intergovernmental Panel on Climate Change (IPCC) warning that despite global efforts, greenhouse gas emissions actually grew more quickly in the first decade of the 21st century than in each of the three previous decades, was greeted, let us say, rather tepidly. In essence, the IPCC report declared that meeting the consensus goal limit of two degrees Celsius of global warming by mid-century would require mitigation measures on an enormous scale which, if not begun within the next decade, would become prohibitively expensive thereafter. As the New York Times put it, this is “the world’s last best chance to get a grip on a problem that . . . could spin out of control.”
Humankind’s track record for global cooperation on any scale is not good. When was the last time world peace broke out, or global poverty became a worldwide priority? The 2008 re-make of the 1951 classic film, The Day the Earth Stood Still, illustrates the problem. In the original movie, the alien civilization sent police robots to stop human aggression and nuclear weapons from spreading beyond Earth; in the re-make, the alien civilization decided that our species would have to be eliminated lest it destroy one of the rare planets in the universe capable of enormous biodiversity. In pleading with the alien for another chance, Professor Barnhardt says, “But it’s only on the brink that people find the will to change. Only at the precipice do we evolve.” And, of course, eventually and after a pretty flashy show of power and destruction, the alien rescinds the death sentence, agreeing with the Professor that at the precipice, humans can change.
Are we there yet? At the precipice? Hard to know. As Seth Jaffe pointed out in his April 14, 2014 post, global giant ExxonMobil has recognized the reality of climate change, but doubts there is sufficient global will to do much about it. On the other hand, the American Physical Society warmed the hearts of climate change skeptics in appointing three like-minded scientists to its panel on public affairs. I tend to agree with that great fictional academic, Professor Barnhardt; it will take something that all humankind recognizes as the clear and unmistakable hallmark of the precipice before we collectively put on the brakes. In the meantime, we muddle through to the next opportunity, the 21st Conference of the Parties in Paris in December 2014, the first such summit meeting on climate change since Rio in 1992.
Posted on January 15, 2014
Some regulatory and economic forces are calling into question the business models of some of the world’s largest oil and gas, coal and electric power companies, and posing a new kind of risk to the investors who own them. Variously described as “unburnable carbon,” “carbon asset risk,” “stranded assets,” “peak carbon,” or the “carbon bubble,” this issue has recently become a hot topic among institutional investors, energy analysts, the International Energy Agency (IEA) and a handful of NGOs—and as a result, some of the world’s largest energy companies.
According to the International Energy Agency and UK NGO Carbon Tracker Initiative (CTI), 2/3 of the current proven carbon reserves of the world’s publicly listed fossil energy companies need to be left in the ground to avoid warming exceeding 2 degrees. Yet according to CTI, these oil, gas and coal companies spent over $650 billion in 2012 to explore and develop new reserves. If these reserves are substantially unusable, or if their use causes catastrophic change, this business model and strategy are unsustainable.
The “unburnable carbon” thesis is based in part on the premise that governments will take action to restrict GHG emissions to avoid catastrophic climate change. Alternatively, global demand for fossil fuels may peak and decline due to a combination of advances in energy efficiency, switching to renewables and cleaner fuels (e.g., from coal to gas), and environmental regulation generally.
These regulatory and market forces, in combination with energy companies’ varying production costs for conventional and unconventional (e.g., tar sands, hydraulic fracturing, deepwater drilling) resources, are predicted to cause high cost producers’ reserves to become “stranded assets.” Indeed, we are already seeing some stranded assets in the U.S. coal industry, where demand— and share prices —have fallen significantly. Proven, producible reserves are a key determinant of the market valuation of fossil energy companies. If the “unburnable carbon” theory is even partially valid, some of these companies’ valuations are at risk.
Based on concerns about “Carbon Asset Risk,” in September 2013, 70 institutional investors, who collectively manage assets of nearly $3 trillion and own substantial shares of major energy companies’ stock, sent letters to 45 of the world’s largest oil & gas, coal and electric power companies inquiring about their exposure to this issue. The letters asked the companies to do scenario analyses on the impact on their business of regulations that would limit global warming to 2 or 4 degrees Celsius, to assess their capital expenditure plans for reserve development under differing demand scenarios, and also to assess the impact of unmitigated climate change on their operations, and to share the results of these analyses with their investors.
