Energy & Environmental Law Update – December 16, 2012
Energy and Climate Debate
With the end of the year and the 113th Congress looming, the lame duck winding down, although lawmakers are still far from coming to an agreement on the fiscal cliff. As fiscal cliff negotiations continue, tax extenders programs, such as the production tax credit, hang in the balance.
The Biomass Power Association, the Energy Recovery Council, the National Hydropower Association, and the Geothermal Energy Association sent a letter to President Obama December 7 urging him to modify the production tax credit for renewable electricity to allow projects under construction by the end of next year, rather than projects placed in service, to qualify. The commence construction language is included in tax extenders legislation (S. 3521) the Senate Finance Committee approved in August. The $205 billion Family and Business Tax Cut Certainty Act of 2012 would extend more than $18 billion in energy-related tax incentives as well as other provisions such as the patch for the alternative minimum tax and the research and development tax credit. Though the negotiations are slow, many are hopeful that Congress will pass the measure as part of a fiscal cliff avoidance package, but the commence construction clause may be returned to its original placed-in-service requirement, as the modification raises the total cost from $5.5 billion to $12.2 billion.
The American Wind Energy Association sent a letter to leading tax writers in the House and Senate December 12 indicating that it would accept a six-year phaseout of the production tax credit. The association’s first priority is congressional passage of the credit, and its phaseout proposal is drawing support from some key Congressional members as part of a path forward for inclusion into the broader agreement, though the proposal was presented as an idea to be considered within the context of comprehensive tax reform next year. Comprehensive tax reform may be the first order of business for the coming Congress, and renewable energy tax credits, including a renewable electricity production tax credit and an investment tax credit for solar energy projects, which cost $20 billion a year when combined with tax incentives for the fossil fuel industry, could be decreased or eliminated as part of the broader tax reform effort.
In addition to tax extenders efforts, the farm bill remains unfinished business in the 112th Congress. A bipartisan group of 33 senators led by Senators Max Baucus (D-MT) and John Hoeven (R-ND) sent a letter December 14 to Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY) urging them to include a five-year farm bill in the end of the year fiscal package.
The Senate also is likely to consider legislation (H.R. 1) that would provide relief to areas affected by Hurricane Sandy. Negotiations regarding the fiscal year 2013 Department of Defense authorization bill are also likely to continue into this week as both the House and Senate have requested a conference to iron out differences between their respective versions of the legislation.
Looking to the 113th Congress, Senator Barbara Boxer (D-CA), chair of the Senate Environment and Public Works Committee, said December 11 that following Hurricane Sandy, more Congressional members are open to readdressing climate change legislation. As a result, she is joined by Senators Tom Carper (D-DE), John Kerry (D-MA), and Bernie Sanders (I-VT) in forming a Senate caucus focused on moving climate legislation in the near future. Senators Boxer and Sanders announced recently that they plan on soon introducing climate legislation, and Senator Kerry said December 11 that he plans on working on climate change legislation as well.
Loan Guarantee Information Sought
Representatives Fred Upton (R-MI) and Cliff Stearns (R-FL) sent Energy Secretary Steven Chu a letter December 13 requesting an update on the financial condition of each of the 26 projects that received funding through the Section 1705 loan guarantee program. They requested a response by December 28.
ENR Democratic Member Changes
Senators-elect Mazie Hirono (D-HI) and Martin Heinrich (D-NM) will join the Senate Energy and Natural Resources Committee in the 113th Congress. They will take the slots being vacated by retiring Senator Jeff Bingaman (D-NM), the panel’s longtime chairman, and Senator Jeanne Shaheen (D-NH), who will also leave the committee to serve on the Senate Appropriations Committee. Incoming committee Chairman Ron Wyden (D-OR) has named longtime aide Josh Sheinkman as the committee’s next staff director. Senate Republicans have yet to announce their committee assignments.
The Democratic Steering Committee approved committee assignments December 12, retaining Senator Barbara Boxer (D-CA) as chair of the Senate Environment and Public Works Committee for the 113th Congress. There have been speculations that Senator Boxer would leave the committee to become chair of the Foreign Relations Committee if Senator John Kerry (D-MA) resigns from the Senate to accept a position in the administration, but Senator Boxer has said that she would not consider leaving her current chairmanship. Though Republicans have not yet announced their committee assignments, Senator David Vitter (R-LA) will take over the committee’s ranking member position, as Senator Jim Inhofe (R-OK) is term limited.
