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

Pretty badly, based on this piece by Clive Cook in The Atlantic on the fallout from the "investigations" of Climategate.  He says:

By way of preamble, let me remind you where I stand on climate change. I think climate science points to a risk that the world needs to take seriously. I think energy policy should be intelligently directed towards mitigating this risk. I am for a carbon tax. I also believe that the Climategate emails revealed, to an extent that surprised even me (and I am difficult to surprise), an ethos of suffocating groupthink and intellectual corruption. The scandal attracted enormous attention in the US, and support for a new energy policy has fallen. In sum, the scientists concerned brought their own discipline into disrepute, and set back the prospects for a better energy policy.

I had hoped, not very confidently, that the various Climategate inquiries would be severe. This would have been a first step towards restoring confidence in the scientific consensus. But no, the reports make things worse. At best they are mealy-mouthed apologies; at worst they are patently incompetent and even wilfully (sic) wrong. The climate-science establishment, of which these inquiries have chosen to make themselves a part, seems entirely incapable of understanding, let alone repairing, the harm it has done to its own cause.

Read Cook's entire piece.  Also, go here for the emails at the center of the controversy.

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From K.B. Battaglini, GT Houston.

The EPA, alleging that Texas' 16-year-old pollution permitting program does not comply with the Federal Clean Air Act, has issued a Final Rule "disapproving revisions to the SIP...that relate to the State's Flexible Permits Program." The program, which permits companies to combine emissions from multiple sources under a single facility cap instead of imposing specific emissions limits for each individual polluting source, supposedly damages "public health and the environment by allowing companies to avoid clean air requirements." The disapproval of the flexible permits program affects the existing permits of 125 or more industrial facilities in Texas.  In turn, Texas has sued the EPA, asking the Fifth Circuit Court of Appeals to review the EPA's action. 

The Texas Commission on Environmental Quality, the state regulatory authority, says its program not only complies with the Clean Air Act, but that it also has contributed to improved air quality in Texas.  On June 16, the TCEQ had submitted proposed revisions to its flexible permitting program in an attempt to work with the federal government.   According to TCEQ Chairman Bryan Shaw, the proposed revisions were not considered by the EPA in issuing the Final Rule.  Texas Governor Rick Perry blasted the action, calling it "irresponsible and heavy-handed." Perry, believing that the EPA is blinded by an activist agenda, vowed to continue to fight "this federal takeover of a successful state program."

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The Senate has voted 47-53 to reject a resolution introduced by Sen. Lisa Murkowski  (S.J. Res. 26) to block EPA regulation of greenhouse gases.  Every Senate Republican, and six Democrats, supported the Resolution, which would have effectively killed EPA's efforts to promulgate and implement its new GHG regulations.  The Obama Administration, supported by environmentalists and business who stand to profit from carbon trading and carbon controls, lobbied hard to defeat the Resolution to preserve EPA's power and support its aggressive regulatory agenda and to increase the pressure on Congress to pass a cap and trade bill. 

You should expect to see the following: (1) The EPA's aggressive regulations will be a major campaign issue during the upcoming Congressional elections.  The opponents' ad message may likely be  "unelected bureaucrats are killing jobs and crippling the economy without improving the environment".  (2) More pressure from the Administration on one or two wavering Republicans to break a potential filibuster and thus to pass cap and trade.  The message will be cap and trade, plus the other incentives in Kerry-Lieberman, are the last best chance "to save the economy from EPA."   

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The Power Act's Title I, Subtitle D, is titled "Renewable Energy and Energy Efficiency."  In Section 1601, Congress states that "large-scale deployment of renewable energy and substantial improvement in energy efficiency" is critical to "improved energy security", among other things.  However, this part of the Power Act is actually very limited in scope. 

First, Section 1602 of the Power Act authorizes EPA to give allowances to power districts, public utilities, and electrical co-op participating in the Rural Utilities Service loan program to be used to fund no-interest loans to consumers for energy efficiency measures.  This section also creates a permanent funding mechanism for a  "national" nonprofit organization with "significant experience" in providing "advice in legal and regulatory matters affecting electric service and the environment" to provide "verification services."  Second, Section 1603 authorizes EPA to distribute emissions allowances (i.e., permission to consume energy) to State governments to offset their higher energy costs.  One-third of the allowances are to be divided among the States equally, one-third shall be distributed ratably based on population, and one-third distributed ratably based on energy consumption.  The allowances are to be used "exclusively" for energy efficiency purposes, deployment of alternative energy projects, funding "Smart Grid" programs, and interestingly, "Providing the non-Federal share of support" for surface transportation capital projects.