More than 30 of the recipient companies have made initial responses, ranging from agreeing to do the requested analyses, to requesting clarification on what the investors are seeking. Others claim they have fully assessed these risks, or dismissed the requests and underlying concerns as totally unfounded. The participating investors intend to engage in dialogues with those companies that respond constructively, and initial meetings have occurred with several major oil companies.
It is anticipated that investors will file shareholder proposals seeking the same assessments and disclosures from U.S. listed companies that are unresponsive or decline to cooperate, and nine such proposals have been filed to date. Some of these resolutions will likely be voted on at corporate annual meetings during the 2013-14 proxy season.
It is unlikely that the institutional investors’ Carbon Asset Risk initiative will convince Exxon Mobil or Peabody Energy that they are in the wrong business or to abandon production of oil, gas and coal. But the unburnable carbon thesis and the risk of stranded assets do raise serious questions about the viability of the long-term business strategies of many fossil energy companies. They are effectively betting that governments will not take meaningful action to curb climate change anytime soon, that climate change won’t have serious physical and economic impacts on their businesses, and that demand for their products will continue to increase for the foreseeable future.
As an investor, I would not bet my money that they are right. And as a lawyer I’d ask if there are material SEC disclosure issues about these risks, the value of their reserves and potential liabilities to shareholders should these assets become stranded.
Posted on October 16, 2013
The UN’s Intergovernmental Panel on Climate Change (“IPCC”) has more bad news for us. Its long range forecast still looks hot, and the IPCC is more confident than ever that humans are largely the cause. On Friday, September 27, the IPCC issued a Summary for Policymakers on the “physical science basis” of climate change. This is the first part of the IPCC’s Fifth Assessment Report to be published. The summary report contains numerous findings, but you may want to begin by thinking about five aspects of them.
1. It is “extremely likely” that we’re the culprit. The IPCC observes that warming in the climate system is unequivocal. But there has been debate about its cause. Based on growing evidence, the report finds it is “extremely likely” that human influence has been the dominant cause of observed global warming since the 1950s. In the IPCC’s previous report, issued in 2007, the IPCC was 90% certain of this conclusion. Now it is 95% certain.
2. We need a carbon budget. For the first time, the IPCC takes a stab at calculating essentially a global limit on anthropogenic CO2 emissions. Science has long estimated that a temperature rise of 2 degrees Celsius above the temperature of preindustrial times is the point after which the most damaging effects of global warming would happen. The report estimates the level of total CO2 emissions since the industrial revolution that would trigger a temperature rise of this magnitude. That number is subject to variation of course, but the report projects it is likely that no more than about one trillion tons of CO2 could be released without triggering this rise in temperatures. We have released about one half of that amount so far, and projections are that at current rates, the other half trillion tons could be released from anthropogenic sources in the next several decades.
3. Temperatures of the last fifteen years are not that comforting. Climate change skeptics have focused on the fact that the rise of global surface temperatures leveled out in the last fifteen years. The IPCC report explains that this recent trend may be due to natural variability. It observes that trends based on records of short duration are very sensitive to beginning and end dates and may not reflect long term climate trends. Nonetheless, in identifying possible explanations for the fifteen year hiatus in warming, IPCC recognizes that the possible explanations for it are not proven. It also recognizes the possibility that in some models, there may be an overestimate of the response to increasing greenhouse gas.
4. There is much we do not know. We don’t know the cause of the fifteen year leveling of global warming. We don’t know how quickly the oceans will rise. We don’t know the likelihood and rate of extinctions. We cannot accurately predict the localized effects of warming temperatures. Much of the report is a detailed exercise in characterizing probabilities and confidence levels of predicted global climate trends over time. The report characterizes the likelihoods of trends it identifies, and they range from the virtually certain to low confidence levels, depending on the trend and timeframe.
5. We will hear more from the UN. The Summary Report for Policymakers focuses on the physical science basis of climate change, and the full version of this part is expected soon. This physical science part is only the first of three that will together comprise the IPCC Fifth Assessment Report. The Fifth Assessment Report follows the Fourth Assessment Report which was published in 2007. In 2014, the two additional parts of this Fifth Assessment Report will be issued concerning (1) likely impacts and (2) steps to limit climate change. As the report is issued, it likely will prompt renewed efforts for a global climate treaty. The UN Secretary General, Ban Ki-moon, urged world leaders to work toward a new global agreement to cap greenhouse gas emissions and declared his intention to call a meeting of world leaders next year.