Finance Committee Democratic Member Changes
Senators Sherrod Brown (D-OH) and Michael Bennett (D-CO) will fill two vacant Democratic seats on the Finance Committee in the 113th Congress. Senators Brown and Bennet will replace Senators Kent Conrad (D-ND) and Jeff Bingaman (D-NM).
Climate Hearing Requested
Representatives Henry Waxman (D-CA) and Bobby Rush (D-IL) sent a letter to House Energy and Commerce Chair Fred Upton (R-MI) and Subcommittee on Energy and Power Chair Ed Whitfield (R-KY) December 11 requesting that the committee hold a hearing on a recent PricewaterhouseCoopers LLP report finding that companies should prepare for global temperatures to increase 6° C by the end of the century. The November 5 report, Too Late for Two Degrees? Low Carbon Economy Index 2012, concludes that carbon intensity must decrease by 5.1 percent per year for the next 39 years to limit climate change to the international goal of 2°C, a reduction rate that has never been achieved.
Senator John Thune (R-SD) and Chuck Grassley (R-IA) called on the Treasury Department December 10 to stop Wanxiang Group, a Chinese company, from purchasing A123 Systems Inc., an electric vehicle battery manufacturer that received a $249 million Energy Department grant. U.S. Bankruptcy Judge Kevin Carney approved the deal December 11.
Sustainable Transportation Project Funding a Priority
Incoming House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) indicated last week that one of his main priorities will be finding a sustainable way to fund transportation projects; he believes vehicle-miles traveled fees may be the best long-term solution. After a year-long pilot program, the Oregon Department of Transportation determined that a VMT fee was a workable alternative to the gas tax for financing highways and roads.
National Infrastructure Bank
Senate Commerce Committee Chairman John Rockefeller (D-WV) is likely to introduce legislation to create a national infrastructure bank early next year. The Brookings Institution advocated for the establishment of a national infrastructure bank in a December 13 report, Setting Priorities, Meeting Needs: The Case for a National Infrastructure Bank.
Efficiency Tax Credits
Appearing before the Senate Finance Subcommittee on Energy, Natural Resources, and Infrastructure December 12, Steven Nadel, executive director of the American Council for an Energy Efficient Economy, told committee members that Congress should review and update energy-related tax breaks every five years as energy efficiency standards improve. The council released a white paper, Energy Efficiency Tax Incentives in the Context of Tax Reform, July 16 on energy tax incentives, finding that incentives to build energy-efficient homes and promote more efficient electric appliances are among the most successful and could be expanded to help the government recoup lost tax revenue. Senator Jeff Bingaman (D-NM) agreed that some incentives warrant a five-year reauthorization, but that others deserve to be made permanent; Senator Ron Wyden (D-OR) contended that Congress needs to create a more level playing field across energy sources, including via the tax benefits they receive.
BLM Fracking Rule Challenged
Congressman Cory Gardner (R-CO) led 42 of his colleagues November 30 in sending a letter to Interior Secretary Ken Salazar warning that a proposed Bureau of Land Management fracking on federal land regulation could threaten water righter rights and state administration of those rights. The bureau expects to issue the final rule, which would establish reporting requirements on drilling plans, fracking chemicals, water management, and wastewater disposal, early next year.
Senator Dick Lugar (R-IN) introduced the Liquefied Natural Gas for NATO Act December 12; the measure would allow domestic liquefied natural gas exports to be sold to members of the North Atlantic Treaty Organization that do not have free-trade agreements with the United States.
Representative Earl Blumenauer (D-OR) introduced legislation (H.R. 6662) December 13 to direct the Treasury Department to establish a pilot program to study alternatives to the gas tax, including a vehicle miles traveled fee. The bill would authorize $154 million to conduct the research.
Global Energy Trends
The National Intelligence Council released a report December 10 anticipating that global energy demand will increase 50 percent over the next 15 to 20 years, and that climate change will exacerbate the demand and severity of the stress. The report, Global Trends 2030: Alternative Worlds, finds that demand for food is expected to rise 35 percent by 2030, while water demands are expected to rise by 40 percent; nearly half of the global population will live in areas with severe water stress by 2030. The report concluded that the United States could become energy independent by 2030 because of natural gas production as a result of fracking.
