May 14, 2010
On May 12, 2010, Senators John Kerry (D-MA) and Joe Lieberman (I-CT) unveiled their long-anticipated draft of the American Power Act. The almost 1,000 page draft bill has yet to be formally introduced in the Senate. While sharing many of the same goals as the American Clean Energy and Security Act, enacted by the House of Representatives in June 2009, the Kerry-Lieberman bill represents, in some ways, a less environmentally ambitious proposal—undoubtedly a reflection of the necessity of attracting 60 votes. At the same time, it includes significantly greater incentives for the development of nuclear power and offshore oil. If enacted, provisions of the American Power Act would take effect in 2013.
At its heart, the bill would establish a mandatory global warming pollution reduction program designed to reduce total annual greenhouse gas emissions for selected sectors of the economy (a more limited selection of sectors than covered by the House bill) to 17 percent below 2005 levels by 2020 and 83 percent below 2005 levels by 2050. The reductions will be achieved by the distribution and/or auction of a fixed number of emissions allowances, which allowances can then be traded in a heavily regulated market and for which a hard price collar would be set. The proposed cap-and-trade program is designed to prevent speculation by limiting potential buyers of allowances to those entities with compliance obligations and those registered to participate in the carbon market. The House bill did not limit market participants.
In an effort to protect consumers in the event of energy price increases, the Kerry-Lieberman bill proposes to refund 75 percent of allowance sale proceeds, while the House bill provides for a refund of only 45 percent of such proceeds. The bill also seeks to protect domestic industry (and jobs) from “carbon leakage” by establishing a border adjustment mechanism by which imports from countries without emissions reductions will be subject to a fee.
In apparent recognition of the need to garner industry support, the bill includes provisions that would limit the ability of the EPA to employ existing provisions of the Clean Air Act to impose additional regulatory obligations on greenhouse gas emissions from facilities that are subject to the bill’s emissions reduction program. While states retain the authority to set vehicle standards and take certain other actions relating to the regulation of greenhouse gases, the proposed legislation would preempt state authority to impose cap-and-trade programs once the federal program was in place. Although portions of the bill were reworked following the disaster in the Gulf of Mexico, the bill incentivizes offshore drilling in previously protected areas by offering revenue sharing to coastal states (subject to state vetoes under certain circumstances). It also contains substantial incentives for nuclear power development and carbon capture and sequestration.
It remains to be seen whether the Obama administration will lend substantial support to this effort, and even if it does, it will be difficult to secure the required 60 votes for passage. The need for certainty by industry and EPA’s spate of regulations addressing greenhouse gas emissions from mobile and stationary sources may create a coalition of the willing for action by Congress.
To read more about the draft bill, see the following links:
May 3, 2010
EPA has issued four new proposed rules to amend the Mandatory Greenhouse Gas (“GHG”) Reporting Rule. Three of the proposed rules would expand the applicability of the existing rule to cover petroleum and natural gas systems, industries that emit fluorinated GHGs, and facilities that inject and store carbon dioxide underground for the purposes of geologic sequestration or enhanced oil and gas recovery. These newly covered sources would be required to begin collecting emissions data on January 1, 2011 and to submit the first annual reports on March 31, 2012.
In addition, EPA proposes to add three reporting requirements applicable to all facilities, requiring provision of the following information: (1) the name, address, and ownership status of the reporter’s U.S. parent company, (2) the reporter’s primary and all other applicable North American Industry Classification System (“NAICS”) code(s), and (3) an indication of whether or not any of the reported emissions are from a cogeneration unit.
EPA plans to finalize all four of these proposed rules this year. Comments are due by June 11, 2010. More information can be found here.
April 29, 2010
On April 28, 2010, Secretary of the Interior Ken Salazar approved Cape Wind Associates, LLC’s proposed $1 billion, 130-turbine wind farm off the coast of Cape Cod in Nantucket Sound, about five miles from the nearest shoreline. The project, when constructed, would be the first wind energy project on the Outer Continental Shelf, and would generate enough energy to power more than 200,000 homes in Massachusetts. The scale of the project is significant; it would cover approximately 25 square miles, and the tip of the highest blade of each turbine would reach 440 feet above the surface of the water.
Supporters, including the Sierra Club and Greenpeace, argue that the project would provide a clean, renewable source of energy and hundreds of construction jobs, and would decrease the region’s reliance on fossil fuels and benefit the environment by lowering emissions of greenhouse gases.
Opponents have focused on negative impacts to natural beauty and the surrounding area’s historic landmarks. In addition, they claim that infrastructure improvements will result in sharply increased costs over those for conventional power. The Wampanoag tribe, which requires unobstructed views of the sunrise for sacred ceremonies, has announced that it will challenge the project for violations of tribal rights.
In response to concerns expressed during the consultations with tribes and the Advisory Council on Historic Preservation, the Department of the Interior (“DOI”) required the developer to change the design and configuration of the wind farm to mitigate potential visual and historic impacts.