Posted on July 19, 2013
On June 13, 2013, I posted a blog regarding how to compensate New Jersey beach owners who have an easement condemned on their property to allow the Corps of Engineers to construct dunes. In the blog, I indicated that the trial court and Appellate Division in New Jersey had excluded testimony on the value that the dunes would bring to the property as a “special benefit”, determining that dunes provided a “general benefit” for not only the property owner but all of the other owners who may be affected, as well as the state of New Jersey, and therefore would not be taken into account in determining the condemnation value for the easement. At the same time, the New Jersey legislature was considering a bill that would specifically require recognition of these “special benefits” and Governor Christie was criticizing beach owners who would not cooperate in helping forestall the damages that such beachfront owners would incur from future “Sandy” storm events.
On Monday, July 8, 2013, the New Jersey Supreme Court, in a unanimous decision, reversed the Appellate Division and remanded the case for the jury to consider the value of the protection afforded by the dune, a “special benefit”, which obviated the need for the legislature to speak to the issue.
The bottom line is that in constructing dunes on the 127 mile coastline, the property owners are “not going to be paid a windfall for [their] easement[s]”, according to Governor Christie.
While it remains to be seen how the lower court will now value the easement, from the standpoint of protection against rising sea levels and catastrophic floods, the recognition that dunes will benefit coastal owners appears to this author to be a step in the right direction.
Posted on July 17, 2013
Mayor Michael Bloomberg and the Special Initiative for Rebuilding and Resiliency recently promulgated a 438-page report titled “A Stronger, More Resilient New York” (the “Resiliency Report”) in the wake of Hurricane Sandy’s devastating destruction on October 29th, 2012. The Resiliency Report emphasizes the inevitable effects of climate change and rising sea levels, opening with a climate analysis conducted by the New York City Panel on Climate Change (“NYCPCC”). According to the NYCPCC, 25% of New York City’s land mass, home to 800,000, will be in the floodplain by 2050. The Resiliency Report is part of Mayor Bloomberg’s PlaNYC, an unprecedented program initiated in 2007, which currently has 132 initiatives to make New York City (“NYC”) more sustainable and adaptable to the effects of climate change. Given the historic impact of Hurricane Sandy and the concern that future weather events could be just as devastating—or even worse—the Resiliency Report was commissioned to build on the momentum of PlaNYC.
The Resiliency Report contains over 250 proposals, implementation of which is estimated to cost $19.5 billion. Approximately $15 billion has been or is expected to be appropriated from federal and city sources, but the remainder of the required funding may be dependent on whether further aid will be available from the federal or state governments. Among other things, the Resiliency Report calls for the restoration of dunes, widening of beaches, and erection of localized surge barriers, levees, and floodwalls in particularly vulnerable areas. The Report also calls for amendment of the Biggert-Waters Flood Insurance Reform Act, which currently only allows for premium reductions if the house is elevated, to allow for flood insurance premium reductions if the homeowner makes other flood-related improvements. Additionally, a Building Resiliency Task Force (established by the Mayor and City Council Speaker Quinn) recently issued a separate Building Resiliency Report, focusing in greater detail on building structural and infrastructure resiliency. The Building Resiliency Report has 33 specific recommendations based on four central themes: constructing stronger buildings, securing backup power, providing essential services, and developing building-specific emergency plans.
Numerous issues have already been raised regarding recommendations in the Resiliency Report. One such example is the controversial proposal of a SeaPort City, which has already spawned community resistance. SeaPort City would be an artificial expansion of the lower east side of Manhattan modeled after Battery Park City, which was highly successful in reducing flood-damage from Hurricane Sandy on the lower west side. Although it has been emphasized as a resiliency initiative, SeaPort City would serve the dual purposes of acting as a protective barrier and providing highly coveted residential and commercial real estate. Nearby South Street Seaport residents and businesses, which were devastated by Hurricane Sandy, argue that this massive landfill would harm wildlife and would have an adverse effect on preservation of the historic neighborhood. Since the plan for SeaPort City is still in its infancy, the costs for such a development have not been calculated into the already staggering $19.5 billion costs to implement the other Resiliency Report proposals.
