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

From David Mandelbaum of GT Philadelphia.

The Delaware Department of Natural Resources and Environmental Control has announced that it is developing a Statewide Adaptation Plan for Sea Level Rise.  Ultimately, this effort should affect coastal construction standards, beach protection and nourishment, and similar matters. It may point the way to some areas of public, or P3, infrastructure investment, as well as new regulatory controls on private projects.  Put simply, you may not want to be owning or contemplating now a structure sea-ward of where the coastal storm hazard will be in 2030 or 2040, at least according to DNREC Secretary Colin O'Mara's comments on NPR.  There is a somewhat parallel effort underway in Maryland, and a pertinent summary of what the Adaptation and Response Working Group is thinking posted here. Other coastal states are not focused on "adaptation" -- that is, coping with sea level rise and other climate change effects -- but instead seem to be pursuing mitigation -- that is, trying to avoid climate effects.

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The literature on the relationship between risk perceptions and environmental policy is extensive - exhaustive, even.  See this, or this, or this.  But here is the best analysis of risk perceptions and policy outcomes I've ever seen - and its from the Onion.  With climate change and TSCA reform on the legislative agenda, and EPA issuing rafts of new regulations,  the use of risk to justify governmental action is an issue of major significance.  Check out the video.

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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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Stewart Brand is one of the founders and intellectual leading lights of modern environmentalism.   In October 2009, he published a book titled Whole Earth Discipline: An Ecopragmatist Manifesto.  To the shock and dismay of some long-time allies, it turns out that forty years in the environmental policy business have led Brand to favor nuclear power and oppose using the Precautionary Principle to make government policy.  As Peter Huber puts it in a thoughtful City Journal review:

The man who founded and then edited the Whole Earth Catalog for 16 years—a magazine guided by “biological understanding” and enamored with the planet-saving power of organic farming, solar, wind, insulation, bicycles, and handmade houses—now concludes: “Cities are Green. Nuclear energy is Green. Genetic engineering is Green.”

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A “cross-examination” of global warming science conducted by Jason Scott Johnston, Professor and Director of the Program on Law, Environment and Economy at the University of Pennsylvania Law School concludes that virtually every claim advanced by global warming proponents fail to stand up to scrutiny.  He summarizes his findings as follows:

Insofar as establishment climate science has glossed over and minimized such fundamental questions and uncertainties in climate science, it has created widespread misimpressions that have serious consequences for optimal policy design. Such misimpressions uniformly tend to support the case for rapid and costly decarbonization of the American economy, yet they characterize the work of even the most rigorous legal scholars. A more balanced and nuanced view of the existing state of climate science supports much more gradual and easily reversible policies regarding greenhouse gas emission reduction, and also urges a redirection in public funding of climate science away from the continued subsidization of refinements of computer models and toward increased spending on the development of standardized observational datasets against which existing climate models can be tested.

The full report is here. Expect Johnston’s analysis to resurface in the litigation against the EPA’s endangerment determination and to be used to counter the narrative behind the Kerry-Lieberman/Waxman-Markey legislative initiatives.

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The justification for cap and trade, centerpiece of both Waxman-Markey and the American Power Act, is that placing a price on carbon emissions makes solar, wind, and other sources of alternative energy cost-competitive with fossil fuels.   However, as James Kanter of the New York Times reports, the EU's experience with carbon trading suggests that carbon must be priced at approximately $76 per ton to make alternative energy economically viable.  He writes:

Each permit, representing a ton of carbon, currently costs around $19, but most experts agree that permits need to cost around four times as much to make them cost-effective enough to build cleaner systems, like offshore wind farms and solar power plants.

