Legislation

NERC's Polite Review of the Clean Power Plan: A "Challenge"

April 30, 2015 07:11
by J. Wylie Donald
When the draft of EPA's Clean Power Plan was promulgated in the Federal Register last June, one of the critical questions raised by those in the electricity space was: what about reliability? If you shut down all those coal plants, will you have enough generation from other sources to keep the lights on? Even if you have enough generation, will you have enough natural gas at the times and places when you need it? Is there enough time to get the needed generation and resources in place under EPA's schedule?

Carbon Emissions | Legislation | Regulation | Utilities

In re Murray Energy - the First Clean Power Plan Donnybrook

April 16, 2015 20:51
by J. Wylie Donald
This morning found us at the E. Barrett Prettyman Courthouse in Washington, hoping to take in the oral argument before the DC Circuit in the first (of what is certain to be many) challenge to the Clean Power Plan: In re Murray Energy Corp. Murray Energy is the largest privately owned coal company in the country and was joined by another coal company, twelve States and numerous amici. It sued last June and claimed, under the All Writs Act, that it would be irreparably harmed by the immense dislocation to be precipitated by EPA's planned move from coal to natural gas, nuclear power, renewable energy and efficiency (i.e., the Clean Power Plan) and, therefore, the Court should stop EPA's plan in its tracks.

Carbon Dioxide | Climate Change Litigation | Legislation | Utilities

April Fool's Day Sees National Flood Insurance Rates Rise

March 31, 2015 20:15
by J. Wylie Donald
So what day would you pick to have your flood insurance premium double? April Fool's Day? You got it. Well, that's a little hyperbolic. Rates aren't doubling instantaneously tomorrow. Instead they are rising between 10% and 18% per year until they match commercial rates. There is a set of exceptions to the 18% cap. There can be up to a 25% increase on non-primary residences, so-called "severe repetitive loss" properties and substantially-damaged / substantially-improved properties. Other change...

Flood Insurance | Legislation

The Keystone XL Pipeline Veto: Much Ado ...

February 27, 2015 18:39
by J. Wylie Donald
When one talks of pipelines in recent days one hears nearly an incessant buzz about Keystone XL, as if that is where the real action is. But it isn't, notwithstanding the histrionics over President Obama's veto of S.1, the Keystone XL Pipeline Approval Act. The real action lies not with an 850,000 barrel per day oil pipeline, but instead with the natural gas pipelines that are needed to supply the natural gas electricity generating plants that will be required to replace, in part, 103 gigawatts of coal powered generation. What are we talking about? Building Block 2 of EPA's Clean Power Plan posits the replacement of coal-fired generation with cleaner natural gas-fired plants. Natural gas plants are also part of the solution to compliance with the strict Mercury and Air Toxics Standards, which are also driving coal plants off the grid. But to get and keep those natural gas plants on-line, the natural gas needs to get there and to do that it needs a means of transportation, which for natural gas, means pipelines. How many miles of pipelines are needed? EPA concluded: "the power industry in aggregate can support higher gas consumption without the need for any major investments in pipeline infrastructure." But the Nation's reliability watchdog, the North American Reliability Corporation, politely disagrees. In its November 2014 review, Potential Reliability Impacts of EPA's Clean Power Plan, NERC noted EPA's position, but then commented: "there are a few critical areas that likely will need additional capital investments. As an example, current and planned pipeline infrastructures in Arizona and Nevada are inadequate for handling increased natural gas demand due to the CPP. Pipeline capacity in New England is currently constrained, and more pipeline capacity additions will be needed as more baseload coal units retire." And that was not the end of it. NERC concluded that more pipeline capacity was needed independent of Clean Power Plan retirements. Further, as should be obvious, pipeline construction will not occur in an instant. NERC points out that "it takes three to five years to plan, permit, sign contract capacity, finance, and build additional pipeline capacity." In other words, planning and permitting of new pipelines is required now if the EPA's initial 2020 compliance date is to be met. But as we reported in a recent post, States aren't even drafting their implementation plans, much less making determinations about what plants to shut down and where pipelines need to be built.Which suggests that we should ask the miles-of-pipeline-needed question again. We have not seen that number but NERC reports that, based on EPA's own estimates for plant retirements due to the Clean Power Plan and other regulatory requirements (primarily the Mercury and Air Toxics Standard), "the power industry will need to replace a total of 103 GW of retired coal resources by 2020, largely anticipated to be natural-gas-fired NGCC and CTs. We tried to compare 103 gigawatts to Keystone XL's 850,000 barrels of oil per day. We came up with a rather stunning number: the energy needed to replace the to-be-retired coal plants is almost 2000 times more than Keystone XL can deliver.* Which leads us back to the beginning of this post: the real action in pipeline permitting is going to be in natural gas. *A barrel of oil contains about 1700 kW-h of energy. So Keystone XL will deliver 850,000 bbl x 1700 kW-h or 1.445 x 10e9 W-h in one day. 103 GW of coal plants operating for 24 hours yields 2472 x 10e9 W-h.