The Resiliency Report opens with an invigorating foreword by Mayor Bloomberg, stating that “[w]e are a coastal city—and we cannot, and will not, abandon our waterfront.” In contrast, on the state level, Governor Cuomo’s floodplain buy-out program provides an incentive for private homeowners to relocate from the coastline. This $400 million purchase program offers to buy houses in flood-prone areas, specifically in Staten Island, with the value offered depending on the vulnerability of the particular neighborhood. The houses would be demolished and the properties would remain undeveloped to act as a natural buffer for future storms. Governor Cuomo stated that “there are some parcels that Mother Nature owns . . . and when she comes to visit, she visits.” Though the buy-out program still awaits federal approval, it has garnered substantial support from Staten Island representatives. The governor’s proposal is consistent with the views of members of the NYCPCC who have urged for a retreat from coastlines.
Regardless of methodology, all parties agree that some changes must be implemented soon to address the growing threat of climate change and rising sea levels. The success of the recommendations in the Resiliency Report and the continuing success of PlaNYC will hinge predominantly on the initiatives of Mayor Bloomberg’s successor. The Bloomberg administration has five months left to lay the foundation for these programs, but the responsibility to implement both the Resiliency Report recommendations and PlaNYC ultimately will fall on the next mayor. The incoming mayor must have the will, dedication, funding and community support to ensure the programs’ continued success. Will the new mayor be willing to commission studies of the SeaPort City proposal? Will the new mayor be able to secure the funding required to implement recommendations in the Resiliency Report? Will the new mayor build on the successes of PlaNYC? Will the new mayor become the flag-bearer for the adaptation of New York City and its coastal metropolitan areas to address growing environmental concerns? These and other questions have already become an important part of the campaign dialogue as voters form their positions for the upcoming mayoral election in November.
Posted on June 13, 2013
How appropriate was the name “Sandy”, which hit the New Jersey shore, leaving in its wake a $30 billion cleanup/rebuild price tag. Climate change experts agree that such catastrophic storms will continue to occur in the future and that adaptation is essential to confront repetitions.
So it is in New Jersey where all 3 branches of government have suggested ways in which to do so. First, Governor Christie has gone on record as being “not in favor of using eminent domain to kick people out of their homes”. He therefore proposes to spend $300 million to acquire key beach homes on the Ocean and Monmouth County shorelines.
Second, and most interesting to environmental and land use attorneys, is the U.S. Army Corps of Engineers’ (Corps) pursuit of acquiring easements along the New Jersey shore lines on which to construct and maintain 2-story high sand dunes. This program, begun in 2003 and contemplated to last 50 years, is focused on 14 miles of New Jersey’s barrier islands at an estimated cost of $144 million. (The Corps’ estimate does not recognize the issues raised here.) The wild card in the Corps’ approach is how much needs to be paid in compensation for the property owners’ easement, including a partial loss of ocean view. This is the issue moving through the New Jersey legislature and, more importantly, its courts. In the most recent case, Borough of Harvey Cedars v. Harvey Karan and Phyllis Karan, Judge E. David Millard, the lower court judge, was faced with the question whether the compensation award for an easement on 1/3 of the Karans’ beachfront property, on which the Corps built a 22 foot high sand dune which partially obstructed their ocean view, should be reduced by the resultant benefit of protection from future storms provided by the dunes – or whether the general benefit to others, and the entire state of New Jersey, made such a “special benefit” to the Karans not recognizable under existing New Jersey case law. Finding such “special benefit” not consistent with prior law and extremely speculative to calculate, Judge Millard instructed the jury not to make any such reduction in the $375,000 award. The New Jersey Superior Court Appellate Division affirmed the result, Borough of Harvey Cedars v. Harvey Karan and Phyllis Karan, 45 A.3d 983 (2012) . The New Jersey Supreme Court granted certification to the Borough and heard two hours of argument on May 20, 2013.
Third, while all this was going on, a bill was introduced in the New Jersey Senate in March 2013 which, if enacted, would allow the Court to consider the “special benefit” which dunes would afford to the affected homeowners. Whether the bill ever becomes law, as well as questions as to its constitutionality and its effect on New Jersey case law would certainly emerge – as will be the question as to whether the New Jersey Supreme Court will take notice of the bill in rendering its decision.
Issues such as these will clearly impact the cost of climate change adaption, especially so with the threat of the anticipated rising of sea levels and recurring coastal storms to island properties. Stay tuned.
