Climate Change Report : Climate Change Lawyer & Attorney : K&L Gates Law Firm : Global Climate Law, Carbon Emissions

by Lawrence Patent (Washington, DC) 

The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) recently published proposed regulations that would further define the term “swap” under the Commodity Exchange Act, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). 76 Fed. Reg. 29818 (May 23, 2011). 

Three items therein may be of particular interest to energy companies. With respect to the forward contract exclusion from the definition of “swap,” the CFTC stated that it would interpret this provision consistent with its historical interpretation of the forward contract exclusion from the definition of the term “future delivery.” Further, book-out transactions in nonfinancial commodities that meet the requirements of the CFTC’s 1990 “Brent Interpretation,” and that are effectuated by a subsequent, separately negotiated agreement, also will qualify for the forward contract exclusion from the swap definition.

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By Cliff L. Rothenstein (Washington, DC), David A. Franchina (Charlotte), Michael W. Evans (Washington, DC) and Cindy L. O'Malley (Washington, DC).

On February 21, 2011, in response to a court order, EPA issued four related rules to control hazardous air pollutants from new and existing industrial, commercial, and institutional boilers and process heaters and from commercial and industrial solid waste incinerators.  The four rules are: the Boiler MACT, Area Source Boiler rule, Commercial and Industrial Solid Waste Incinerators (CISWI), and the Solid Waste rule.

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By Donald Kaplan, Andrew Young, William Keyser and Molly Suda (Wasington, DC)

Concerned that transmission system operators’ current operational protocols are inhibiting the integration of renewable generation facilities that depend on intermittent energy sources, such as wind and solar generation facilities, the Federal Energy Regulatory Commission (“FERC”) recently issued a Notice of Proposed Rulemaking on the Integration of Variable Energy Resources (“NOPR”).

Building from the Notice of Inquiry on the Integration of Variable Energy Resources (“NOI”) issued earlier this year, FERC recognized that the increasing role of variable energy resources could necessitate reforms to operational protocols that were developed at a time when virtually all generation could be scheduled and only load exhibited significant degrees of variability. 

Choosing to focus on reforms that would have near-term effects instead of addressing all the topics covered by the NOI, FERC identifies three complementary reforms to existing operational protocols that it hopes will encourage the interconnection of renewable generation facilities...

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By Cliff Rothenstein (Washington, DC) and Thomas Carey (Chicago).

On December 8, 2009 we blogged about the United States Environmental Protection Agency’s nascent attempts to define what types of “Best Available Control Technologies” could be utilized to control greenhouse gas emissions. 

At that time, the only viable BACT identified for GHGs involved increasing petroleum-based fuel burning efficiencies (less fuel use = less CO2 emissions) in boilers, engines, and other fuel combustion devices. Other BACT emission “controls” included switching from high CO2 emission fuels like coal and fuel oil to lower emission fuels like natural gas. Carbon sequestration – a popular and much touted way to control GHG emissions – was, and is, still on the drawing board as a recognized BACT-ready control alternative, as are other BACT alternatives.

BACT to the Future II:
Now, one year later, (following the 2010 mid-term elections) Republicans control the U.S. House of Representatives by a wide margin and the Democrats’ control of the Senate is razor-thin. 

Result:  federal cap and trade legislation is “dead” and USEPA is now cornered into pursuing the GHG regulatory option. 

In furtherance thereof, on November 10, 2010 – just two months away from the January 11, 2011 date effective date of the Tailoring Rule (when stationary sources become subject to PSD and Title V permitting when making major modifications) – the USEPA issued its BACT determination guidance, entitled “PSD and Title V Permitting Guidance For Greenhouse Gases.” 

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by Thomas R. Carey (Chicago), David A. Franchina (Charlotte), Ashley A. Peck (Seattle), and  Christopher S. Walker (Charlotte)

On June 4, 2010, EPA published four proposed rules related to its regulation of emissions of hazardous air pollutants from new and existing industrial, commercial, and institutional boilers and process heaters and commercial and industrial solid waste incinerators ("CISWI") under the Clean Air Act.

Of the four rules, the rule clarifying which fuel types are not “solid waste” under the Resource Conservation and Recovery Act ("RCRA") may prove to have the greatest regulatory effect because it will dictate whether a particular combustion unit will be regulated as a boiler or under the more-stringent CISWI Rule. 

Thus, the type of fuel used in a facility’s combustion units can have a large impact on a facility’s environmental compliance costs and should be considered in project, operation, and budget decision-making.  This article provides an overview of the proposed rules and focuses specifically on facilities that combust two fuel types—natural gas and biomass.