Department of Agriculture
$10 Million for Biofuels
The Department of Agriculture awarded $10 million in research grants December 14 through the Agriculture and Food Research Initiative to help universities build regional systems to deliver biofuels. The 25 recipients will work to hasten bioenergy and bio-based product development in four categories: policies for regional biofuels systems, impacts on wildlife and pollinators, socioeconomic effects, and direct and indirect land-use change.
Department of Commerce
CASM Supports AD/CVD Orders
The Coalition for American Solar Manufacturing welcomed December 10 the Commerce Department’s issuance of countervailing and antidumping duty orders putting in place significant duties on imports of Chinese crystalline silicon cells and panels.
Department of Energy
$12 Million for Advanced Biofuels
The Department of Energy announced December 14 up to $12 million in new funding for projects that aim to reduce the cost of producing gasoline, diesel, and jet fuels from biomass. Advanced drop-in biofuels can be blended with conventional fuels for use in traditional cars, trucks, and airplanes. Five research and development projects will boost biofuel yields from non-food-based lignocellulosic feedstocks.
Regional CHP Technical Assistance Partnerships
The Department of Energy’s Advanced Manufacturing office issued a solicitation December 13 to establish regional Combined Heat and Power Technical Assistance Partnerships. The partnerships are designed to enable the use of combined heat and power, including waste heat to power, as solutions to the energy issues in the furtherance of the president’s August 30th Accelerating Industrial Energy Efficiency Executive Order.
$29 Million for Solar Projects
The Department of Energy announced a $29 million investment December 7 in four projects as part of its SunShot Initiative to improve grid connection and reduce installation costs through innovative plug-and-play technologies and reliable solar power forecasts. The agency will direct $21 million over five years to design plug-and-play photovoltaic systems that can be purchased, installed, and operational in one day; $8 million will be used to help utilities and grid operators better forecast when, where, and how much solar power will be produced at domestic solar energy plants.
Department of Interior
The Department of Interior announced December 12 that it is seeking expressions of interest in the leasing of locations for wind farms off the coast of North Carolina. The Bureau of Ocean Energy Management has identified three areas totaling 1,441 nautical square miles on the Outer Continental Shelf where commercial wind energy leasing could take place. At the same time, the Energy Department announced the selection of seven research and development projects for offshore wind energy in marine or lake waters off the coasts of Maine, New Jersey, Ohio, Oregon, Texas, and Virginia; each will receive up to $4 million to complete the engineering, design, and permitting phases.
Solar Energy Zone Land Preservation
The Department of Interior approved a plan that will be published December 17 to withdraw 303,900 acres of public land from mining claims to preserve the areas for solar energy development. The plan will protect and preserve 17 solar energy zones in Arizona, California, Colorado, Nevada, New Mexico, and Utah for a 20-year period.
Environmental Protection Agency
Particulate Matter Standard Finalized
The Environmental Protection Agency finalized an update to its national ambient air quality standard for fine particulate matter (PM2.5), including soot, December 14, setting the annual health standard at 12 micrograms per cubic meter, down from the 1997 15 ug/m3 standard. The agency made no changes to the 24-hour fine particle standard or the standard for coarse particulate matter (PM10), and 99 percent of U.S. counties are projected to meet the revised standard without any additional actions by 2020. Early in the day, Senators Orrin Hatch (R-UT), Mary Landrieu (D-LA), Roy Blunt (R-MO), Jim Inhofe (R-OK), Mike Lee (R-UT), and Rob Portman (R-OH) sent a letter urging the agency not to finalize a tighter standard because of economic dangers for nonattainment areas. While the American Lung Association, the American Public Health Association, the Environmental Defense Fund, the League of Conservation Voters, Natural Resources Defense Council, and other environmental and public health groups applauded the agency’s decision, the National Association of Manufacturers, the American Petroleum Institute, and other industry groups opposed it.