Carbon Dioxide | Legislation | Regulation | Utilities

Is RGGI in New Jersey's and Pennsylvania’s Future?

June 14, 2014 08:02
by John McAleese
With the release of EPA’s proposed regulation of CO2 from existing sources on June 2, there has been a lot of speculation that states will look to cap-and-trade schemes as a means of complying with EPA’s mandate that the states reduce CO2 emissions by 30% of 2005 levels by 2030. The Regional Greenhouse Gas Initiative (RGGI) provides an existing market-based framework for states in the northeast, and maybe nationwide, to implement cap-and-trade on an interstate basis. RGGI is currently a voluntary, interstate greenhouse gas emissions trading platform among Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont. For New Jersey, which was in RGGI at one time but withdrew under the Christie administration, the new EPA regulations, assuming they become final in substantially the same form, give it the opportunity to re-think its decision to withdraw several years ago. So far, the New Jersey regulators have indicated that they are not willing to re-join RGGI, even as means of complying with the new EPA regulations. There are certainly other means for the state to achieve the emissions reductions called for by the EPA regulations such as limits with no trading, or mandates on use of non-CO2-emitting generation such as solar, wind and nuclear. However, the cap-and-trade structure provided by programs like RGGI offers sources the economic incentives for voluntary reductions even beyond what is called for by the EPA regulations. Time and pressure from the regulated community may change this position over the next several years – wait and see. Pennsylvania’s situation is even more intriguing. There is a Pennsylvania gubernatorial election this November. Pennsylvanians will vote either to keep the incumbent Republican, Tom Corbett, or to replace him with Democratic candidate, Tom Wolf. At the Pennsylvania Environmental Council’s Annual Philadelphia Dinner on Wednesday night, both candidates spoke to the mixed crowd of representatives of environmental groups, government and industry. Governor Corbett did not mention either RGGI or the proposed EPA CO2 emissions regulations, but he did signal his continuing support for natural gas production in the Commonwealth through fracking as a means to provide cleaner energy for Pennsylvania, and his belief that environmental stewardship is important but must be “balanced” with economic considerations. Mr. Wolf, on the other hand, unequivocally stated that, if elected Governor, he will “bring RGGI to Pennsylvania!” Several members of the crowd clapped enthusiastically, while everyone else remained quiet in anticipation of the dinner which had yet to be served. It will be interesting to see whether this limb that Mr. Wolf climbed (jumped) out on will sustain the weight of five more months of what is sure to be a heated campaign. There is a very good potential that this issue will become an important hot button in the election.

Carbon Emissions | Greenhouse Gases | Legislation | Regulation

Top 6 at 6: Highlights of the Top Climate Change Stories in the First Half of 2013

