E2 Law Blog : Environmental Lawyers & Attorneys : Greenberg Traurig Law Firm : Climate Change, Energy Legislation

From Todd Sumner of GT Tallahassee:

The Governors' Wind Energy Coalition (GWC) submitted a GWC Letter to President Obama (July 2011) which set forth a punch list of action items that the Administration should pursue in order to facilitate further development of the U.S. wind industry including the newly emerging offshore wind sector. The GWC, comprised of 24 governors (Democrats, Republicans, Independents), from diverse regions of the U.S., called for the Administration to extend for at least 7 years the production tax credit and the investment tax credit in order "to have a consistency in policy to support the continued development of and wind manufacturing in the United States."  The GWC also emphasized other steps that should be taken by the Administration including :

- establish a combined intergovernmental state-federal task force on wind energy development;

- restore collaboration on wind deployment and expand technology development;

- improve siting collaboration;

- expedite the Deployment of Offshore Wind;

- identify transmission priorities for Power Marketing Administrations; and

- release completed DOE analytical information.

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From Sabrina Mizrachi of GT Philadelphia:

The Infrastructure Jobs and Energy Independence Act was introduced on May 12, 2011, and seeks to allow more offshore drilling in order to reduce U.S. reliance on imported fuels and create jobs. The bill was introduced by a bipartisan group of four congressmen, Democrats Jim Costa of California and Tim Walz of Minnesota in collaboration with Pennsylvania Republicans Tim Murphy and Bill Shuster. The bill contains no new taxes or increase of existing taxes, and would allow drillers to reach natural-gas reservoirs that could fuel industry in the U.S. for 63 years and the U.S. oil industry for 80 years, and also create 1.2 million jobs per year.

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with Mark Glaser, GT Albany

Last week was an active week for those following regulation of Marcellus Shale natural gas development.

On December 11, New York Governor David Paterson vetoed AB 1143 / SB 8129, that would have banned all new permits for natural gas wells to be stimulated by hydraulic fracturing until May.  Instead, he issued an Executive Order establishing a moratorium on new horizontal, high-volume, hydraulic fracturing until July 1, 2011.  His counsel's statement is here.

Update:  The Governor's veto message was released on December 14.

On December 9, the Delaware River Basin Commission published its long-awaited draft natural gas well pad regulations.  It did so against the advice of New Jersey DEP Commissioner Bob Martin stated in a letter of December 7 and over the objection of New York Governor Paterson stated in a letter of December 6.  New York voted against release of the draft regulations at the Commission meeting of December 8.  Comments on the draft are due by March 16, 2011, and the Commission plans three public hearings in February.

On December 8, the Delaware River Basin Commission also adopted a resolution drastically curtailing, and possibly terminating, planned January hearings on natural gas exploratory wells -- that is wells intended for investigation and not production.  Most of the issues to have been addressed in that hearing are now to be considered in the pending rulemaking.  This resolution also avoided having the hearing address the adequacy of Pennsylvania state regulatory program, an issue that opponents of natural gas development had advanced in expert reports filed in the proceeding.  The Commission Chair's instructions to the hearing officer of December 3 reflect the difficulty of that issue.

The DRBC draft regulations would govern a number of issues, such as bonding and setbacks, also regulated by Pennsylvania and New York.  If adopted, they would impose different rules for identical natural gas development in different watersheds, including different watersheds within the same state.  The December 10 Philadelphia Inquirer quoted Commission Executive Director Carol Collier as analogizing this distinction to the regulations administered in the New Jersey Pinelands by the Pinelands Commission.  Those are quite explicitly land use regulation.  Whether the Interstate Compact Commissions intend to regulate each wave of land development, or just to focus on the current natural gas "boom," remains to be seen.

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 On November 29, the New York Assembly passed A1143B/S08129B which had previously passed the Senate.  Governor Paterson is reported to be prepared to sign the bill, although the New York Times blog reports that industry groups are still pushing for a veto.  The bill, if signed, would impose a moratorium on new permits for natural gas wells that use hydraulic fracturing until May 15, 2011. 

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The New York Times recently covered the ongoing dispute over drilling for natural gas in the Delaware River Basin, an area not only subject to the jurisdiction of state environmental agencies but also an interstate compact agency known as the Delaware River Basin Commission. At the Commission's regular September 15 meeting, the DRBC Executive Director announced that draft regulations for natural gas wells expected by "end of Summer" would be delayed until "mid-October."  The Commission will not consider new production wells for approval until those regulations are adopted after a public review process.