First GHG Enforcement
The Environmental Protection Agency announced December 10 that Vintage Production California LLC will pay $34,000 in penalties to resolve the agency’s first greenhouse gas permitting violation. The subsidiary of OXY USA Inc. self-reported the prevention of significant deterioration permitting violation at its Kern Front Oil Field near Bakersfield, California. The company failed to obtain the required permit for its emissions after it constructed three steam generators at the oil field late last year.
CH4 From Fracking
Attorneys general from Connecticut, Delaware, Maryland, Massachusetts, New York, Rhode Island, and Vermont issued a notice to the Environmental Protection Agency December 11 announcing plans to sue the agency for failure to directly regulate CH4 emissions in its performance standards for fracking operations. The states want the agency to set a CH4 performance standard for new natural gas wells and emissions guidelines for existing facilities. The agency issued a rule in August that phases in the performance standards for new and modified natural gas wells through 2015, when wells will be required to use reduced emissions completion equipment to capture emissions, but the rule does not directly regulate CH4. The Natural Resources Defense Council, Sierra Club, and Environmental Defense Fund filed a similar lawsuit recently in the U.S. Court of Appeals for the District of Columbia Circuit.
Coal Effluent Guidelines Postponed
The Environmental Protection Agency, Defenders of Wildlife, Earthjustice, the Environmental Integrity Project, and the Sierra Club filed a notice of stipulated extension December 10 in the U.S. District Court for the District of Columbia agreeing to amend an existing consent decree to allow a four-month extension, to April 19, to propose effluent limits for coal-fired power plants.
Climate Change Evidence
The Environmental Protection Agency released a report December 10 finding that rising temperatures, shifting snow and rainfall patterns, and increased extreme weather events in the United States are evidence of global climate change. The report, Climate Change Indicators in the United States, 2012, updates the first 2010 report on the issue, and adds three indicators – total snowfall, streamflow changes, and the length of the ragweed pollen season.
Light-Duty Vehicle Emissions Rule Challenged
The Utility Air Regulatory Group filed a petition for review December 13 in the U.S. Court of Appeals for the District of Columbia Circuit challenging the Environmental Protection Agency and the National Highway Traffic Safety Administration’s October fuel economy and greenhouse gas emissions standards for light-duty trucks and model years 2017 to 2025. The final rule requires light-duty vehicles to achieve an average of 54.5 MPG by 2025 if GHG reductions are achieved primarily through fuel economy improvements.
NSPS Challenges Dismissed
The U.S. Court of Appeals for the District of Columbia Circuit dismissed as premature December 13 power industry challenges to the Environmental Protection Agency’s proposed CO2 emissions limit for new fossil fuel fired power plants. The April 13 proposed standard would limit new fossil fuel-fired power plants to 1,000 lbs./MWh CO2. The companies have the option of requesting a rehearing, but no decisions have been made.
Cellulosic Ethanol Required Opposed
The American Petroleum Institute argued December 10 that the U.S. Court of Appeals for the District of Columbia Circuit should vacate an Environmental Protection Agency requirement that petroleum refiners blend 8.65 million gallons of cellulosic ethanol into the nation’s gasoline supply in 2012 because it has repeatedly overestimated production volumes. Vacating the requirement would save the industry millions of dollars in penalties for failing to purchase fuel that is not commercially available.
Tier 3 Standards Forthcoming
Chris Grundler, the Environmental Protection Agency’s new director of transportation and air quality, said December 13 that he hopes the agency will soon send proposed Tier 3 vehicle and gasoline standards to the White House Office of Management and Budget for interagency review. The agency is aiming to finalize the standards by the end of next year, thus harmonizing federal and California standards and allowing automakers enough time to build compliant vehicles for model year 2017.
RICE NESHAP Delayed
The Environmental Protection Agency published a Proposed Rule June 7, 2012 regarding the treatment of emergency engines used in demand response programs in the National Emission Standards for Hazardous Air Pollutants for Reciprocating Internal Combustion Engines and the New Source Performance Standards for Stationary Internal Combustion Engines regulations. Demand response programs are critical to keeping the nation’s electric grid stable, energy efficient, and cost effective. The agency sent the proposed rule to the Office of Management and budget for interagency review on December 7. The agency was scheduled to release the final RICE NESHAP rule December 14, but the agency and the co-litigants EnerNOC, Inc., Innoventive Power and Johnson Controls, Inc. signed a modified agreement on December 12th that provides a one-month extension, to January 14, for finalization of the rule.
