Regulation

The Keystone XL Pipeline Veto: Much Ado ...

February 27, 2015 21:39
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

The Clean Power Plan: A View from FERC, Part II - Infrastructure

February 26, 2015 15:54
by Tricia Caliguire

Because I had a seat inside the meeting room at FERC's Clean Power Plan Overview last Thursday, I got a close-up view of the protesters.  Most were older (as opposed to the college-student variety), they carried signs, wore matching red t-shirts and, after the first panel concluded, began to chant, “gas is dirty.”  Though none of them explained what they meant, and the speakers so far had not focused on Building Block 2 (shifting dispatch from coal to natural gas combined-cycle generators), most of the rest of the crowd understood that they were protesting the Clean Power Plan (CPP) reliance on natural gas-fired power plants to reduce greenhouse gas emissions.  Given that the temperature outside was in the single digits, I wanted to ask the group if they knew how the building was heated sufficient for them to wear only t-shirts, but that would have meant risking my seat, so I demurred.

The red shirts would have been pleased to hear, later in the day, that the US Department of Energy (DOE) recently completed a study titled “Natural Gas Infrastructure Implications of Increased Demand from the Electric Power Sector,” which found that compliance with the CPP would not require much additional spending for natural gas pipelines.  Commissioner LaFleur “questioned [the study’s] conclusions,” including that increased demand for gas can be satisfied by better or more strategic utilization of existing pipeline capacity.  Commissioner Clark was more blunt, pointing out that DOE gives the “false impression” that siting of pipelines will be easier than experience – particularly in the northeast – has proven it to be.

As if to prove him prescient, last night, FERC staff held a scoping meeting for the PennEast pipeline project, proposed to traverse six, mainly suburban and rural, counties over a 114-mile route in northeast Pennsylvania and west-central New Jersey.  Hundreds turned out at the Ewing, New Jersey hearing (the first in New Jersey); most strongly opposed the pipeline; and many spoke in favor of the “no build” alternative.  The director of the New Jersey chapter of the Sierra Club, compared the natural gas companies to the British and Hessian invaders who tried “to take our land” in the 1700s (though some might argue that the land more precisely belonged to the British at that point).  “This pipeline turns 50 years of public policy and change on its head,” he continued.

Supporters of the pipeline included union members (who need jobs) and the gas companies.  Though they spoke of the increased reliability of supply for their customers, some of which are power plants, they did not discuss the significant CPP compliance obligations of Pennsylvania and New Jersey and the role that natural gas-fired generation will likely play in meeting those obligations.

Which brings us back to the meeting room at FERC.  Toward the end of the afternoon, an Environmental Council of the States (ECOS) representative conceded that not all environmental policies align.  Nuclear is carbon free, but it is nuclear.  Wind and solar are expensive, intermittent, take up lots of space, and interfere with (even kill) birds and bats.  The best wind resources are far from load and transmission lines are unsightly and may traverse protected areas.  Natural gas plants are cleaner than coal and oil, but the gas has to be brought to the surface and transported, whether by pipeline or tanker truck or train. And, as the red shirts made clear, some think gas too is dirty.  To meet the CPP goals in 2030, some policies will have to give.

Carbon Emissions | Regulation | Utilities

The Clean Power Plan: A View from FERC

February 19, 2015 22:30
by J. Wylie Donald

It is innocuous enough: Conference on Environmental Regulations; but the plainness of title belies what is going on at the Federal Energy Regulatory Commission today. Today is the first public forum at FERC on EPA's Clean Power Plan. It is playing to overflow crowds. Notwithstanding arriving an hour early, I didn't even get to see the Commission, except remotely.

One of the panelists characterized the implications of the Clean Power Plan as the most significant transformation of the bulk power system ever. While some might not agree, none would disagree that EPA's involvement in the electricity grid is unprecedented. This tension was evidenced repeatedly. Reliability and affordability are paramount - where are they referenced in EPA's plan? States and FERC regulate power supply and distribution - how is EPA directing States to prefer one source over another? Citizen suits regularly seek to compel compliance with Clean Air Act requirements - who will be the target when a State plan incorporates voluntary initiatives like fluorescent light bulbs or efficiency planning?

So that all have the basics: EPA issued its proposed rule last summer. Comments were due in the fall. A final rule is predicted in early summer. EPA has proposed a broad and flexible plan (EPA's terms) to allow the United States to reduce its carbon dioxide emissions 30% below its 2005 emissions. Each State has been given targets with wide flexibility on how it will get there. EPA has identified four building blocks: improvements in fossil fuel plant efficiency, expansion of renewable energy and nuclear power sources, replacement of coal plants with natural gas, and improvements in system efficiencies. State plans are required by 2016, which can be extended to 2017 and even 2018. Requirements kick in by 2020 with the plans fully implemented by 2030.