To minimize economic dislocation, Waxman-Markey prices carbon emissions using a "soft collar" of $28 per ton going to 60% above three-year-average market price.   The American Power Act prices carbon emissions using a  “hard” collar between $12 and $25 per ton, floor increases at 3%+CPI, ceiling at 5%+CPI, plus permit reserve auctions.   Yet, if Kanter's reporting is correct, then neither Bill prices carbon anywhere near the level needed to make solar and wind cost-competitive.  The result?  The worst of both worlds, it seems.  Big economic pain without any environmental gain.  

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"Climate change" legislation such as the Kerry-Lieberman Bill can be passed only if the base alliance between environmental activists (through their amen corner of politicians), invested scientists, and credulous media holds firm.  However, this Newsweek article, titled "Uncertain Science", suggests that the media may be cracking.

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From Sherry Spiers, GT Tallahassee.  Thanks and Welcome to Sherry!

Title VI of the Power Act, titled "Community Protection from Climate Change Impacts," seeks to comprehensively address climate change impacts on fish, wildlife, plants and associated habitats, and coastal systems at the federal level by requiring development of a Natural Resources Climate Change Adaptation Strategy to be implemented by all federal departments and agencies with natural resource management responsibilities through development of specific agency plans consistent with the Strategy, and through environmental reviews, programs, and activities, with updates to the Strategy and the agency plans every five years. 

Title VI creates the National Climate Change and Wildlife Science Center within the US Geological Survey to assess current physical and biological knowledge, conduct necessary research, develop approaches and models to address the impacts of climate change, and provide standardized data to all federal agencies and the states.  Funding is available to states to develop state plans that meet detailed criteria in the bill.

Title VI should be costly to the federal government in several respects. Developing and periodically updating the new Natural Resources Climate Change Adaptation Strategy required by Section 6004 of the bill will require significant effort and expense. Significant effort and expense will also be required to develop, periodically update, and implement the federal agency adaptation plans required under Section 6006 of the bill. 

Title VI also will burden States and Indian Tribes that elect to seek federal funding for climate change mitigation activities because, to be eligible for funding, Section 6007 of the bill requires development and adoption of a separate state or tribal adaptation plan to be approved by the Secretary of Commerce and the Secretary of the Interior.  Among other things, the state adaptation plan must establish programs for long-term monitoring of the impacts of climate change on the ocean and coastal zone; assess and adjust adaptive management strategies; and consider and, if appropriate, integrate goals and measures in other designated federal, state and Indian plans and insurance programs, all of which requires funding to implement. 

Title VI, Section 2006(d), requires that the agency adaptation plans be implemented through existing or new plans, policies, programs, activities, and actions.   Accordingly, the Power Act will be costly to regulated companies and individuals who must now address climate change issues consistent with the applicable agency adaptation plan in order to obtain federal permitting for development activities on their properties.  Implementation of an additional layer of state or tribal adaptation plans will only increase both the time and expense of development that supports economic growth in all US States and territories.

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Title II creates an economy-wide, comprehensive GHG cap and trade system. (When Sen. Graham said cap and trade is dead, he apparently meant only the term and not the program.)  The Power Act's cap and trade provisions are immensely complex and thus it is very difficult on a first pass to meaningfully summarize this Title.  Here is an overview - a more detailed analysis of all relevant subtitles will follow in a few days. 

To begin with, the Power Act will substantially increase energy costs, perhaps 8 - 10% or more per year for each year between 2013 and 2030.  Title II sets a shrinking cap on CO2 emissions - which are, after all, only a surrogate for energy consumption - that will by 2020 require the US to emit no more than 83% of the CO2 emitted in 2005.   By 2050, the US must emit no more than 17% of the CO2 emitted in 2005.  The Power Act empowers the federal government to throw billions and billions of dollars into subsidies for "alternative energy" projects.  However, the Power Act's drafters do not rely on new technology to meet the self-imposed energy consumption cap.  Instead, they ensure compliance by raising energy costs so substantially that the average consumer cuts his or her energy consumption by the requisite amount (17% by 2020, 83% by 2050).    