Posted on June 7, 2013
On the night of his re-election, President Obama told the nation that he wanted “our children to live in an America…that isn’t threatened by the destructive power of a warming planet.”
In the past year, we’ve seen extreme weather, fueled by carbon pollution, cost hundreds of American lives and nearly $100 billion in damage across the country. Yet right now we have no national standards to control carbon pollution from the biggest emitters—the 1500 existing power plants which are responsible for 40 percent of U.S. carbon pollution. NRDC has developed a plan for how the President could use his existing authority under the Clean Air Act to cut this climate-changing pollution from power plants, quickly and cost-effectively.
In a 2011 Supreme Court decision, American Electric Power v. Connecticut, the court ruled that it is the EPA’s responsibility to curb carbon pollution from power plants, new and existing. Carbon pollution limits for new power plants have been proposed and the EPA needs to make them final. But the step that will make the biggest difference is cutting pollution from existing power plants. Under section 111(d) of the Clean Air Act, the EPA could set state-specific standards for average emissions from existing power plants based on each state’s current energy mix. Then states and power plant owners would have broad flexibility in deciding how to meet those standards, using a range of cost-effective measures and technologies.
Not all states line up at the same starting point when it comes to carbon emissions—some are heavily coal dependent, while others rely more on lower-carbon fuels and clean, renewable energy. Developing state-specific standards will give heavily coal-reliant states more realistic targets, while still moving them toward a cleaner energy supply. In addition, states and power plant owners can keep costs down by using a variety of measures to achieve compliance, whether it’s installing a new boiler in an old coal-fired plant, or investing in a home-weatherization program to reduce energy demand. These efficiency measures will help keep energy bills low and also create thousands of jobs that can’t be outsourced.
All in all, NRDC’s flexible, cost-effective proposal can achieve a 26 percent reduction (from 2005 levels) in carbon pollution from power plants by 2020, according to modeling done by the same firm the EPA uses for much of its air pollution modeling. The cost of compliance, about $4 billion, is comparatively low, and is vastly outweighed by the benefits--$25 to $60 billion in savings. These benefits come in the form of 3,600 lives saved, and thousands of asthma attacks and other illness prevented each year due to less air pollution, as well as the value of reducing carbon pollution by 560 million tons. This is twice the reduction that will be achieved by clean car standards.
The President has been very clear about the need to do something to curb global warming. This cost-effective proposal could be his biggest opportunity to take decisive action. He can dramatically reduce carbon pollution from power plants--while creating major health benefits and jobs--using his existing authority under the Clean Air Act.
Posted on September 21, 2012
The August 2012 preliminary results from the European Space Agency’s CryoSat-2 probe indicate that 900 cubic kilometers of summer sea ice has disappeared from the Arctic ocean over the past year. This rate of loss is 50% higher than most scenarios from historic information outlined by polar scientists. The summer figures provide a real shock. In 2004 there were about 13,000 cubic kilometers of summer sea ice in the Arctic -- now only 7,000 cubic kilometers were measured. If the current annual loss of around 900 cubic kilometers continues, summer ice coverage could disappear in about a decade in the Arctic.
The new sea ice measurement was set on August 26, 2012, a full three weeks before the usual end of the melting season, according to the National Snow and Ice Data Center. So more melt in 2012 is predicted. Every major scientific institution that tracks Arctic sea ice agrees that new records for low ice area, extent, and volume have been set. These organizations include the University of Washington Polar Science Center (a new record for low ice volume), the Nansen Environmental & Remote Sensing Center in Norway, and the University of Illinois Cryosphere Today.
The consequences of losing the Arctic’s sea ice coverage, even for only part of the year, could be profound. Without the cap’s white brilliance to reflect sunlight back into space, the region will heat up even more than at present. As a result, ocean temperatures will rise and methane deposits on the ocean floor could melt, evaporate and bubble into the atmosphere. Scientists have recently reported evidence that methane plumes are now appearing in many areas. Methane is a particularly powerful greenhouse gas and rising levels of it in the atmosphere are only likely to accelerate global warming. And, with the disappearance of sea ice around the shores of Greenland, its glaciers will melt faster and raise sea levels even more rapidly than previously predicted.