June 30, 2013 21:01
by J. Wylie Donald
Another six months have passed and it is time for our semi-annual look at climate change and its intersection with the law.  Here are some highlights of the last six months: 1.  The Administration’s Focus.  After months of silence in the 2012 presidential campaign, President Obama rejuvenated his administration’s commitment to addressing climate change.  We heard in his inaugural address:   “We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations. Some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires and crippling drought and more powerful storms.”  He carried this forward in his State of the Union address less than a month later: “I urge this Congress to get together, pursue a bipartisan, market-based solution to climate change, like the one John McCain and Joe Lieberman worked on together a few years ago.  But if Congress won’t act soon to protect future generations, I will.  (Applause.)  I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy.”     And in a speech this past Tuesday the promises took another step toward reality when the President outlined his “climate action plan.”  Recognizing the logjam in Congress, the Administration's plan is based on authority the executive branch already has. The salient points include:  1) further restrictions on powerplant greenhouse gas emissions (notably addressing coal); 2) promotion of resilience and adaptation with respect to weather-related calamities; 3) additional permitting of renewable energy facilities on public lands; and 4) engagement in the international arena on climate change such as working out a global free trade agreement on clean energy technologies.   The goal is a reduction of U.S. greenhouse gas emissions by 17%.  The Wall Street Journal called these “sweeping climate policies.”  We will see; with no new authority, Gina McCarthy’s nomination to head EPA held up, and the bounty of natural gas unleashed by fracking, greenhouse gas reduction may be achieved by the market, see Leveraging Natural Gas to Reduce Greenhouse Gas Emissions,  not governmental efforts.   2. 400 PPM.  On May 9, Mauna Loa Observatory of NOAA’s Earth System Research Laboratory reported that the average weekly value of atmospheric carbon dioxide at the observatory had reached 400 ppm, a level unsurpassed in 3 million years.  The world collectively ignored the number, treating it more like an insignificant decimal, 0.0004, which it was (a decimal, not insignificant).  We don’t think anyone will dispute that there are three ways to interpret this number:  it’s bad, it’s good, it’s neither.  Climate scientists are unanimous that it’s bad.  There is nothing saying it’s good.  Which means the justification for not taking action on climate change is that the ever increasing levels, and the ever increasing rate of accumulation, of carbon dioxide in the atmosphere (see the graphs by the observatory), are of no consequence.  US Airways will probably side with the climate scientists - it canceled 18 flights as a result of the record-breaking temperatures in the southwest this past weekend.  As a footnote, we note that Mauna Loa’s number is an average, and is subject to refinement.  As it turned out, the 400 ppm number was refined a few weeks later to 399.89.   3.  Free Trade.  In 2009 Ontario enacted its Green Energy Act to promote renewable energy in the province.  One approach is the adoption of a feed-in tariff (mandatory above-market rates for electricity derived from renewable resources).  This had successfully been pioneered in Germany.  Ontario legislators also saw the opportunity to spur job growth by giving subsidies to businesses that sourced their wind turbines and solar panels in Ontario (i.e., “domestic content”). Japan jumped on this protectionism immediately and sought consultations with Canada under the General Agreement on Tariffs and Trade and the World Trade Organization. The consultations were ineffective and Japan requested a panel to hear the dispute concerning Ontario’s “domestic content requirements," with which renewable energy generators were required to comply "in the design and construction of electricity generation facilities in order to qualify for guaranteed prices” under the feed-in tariff program. Last December the panel ruled in favor of Japan on the domestic content requirements. Canada appealed and this May the appellate panel affirmed. Ontario's energy minister has confirmed that Ontario will abide by the WTO decision and revise its Green Energy Act.   We conclude that free trade remains colorblind. 