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The coal provisions of  the Power Act appear to be designed to substantially increase the cost of coal and other forms of fossil fuel-based energy in the immediate near term, and, given the limits of available and anticipated carbon capture technology, to close down coal-fired power plants ten years from now. 

Title I, Subtitle C, titled "Coal" has three key provisions.  First, in Section 1415, it directs the Department of Energy to levy a $2 billion tax on "all fossil fuel-based electricity sold to electric consumers."  In other words, all electricity is taxed unless it is generated by nuclear, wind, solar, or hydroelectric plants. The tax will be paid by utilities but the bill is designed to allow utilities to pass-through the cost to consumers.  

Second, in Section 1441, the Power Act amends the Clean Air Act to set strict performance standards on coal-generated power plants, mandating CO2 emission reductions of either 50% or 65%, based on the date the plant is "permitted," beginning no later than January 1, 2020.   Given the state of carbon capture and sequestration technology, this will require coal-based electricity generating plants to reduce production or shut down, thereby reducing energy supplies and increasing consumer costs.  

Third, the Power Act generally confers EPA with extremely broad powers to regulate coal use in the United States.  Notably, the Power Act, in Section 1413, creates a "Council" to hand out federal funds to "support projects to accelerate the commercial availability" of carbon capture technology.  This "Council" will be a political body.  Its members must include, among others, "nonprofit organizations", "consumer groups", and unions.   Notably, private companies are not eligible for federal research funding, but "nonprofit organizations" are.

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Nuclear power and offshore drilling kick off the American Power Act.

The Power Act was supposed to include a "robust" nuclear title.  The good news is more government money is made available for nuclear grants and loan guarantees.  The bad news includes the following: (1) Although provisions for streamlining the permitting process are included, but the conditions for expedited approvall include construction of the reactor "based on a design approved by the Commission" and more importantly on "a site at which an operating nuclear power plant exists."   The Power Act thus hamstrings construction of new plants.  (2) Also, the Power Act reaffirms NEPA's applicability to nuclear plant siting and construction.  This means plant construction will be delayed by litigation from NIMBY and anti-nuclear zealots.  In other words, don't expect to see new nuclear plants anytime soon.

The rumor was offshore drilling might be "out" of the bill.  It seems to be in.  In an odd turn of language, the Power Act states that  "The purposes of this Act are...to consider through this Act or accompanying legislation (A) a moratorium on any new offshore drilling activities" until: (1) the cause of the Deepwater Horizon accident is determined; (2) the Secretary of the Interior certifies that it is safe to continue proposed drilling plans; (3) liability mechanisms to ensure adequate funds are available to pay for cleanup; (4) new safety measures are in place to protect oil workers; and (5) allowing States to determine whether offshore drilling should take place.  However, the Power Act does not prohibit drilling.  In fact, it explicitly allocates to the States 37.5% of any offshore lease rental and royalty payments, with 20% of that allocable share going directly to "certain coastal political subdivisions."

More to follow.     

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The "Discussion Draft" (whatever that means) of the Kerry-Lieberman energy bill, now called "The American Power Act," is available here.  The bill is 900+ pages long.  We'll have an analysis shortly.

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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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In late February, cap and trade was declared dead.   The blogosphere then began buzzing with alternatives, revolving around Senators Graham, Kerry, and Lieberman's revamp of Waxman-Markey and the Cantwell-Collins CLEAR bill, S.2877.  But now, in the wake of health care, there are rumors the White House has put cap and trade back on the table confident it has the power to jam at least one more massive government program through Congress prior to the November elections.

Cap and trade's Zombie resurrection is no miracle.  Cap and trade has some quiet Republican support, and might prove to be an easier "get" than either financial system reform or a comprehensive immigration over-haul,  the other two big Obama initiatives.   Stay tuned.

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Rep. Ike Skelton, D. MO., Rep. Colin Peterson, D. MN, and Rep. JoAnn Emerson, R. MO, have introduced H.J. Res. 76, a resolution to disapprove and block EPA from regulating GHG's based on the endangerment finding.   Skelton and Peterson are typically described as "centrist Democrats" and both are from rural districts.  