Posted on August 20, 2012
Co-Authored by: Beth A. Coombs, Gibson Dunn & Crutcher LLP
California’s recently approved regulations establishing a Cap-and-Trade Program for the reduction of greenhouse gas (“GHG”) emissions are already under attack in California court. In March 2012, two citizen groups filed a petition challenging the California Air Resources Board’s (“CARB’s”) regulations that allow entities to quantify GHG emission reductions and take credit for those reductions while, at the same time, making such reductions available to other GHG emitters to purchase as an “offset” to their own greenhouse gas emissions. The case, Citizens Climate Lobby and Our Children’s Earth Foundation v. California Air Resources Board, Case No. CGC-12-519554, filed in San Francisco County Superior Court, represents the first major legal challenge to California’s landmark Cap-and-Trade Program.
The Cap-and-Trade program is part of the Global Warming Solutions Act of 2006, which the California legislature adopted in 2006 under Assembly Bill 32. The bill required statewide GHG emissions to be reduced to their prior 1990 levels by 2020. Cal. Health & Saf. Code § 38550. As part of its overall statutory scheme, AB 32 vested the CARB with the discretion to decide whether to adopt regulations employing “market based compliance mechanisms.” Health & Safety Code §38570. Exercising that discretion, CARB, through a multi-year process involving extensive public comment, promulgated regulations establishing offset credits through protocols specific to certain industries or business operations. It is these offset protocols that are now under attack.
Petitioners claim that the protocols adopted by the CARB allow GHG emission reductions that are not “additional.” This, they say, violates AB 32’s mandate that offsets must be “in addition to any greenhouse gas emission reduction otherwise required by law or regulation, and any other greenhouse gas emission reduction that otherwise would occur.” Cal. Health & Saf. Code § 38562(d)(emphasis supplied). However, Petitioners’ interpretation of “additionality” is inappropriately and prohibitively narrow. For example, under Petitioners’ view of AB 32’s requirements, the offset protocol for the use of anaerobic digesters that reduce GHG emissions (primarily methane) by treating manure at dairies and hog farms allows in “non-additional” projects because some farms within the United States already use digesters—despite the fact that (1) farms currently using digesters would not be credited under the program, (2) the use of digesters on farms is still rare, and (3) most digesters currently in use were installed under grants for increasing energy efficiency. As another example, Petitioners argue that the offset protocol for the destruction of ozone depleting substances (“ODS”) allows crediting for projects that otherwise would occur because while less than 1.5% of recoverable U.S. sourced ODS is currently being destroyed, there are still ‘business reasons” aside from offset incentives for destroying ODS. And they point to the General Electric Company as an example of a company that gains “goodwill” with the consumer public by voluntarily destroying ODS.
This prohibitively narrow view of AB 32’s offset requirements for “additionality” effectively nullifies the California legislature’s grant of regulatory authority to CARB to create an offset program, because no such program could comply with the strictures laid out by Petitioners. Indeed, it is Petitioners’ philosophical disagreement with the legislature’s decision to allow an offset program that underlies this litigation. Two members of one of the groups challenging the offsets long ago advised CARB that, “[i]t is critically important for ARB to resist the temptation to make offsets part of California’s cap-and-trade program.” Laurie Williams & Allan Zabel, Comment on Proposed GHG Offset Protocols, 9, Dec. 13, 2010, Comment 521 for California Cap-and-Trade Program. But this fundamental disagreement about whether offsets should be part of a government greenhouse gas reduction program is necessarily a policy decision – not one that should be decided by the courts – and the legislature clearly gave CARB the discretion to adopt the protocols.
The legal problem with Petitioners’ attack is that they sidestep the critical definition of “additional” that CARB adopted as part of the same regulatory package that contains the offset protocols. That definition provides that:
"in the context of offset credits, [GHG] emission reductions or removals that exceed any [GHG] reduction or removals otherwise required by law, regulation or legally binding mandate, and that exceed any [GHG] reductions or removals that would otherwise occur in a conservative business-as-usual scenario.” Cal. Code of Regs. tit. 17, Section 95802(a)(3).