Coal Ash Regs
The Environmental Protection Agency filed a court declaration in the U.S. District Court for the District of Columbia December saying that the agency has not yet made any final decisions on a final rule regarding the management of coal ash, and that it needs to issue an additional Notice of Data Availability before finalizing the rule. The agency proposed two options for regulating coal ash in May 2010: to regulate the material under Subtitle C of the Resource Conservation and Recovery Act as a special waste, subjecting it to hazardous waste regulations; or to regulate it as a nonhazardous waste under Subtitle D, subjecting it to solid waste regulations.
Federal Energy Regulatory Commission
Electric, Gas Industry Coordination
The Federal Energy Regulatory Commission published a notice December 13 scheduling an additional technical conference for February 13 to discuss how the electric and natural gas industries can better coordinate the increased use of natural gas for electric generation, avoiding reliability problems. The commission is requesting comments by January 7 on communication needed between the industries to handle emergency situations; other ways to enhance routine communications; and weather natural gas pipelines and electric grid operators should be allowed to exchange confidential information in order to improve operations and reliability.
LA LNG Export Permit
Sempra Energy filed an application with the Federal Energy Regulatory Commission December 10 for permission to build a liquefied natural gas export terminal on the Louisiana coast that would be capable of exporting 1.7 cu ft./day of domestically produced natural gas to international markets. The filing keeps the project on schedule to receive FERC approval and begin construction in the fourth quarter of next year. The company is also awaiting an export license from the Department of Energy.
Jane Lubchenco announced December 12 that she will leave her post as head of the National Oceanic and Atmospheric Administration at the end of February. She will return to academia and her family on the West Coast after four years of handling issues including the Deepwater Horizon explosion and efforts to develop an integrated National Ocean Policy.
UK Shale Gas Exploration
Energy and Climate Change Secretary Edward Davey announced December 13 that the United Kingdom has ended a ban on exploration for shale gas using fracking but operators will be subject to new controls to prevent seismic risks. The agency will commission a study on the possible impacts of shale gas extraction on GHG emissions and climate change.
Natural Gas and Coal Competition
Credit Suisse released a report December 13 suggesting that competition between natural gas and coal may slow in the United States and other nations, but that from 2020 onward, the environmental and cost advantages of natural gas will have a global impact on coal. The report, The Shale Revolution, concludes that what works in the United States does not always work as quickly in other countries, particularly because few have the pipeline infrastructure and other market elements needed for rapid change.
Kyoto Extension Provides Market Certainty
Dirk Forrister, president of the International Emissions Trading Association, said December 10 that the eight-year Kyoto Protocol extension, as negotiated at the 18th Conference of the Parties to the United Nations Framework Convention on Climate Change in Qatar, will create certainty in international carbon markets. The extension ensures that the Clean Development Mechanism will continue, allowing the international market regime to remain in place and provide certainty to those markets.
EU Air Quality Revisions
The European Commission published a consultation document December 10 finding that an upcoming review of the European Union’s air quality legislation is necessary because member countries only partially meet currently mandated standards and need to align their objectives with the revised Gothenburg Protocol. The review, which will be published late next year, is likely to result in the revision of two EU air quality laws and could include setting air quality goals for 2020, 2025, and 2030.
UNEP Environmental Law Council
The United Nations Environment Program appointed nine people December 7 to serve on the International Advisory Council for the Advancement of Justice, Governance, and Law. The council is aimed at supporting the development and implementation of environmental law, and will submit a paper to the United Nations within five years on environmental law issues.
Quebec Cap and Trade
Quebec finalized amendments December 13 to its GHG cap and trade program to harmonize it with California’s system and future partners elsewhere. The amendments clear the way for the province to participate fully in the development of a North American carbon market through the Western Climate Initiative. The regulation, adopted last December and going into effect January 1, applies to industrial facilities emitting 25,000 MT/CO2e/year. Additionally, requirements will apply to companies that import or distribute fuels in the transportation and building sectors that emit that amount by 2015.