4. Climate Change Liability Lawsuits.  For seven years now, the first wave of climate change liability lawsuits have roiled the legal waters.  It bears remembering that in October 2009, the plaintiffs in these cases rode the crest of the wave.  The Second Circuit had reversed the trial court’s dismissal in Connecticut v. American Electric Power (AEP), and the Fifth Circuit likewise overturned the Southern District of Mississippi’s dismissal of Comer v. Murphy Oil USA.  Plaintiffs had standing; the political question doctrine did not apply. Things have gone badly for the plaintiffs since.  All readers of this blog know of the Supreme Court’s decision in AEP, stifling the plaintiffs’ case under the doctrine of displacement.  This year two more decisions confirmed the Judicial Branch’s hostility to these claims.  Comer made it back to the Fifth Circuit, where dismissal was summarily affirmed on the doctrine of res judicata.  And the last of the original quadriga, Native Village of Kivalina v. ExxonMobil Corp., found its petition for certiorari denied in April,  thus leaving the Ninth Circuit’s affirmance of dismissal unchanged. The only reed left for the plaintiffs is the granting of a petition for certiorari in Comer, a prospect we deem unlikely, if only because the appeal would be based on a purely procedural question of little likelihood of being repeated and of little relevance to the larger climate change issues. 5.  Ursus Maritimus.  On March 1 the D.C. Circuit in In re Polar Bear Endangered Species Act Litigation  affirmed the district court’s dismissal of challenges to the Fish and Wildlife Service’s designation of the polar bear as threatened under the Endangered Species Act because “due to the effects of global climate change, the polar bear is likely to become an endangered species and face the threat of extinction within the foreseeable future.” The polar bear’s friends (environmental groups) sought to have the bear listed as “endangered.”  Ursus maritimus’s less-than-friends (the State of Alaska and hunting groups), urged that no listing was appropriate.  The standard in such reviews is relatively simple:  “Our principal responsibility here is to determine, in light of the record considered by the agency, whether the Listing Rule is a product of reasoned decisionmaking.”  The Court found that it was, holding specifically the the Listing Rule rests on a three-part thesis: the polar bear is dependent upon sea ice for its survival; sea ice is declining; and climatic changes have and will continue to dramatically reduce the extent and quality of Arctic sea ice to a degree sufficiently grave to jeopardize polar bear populations. See Listing Rule, 73 Fed. Reg. at 28,212. No part of this thesis is disputed and we find that FWS’s conclusion – that the polar bear is threatened within the meaning of the ESA – is reasonable and adequately supported by the record.” As arctic resource development progresses as the ice retreats, the polar bear's Endangered Species Act listing is sure to take on larger significance, both as a model for the preservation of other arctic species, and as a tool to block development. 6.  Compressed Natural Gas (CNG). On June 13 the Fifth Circuit affirmed the district court's decision in Association of Taxicab Operators USA v. City of Dallas. In the case the local taxicab organization challenged a city ordinance that allowed CNG-fueled taxicabs “head-of-the-line” privileges at Love Field in downtown Dallas. Plaintiff's theory was that section 209(a) of the Clean Air Act, which prohibits states and their political subdivisions from adopting emission standards for motor vehicles, preempted the ordinance either directly or by implication. The Fifth Circuit did not agree. Traditional police powers of the state were preserved to the state by section 209(d) of the Clean Air Act. More importantly, an ordinance granting head-of-the-line privileges, on its face did not set an emission standard, as required by the statute.  As to any implied preemption, the ordinance may have influenced taxicab operators to alter their behavior, but it did not compel them to do so. Less than 7% of Dallas's taxicabs served Love Field and the only place CNG cabs had head-of-the-line privileges was at Love Field; there were plenty of other places for gasoline powered cabs to pick up fares. Accordingly implied preemption did not apply either.  One of our themes in a world beset by climate change is that there will be winners and there will be losers. Little did taxicab operators know they would be both.