The Commission is holding fora on the subject over the next 45 days. Besides today's National Overview conference, upcoming regional meetings are scheduled for Denver (2/25), DC (3/11) and St. Louis (3/31).
The conference opened with FERC Chairman Cheryl LaFleur explaining the Commission's goals. FERC wants to move beyond rhetoric and ideology. There will be three panels focusing on reliability (which is all we will address in this blog), infrastructure and markets. The goal is to identify concrete facts and suggestions to move things forward.

The other commissioners lent their views as well. Commissioner Moeller pointed out that the role of wholesale markets has expanded over the last several decades. In so doing, the grid has provided unprecedented reliable and affordable power to consumers. The Clean Power Plan cannot upset those markets. Commissioner Clark stated that the "rubber meets the road" issue is reliability, and responsibility for that falls squarely on State regulators and FERC. There needs to be a granular and technical analysis to make this happen, which will require the permitting of a lot of infrastructure. The analysis will be two-fold: what does the reliability analysis need to look like (things like voltage support, market impact, SIP integration) and how can FERC leverage its expertise to assist EPA.

Commissioner Bay echoed the concerns about challenges and FERC assistance; he also emphasized the importance of addressing infrastructure and market operation. Commissioner Honorable likewise saw the exercise as a job of constructively and thoughtfully solving the problem, and in so doing providing assistance to EPA.

Acting EPA Assistant Administrator Janet McCabe spoke for EPA. She acknowledged that reliability is absolutely critical and offered that in the last forty years of Clean Air Act activity, at no time have EPA actions affected reliability. Anticipating a topic raised by other speakers, Ms. McCabe was confident that the EPA proposal could be implemented by 2030, but she seemed to be offering flexibility on the interim deadlines; EPA is listening to the States' and industry's concerns about the short term planning horizons. Another anticipated topic was the reliability safety valve (RSV), although EPA did not call it by that name. Ms. McCabe offered that experience with the Mercury, Air Toxics Standards (MATS) demonstrated that compliance could be melded with reliability. Chairman LaFleur commented that her review of the written comments identified five different RSVs that people were considering: 1) a fixed process identified in the rule, 2) a dynamic process that can take account of changing conditions, 3) a rule that takes into consideration the mutual achievability of all state plans, 4) exceptions for particular plants, 5) exceptions for particular evolving circumstances (i.e., a hotline). There was no consensus on what should be written into the rule.

The panelists did not see it exactly like EPA did. Focusing on just these two topics (timeline and RSV) one heard the following:

TIMING

States are not working on their implementation plans because the proposed rule is too uncertain (Environmental Council of the States - Alexandra Dunn, Edison Electric Institute member companies - Gerard Anderson)
The timing to build plants, pipelines, and infrastructure is all five years or more - the interim deadline of 2020 is simply not achievable; a longer "glide path" to 2030 is needed (EEI)
A longer timeline is necessary (American Public Power Association - Sue Kelly)
The deadlines are not realistic - we are facing a short-term "cliff" (National Rural Electric Cooperative Association - Jay Morrison)
There is no short-term cliff; PJM has demonstrated this (Sustainable FERC Project - John Moore)
Pushing out the interim deadline and easing the "glide path" would make achieving EPA's goals a lot easier (EEI, Environmental Council of the States)

RELIABILITY SAFETY VALVE

All the contingencies cannot be seen now so there has to be an RSV "baked into the rule" (National Electricity Reliability Corporation (NERC) - Gerry Cauley)
No one has defined what a reliability safety valve is so the ISO/RTO Council did and provided specifics in its written comments. Key is that the process for invoking the RSV needs to be written into the rule (Independent System Operator/Regional Transmission Organizations Council - Craig Glazer)
The RSV needs to be dynamic - able to adjust based on changing resources over the 15 year implementation period and beyond (NRECA)
The need for the RSV is overstated, but if it is available it needs to be tightly written (Sustainable FERC Project)
The RSV needs to be available for entities that have approved operations but then find that things go awry (APPA)
The EEI companies have not reached agreement on what the scope of the RSV should be (EEI).