This could prove to be a significant development.  Skelton is chairman of the House Armed Services Committee.  Peterson is chairman of the House Agriculture Committee.   Their action follows a letter from the powerful American Farm Bureau Federation to all House members on February 19 stating:

Farm Bureau urges members on both sides of the aisle to avoid partisan fights and to work constructively, in a bipartisan fashion, to halt impending EPA regulation that holds the prospect of critically injuring the U.S. economy.  Farmers and ranchers across the country are watching this issue closely for meaningful support.

Stay tuned.

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Sen. Jay Rockefeller and several other coal state Democrats sent a letter to EPA's Lisa Jackson dated February 19, expressing concern regarding the economic impact of GHG regulation. Jackson responded on February 22, stating no permits would be required in 2010 and detailing an aggressive "Five Year Plan" for regulating CO2 sources.  The same day, Sen. Rockefeller issued a press release saying the Plan was "good progress" but that he remained "concerned" and that Congress needed to "set in stone through legislation enough time" to consider a "comprehensive energy bill" (the new euphemism for legislative GHG controls via cap and trade).

Was this all just political kabuki, choreographed to fog the optics and protect exposed Democrats from "cap and tax" backlash in the November elections?  And what should be made of a statement by an environmental group operative, about a week before Jackson's letter was issued, revealing the Five Year Plan?  Well, it could be the Rockefeller - Jackson letters likely were "worked out" by both parties ahead of time.  This would explain why EPA responded as quickly as it did.  Also, the White House makes EPA policy and the White House is working hand in glove with the environmental special interests.  Therefore, it should not surprise anyone that EPA's Plan was "put out there" by one of these groups - in fact, they likely helped write that Plan in the first place.

Or so some people say. 

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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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They're playing hockey in Hades.  Massachusetts has elected a Republican Senator.

The conventional wisdom seems to be Scott Brown's election means cap and trade is all but dead.  Maybe so.  But, Scott Brown and the Republicans are not the reason cap and trade is in extremis.  Cap and trade proponents must admit data quality, or more accurately the lack thereof, is the root of the problem. 

In a Politico blog posting (Politico is a first rate source for DC news) Walter Russell Mead, a respected fellow at the Council on Foreign Relations, makes the point well:

While everyone's attention was fixed on Massachusetts, the climate change agenda was busily unraveling....The problem is that the IPCC's prediction that the Himalayan glaciers would melt by 2035 turns out to have no factual or scientific basis at all. Zip. The IPCC is withdrawing the prediction...after ignoring attempts by specialists to delete the ridiculous prediction and then vilifying public critics as anti-scientific numbskulls.

Mead's point, which should be well taken, is poor data quality will "heighten skepticism about IPCC recommendations -- and about both the will and the capacity of the climate change establishment to translate raw scientific data into serious policy".  As a result, he predicts "2010 will not be the year that either the US or the world in general come to terms on a serious climate agenda."  Absent a credible data fix, the US may not "come to terms on a serious climate agenda" for 2010 and beyond.

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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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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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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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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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Welcome to the e2 Law Blog, sponsored by Greenberg Traurig LLP.  Here you will find a skeptical and robust critique of environmental and energy (e2) law and policy.  We will expose the key issues obscured by the seemingly absurd debates over such things as regulating burping cows or the miasma of thousands of pages in proposed regulations, analyzing and explaining, with sources, what these developments mean to you and your business. 

Our primary bloggers are Greg Casas, an energy and litigation shareholder in GT's Houston, Texas office, Robert Lamkin, an energy and FERC attorney in GT's Washington, D.C. office, Al Malefatto, an environmental and land use shareholder in GT's West Palm Beach office,  and Reed Rubinstein, an environmental and regulatory shareholder in GT's Washington,  D.C. office.  From time to time, Greg, Al, Rob and I will offer opinions and commentary.  Also, we plan on hosting guest bloggers from trade groups, government relations firms, think tanks, academia, the media, and elsewhere, and sincerely hope you will weigh in with your comments and concerns as well.  Obviously, the opinions expressed on the e2 Law Blog are those only of the individual blogger, not of GT or its clients.   

We hope you find the e2 Law Blog informative, entertaining, and useful.  These are challenging times. We look forward to sharing them with you.    

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