This is not the final hurdle that this project must clear, however. The Federal Aviation Administration has yet to make a final determination on the project and the developer has not yet entered into a contract with the local utility, National Grid, to carry the power. Nine state and local permits are being appealed in the courts, and nearly a dozen parties have filed notices of intention to sue for violations of various environmental laws and regulations.
Despite the remaining steps before construction may begin, DOI’s approval of the Cape Wind project is seen as a positive sign for several other proposed offshore wind projects along the eastern seaboard. Each project will face its own complex federal, state and local permitting issues, but DOI’s action on Cape Wind will likely provide valuable political momentum to other proposed offshore wind projects.
Read the full DOI press release here.
SPR principal Jeff Gracer will moderate a program on climate change law and litigation on Wednesday, May 12, 2010 at 6:00pm in the Great Hall of the New York City Bar Association. The program has been organized by the New York City Bar Association’s Committee on Environmental Law, and is being co-sponsored by the Association’s Committees on International Environmental Law, Energy Law, and Project Finance, as well as the Environmental Law Institute. It will address the status of international negotiations, Congressional deliberations, EPA’s greenhouse gas rulemakings, and climate change litigation.
A keynote address will be given by Peter Lehner, Executive Director of the Natural Resources Defense Council. For registration information, please visit the City Bar’s website, or contact Jeff Gracer.
April 9, 2010
DEC recently released its proposed policy document DER-31: Green Remediation, which sets forth DEC’s preference for remediating sites in a way that promotes sustainability. The new policy would apply to the investigation and remediation of sites under DEC’s Spill Response Program, the Inactive Hazardous Waste Disposal Site Remedial Program, the Environmental Restoration Program, the Brownfield Cleanup Program and the Voluntary Cleanup Program. It would apply to all activities at new sites and to subsequent phases of investigation or remediation at sites currently in those programs.
The draft identifies the major green concepts to be considered, which include reducing greenhouse gas (“GHG”) emissions, increasing energy efficiency, reducing waste and increasing recycling, and maximizing habitat value and creating habitat where possible. In addition, DEC identifies specific techniques that could be employed to “green” a remedial option, such as utilizing clean diesel to reduce emissions, incorporating green building design and utilizing native vegetation to reduce water usage. DEC repeatedly emphasizes that concepts of green remediation cannot be used to justify the “no action” alternative or to support a less protective remedy.
Notably, for state-funded cleanups, DEC would now require the use of renewable energy and/or the purchase of renewable energy credits to offset 100% of the electricity required to implement a remedy. For other remedial projects, DEC would “strongly encourage[e]” compliance with this requirement, unless a site-specific evaluation demonstrated that it was impracticable or favored an alternative green approach.
All remedial alternatives analysis and decision documents would be required to describe those green remediation principles considered in the remedy selection process. In addition, such documents would now have to include an analysis of GHG emissions and options to minimize such emissions. Final engineering reports would also need to include a discussion of the green remediation techniques utilized in the remedial program.
A copy of the proposed policy is available here (pdf). DEC is accepting comments on the draft until April 30, 2010.
April 7, 2010
On April 1, the Environmental Protection Agency (“EPA”) and the National Highway Traffic Safety Administration (“NHTSA”) issued a joint final rule, “Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards,” establishing a National Program to reduce greenhouse gas (“GHG”) emissions and improve fuel economy. The National Program creates new standards for cars, light-duty trucks, and medium-duty passenger vehicles for model years 2012-2016. According to EPA, the new standards will reduce greenhouse gas emissions by approximately 21 percent by 2030 from the light-duty vehicle fleet. This rule is EPA’s first final rule directly regulating GHG emissions.
EPA’s new GHG standards require that by model year 2016, vehicles have an estimated combined average emissions level of 250 grams of carbon dioxide per mile. This level would equate to 35.5 miles per gallon (mpg) if the automotive industry met EPA’s requirements completely through fuel economy improvements. However, the industry may meet this emission level with a combination of improvements such as fuel economy, engine technology, air conditioning units, and tire performance, as well as increased use of hybrid and alternative fuel technologies.
NHTSA’s new Corporate Average Fuel Economy (“CAFE”) standards set fuel economy targets for each light vehicle model produced for sale in the U.S. By model year 2016, passenger cars and light trucks must meet an estimated combined average of 34.1 mpg. Because the new fuel economy standards are averaged across the industry, CAFE levels which individual manufacturers must meet may differ, depending upon the type and mix of vehicles in their fleet.
Manufacturers will be able to earn and transfer credits to be used toward achieving fleet-wide standards. For example, manufacturers that design vehicles to operate on alternative fuels will be eligible for credits. Credits earned may be averaged, banked for years in which the manufacturer did not meet its CAFE level, or traded between companies.