Carbon Dioxide | Carbon Emissions | Climate Change | Greenhouse Gases | Legislation | Regulation | Utilities | Year in Review

Climate Change Legal Theories: The Atmospheric Public Trust Doctrine Moves Another Step Forward

April 29, 2013 05:49
by J. Wylie Donald
One of the shibboleths of those following climate change litigation is the idea that new legal theories will be surfaced, fired in the furnace of litigation and then forged as the vehicle for addressing climate change in the courts.  The public trust doctrine is being hammered out in that direction. Last month in Butler v. Brewer an appellate panel in Arizona considered a claim based on the theory that the atmosphere is subject to the public trust doctrine and that, therefore, the State of Arizona was obligated to take steps to address greehnouse gases and combat climate change.  Although the court affirmed the trial court’s dismissal of the suit, before reaching that conclusion it specifically rejected Arizona’s argument that greenhouse gas issues are non-justiciable under the doctrine. Butler is one of a slew of cases and regulatory petitions against the federal and state governments orchestrated by Our Children’s Trust, a public interest organization based in Oregon.  We have commented on OCT previously.  Its success has not been overwhelming, or even any.  Not one court has concluded that a state or the federal government can be compelled to do anything. Yet, if the measure of success is whether one’s theory is more well-formed than previously, and whether one can cite more legal precedent supporting it, then OCT is moving its ball forward.  By our count, OCT has positive rulings on its atmospheric trust theory from Texas, New Mexico and now Arizona. In Butler, the appellant raised only one issue:  "[w]hether the [public trust doctrine] in Arizona includes the atmosphere.”  The State of Arizona engaged that argument head on:  “the Doctrine does not include the atmosphere.”  Arizona also raised defenses of displacement, standing, and political question, among others.  The court considered prior Arizona and federal precedent to set forth the scope of the doctrine: First, that the substance of the Doctrine, including what resources are protected by it, is from the inherent nature of Arizona's status as a sovereign state. Second, that based on separation of powers, the legislature can enact laws which might affect the resources protected by the Doctrine, but is it up the to judiciary to determine whether those laws violate the Doctrine and if there is any remedy. Third, that the constitutional dimension of the Doctrine is based on separation of powers and specific constitutional provisions which would preclude the State from violating the Doctrine, such as the gift clause. From those principles the court had no difficulty responding to Arizona’s argument that the doctrine did not apply to the atmosphere:  “we reject the Defendants' argument that the determinations of what resources are included in the Doctrine and whether the State has violated the Doctrine are non-justiciable.”  Further, “While public trust jurisprudence in Arizona has developed in the context of the state's interest in land under its waters, we reject Defendants' argument that such jurisprudence limits the Doctrine to water-related issues.” (Note, however, Presiding Judge Gemmill concurred separately and stated:  "the atmosphere is not subject to the public trust doctrine.") Thus, “For purposes of our analysis, we assume without deciding that the atmosphere is a part of the public trust subject to the Doctrine.”  Unfortunately for the appellant, this was as far as the court was willing to go.  Appellant did not point to any violation of the Arizona Constitution or statutory law.  Such a violation was mandatory for the claim to succeed.  Additionally, in 2010 Arizona’s legislature took strong steps to ensure that the regulation of greenhouse gases remained in its bailiwick, rather than any administrative agency’s.  A.R.S. 49-191 provides: A. Notwithstanding any other law, a state agency established under this title or title 41 shall not adopt or enforce a state or regional program to regulate the emission of greenhouse gas for the purposes of addressing changes in atmospheric temperature without express legislative authorization. Absent a ruling that A.R.S. 49-191 was unconstitutional, there was no order the court could issue that would be able to implement the relief appellant sought.  Accordingly, appellant had no standing. Rome wasn’t built in a day.  The atmospheric public trust doctrine hasn’t been either.  But construction continues. 