However, at the same meeting, the Commission considered a request by opponents of natural gas development to stop construction of exploratory or "science" wells currently under way. The Executive Director's determination subjecting exploratory wells other than certain grandfathered wells to DRBC approval is the subject of a contested hearing, but that hearing may not take place until after the grandfathered wells, or several of them, are complete.  On September 15, the Commission voted not to stop construction of the grandfathered wells.  Until those wells are completed and analyzed, the gas production companies cannot decide whether to proceed with production wells in the area, and so if they are permitted, natural gas development can remain on track despite the "moratorium" currently in place until the Commission adopts regulations.

The request for a "supersedeas" filed by the opponents, Damascus Citizens for Sustainability, the Delaware Riverkeeper, and the Delaware Riverkeeper Network may be found here. The responses of the drilling proponents, Northern Wayne Property Owners' Alliance and Newfield Appalachia PA, LLC, may be found here and here.

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Opposition from Republican and some Democratic senators, spurred on by industry groups, has successfully forestalled (if not killed, per our prior blog post) passage of comprehensive climate change legislation. However, as Greenberg Traurig shareholder David Mandelbaum notes in his monthly column for The Legal Intelligencer, EPA and some states (notably Pennsylvania) will be regulating greenhouse gas emissions, perhaps awkwardly, under the Clean Air Act and state analogs. Query whether we are better off driving nails with baseball bats or hammers?

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DOE is handing out billions in grants and loan guarantees. And, as you might expect, there have been some bumps along the way. The watchdog GAO reports: "DOE's [loan guarantee program] has treated applicants inconsistently, favoring some and disadvantaging others."

So how is it that some companies are favored and others not? Well, take the case of Solyndra.  According to Jim McTague in Barron's, Solyndra has already been awarded $535 million in taxpayer-backed federal loan guarantees.  Its application for another $469 million in loan guarantees is pending.  Solyndra "was supposed to be the cornerstone of Obama's vaunted green-energy future, but now is a king-size political embarrassment....[it] last month cancelled (sic) a $300 million initial public offering because auditor PricewaterhouseCoooper said its operating losses and negative cash flow raise doubts about its ability to continue as a going concern."  However, according to David Freddoso in the Washington Examiner, "Solyndra has hired people that people in Washington listen to, spending $140,000 on lobbyists in just the first quarter of this year....The company's issues: the stimulus, the second stimulus, an energy subsidy bill and the cap-and-trade bill."  Thus the funding flows. 

To be clear, the DOE is no worse, and arguably much better, than most other Federal and State government agencies with respect to the distribution of loan guarantees and grant funds.  And, Solyndra does bring new solar panel technology to the table. Even so, the McTague and Freddoso articles (and you should read both in their entirety) usefully demonstrate what corporate executives and their advisors must do to compete effectively for taxpayer dollars.

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The always-useful Politico nails the Democrat plan for cap and trade legislation though Harry Reid won't use that term.  Look for the Bill to have four sections: (1) oil spill response; (2) a clean-energy and job-creation title based on work done in the Senate Energy and Natural Resources Committee; (3) a tax package from the Senate Finance Committee; and (4) a section that deals with greenhouse gas emissions from the electric utility industry.  Sections 1 and 2 seem to have bi-partisan support in concept and should pass (though more spending is somewhat problematic politically, given deficit concerns). Sections 3 and 4 may be jettisoned at the end of the day to assure passage of 1 and 2.  Still, the Bill is being written and deals are being cut now. 

We will post the Bill and analyze winners and losers as soon as the text is out. 

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Robert Bryce, a senior fellow at the Manhattan Institute, lays out a cogent "reality-based" analysis of US energy needs and policy in his new book, "Power Hungry."   This book is not a simple-minded, ideological rant.  On the one hand, Bryce opposes mountain top coal mining due to its ecological impact.  But, on the other hand, he is honest enough to recognize the policy implications of the fact that just one coal mine in Kentucky produces the equivalent of 75% of the energy produced by all wind and solar sources in the U.S. combined. 

Bryce says that energy policy must be based upon four imperatives: "power density, energy density, cost and scale."   Wind and solar power fail due to storage problems and weather.  He points out that Denmark, the poster child for renewable energy, nevertheless imports hydroelectric power from Norway and Sweden, relies heavily upon North Sea oil and coal, and increased its greenhouse gas emissions by 2.1 percent between 1990 and 2006.  Given the environmental cost of hydro-power ("ruining habitats for aquatic life"), oil spills, and coal mining, Bryce makes a strong case for heavier reliance upon natural gas, a relatively clean and readily available carbon fuel, as a bridge technology: "The smartest, most forward-looking U.S. energy policy can be summed up in one acronym: 'N2N'," for "natural gas to nuclear power."