According to EPA, the National Program will “reduce[] carbon dioxide emissions by about 960 million metric tons, . . . conserve[] about 1.8 billion barrels of oil,” and save the average car buyer approximately $3,000 over the lifetime of the vehicles regulated. According to NHTSA, the National Program will provide “lifetime benefits” of over $240 billion, with most of the savings from reduced fuel consumption. [NHTSA Fact Sheet at 5.]
Now that GHGs are regulated under the Clean Air Act (“CAA”), it is expected that EPA will regulate stationary sources like power plants, steel mills, and refineries. Last Fall, EPA proposed a rule (the “Tailoring Rule”) that would require new and existing industrial facilities emitting more than 25,000 tons of GHGs per year to obtain permits under the CAA’s New Source Review and Title V operating permits programs. Once the Tailoring Rule is finalized, the GHG emissions thresholds for stationary sources will take effect immediately.
For additional information, see:
March 8, 2010
On February 18, 2010, the Council on Environmental Quality (“CEQ”) released a long-anticipated draft guidance document addressing how the effects of climate change and greenhouse gas (“GHG”) emissions should be analyzed under the National Environmental Policy Act (NEPA).
The CEQ guidance stresses that NEPA “demands informed, realistic governmental decision making.” Accordingly, the guidance instructs federal agencies to include a discussion of climate change within the scope of its NEPA analysis when an analysis of the direct and indirect of GHG emissions from proposed actions “may provide meaningful information to decision makers and the public.”
To put some meat on the bones of its overarching standard for “meaningful information”, the guidance deems projected direct annual CO2-equivalent GHG emissions from a proposed action of 25,000 metric tons or more “an indicator that a quantitative or qualitative assessment may be meaningful to decision makers and the public.”
However, the 25,000 metric ton figure is not a firm standard. The guidance makes clear that impacts from long-term projects with emissions below 25,000 metric tons annually may also warrant analysis. The Guidance goes on to list a number of technical documents that can assist agencies in quantifying GHG emissions for the purpose of a NEPA review. The Guidance also states expressly that the 25,000 ton standard should not be seen as an indicator of the significance of potential impacts of an action.
Apart from GHG emission, the Guidance also provides that, when appropriate, agencies should consider the potential effects of climate change on, or in combination with, a proposed action. According to the Guidance, climate change effects should be considered in the analysis of projects designed for long-term utility and located in climate-change vulnerable areas. It states that as such “the observed and projected effects of climate change that warrant consideration are most appropriately described as part of the current and future state of the proposed action’s ‘affected environment.’” The Guidance emphasizes that, in light of the uncertainties associated with climate change predictions, in considering the future effects of climate change, monitoring programs should be considered for inclusion in NEPA decision documents.
The draft Guidance specifically does not address what climate-change related impacts rise to the level of “significance” – thus requiring the preparation of an EIS. Rather, it seems to assume that agencies will analyze climate change within whatever NEPA document is otherwise being prepared for an action. However, CEQ has asked for comment on whether the final Guidance should address significance.
The Guidance attempts to strike a balance between requiring an assessment of GHG emissions and climate change impacts within the scope of NEPA review where it would be meaningful, while limiting the scope of such review so it does not run afoul of the “rule of reason,” the principle that agencies should focus on the usefulness of the potential information to the decision making process when determining the scope of its NEPA review. To that end, CEQ makes clear that agencies should use the NEPA scoping process “to set reasonable spatial and temporal boundaries” on any GHG assessment and, most importantly, “focus on aspects of climate change that may lead to changes in the impacts, sustainability, vulnerability and design of the proposed action and alternative courses of action.” It is clear that CEQ is not looking for wholly academic discussions of climate change in NEPA EAs and EISs, and also does not want a discourse on “wholly speculative effects.” Rather, the Guidance favors a discussion of GHG emissions and climate change in a manner where it could meaningfully impact the decision making process subject to the NEPA review, such as cases where the NEPA review could be used “to reduce vulnerability to climate change impacts, adapt to changes in our environment, and mitigate the impacts of Federal agency actions that are exacerbated by climate change.” In that vein, the Guidance emphasizes the importance of comparing the climate change-related effects of various project alternatives.
Thus, the emphasis of the Guidance is precisely where it should be – to provide information and analysis consistent with NEPA’s “rule of reason.” Of course, like most things NEPA, the devil is in the details. While this draft Guidance document, when finalized, will provide some useful broad overarching principles to determine the scope of any GHG/climate change analysis, as well as some specific tools to assist agencies in conducting that analysis, it will be left to the agencies – and ultimately the federal courts – to grapple with these issues in the context of the myriad federal actions with the potential to cause GHG/climate change impacts or that are potentially vulnerable to climate change impacts.
CEQ will receive public comment on the guidance documents for 90 days. The guidance documents and instructions for submitting comments are available here: www.whitehouse.gov/ceq/initiatives/nepa.
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