Consequently, the Power Act will increase costs and lead to job losses across the board as businesses, farmers, trucking companies, landlords, utilities, and gasoline refiners, among others, pass along the higher costs of energy to consumers, and consumers devote more of their disposable income to energy-related expenses.  The potential cost increases will likely run into the trillions of dollars over the next ten to fifteen years.  High energy costs generally correlate with a reduction in economic activity.  Therefore, there is good reason to believe the Power Act will, at least in the short term, depress US economic performance to a significant but uncertain extent.  

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From Tracy L Weiss, GT Phoenix.  Thanks and Welcome To Tracy!

As its name suggests, Title IV addresses job protection and growth. Subtitle A of Title IV focuses on job protection. Specifically, it establishes the Emission Allowance Rebate Program to rebate emission allowances to eligible industrial sectors.  Theoretically, this will compensate these sectors for costs incurred as a result of compliance with the Power Act's emission caps.  Also, Subtitle A empowers the President to establish an International Reserve Allowance Program, which will require specified foreign entities to buy carbon allowances to help counterbalance the costs incurred by U.S. companies.    The success of this industrial policy depends on EPA's ability to establish effective guidelines to both meaningfully measure emissions and manage the rebate program, as well as the Federal government's ability to monitor, implement, and enforce the International Reserve Allowance program, which at least facially raises significant WTO/free trade concerns.

Subtitle B focuses on clean energy technology and jobs as a means to both protect and grow U.S. job opportunities.  Theoretically, increasing government funding for America's "clean energy" (non-fossil fuel) technology might generate jobs and reduce dependency on foreign energy sources.  Even if this theory proves to be true (and the initial data creates some grounds for uncertainty), with the exception of the Clean Vehicle Technology Fund, which shall receive monies from the auction of emission allowances, the other proposed clean energy technology and jobs policies "shall be appropriated" without specifying the anticipated amount or source of funds.  As a result, the cost-benefit analysis of these proposed reforms is hard to predict. 

Between the proposed rebates, tax incentives, and program creation, the Power Act seems likely to prove very expensive. More information is necessary to determine if the benefits  warrant the expense.

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Title I, Subtitle F, authorizes the DOE to distribute 2% of all CO2 allowances "on a competitive basis" to universities, foundations, and private companies for the purpose of promoting the development and deployment of  "clean energy technology" while "taking into account the goals of ARPA-E."  (Sec. 1801(c)).  "Clean energy technology" means a technology that produces energy from something other than a fossil fuel; "more efficiently" stores, transmits, or distributes energy or reduces emissions; enhances energy efficiency for buildings or industry; enables development of the "Smart Grid"; produces an advanced or sustainable material with an energy or energy efficiency application; enhances water security and conservation; or improves energy efficiency for transportation. (Sec. 1801(a)(3)).

Interestingly, the Power Act references the "goals" of ARPA-E, which is basically a non-political research and development program, while reserving power and control over the allowance fund (which is substantial) for DOE's political leadership.   The rationale for this approach is not immediately clear.  Also, water "security and conservation" have historically been EPA's purview.  It seems Congress, through its definition of "clean energy technology," aims to expand DOE's portfolio a bit.  Again, the rationale for this change is not immediately clear.

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Title I, subtitle E, is titled "Clean Transportation" and contains three parts.  Part I directs DOE to study electric car infrastructure, run pilot projects, and hire one dedicated worker to do planning, all with an "aspirational goal" of deployment by 2020.  No money is appropriated for these efforts. (Sec. 1701).  Part III (Sec. 1721) references the allocation of CO2 allowances to the Highway Trust Fund to "promote the safety, effectiveness, and efficiency of transportation in the United States..."The key provisions, however, are in Part II (Sec. 1711) and relate to GHG emission reductions through "transportation efficiency." 