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By Edward P. Sangster (San Francisco)

A tsunami is a wave that washes over lands far distant from the geological event that caused it. So it will be with California's "Regulations for Safer Products," which will shortly be released for public comment. These regulations will have far reaching impacts in markets throughout the United States and beyond.

The Green Chemistry Initiative
The Regulations for Safer Products will comprise one part of California's Green Chemistry Initiative. The Green Chemistry Initiative surfaced in April 2007 as a directive from the Secretary of California’s Environmental Protection Agency to its subsidiary agencies and boards. The Green Chemistry Initiative was described at the time as a "preemptive strategy to stop toxic substances before they contaminate the environment and our bodies." The Secretary directed agencies to place new emphasis on enforcing existing statutes and regulations, and to develop new regulations focused on eliminating exposures, rather than regulating wastes.

The official motto for the Green Chemistry Initiative succinctly, if quixotically, states its ultimate goal: "cradle to cradle" regulation.  The motto signifies the intention of California regulators to compel the design of chemical products and processes that will reduce or eliminate the use of hazardous substances and the generation of hazardous wastes. 

In 2008, the California Legislature empowered the Green Chemistry Initiative by enacting Assembly Bill ("AB") 1879. AB 1879 requires California's Department of Toxic Substances Control ("DTSC") to enact regulations by January 1, 2011 to identify Chemicals of Concern in consumer products, and then to impose life cycle regulation on consumer products containing such chemicals...

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By Thomas R. Carey (Chicago), David A. Franchina (Charlotte), Ashley A. Peck (Seattle), and Christopher S. Walker (Charlotte)

The U.S. Environmental Protection Agency recently issued regulations confirming that it will not regulate emissions of greenhouse gases (“GHGs”) from stationary sources in 2010.  However, barring court intervention or action from Congress, EPA will regulate GHGs under the Clean Air Act (“CAA”) starting in 2011 through the Prevention of Significant Deterioration (“PSD”) construction permit program and other sections of the CAA. 

Though it remains unclear what the practical effect of applying PSD for GHGs will ultimately be, power plants may want to address their GHG emissions sooner rather than later to prepare for eventual regulation and as a hedge against potential litigation. 

This alert describes recent regulatory developments on GHG emissions, highlights actions underway to develop guidance for best available control technology (“BACT”) for GHGs under the PSD program, and suggests that power plants may want to consider addressing BACT for their GHG emissions prior to the onset of a legal mandate.

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By Barry M. Hartman (Washington, DC), Mark Ruge (Washington, DC), Susan B. Geiger (Washington, DC) and Stephen P. Roberts (Washington, DC).

 

Why is this study important?

In an apparent major step forward toward performance-based regulation of vessel discharges, the Environmental Protection Agency (EPA) has sent to Congress a draft report on the discharges from fishing vessels of all sizes and non-recreational vessels less than 79 feet in length. 

In December 2008, the EPA issued its first Vessel General Permit (VGP), which regulated the discharge of everything from deck runoff to chain effluent on large commercial cargo and tankers.[1] At the time, fishing vessels and non-recreational vessels under 79 feet were exempt, pending a further study.[2] Unlike when EPA issued its requirements for the VGP,[3] the EPA conducted its own testing of discharges from these currently exempt vessels to provide a foundation for Congress to determine whether to continue a two-year moratorium from VGP requirements on discharges for fishing vessels and these smaller vessels. 

What does the study say?

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Written by Kevin Greene (London), Sophie Charveron (London), Bonny Hedderly (London).

What is CRC?

• The Carbon Reduction Commitment (CRC) is a mandatory auction-based emissions trading scheme for energy users which applies to both public authorities and private sector companies. It forms part of the Climate Change Act 2008, which comes into force in April 2010.
• It is not a new building regulation as such as it targets energy use in buildings, rather than their construction. The CRC incorporates incentives and challenges to encourage business and the public sector to reduce energy use by taking steps to become more energy efficient
• According to Nicholas Stern's report on climate change, 50% of the total CO2 emissions in the UK come from its existing buildings. This percentage is likely to increase by 140% by 2050 if nothing is done to curb the CO2 emissions by buildings by improving their energy efficiency.
• The CRC focuses on businesses that have not previously been directly targeted by climate change legislation such as the European Emissions Trading Scheme (EU ETS) and a Climate Change Agreement.
• The CRC scheme is revenue neutral to the Government. Revenue raised from the auctioning of allowances will be "recycled" to the entities responsible for compliance with the scheme in proportion to their average annual emissions (i.e. their "performance") since the start of the scheme. CRC Organisations will receive a bonus or penalty depending on the their position in the league table published by the Government each year.