The Democrat leadership in the Congress, which is figuring out where to go with energy legislation, would be well-advised to give Bryce's prescription careful consideration. 

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Here's the latest rumors about the contents of the Kerry-Lieberman Senate Energy Bill.  It used to be the Kerry-Graham-Lieberman Senate Energy Bill, but Sen. Graham has bailed out.  It is not clear whether this information is accurate, but here it is, for what its worth.  This is being sold as a "transformational" law.  The drafters don't want to do much - just fundamentally remake the entire US economy.

1. This is a cap and trade bill covering the entire economy. When Sen. Graham said "cap and trade is dead," he meant the term, not the program.  In any event, the caps are phased in by sector. First utilities, then transportation, then manufacturing. There is a "five year plan" (honestly) for the caps. There will be a "price collar" pegged to CPI. Secondary and derivative carbon trading will take place regulated by the CFTC. There will be international and domestic agricultural offsets. The government will take about 20% off the top from the allowance fund to cover its increased energy costs and for deficit reduction. However, the drafters were very vague about how the money will be handled, who will actually sell the allowances, whether a new agency is required, what the revenue projections are, etc. Apparently, the Environmental Defense Fund is doing the economic modeling for the bill

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Here are the latest rumors about the Kerry-Graham-Lieberman draft Senate energy bill. 

• KGL plan to release their bill by the week of Earth Day, which is April 22.
• The bill will tax energy in multiple ways.  The taxes will be heavy.  To ease the pain somewhat, between 50-60 percent of the revenue taken by the government will be re-circulated back to the taxpayer/consumer.
• Contrary to earlier reports, there will not be much if any new off-shore drilling, due to Democrat opposition.   "Drill here, drill now" seems dead.
• There is a major fight over drilling for natural gas in the Marcellus shale.  This issue is still up in the air, but the enviros supposedly have vowed to do "whatever it takes to put drilling on the shelf."
• One of the key issues – division of energy rights, likely in the form of emission allocations, among different industries – is being deferred until the other sections of the bill are agreed.  However, the KGL bill accepts the proposition that the government should decide much energy consumers, and different sectors of the economy, may properly consume.
• Right now, the “bipartisan” aspect of the Bill seems confined to increased support for the nuclear industry.

 Of course, the draft bill is not final, much less law.  And these are just rumors. 

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The Cleantech Group LLC and Deloitte report cleantech venture investment totaled approximately $5.6 billion in 2009.  This was a big drop of 33% from 2008. Key trends are strong Asian M&A and IPO activity and more VC investment in Israel and Europe.  62% of cleantech investment was in the U.S. (down from 72% in 2008), 29% in Europe/Israel (as noted here Israel, with a total population of about 7 million, is a world cleantech powerhouse) then 9% in China and India combined.   Solar  attracted 21%, transportation 20% and energy efficiency businesses 18% of total investment.  Solar was down 64% from 2008, but  transportation and efficiency investment reached record levels.  

So what conclusions can be drawn from the data?  Well, to begin with, absent some unexpected technological breakthrough, U.S. solar, wind, and biomass industries are substantially (entirely?) tied to favorable government regulations and mandates.  Utilities under renewable mandates are behind many solar and wind projects.  However, for the reasons highlighted here, mandates are not enough - renewable power generators need regulatory relief from the web of federal and state requirements used by environmentalists and competitors to stop projects. Transportation and energy efficiency businesses, on the other hand, may cash-flow without government subsidy and could be an easier short-term lift for investors.   

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Do "environmental groups" aim to kill green energy?  A distressing pattern of litigious conduct suggests at least some "greens" oppose any energy project supporting the supposedly "unsustainable" Western lifestyle.   So, they sue.

Thanks to Robert Lamkin for the following post.

Judge Roger W. Titus of the U.S. District Court of Maryland has “reluctantly” enjoined construction of a West Virginia wind farm under the Endangered Species Act (ESA) to protect the Indiana bat. In Animal Welfare Institute v. Beech Ridge Energy LLC, Judge Titus ordered construction cease and operations suspended except when the bat hibernates. 