Other topics that bear paying attention to included:

EPA involvement may interfere with the exclusive jurisdiction of the state utility commissioners (National Association of Regulatory Utility Commissioners (NARUC) - Lisa Edgar)
Intermittent sources may compromise reliability (NARUC, NERC)
The patchwork of state plans may not work together effectively (NERC)
Need better coordination of electricity and gas sectors (APPA)
EPA did not consider the value of fuel diversity (NRECA)
States will be reluctant to bring their voluntary programs into a federally mandated implementation plan (Environmental Council of the States)

As can be seen, there are a lot of topics for discussion. We expect the dialog will be intense over the next several months. On one thing there was unanimity, however; all of the panelists wanted FERC to be more than a potted plant. As Sue Kelly of APPA put it, EPA has swept FERC into the maelstrom, FERC cannot be chopped liver.

Carbon Emissions | Regulation | Utilities

A Provisional Winner of an Offshore Wind Lease is Announced and that Means the Goal Line is Still Far Off

August 24, 2014 23:23
by J. Wylie Donald

Offshore wind took another small step forward last week when US Wind was announced as the provisional winner of the US Bureau of Ocean Energy Management's August 19 auction of development rights to nearly 80,000 acres off of Maryland.  The price?  $8.7 million.

According to the BOEM press release, and other reports the few million to be ponied up by US Wind (or by its Italian parents, Renexia and Toto S.p.A.) is more than was bid for offshore leases in Virginia and Massachusetts and apparently is justified by the substantial financial carrot established by the O'Malley administration: $1.7 billion in construction subsidies.

So what does it mean to be a provisional winner? It means the Attorney General and the FTC have 30 days to complete an antitrust review, following which US Wind can sign the lease, file the required financial assurance and pay the balance of the lease bid.  And then it's all downhill, right?  Well, not so fast. 

First, a lot has been done to get to this point:

November 2010 – BOEM issued Request for Interest to gauge industry’s interest in obtaining offshore Maryland commercial wind leases.  Commercial interests, for example, showed no interest in offshore Maine
February 2012 - BOEM published a Call for Information and Nominations to solicit lease nominations and request public comments.
February 3, 2012 - BOEM published in the Federal Register a Notice of Availability of an Environmental Assessment, and a Finding of No Significant Impact (FONSI) for “commercial wind lease issuance and site assessment activities on the Atlantic OCS offshore New Jersey, Delaware, Maryland, and Virginia.”
June 2012 - BOEM published a Finding of No Historic Properties Affected.
December 18, 2013 - BOEM published a Proposed Sale Notice and took comments.
July 3, 2014 –BOEM  published a Final Sale Notice scheduling the August 19, 2014 sale. 

These steps have completed the first two phases of BOEM’s program for outer continental shelf leasing:  (1) planning and analysis, (2) lease issuance.  So in a little over 3 and a half years an entity interested in pursuing an offshore wind project, is poised, but poised for what? 

It is poised for phases 3 and 4, site assessment, and construction and operations, as BOEM further explains in its fact sheet.  There is an ominous word in the fact sheet, however:  “BOEM conducts environmental and technical reviews of SAP [Site Assessment Plan], eventually deciding to approve, approve with modification, or disapprove” (emphasis added).  A Site Assessment Plan “describes the activities (installation of meteorological towers and buoys) a lessee plans to perform for the assessment of the wind resources and ocean conditions of its commercial lease area.”  That BOEM will eventually complete its review, does not suggest alacrity, or even timeliness.  Once the SAP is approved, another plan must be submitted, the COP, the construction and operations plan. The same ominous term, "eventually," shows up as well in the description of the approval process of the COP. And then, only after the COP is approved, can construction begin.

What struck us as we reviewed all of this is that at least four sessions of Congress will have passed from when BOEM’s 2010 Request for Interest emerged before a single joule of energy will make its way from some mid-Atlantic zephyr into a Maryland household.  And it would not surprise us if it were six or eight sessions.  In other words, success in offshore wind may depend nearly as much on the political winds, as the meteorological ones. 

Regulation | Renewable Energy | Wind Energy

Top 6 at 6: Highlights of the Top Climate Change Legal Stories in the First Half of 2014

July 7, 2014 09:10
by J. Wylie Donald
Our semi-annual look at the top climate change legal stories is keyed on EPA.  You hardly have to have been awake to be aware of the Clean Power Plan and UARG v. EPA.  But other things have stirred the pot as well:  three reports – two by the Intergovernmental Panel on Climate Change and the other by Standard & Poor’s, and two climate change lawsuits – one by Illinois Farmers Insurance Company and the other by Biscayne Bay Water Keeper. 
 