UN Report Finds Evidence of Global Warming Unequivocal
A leaked draft of the United Nations Intergovernmental Panel on Climate Change’s fifth climate assessment report finds that evidence of a warming climate is unequivocal. The October 5 draft, which is scheduled to for a 2013 release, shows that it is highly likely that human activities are responsible for more than half of the surface temperature increase that has been observed since the 1950s, and concludes that GHGs are incredibly likely to have contributed between 0.6 and 1.4 degrees Celsius of warming between 1951 and 2010.
Keystone XL TX Construction Temporarily Prohibited
Judge Jack Sinz of the Texas County Court at Law for Nacogdoches County approved a temporary restraining order December 11 blocking TransCanada Keystone Pipeline LP from moving forward with building its pipeline across land owned by east Texan Michael Bishop.
RGGI Emission Reductions
Environment Northeast released a report December 10 urging the nine states participating in the Regional Greenhouse Gas Initiative to adjust the emissions cap in 2014 to lock in the reductions that have already occurred since the program began in 2009. The report, RGGI’s Past and Future: Emissions Trends and Potential Reforms, concluded that 2012 CO2 emissions in the region will be about 45 percent below the original cap, and electricity prices have declined 10 percent since the first auction. The initiative is considering four options to lower the cap to 106 MMT, 101 MMT, 97 MMT, or 91 MMT, but since current emissions are just over 91 MMT, all but one would actually allow for an emissions increase.
Chicago’s Clean Energy Portfolio
Chicago Mayor Rahm Emmanuel announced December 12 that the city has entered into the largest municipal electric power purchase agreement in the country and will use its purchasing power to remove coal from the fuel mix. Integrys Energy Services will provide power at a lower rate than that charged by Commonwealth Edison and will not supply electricity generated by coal powered facilities.
CO Fracking Ban Rejected
Boulder County Colorado commissioners approved December 13 land use rules for oil and gas activities in unincorporated parts of the county but did not include a ban on fracking for which residents and environmental groups called. The commissioners sent a letter to Governor John Hickenlooper (D) requesting that he end a lawsuit against Longmont over its recently adopted oil and gas regulations.
US Natural Gas Example
Accenture released a report December 10 urging oil and gas producers to use the United States’ experience in natural gas development as a model for developing shale gas in countries with varying geologies and water conditions, such as China. The paper, Water and Shale Gas Development: Leveraging the US Experience in New Shale Developments, concluded that shale gas production is water intensive; a typical well requires about 5 million gallons of water to drill and frack.
Coal Ash Legislation Won’t Protect Environment or Health
The Congressional Research Service issued a report December 5 finding that House and Senate legislation on the management of coal ash would not ensure the implementation of fuel standards necessary to protect human health and the environment and would establish unmatched environmental federal regulatory framework. The paper, Analysis of Proposals to Create a Coal Combustion Residuals Permit Program Under RCRA, considered Senator John Hoeven’s (R-ND) Coal Ash Recycling and Oversight Act (S. 3512) and Representative David McKinley’s (R-WV) Coal Residuals Reuse and Management Act (H.R. 2273).
The World Wildlife Fund, Ceres, and Calvert Investments released a paper December 10 finding that more than half of the Fortune 100 companies have established emissions reduction commitments, renewable energy commitments, or both. The report, Power Forward: Why the World’s Largest Companies are Investing in Renewable Energy, concluded that clean energy practices are becoming standard procures for many of the largest and most profitable companies in the world. The report also urged extending the Production Tax Credit and establishing Renewable Portfolio Standards in states that do not have them. The Association of Climate Change Officers released a similar report December 12, Trends in Corporate Climate Change Governance, finding that Fortune 500 companies have been more active than others in addressing climate change.
New Coal Export Project Faces Opposition
Opponents of proposals to export coal to Asia through Northwest ports highly attended December 13 a public meeting held by federal, state, and local regulators who were seeking comment on how broad the scope of the environmental impact statement should be. The plan, developed by SSA Marine and Goldman Sachs Infrastructure Partners, calls for the construction of a new Gateway Pacific Terminal on north Puget Sound near the Canadian Border that would ship up to 48 MMT coal/year. Organized labor and business backers support the project, while Native Americans, ranchers, and locals who live along the rail route are concerned that the plan would negatively impact fishing rites, sacred sites, water health, ranch integrity, noise pollution, traffic, and toxic coal dust.