Carbon Dioxide | Climate Change Litigation | Greenhouse Gases | Legislation

A Tale of Two Deductibles: Post-Tropical Cyclone Sandy is Not a Hurricane

November 3, 2012 06:26
by J. Wylie Donald
You've just weathered a post-tropical cyclone.  Your garage is flattened.  Do you have a hurricane deductible?  Or will your regular deductible apply?  The answer can be worth thousands of dollars as a hurricane deductible is not a fixed amount but is calculated based on a percentage of your home’s insured value.  These questions loom large as the process of recovery from what-was-at-one-time-known-as Hurricane-Sandy gathers steam and homeowners get the lights back on.  The news services and trade press have been all over this topic in the last few days with the governors of New York, New Jersey, Pennsylvania and Connecticut (as well as their Departments of Insurance) weighing in and advising that hurricane deductibles cannot be applied because the storm that started in the south as a hurricane, was no longer a hurricane when it arrived in their respective states. Would that it were so easy.  All you need to determine the meaning of your policy is the ipse dixit of the governor.  Not quite. What actually was going on was this:  the governor was getting advice from his department of insurance, which in turn had reviewed the weather reports and the hurricane deductible form or regulation that had been approved months or years ago.  New Jersey for example issued an executive order, which referenced the applicable regulation.  N.J.A.C. 11:2-42.7 provides:  "This deductible applies, as described below, in the event of direct physical loss to property covered under this policy, caused directly or indirectly in the event of a hurricane named by the National Weather Service or its successor from which sustained hurricane force winds of 74 miles per hour or greater have been measured in New Jersey by the National Weather Service (regardless of whether the sustained hurricane-force winds reach the risk insured under the policy) and shall replace any other applicable deductible in that event.” New York hasn’t codified its hurricane deductible rule and the policy language very much matters.  In the case of one insurer in New York, for example, for a hurricane deductible to apply, a number of things are necessary.  One needs A windstorm of tropical origin; Winds of 74 miles per hour or greater;Those winds must by confirmed by the National Weather Service at a landfall in specified counties.  Because Sandy could not muster 74 mile per hour winds as it entered New York, the hurricane deductible could not be applied.  But suppose the winds had reached 74 mph, what then?  It gets complex fast.  First, according to NASA Sandy packed tropical storm force winds across almost 1000 miles.  The hurricane deductible under this insurer’s policy applies to any insured property “regardless of [its] specific location.”  So, all that is needed is a trace of a hurricane in Montauk at the tip of Long Island and the good citizens of Albany could be facing hurricane deductibles for whatever windstorm loss occurs as the tropical storm ultimately demises, regardless of how violent the winds were (or weren’t).  Second, the deductible applies 12 hours before the hurricane gets there and “ends 12 hours after a hurricane …” – whatever that means. Third, maybe you don’t care about the hurricane deductible because your policy is only triggered by a Category 2 storm or requires that the hurricane force winds be within your county.  Fourth, or maybe you are at the opposite end of the spectrum and your policy applies the deductible if hurricane force winds are in any county in New York, not just coastal counties, or worse, if hurricane force winds are in a contiguous state. The point is that the terms of your policy matter and they may vary widely.  The Department of Financial Services in New York put together a table outlining all the permutations of coverage. We assume that one is likely to have to pay for the differences where more risk is shifted to the insurer. And these wide differences can get even wider as one changes states.  Maryland, for example, requires by statute that the hurricane deductible may only apply “beginning at the time the National Hurricane Center of the National Weather Service issues a hurricane warning for any part of the State where the insured's home is located and ending 24 hours following the termination of the last hurricane warning issued for any part of the State in which the insured's home is located.”  Md. Insurance Code § 19-209(b).   In plainer English, the hurricane warning has to be for the county where your home is, not just any place in Maryland.  (With regard to Sandy, the Maryland Insurance Administration echoed what the governors were doing.  Bulletin 12-24 advised that hurricane deductibles would not apply because "The National Hurricane Center of the National Weather Service did not issue a hurricane warning for the State of Maryland.")  Florida, as might be expected, has its own rules.  A hurricane deductible can only apply per calendar year, and can be a fixed amount, or 2%, 5% or 10% of the home’s value.  The hurricane period is extended out to 72 hours after the last hurricane warning.   Hurricane deductibles are ubiquitous but they are not all the same.  Even where the language is mandated by state law, insurers can always provide more coverage than is required.  You should check that, but also check the premium. Florida’s hurricane deductible popped up after Hurricane Andrew in 1992.  Its calendar year requirement was enacted after Charley, Frances, Ivan and Jeanne wreaked their havoc in 2005.  Connecticut revised its hurricane deductible law following Hurricane Irene.  The meteorologists tells us Sandy was a unique megastorm: a tropical storm, combined with a winter storm, combined with frigid Canadian air, combined with a high tide.  Unique or no, we expect revisions to state hurricane deductible laws as a result. 

Insurance | Legislation | Regulation | Weather

Tough Love: Florida Continues to Improve Its Hurricane Coverage But Will It Be Enough?