It is not clear whether this decision - the first from a federal court holding a wind power project violates ESA - means the Indiana bat is the green energy northern spotted owl, but it very well might.  The Judge assumed the developers could have obtained the FWS permit, but, as anyone with FWS experience can tell you, this is quite an assumption. The Indiana bat's habitat spans approximately twenty states in the mid-western and eastern U.S.   Thus, the Beech Ridge decision means wind power projects in a huge part of the US now may need to factor FWS permits into development financing and cost estimates, creating yet another barrier to green energy deployment.

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This post is courtesy of Cecily A. O'Regan, an IP lawyer in GT's Silicon Valley office.  Welcome Cecily!

The USPTO has announced a pilot program enabling applicants to have a patent application advanced out of turn for examination (thereby accelerating prosecution) for “green technology.” As anyone familiar with Patent Office backlogs will appreciate, this is particularly good news for start-up companies who may find financing easier with one or more patents further in the queue or (better yet) in hand. 

Under this new program applications pertaining to environmental quality, energy conservation, development of renewable energy resources, or greenhouse gas emission reduction are eligible to apply for accelerated examination. Of course, there is a catch - the USPTO will only accept the first 3,000 eligible petitions.  Thus, technology companies and entrepreneurs need to consult with patent counsel soooner, not later, to take advantage of this opportunity. 

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So, in the end, was the UN Copenhagen climate summit  nothing more than a good party  and a massive waste of hot air?  And what now for US businesses and consumers?  

It is, frankly, far too early to evaluate the potential long-term impact (or lack thereof) of the Copenhagen Accord.  It is evident the combination of a massive recession and concerns regarding the science used to justify stringent CO2 controls are having a legislative impact.  And it certainly seems carbon traders took a hit because Copenhagen is widely perceived to have been a bust.   But in the final analysis, it is EPA's endangerment finding, and not the Copenhagen Accord, that matters most for US businesses, consumers, and politicians. 

Here's why:  EPA's endangerment finding effectively triggers significant Clean Air Act regulatory requirements, and thereby places the fate of US businesses and consumers in the hands of the federal courts.  Absent Congressional action taking CO2 regulation away from EPA (and right now passage of climate change or energy policy legislation taking ownership of the CO2 issues is unlikely due to splits in the Democratic Party) there will be a muti-year torrent of litigation from environmentalists, business groups, and everyone in between challenging pretty much everything EPA chooses to do (or not do).  This means, in turn, that the courts will effectively make or break US energy policy and thereby shape the future of the US economy.  

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Joe R. Reeder is a 1970 West Point graduate, an Army Ranger, the 14th Undersecretary of the Army (Clinton Administration), and the past Chairman of the Panama Canal Commission's Board of Directors, among other things.  In a recent speech before dignitaries, officials, and industry leaders at a plenary session of the Watec 09 international energy and environmental conference and exhibition in Tel Aviv, Israel Mr. Reeder explained the U.S. national security imperative of clean energy.  Based on Lawrence Livermore Laboratory research, Reeder called for a dual program of advanced research and practical, incremental measures, including federal, state, and local legal reforms to speed development and deployment of an efficient advanced electrical grid and alternative energy systems, an open fuel standard for cars and trucks, and a full bore commitment to nuclear power.  Reeder used Patton's Third Army march through France during 1944 and the Arab oil embargo of 1973 to drive home the strategic importance of secure and reliable energy supply and the crippling consequences of dependency on foreign oil.

What with climate change legislation bogged down in the Senate, the growing scandal over the apparent manipulation and misrepresentation of data by pro-regulatory scientists dubbed "Climategate", and apparent public scepticism about the entire issue, perhaps it is time for clean energy advocates to stop worrying about "saving the world" and instead to start focusing on what's good for America. Asking "What Would Patton Do?" might be a good start indeed.  

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As the Wall Street Journal reports, the biofuel industry is, yet again, suffering tough times.  The National Biodiesel Board has released a report claiming the industry "could be expected to collapse" unless the federal biofuels tax credit expiring December 31, 2009 is renewed.  However, Congressional action is uncertain, even as state and local governments fail to mandate biodiesel use. The tepid support is due, in part, to the fact feedstocks are typically food crops, as opposed to sugar cane, castor plants or algae, meaning biofuels swap food for fuel. 

Help may be on the way, though.  First, the Department of Energy is aggressively funding feedstock alternatives to grain and corn including algae.   Second, the USDA Animal & Plant Health Inspection Service is considering a petition from Syngenta Seeds, Inc. to deregulate corn genetically engineered to produce a microbial enzyme that facilitates ethanol production. If APHIS grants the petition, then the GE corn and its progeny would no longer be regulated and could be planted without APHIS permits or oversight, obviating some of the "food v. fuel" concerns through increased yields.            

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