Essentially, the Power Act authorizes EPA and the Department of Transportation to set emissions limits for the transportation sector, and then requires States and empowers "Metropolitan Planning Organizations" (MPOs) to develop strategies to meet these limits, subject to DOT review. (Sec. 803b and 803c).  These "strategies" include ride-share mandates, mass transit requirements, and so forth.  Funding for the strategies is in the form of a distribution of CO2 emission allowances from DOT to qualifying States and/or MPOs.  Paradoxically, the Power Act explicitly provides land use authority remains in the hands of local governments. 

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The US Chamber of Commerce has announced its support for S.J. Res. 26, sponsored by Sens. Murkowski and Lincoln to prevent EPA from implementing any GHG rules.   The Chamber's decision to support this measure, coming hard on the heels of the Kerry-Lieberman energy bill roll out and the final EPA GHG rule, suggests there now may be enough votes to get the Resolution passed.  The political waters are becoming extremely murky. 

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From David Mandelbaum, GT Philadelphia, and K.B. Battaglini, GT Houston.

Special interest groups have long relied on the National Environmental Policy Act of 1969 (NEPA) to delay or halt domestic oil and gas development.  Now, reversing decades of policy and practice, the federal government (e.g. the Department of Agriculture's Forest Service and the Department of Interior's Bureau of Land Management) seems to be playing along with the environmentalists' strategy.  The government apparently has determined to apply NEPA not only to the availability of federal lands for oil and gas development, but also to the grant of specific oil and gas leases and perhaps even for mere access to drill individual wells.  This new policy needlessly pits the government against mineral rights holders. Oddly, at a time when the country clearly needs different energy infrastructure and resources, the government is using NEPA to avoid engagement on the substantive questions and as a vehicle for delay. 

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From David Mandelbaum, GT Philadelphia.

On April 6, the Federal Highway Administration disapproved Pennsylvania's proposal to impose tolls on Interstate 80, one of two main east-west highways through the Commonwealth.  The funds were to be used to provide secure funding for a broad range of transportation needs in Pennsylvania, including, importantly, capital improvements to the major metropolitan public transportation systems.  FHWA reasoned that federal law restricted the use of toll revenues to improvements of I-80, and would not permit use of the funds to rebuild other roads and bridges or to fund mass transit.

If you believe that the cost of transportation fuels will increase because of climate policy, international politics, or availability of petroleum, then you believe that those regions that can do business with less fuel will do better. Cities with better transit will, all other things equal, be where businesses and people want to be. In the process, the nation as a whole will become more efficient as activity flows to those places. As a practical matter, capital improvements to urban transit systems are just not going to be funded by the bus fairy. Pennsylvania tried one interesting approach to having one transportation mode help fund the sort of capital improvements that climate-friendliness and energy-efficiency would require. We see here an example of the sclerotic complexity that rebuilding the economy for an energy- or carbon-constrained world encounters.

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The informative Texas Energy and Environmental Blog reports "At a briefing this morning with reporters from The Dallas Morning Newsand other outlets, White House senior advisor David Axelrod didn't list climate change as a top priority for 2010. (The list basically consisted of finding ways to create jobs and passing a major financial regulation bill.)" and asks "is climate change is still a priority for Team Obama?"

Well, it is, but not through legislation.  Instead, the Administration is acting by expanding Federal agency power and control.  For example, at the January 20 meeting of the US Conference of Mayors, EPA Administrator Lisa Jackson again made it clear EPA intends to control local land use for "sustainability," as we discussed here.  

What's happening in Congress is and probably always has been little more than a distraction to the Administration.  The real action is in the Federal bureaucracy, but almost no one is paying attention.   Team Obama wants "transformative change" to the economy, and has opted for agency rules over legislation to avoid the "distractions" of the legislative process - i.e., popular opposition (the Landrieu (D-La.)/Murkowski (R-Alaska) bipartisan effort to block EPA from regulating greenhouse gases under the Clean Air Act, health care, etc.)  Republican Scott Brown's stunning election will encourage Team Obama to accelerate its efforts on the agency front. They know rules and guidance once issued almost never die. 