September 8, 2012 21:03
by J. Wylie Donald
We have been rather tough on Florida and its insurer of last resort, Citizens Property Insurance Corporation, over the years (not that they pay any attention to climatelawyers.com).  But Citizens has deserved it. Here is what its president, Barry Gilway, has had to say about the current state of affairs: Citizens is close to being able to cover a major hurricane, the kind that strikes once every 100 years. ... Citizens has the ability to pay $19.5 billion in claims – close to the roughly $22 billion maximum expected damage from a 100-year storm. But more than $5 billion, or about a fourth of the claims-paying funds, are from loans that would have to be paid back.   Close to being able to cover?  Close to the maximum expected damage?  Loss payments to be covered by loans?  Not the most fiscally conservative program on the planet and certainly not one that would be approved by any insurance regulator that wanted to keep her job. Tough love coming from somewhere though is having an effect.  This year continues big fiscal change at Citizens, demonstrated again just this past Thursday, when the Florida Office of Insurance Regulation (OIR) 1) announced a significant depopulation (i.e., transfer of policies) at Citizens, and 2) tentatively approved a proposal for low-interest loans to private insurers.  This follows steps by Citizens to pursue a vigorous reinsurance program, cede the largest catastrophe bond ever placed, and restrict its obligations by dropping coverage for carports and screened enclosures, limiting personal liability coverage and raising deductibles.  Citizens has also taken a lot of heat for conducting reinspections of homes claiming wind-storm mitigation features qualifying for premium discounts.  When the features don’t satisfy the inspectors’ standards, the discounts are removed, an approximately one billion dollar boost to the bottom line.   Depopulation is the Florida Legislature’s term.  Under that authority, 150,000 policies were just approved for removal from Citizens, roughly ten percent of the 1.4 million policies provided by Citizens. But depopulation is not mandatory.  Instead, the Florida Legislature settled on incentives to convince private insurers to step in. A private insurer can get up to $100 from Citizens’ for each risk the insurer takes on.  F.S.A. 627.3511(2).  Perhaps more importantly, the insurer can be excluded from assessments for the next three years.  F.S.A. 627.3511(3).  Mandatory ssessments, for those who don’t recall, are the secret sauces relied upon in Florida to balance the books in the event Citizens’ resources are not sufficient to pay claims.  One has to imagine that the reduced coverages and rising rates for Citizens’ policies may be of moment in a policyholder’s decision to shift insurers.  And it is the policyholder’s decision; he or she does not have to agree to leave Citizens.   As for the low-interest loans, this alternative route to depopulation is being pushed by insurers and their investors.  They seek “surplus notes” (last-to-get-paid instruments) from Citizens and guarantees of premium.  In exchange, the companies would commit to: • Renew the assumed policies for at least 10 years after the expiration of the current policy term.• Limit rate increases, for renewal offers from January 1, 2013, through January 1, 2016, to no more than 10 % per policy per year (consistent with Citizens' current 10% glidepath).• Provide substantially the same coverage for the first three years as that provided by Citizens. All of these may be steps in the right direction but caution is still the word.  First, Citizens is subject to a rate increase cap of 10%.  Media advisories issued by the OIR indicate that Florida insurers seeking rate increases in 2012 were looking for increases in excess of 17% (Universal – 22%, Cypress – 17.7%, Sunshine State – 17.8%).  Even if someone agrees to depopulate himself because rates are better at the new insurer, there is no guarantee they will remain better.  One researcher has written: "Over the past five years, indeed, nearly all “depopulated” policies have ended up back in Citizens and as liabilities for Florida’s taxpayers."  Second, Florida’s insurance market is substantially a world unto itself.  A presentation to the Cabinet by the OIR shows this clearly (at 3).  Citizens has 24% of the coverage, other Florida domestic carriers 60% and non-domestic carriers have 16%.  That lack of diversity should give one pause.  Over 80% of the coverage is written by Florida companies.  Tough love is effecting change in Florida.  It remains to be seen whether it will be enough.

Insurance | Legislation | Regulation | Weather

Is a Mass Filing the Right Strategy to Get Carbon Dioxide Regulation Going?