Read more about when it comes into force; the threshold; obligations on CRC Organisations; costs; enforcement; important dates, and; the responsbilities of parents and subsidiaries, PFI companies, tenants and landlords.

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Authored by Greg Luloff (Seattle) and Eric E. Freedman (Seattle)

The rapid growth of energy trading since the 1970s coupled with recent efforts to curb greenhouse gas (GHG) emissions has given rise to a robust and volatile emissions allowance and environmental attributes trading sector. Today, viable cash markets exist for carbon dioxide, sulfur dioxide, nitrogen oxide and other emissions allowances, renewable energy credits/renewable energy certificates (RECs), and other emissions-based and environmental products. Trading of emissions allowances and other environmental products has evolved into a major tool in global efforts to tackle climate change and achieve energy independence. While there is tremendous investment potential in emissions allowance and other environmental products trading, the markets for such products remain in their infancy, and thus are likely to be challenging and unpredictable in the near term. Energy trading itself has proven to be a risky business, as demonstrated by the recent failures of Amaranth Advisors LLC and MotherRock LP, and the emissions allowance and REC trading markets can present even greater price volatility. A central cause of this volatility is the uncertainty over the future of climate change legislation and regulation both in the near future and in the long term. Despite this uncertainty, there are steps that investors can take to mitigate the risks they face in this market.

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Authored by Vanessa C. Edwards (London)

Two recent court judgments concern European Commission decisions relying upon its own data in its review of two national plans identifying and allocating quantities of greenhouse gas emission allowances. Was the Commission simply reviewing the Member States’ actions or was it rather usurping their powers? The result could determine how effective the EU’s efforts to reduce emissions will be.

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Authored by Susan B. Geiger (Washington, D.C.) and Akilah Green (Washington, D.C.)

The current United Nations climate change summit in Copenhagen, Denmark is only the latest in a series of events that, taken together, are placing mounting pressure on the U.S. Congress to pass legislation that will reduce greenhouse gas (“GHG”) emissions. As a result, Congress and the Obama Administration have set a goal of passing comprehensive climate change legislation next year, and that legislation is likely to contain measures that will pose unprecedented challenges for the maritime industry.

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Authored by Stanford D. Baird, Thomas R. Carey, David A. Franchina, Ashley A. Peck and Elizabeth Thomas

On September 30, 2009 the United States Environmental Protection Agency (“USEPA”) issued its now famous (or in some quarters infamous) proposed “Tailoring Rule” aimed at regulating “greenhouse gas” or “GHG” emissions from large facilities. The Tailoring Rule essentially shoehorns GHG emission control (for re-defined “new major stationary sources” and “major modifications” at existing major stationary sources) under the Clean Air Act’s (“CAA”) Prevention of Significant Deterioration (“PSD”) construction permit program. Under the PSD program, facilities are required to institute “Best Available Control Technology” or “BACT” to control pollution emissions.

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Authored by Kenneth J. Gish, Jr. and Andrew B. Young

A key driver for new renewable energy resources in the United States has been the adoption by over half of the states of renewable portfolio standards (RPS) (sometimes called renewable energy standards (RES)). The details RPS vary from state to state, but put simply, an RPS is a requirement that electric utilities obtain from qualifying renewable resources (meaning renewable resources that are deemed acceptable under the applicable state RPS statute for purposes of meeting the RPS mandate) not less than a certain percentage – a percentage that typically increases over time -- of the electricity that the utilities use to serve their retail customers in that state.

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Written by by William H. Hyatt, Jr. and Mary Theresa S. Kenny.

Two recent United States Court of Appeals decisions may herald a new wave of litigation for damages arising from greenhouse gas emissions. Plaintiffs, relying on the federal and state common law of public and private nuisance, as well as other common law tort theories, and encouraged by the prospect of potentially substantial compensatory and punitive damage awards, may sue public sector and private industry defendants, contending that their emissions of greenhouse gases have caused or contributed to global warming, in turn, harming the plaintiffs.

In the course of resolving those lawsuits, courts are likely to be called upon to make judgments that practitioners might expect would be made, at least in the first instance, by Congress or by regulatory agencies.