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Who is the key White House official telling Congressional and industry energy bill negotiators that the Obama Administration is unwilling to die on the cap and trade hilltop?

At the same time, what about the big-time green group legal director who let it slip at a recent "private" dinner that there is a coordinated and "totally funded" litigation effort in the offing, purportedly by "fringe" environmental organizations, to gut the EPA's tailoring rule and extend CO2 permit requirements as far as possible, even to the neighborhood pizza shop?  And that key players in EPA and the West Wing are covertly supporting and aiding this effort?

Stay tuned.  

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North Dakota's member of the House of Representatives, Democrat Earl Pomeroy, has introduced H.R. 4396, the "Save Our Energy Jobs Act", to prohibit EPA from regulating CO2.  

The Bill proposes to amend Section 302(g) of the Clean Air Act (42 U.S.C. 7602(g)) to read "The term `air pollutant' shall not include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, or sulfur hexafluoride."   It also contains a "sense of Congress" provision providing (1) Congress did not intend to regulate greenhouse gases under the Clean Air Act.  (2) EPA should not regulate greenhouse gas emissions without explicit authority to do so. (3) GHG rules will significantly affect nearly all aspects of the US economy and should not be left to administrative rulemaking absent congressional action.  (4) Comprehensive GHG regulations must only be enacted--(A) at the direction of Congress; and (B) if Congress specifically intends such regulations to be implemented.

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Codexis, Inc., a San Francisco-based company developing biocatalysts to better enable the commercial use of cellulosic feedstock biofuels, among other things, has launched a $100m IPO.   

The S-1 warns potential investors the company's performance may be dependent on "the existence of government subsidies or regulations with respect to carbon dioxide emissions."  Codexis is far from unique in this respect - many alternative energy companies depend, to varying degrees, on government regulation to "make the market."  However, to date the government has generally failed to deliver and the alternative energy industry has suffered accordingly.  The Wall Street Journal notes:

An alternative energy, U.S.-listed IPO is something of a novelty. The last biofuels IPO was way back in December 2007, when Chinese biodiesel maker Gushan Environmental Energy Ltd. debuted. After that there have only been three IPOs – solar outfits Real Goods Solar, GT Solar and STR Holdings. (Hat tip to Dealogic for the data.) Battery maker A123 began trading a couple months ago also.

In retrospect, the alternative energy industry may have over-commited on "climate change" as a policy driver.  Now, with cap and trade bogged down in Congress, the industry's short and mid-term prospects are muddy, complicating private investment.  As discussed here, the industry should consider relying far more on energy security, and far less on global warming, to make its case in Congress.  

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The Southeastern Legal Foundation has filed a Petition for Reconsideration of the EPA's endangerment determination due to Climategate.  Although EPA likely will reject the Petition, it makes for interesting reading and provides a good foundation for future litigation.

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EPA, as a matter of express policy, has not yet made common cause with the NGOs that aim to stop nanotechnology.  But it seems the agency has definitely shifted course, aggressively interpreting its legal authorities to justify increased regulation of, and limits on, commercial nanotechnology use.

Recent remarks by Steve Owens, EPA's Assistant Administrator for the Office of Prevention, Pesticides and Toxic Substances, make it clear EPA will, if possible, circumvent TSCA to expand its authority over nanotechnology in order to regulate more aggressively. Owens said EPA will not wait for Congress to amend TSCA to provide the authority it seeks, instead, the agency will propose a reporting rule under TSCA section 8(a) "to require companies to report a range of information on nanoscale materials" and a test rule under TSCA section 4 requiring companies "to test several manufactured nanomaterials for health and environmental effects."  He also stated EPA's existing policy that a nanoscale substance with the same molecular identity as a substance listed on EPA’s TSCA Inventory is considered to be an existing chemical is under review, suggesting it likely will be changed.

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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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