August 3, 2012 20:53
by J. Wylie Donald
After a string of defeats at the regulatory agencies and state and federal courts, Our Children's Trust finally notched two victories last month in its quest to use the public trust doctrine to implement carbon dioxide emission regulations.  Our Children's Trust, an environmental organization based in Oregon,  began its campaign in May 2011 when it oversaw the filing of nearly two score regulatory petitions and a dozen lawsuits seeking to force individual states to take action to restrict carbon dioxide emissions.   OCT's trademark feature is to include as plaintiffs "youth activists".  Up to the beginning of July it had not had any success.  But then, maybe, the tide began to turn.  First, on July 9 Texas District Court Judge Gisela Triana partially overrode the Texas Commission on Environmental Quality's decision rejecting a petition for rulemaking on the public trust doctrine.  Petitioners appealed the decision in Bonser-Lain v. TCEQ.  Petitioners had sought, relying on the public trust doctrine, to force the TCEQ to act to preserve the atmosphere by regulating carbon dioxide.  The TCEQ had concluded that in Texas the public trust doctrine applies solely to water.  Furthermore, according to the Commission, it was precluded from acting by the federal Clean Air Act, which preempted more restrictive state action.  Judge Triana made short shrift of both arguments.  Relying on Article XVI of the Texas Constitution she ruled:  "The Court will find that the Commission’s conclusion, that the public trust doctrine is exclusively limited to the conservation of water, is legally invalid. The doctrine includes all natural resources of the State.”  As to the preemption idea, the federal Clean Air Act "is a floor, not a ceiling, for the protection of air quality, and therefore the Commission's ruling on this point is not supported by law."  The court did find, however, that because of other pending litigation, the TCEQ did properly exercise its discretion in refusing to entertain the petition.  Second, on July 14, New Mexico District Court Judge Sarah Singleton refused to dismiss  a case asserting the State of New Mexico had an obligation to protect the atmosphere under the public trust doctrine.  The 18-line decision would hardly merit discussion except that this was the first decision allowing one of these cases to move forward.  Like the petitioners in Texas, the plaintiffs in New Mexico sought  to establish the public trust doctrine as a vehicle to control carbon dioxide emissions.  In a nutshell, Judge Singleton ruled that the suit, Sanders-Reed v. Martinez, could go forward insofar as it alleged that the State of New Mexico was not in compliance with laws passed by the New Mexico Legislature.  Specifically, the "Motion [to Dimiss] is DENIED to the extent that Plaintiffs have made a substantive allegation that, notwithstanding statutes enacted by the New Mexico Legislature which enable the state to set state air quality standards, the process has gone astray and the state is ignoring the atmosphere with respect to greenhouse gas emissions."  The motion was successful, however, where the court dismissed claims "based on the New Mexico Legislature's failure to act with respect to the atmosphere."  These cases may or may not be important in the climate change arena.  To be sure, they upset an unbroken stream of victories for state regulators over OCT plaintiffs and will undoubtedly serve as a rallying point for the remaining cases as well as to-be-filed cases.  But the comments in  Bonser-Lain are only dicta and that Sanders-Reed survived a motion to dismiss says nothing about the merits.  But the mass-filing strategy by Our Children's Trust bears watching because it is not unique and may surface elsewhere.  Indeed it has. Following the filing of a class action against Thomas Jefferson Law School in California over alleged misrepresentations in law school placement data, a team of lawyers coordinated by two attorneys in New York, David Anziska and Jesse Strauss, put together a mass-filing strategy similar in some respects to that followed by OCT.  Twelve apparently is the magic number.  The law school placement team brought suit against a dozen law schools in jurisdictions across the nation.  Although another twenty suits are theoretically teed up as information from prospective plaintiffs is collected, those suits were promised for Memorial Day but have not yet materialized.  A big filing day is mandatory to maximize press coverage.   As were the atmospheric trust cases, the law school placement cases were nearly all filed on the same day.  Both litigation teams have sought public exposure throughout the course of the litigation. A defendant's typical response in both sets of cases is a motion to dismiss.  Some throw in everything and the kitchen sink, others are more thoughtful.  There is a danger to the kitchen sink approach; the court may issue a ruling giving the plaintiffs a set of victories as happened with Thomas Cooley Law School in Michigan (see attached) (even though Cooley ultimately prevailed at the trial court). But this is where the mass filing paradigm falls down.  Both sets of litigation are based on state law.  In the law school placement cases, two California cases have survived demurrers because California consumer protection law includes educational services (see attached), and two have been dismissed because, among other things, Michigan consumer protection law does not reach professional schools and New York law finds law students to be sophisticated consumers.  In the atmospheric public trust cases, notwithstanding case after case rejecting the claims, courts in New Mexico and Texas find under their states' laws that the theory is well-founded.  The lesson one should take from this is that, like politics, all law is local.  Well-timed press releases and news conferences touting the ineluctable triumph of the plaintiffs, at the end of the day count for very little.  Rather, what matters is the particular law of the particular jurisdiction on the particular facts of the case.  Both plaintiffs and defendants should take note. 20120726 Filing in Florida Coastal of USF and Golden Gate decisions.pdf (366.85 kb) 20120607 Initial Thomas Cooley Law School Order re Motion to Dismissf.pdf (67.07 kb)

Carbon Dioxide | Climate Change Litigation | Legislation | Regulation

McCARTER & ENGLISH CLIMATE CHANGE AND RENEWABLE ENERGY PRACTICE GROUP

The business case for the development of renewable energy projects, from biodiesel and ethanol to wind, solar, and distributed generation, is more compelling than ever as tax and regulatory incentives combine to attract investments. Emerging issues in environmental law and increasingly recognized principles of corporate social responsibility are encouraging public companies to voluntarily reduce greenhouse gas emissions, install clean energy alternatives, and invest overseas in projects under the Kyoto Protocol to respond to climate change concerns.

Click here for more information and a list of our group members.

MONTH LIST

© 2015 McCarter & English, LLP. All Rights Reserved. disclaimer
navbottom image