April 22, 2011
On April 18, 2011, New York Attorney General Eric Schneiderman threatened to sue the Delaware River Basin Commission (“DRBC”), if it did not, within 30 days, commit to conducting an environmental review of its draft natural gas development regulations pursuant to the National Environmental Policy Act (“NEPA”). The DRBC is a federal-interstate entity formed by compact and concurrent legislation by the federal government, Delaware, New Jersey, Pennsylvania, and New York to manage the water resources of the Delaware River Basin. According to Schneiderman’s press release, “[t]he Basin includes the New York City watershed and portions of Broome, Chenango, Delaware, Schoharie, Greene, Ulster, Orange and Sullivan Counties, and provides approximately 50 percent of the drinking water used by over nine million New York residents and visitors every day.”
The DRBC released its draft natural gas development regulations on December 9, 2010, over the objection of former New York Governor David Paterson. Paterson had cautioned that DRBC’s regulations “did not have the advantage of the full investigations and public deliberations taking place in New York, and could conflict with or complicate any protocols ultimately established by New York after it completed its pending review of the environmental impacts of high volume hydraulic fracturing.”
In his public statement, Schneiderman criticizes DRBC’s failure to comprehensively assess the environmental impacts of its proposed regulatory scheme – in particular, the consequences of allowing hydraulic fracturing within the Basin – before releasing them in draft form.
April 19, 2011
On April 19, 2011, the U.S. Supreme Court heard oral arguments in American Electric Power v. Connecticut, a highly anticipated case that will determine whether states and land trusts may pursue reductions in power plant greenhouse gas (GHG) emissions under a federal common law public nuisance theory. The Supreme Court is reviewing a 2009 Second Circuit decision that found no jurisdictional bar to the climate change tort suit.
At oral argument, the Supreme Court justices focused largely on whether legislative and regulatory action on climate change had displaced federal common law remedies and whether the federal courts were competent to make the policy determinations required for the states’ desired injunction, lines of questioning that could present obstacles for the state plaintiffs. Justice Ginsburg, who joined a prior Supreme Court decision holding that the Environmental Protection Agency (EPA) could regulate GHGs under the Clean Air Act, noted skeptically that “the relief [the states are] seeking seems … to set up a district judge, who does not have the resources, the expertise, as a kind of super EPA.”
In what may be a silver lining for the plaintiffs, the industry defendants acknowledged that a decision under Article III standing or displacement grounds could allow future plaintiffs to pursue similar relief in state courts under state common law theories. Of course, any such challenges would be subject to potential standing and preemption constraints. As explained in a prior post, the Obama Administration also argued for reversal of the Second Circuit decision on behalf of defendant Tennessee Valley Authority, albeit on different grounds than the other defendants.
New York Solicitor General Barbara D. Underwood argued the case on behalf of the states and land trusts. Justice Sotomayor, who sat on the Second Circuit panel that originally heard the case but was nominated to the Supreme Court before the appellate court’s decision, has recused herself from the Supreme Court’s review and did not participate in the oral argument.
April 13, 2011
While the use of hydraulic fracturing to extract natural gas from shale has generated substantial concerns about its water quality and conventional air pollution impacts, such opposition has rarely focused on greenhouse gas (“GHG”) emissions. Instead, it has been widely assumed, including by some environmental organizations, that natural gas is the least harmful “bridge fuel” to reduce GHG emissions during a transition from coal to alternative energy sources. That core assumption was called into question this week following the release of a new study finding that total GHGs from natural gas extracted through hydraulic fracturing (“shale gas”) may match or exceed those from coal. The validity of these conclusions, however, is already the subject of intense debate.
The study, by three Cornell University researchers, reported that the primary GHG emissions from hydraulic fracturing are not carbon dioxide from the burning of natural gas, but methane released during the fracturing process, the operation of the wells, and the transportation and storage of the fuel. Because methane is a far more potent greenhouse gas than carbon dioxide, the study concluded that over a 20 year time frame “the GHG footprint for shale gas is at least 20% greater than and perhaps more than twice as great as that for coal.” Carbon dioxide remains in the atmosphere for longer than methane, but even over a 100-year period the study found that shale gas emissions were “comparable” to coal emissions. The study’s data and methodology have already been disputed by the oil and gas industry, principally because the assumed rate of fugitive emissions is at odds with industry standards and practices. The report’s authors acknowledge that better data is needed on the amount of methane emissions that leak or are otherwise lost during and after hydraulic fracturing operations, which is now likely to become a focus of increased attention.
Additional obstacles for fracturing proponents surfaced during a Senate Environment and Public Works Committee hearing yesterday, as an Environmental Protection Agency (“EPA”) official affirmed that drilling companies that use diesel fuel in hydraulic fracturing operations without a permit are in violation of Safe Drinking Water Act. A 2010 report revealed inconsistent positions among state environmental regulators concerning the use of diesel as a fracturing fluid, and last year EPA posted a statement on its website that: “Any service company that performs hydraulic fracturing using diesel fuel must receive prior authorization …” The Independent Petroleum Association of America and U.S. Oil & Gas Association are challenging that posting in the D.C. Circuit Court of Appeals, alleging that EPA imposed new substantive requirements without undertaking the rulemaking procedures required by the Administrative Procedures Act (“APA”).
In New York, a bill that would have required the disclosure of hydraulic fracturing chemicals was rejected in the Senate Environmental Conservation Committee yesterday. The legislation, S. 425, drew support from a majority of Committee members voting, but fell one vote short of the eight required to bring it to the Senate floor. Fracturing disclosure legislation is also pending in the United States Congress. While such disclosure is not currently required nationwide, a new website from the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission, funded in part by the Department of Energy, has collected chemical data voluntarily submitted by participating oil and gas companies and published it in a searchable database.