The four protocols challenged by the litigation – livestock (digestors), ozone depleting substances, forests and urban forests – were all developed through a lengthy and thorough public process involving stakeholders from all perspectives on the political spectrum. In each case, data and research were devoted to determining what “business as usual” meant with respect to GHG emissions reductions. And where there were clear additional steps that very few, or almost none, of the industry was taking regarding GHG emissions reductions, then protocols were developed to recognize such steps as potentially qualifying for offsets. There seems little doubt that the protocols easily meet the CARB definition of “additional” and that may be why Petitioners chose to avoid a challenge of the regulatory definition, and instead simply to claim that the protocols violate the statute. But their failure to challenge the definition in the same regulatory package seems like a transparent attempt to avoid the more lenient “arbitrary and capricious” standard of review for the adoption of most regulatory programs in California, and to try for the more rigorous “de novo” standard of review.
All of these issues are laid out in the briefs that have been filed by Petitioners, CARB, and the interveners which include the Climate Action Registry (the original developer of the protocols), a business interveners group which includes many of the large utilities (Southern California Edison, for example, is a member), and the Environmental Defense Fund. The Nature Conservancy has also submitted an amicus brief. It is certainly telling that a coalition of major utilities, the Environmental Defense Fund, and The Nature Conservancy have all lined up to take the same position of defending CARB’s adoption of the four offset protocols.
The Court has scheduled November 6, 2012 as the date to hear the matter.
Posted on November 4, 2011
The October 16 New York Times asked the question: Where Did Global Warming Go? Congress is considering legislation to reduce the authority of EPA. Some presidential candidates argue that the Environmental Protection Agency has caused significant damage to the American economy, and some have suggested its abolition. Questions have been raised about the failure of a large solar energy company despite a massive loan guarantee by the United States government.
In the midst of all these headlines, I was surprised to read that the European Union has adopted a rule which requires a shift to renewable energy. This rule will turn buildings into “power plants” to collect and store energy from sun, wind, and other non-fossil fuel sources. Rule 116 of the Rules of Procedure calls upon EU Institutions to:
- Pursue a 20% increase in energy efficiency by 2020,
- Reduce greenhouse gas emissions by 30% by 2020,
- Produce 33% of electricity and 25% of overall energy from renewal energy sources by 2020,
- Institute hydrogen fuel cell storage technology and other storage technologies for portable, stationary and transport uses and establish a decentralized bottom up hydrogen infrastructure by 2025 in all EU Member States, and
- Make power grids smart and independent by 2025 so that regions, cities, SMEs and citizens can produce and share energy in accordance with the same open access principals as apply to the internet now.
Germany is the leading early adopter of the program to turn buildings into small power plants that will collect and store energy.
How did this happen in the EU? Are Europeans more concerned about global warming? Or is it the high cost of oil?
Oil prices affect the cost of everything. If Europe can reduce its dependence on fossil fuel, it can improve its economic condition. Retrofitting existing buildings and developing new technologies to collect energy from non-fossil fuels provides jobs. Having each building become a small “power plant” uses lessons learned from the internet practice of sharing information and working collectively to produce a better product than the top down vertical development approach.
Where did the EU and Germany come up with the plan to turn buildings into power plants to store energy and to reduce their dependence on the price of oil? They listened to an American economist, Jeremy Rifkin. Rifkin wrote The Third Industrial Revolution: How Lateral Power is Transforming Energy, the Economy and the World. Rifkin’s views may not be accepted by many in America, however, his book and his teachings are worth considering. Rifkin’s ideas are the basis for the EU Rule.
What happened to global warming and the U. S. green economy? The New York Times suggests that Americans prefer larger cars and less government intrusion while remaining skeptical of science.
Yet American history shows that we have always believed that there is another frontier for our pioneering spirit to conquer. Some Americans believe that the next frontier is safe development of shale gas and North American oil reserves, as opposed to renewable resources. This approach requires far less change than the development of alternative fuel sources in the manner dictated by the new EU rule. The reserves seem plentiful and can displace energy imports. However, their use continues the rise in green house gas emissions.
Is the problem in our current political system? Is our focus on winning at all costs preventing any consensus on significant long term changes necessary to develop sustainable alternative approaches to energy?
Perhaps it is the American character. Traffic congestion is a problem in major cities all over the world. The most significant changes to eliminate traffic congestion include bans or significant restrictions on driving in London, Milan, Florence and other European cities. American cities resist restrictions on driving. Europeans value walking and pedestrian access far more than Americans. Americans still believe that the convenience of driving is more important than reducing traffic congestion.
Whatever the answer is to these questions, it appears that Europeans are implementing a green economy that will benefit all of their citizens regardless of whether there is global warming. Shouldn’t America consider this as well?