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Written by John F. Spinello, B. David Naidu, Christopher R. Nestor

The New York State Department of Environmental Conservation (NYSDEC) recently published for public review and comment a draft Supplemental Generic Environmental Impact Statement (SGEIS) for horizontal drilling and high-volume fracturing activities in the Marcellus Shale, the Utica Shale and other deep, low permeable natural gas reservoirs. NYSDEC has scheduled public hearings to explain and take comments and questions on the draft SGEIS. The NYSDEC will consider and respond to the comments it receives and then issue a final SGEIS—after which the State will be able to issue permits to applicants for horizontal wells.

The draft SGEIS outlines safety measures, protection standards and mitigation strategies that drillers will need to comply with in order to satisfy the requirements of the State Environmental Quality Review Act (Environmental Conservation Law Article 8)—a prerequisite to obtaining a drilling permit—or otherwise, they will need to file a site-specific environmental impact statement for individual drilling projects. The safety measures will apply in addition to existing regulatory requirements, including those set forth in the Generic Environmental Impact Statement (GEIS) adopted in 1992. This article briefly summarizes the draft SGEIS and its significance to natural gas development in the Marcellus and Utica Shales.

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Written by  Elizabeth Thomas, Brianne P. Anderson, Maria Cull, Gordon F. Peery.

On September 22, 2009, the U.S. Environmental Protection Agency (EPA) issued a final rule pursuant to authority under the Clean Air Act, codified at 40 C.F.R. pts. 86, 87, 89, 90, 94, 98, 1033, 1039, 1042, 1045, 1048, 1051, 1054, and 1065, that requires industries across the U.S. economy to report greenhouse gas (GHG) emissions. 

One goal of this reporting rule is to better understand from where GHGs are coming, which is expected to guide the development of policies and programs focusing on the reduction of GHG emissions.  This rule sets the stage both for Congressional action and further regulatory action to regulate emissions of GHGs.

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Written by Barry M. Hartman (Washington, D.C.), Susan B. Geiger (Washington, D.C.), Christopher R. Tate (Washington, D.C.)

An environmental group is petitioning the U.S. Environmental Protection Agency ("EPA") to completely revamp the regulation of sewage discharges by strengthening and changing treatment requirements and imposing new, expansive recordkeeping requirements for marine sanitation devices ("MSDs") at a cost for cruise ships that is estimated to approach $10 million. MSDs used on everything from container ships to car carriers to tug boats to offshore vessels to large private yachts — anything that is over 65 feet in length — could be affected by the proposed changes.

This petition represents only the most recent effort by citizen groups to expand the regulation of vessels under federal environmental laws. This alert describes what this petition seeks, how it will be handled, and what the maritime industry might consider doing to effectively participate in this process.

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Written by Darrell L. Conner (Washington, D.C.), Yvette T. Wissmann (Washington, D.C.)

Environmental pressures continue to mount on the shipping industry, and soon virtually the entire U.S. coastline will have new emission requirements in place if the International Maritime Organization ("IMO") approves a joint U.S.-Canada request to create Emission Control Areas ("ECA"). The new proposal was announced at a March 30, 2009 news conference by the Environmental Protection Agency ("EPA"), joined by officials from the U.S. Coast Guard and elected officials from New Jersey. But even if approved by the IMO and implemented in the U.S., can shipping companies comply with the new requirements?

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Written by Barry M. Hartman (Washington, D.C.), John F. Spinello (Newark), Susan B. Geiger (Washington, D.C.), and Akilah Green (Washington D.C.)

Climate change negotiators from around the world met in Bonn, Germany this month to begin hammering out a global strategy for reducing greenhouse gas emissions, which many believe contribute to climate change.Discussions in Bonn included strategies for reducing GHG emissions that result from maritime shipping.

At the same time, in the United States, the maritime industry finds itself the target of a new congressional effort to reduce domestic GHGs. Specifically, the Waxman-Markey discussion draft of the "American Clean Energy and Security Act," released on March 31st, would mandate a reduction in domestic GHG emissions by 83 percent below 2005 levels over the next 40 years. To accomplish this, the proposed legislation would amend the U.S. Clean Air Act to give the federal Environmental Protection Agency sweeping new authority to regulate GHGs, including mandatory changes in marine fuel and engine standards, and the discretion to extend these requirements to oceangoing vessels.

These new mandates on marine fuel and engines would be in addition to the major changes adopted by EPA and the International Maritime Organization last year to reduce vessel emissions of sulfur and nitrogen oxides.

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