April 1, 2011
At long last, the Environmental Protection Agency (“EPA”) has previewed its new Phase II Cooling Water Intake Structure rule (the “Phase II rule”). On March 28, 2011, EPA released its prepublication version of the proposed Phase II rule, which will govern cooling water intake structures (“CWIS”) at roughly 1,260 existing power plants and manufacturing facilities. Because it applies to existing facilities that withdraw at least 2 million gallons of cooling water per day, the Phase II rule will primarily affect the electric power generating industry. Other industrial sectors most likely to be affected are food processing and the manufacture of aluminum, iron, steel, petroleum, paper, and chemicals.
The purpose of the rule is to protect aquatic species from injury and death sustained when they are drawn against (i.e., impinged) or sucked into (i.e., entrained) a facility’s CWIS. To accomplish this the proposed Phase II rule has three main components:
- First, the Phase II rule would subject most facilities to an upper limit on how many fish can be killed by the facility through impingement. The facility would determine which technology would be best suited to meeting this limit, including whether to reduce its intake velocity to 0.5 feet per second. EPA has proposed this option because studies have shown that at this withdrawal rate most fish can swim away from the CWIS.
- Second, the Phase II rule would require that facilities that withdraw very large amounts of water—125 million gallons per day or more—to conduct specified entrainment mortality studies. For all other facilities subject to the Phase II rule, however, no such studies are required, and the regulatory agency will determine on a case-by-case basis what type of site-specific entrainment mortality controls to require. This process would include public input.
- Third, new electric generating units at existing facilities would be required to reduce the intake flow to a level similar to a closed cycle recirculation system by incorporating a such a system into the new unit design, or by making other design changes equivalent to closed-cycle cooling reductions.
These three components implement the mandate in Section 316(b) of the Clean Water Act (“CWA”) seeking to ensure that the “design, construction and capacity of cooling water intake structures reflect the best technology available [“BTA”] for minimizing adverse environmental impact.” This BTA requirement has been the subject of extensive litigation since the 1970’s. The heart of the debate has been whether power plants should be required to implement costly closed-cycle cooling technology, which re-circulates cooling water and consequently requires relatively little water withdrawal, resulting in the lowest rates of impingement and entrainment. In the absence of final regulations defining BTA, permitting authorities had been directed to determine BTA for each facility on a case-by-case basis. (Proposed Phase II rule, prepublication version, 14 of 413.)
EPA’s proposed approach to entrainment reduction continues the practice of case-by-case BTA determinations based on regulatory agency discretion. Although EPA acknowledged that closed-cycle cooling, “reduces impingement and entrainment mortality to the greatest extent,” this requires the construction of large cooling towers that are “not practically feasible” in a number of circumstances when “energy reliability, air emissions permits, land availability, and remaining useful plant life” are considered. (Proposed Phase II rule, prepublication version, 132-33 of 413.) Accordingly, the BTA determination for entrainment under the proposed Phase II rule will be based on balancing myriad site-specific factors including the number and types of organisms entrained, social benefits and costs of available entrainment technologies, and impacts on the reliability of energy delivery within the immediate area. (Proposed 40 CFR §§ 125.94(c), 125.98.)
The uncertainty inherent in the case-by-case approach to entrainment BTA is likely to provoke strong opinions from both environmentalists and the regulated community. Some environmentalists have already voiced their disapproval; in a joint statement, NRDC and Riverkeeper have asserted, “EPA will leave it up to state agencies to figure out requirements for plants, but decades of experience have shown that states lack the resources and expertise to make these decisions on a case-by-case basis and have complained to EPA of the extreme burden of having to do so.” The Edison Electric Institute, an association of U.S. shareholder-owned electric companies, has not yet issued a press statement regarding the proposed rule.
EPA will accept comments on the proposed Phase II rule for 90 days following its publication in the Federal Register. Instructions for submitting comments are provided on page 2-4 of the prepublication version of the proposed rule.
While brownfields redevelopment is governed primarily by state and local law, a range of federal tax incentives and funding programs offer additional support for the redevelopment and reuse of contaminated property. To call attention to these opportunities, the Environmental Protection Agency (“EPA”) recently revised its Guide to Federal Tax Incentives for Brownfields Redevelopment and Brownfields Federal Programs Guide, providing an updated overview of often-overlooked federal resources.
One of the largest federal incentives for brownfield developers is the Brownfields Tax Incentive, I.R.C. § 198(a), which allows certain cleanup costs to be fully deducted in the year in which they are incurred, as opposed to being capitalized and deducted over a longer span. In order to qualify for this incentive: (a) the brownfield site must be “held by the taxpayer for use in a trade or business or for the production of income,” (b) there must have “been a release (or threat of release) or disposal of any hazardous substance,” including but not limited to “any petroleum product,” on the site, and (c) the taxpayer must receive “a statement from the appropriate agency of the State” certifying that the site is a brownfield and eligible for the incentive. Id. § 198(c).
Instructions for obtaining New York State certification are available through the Department of Environmental Conservation (“DEC”), and EPA has published a list of agency contacts in other states. The tax incentive is set to expire at the end of 2011, though Congress has repeatedly extended it in the past, at times applying the extensions retroactively after the program had already lapsed.
In addition to tax incentives, many other federal programs provide direct financial and technical assistance to support brownfield redevelopment, dozens of which are described in EPA’s latest Brownfields Federal Programs Guide. For more information on state and federal incentives available for the voluntary cleanup of contaminated property, contact Jeffrey Gracer.