1.  The Clean Power Plan - On June 6 EPA issued a 600+ page proposal directed at controlling carbon dioxide emissions from operating power plants.  By June 2016 States are required to submit plans for such control (there is also an option for extending the due date if more time is needed).  EPA’s press release summarizes what is supposed to happen:
 
The Clean Power Plan will be implemented through a state-federal partnership under which states identify a path forward using either current or new electricity production and pollution control policies to meet the goals of the proposed program. The proposal provides guidelines for states to develop plans to meet state-specific goals to reduce carbon pollution and gives them the flexibility to design a program that makes the most sense for their unique situation. States can choose the right mix of generation using diverse fuels, energy efficiency and demand-side management to meet the goals and their own needs. It allows them to work alone to develop individual plans or to work together with other states to develop multi-state plans.
  
Thus, the learning that has gone on over the past several years as embodied in RGGI, AB 32, RPSs and other state initiatives is going to have an opportunity to prove itself.

2. UARG v. EPA - The Supreme Court has now weighed in on climate change three times:  Massachusetts v. EPA, Connecticut v. American Electric Power and, this past month, Utility Air Regulatory Group v. EPA. – Readers will remember the D.C. Circuit’s 2012 ruling in favor of EPA defeating challenges to the Endangerment Finding, the Tailpipe Rule, the Timing Rule and the Tailoring Rule.  UARG was a limited appeal of that decision and accomplished nearly all that EPA required.  At the end of June the Supreme Court affirmed EPA’s greenhouse gas regulatory program, with the exception of rules focused on a small group of emitters.  How small?  Before UARG EPA estimated its rules would reach 86% of GHG emissions.  After UARG EPA can reach only 83%.  In a nutshell, EPA has authority under the Clean Air Act to impose GHG emission regulations on major emitters already subject to regulation.  This bodes ill for those seeking to challenge the Clean Power Plan.

3. Climate Science - The science continues to mount demonstrating the effects of climate change.  In two more contributions from the Intergovernmental Panel on Climate Change, Working Group II lays out in Climate Change 2014: Impacts, Adaptation, and Vulnerability “how patterns of risks and potential benefits are shifting due to climate change.”  The report also assesses how “impacts and risks related to climate change can be reduced and managed through adaptation and mitigation.”  In Climate Change 2014:  Mitigation of Climate Change Working Group III “respond[ed] to the request of the world's governments for a comprehensive, objective and policy neutral assessment of the current scientific knowledge on mitigating climate change." The two reports complement Working Group I’s report released last year, which concluded:  “It is extremely likely that human influence has been the dominant cause of the observed warming since the mid-20th century.”

4.  Climate Risk - It has been a common theme for this blog that acceptance of climate change will occur not because of science, but because of the responses of business entities that recognize that climate change denial is not in their best interest.  But it is also a theme that until there is an actual identified business reason to take an action, businesses will not go out on a limb.  Standard & Poor’s exemplifies our thinking.  In March it issued a short report, Climate Change is a Global Mega-Trend for Sovereign Risk.  In the report S&P concludes “the evidence suggests that it is probably safe to expect that for most national economies, other things being equal, climate change will negatively impact national welfare and economic growth potential.  Observations corroborating this expectation could lead Standard & Poor’s to lower sovereign ratings on the most affected sovereigns.”  That is, “we see a potential problem but we aren’t ready to act just yet.”  Notwithstanding S&P's failure to move today, this pronouncement does communicate to the buyers of sovereign debt that they had better pay attention to climate change as it may be material to their investment.

5.  Illinois Farmers Insurance Co. v. The Metropolitan Water Reclamation District of Greater Chicago  - It didn’t take Illinois Farmers long (less than 60 days) to drop its lawsuits against dozens of municipalities and other government entities alleging negligent management of stormwater.  The central feature was the claim that the government entities were on notice of the effects of climate change and did not incorporate them into their stormwater planning.  We presume the entities’ sovereign immunity defense persuaded Illinois Farmers to go quietly in the night.  But the insurance company has competent lawyers and sovereign immunity surely was no surprise.  So, was this the proverbial shot across the bow, putting government, and the entities that serve government – the design and engineering firms – on notice that climate change had better enter into their forecasts or they will be pursued for negligence?  Time will tell.
 
6. U.S. v. Miami-Dade County - Miami-Dade’s sewer insfrastructure is falling apart and EPA compelled the city into a consent order under the Clean Water Act to get things cleaned up.  Enter the intervenor, Biscayne Bay Waterkeeper, who insisted that the consent decree
was improper as it did not take rising sea levels caused by climate change into effect.  Federal district court judge Federico A. Moreno considered the consent decree and rejected it because it lacked sufficient incentive for the county to abide by the decree.  The court did not mention BBWK’s concern.  Nevertheless, Miami-Dade appears to have gotten the message that it needs to be paying attention.  The county has a task force devoted to sea level rise and it is preparing a report with recommendations.  This is from the April 28 minutes of the task force: 
 
Chairman Ruvin said that sea level rise was inevitable, and to ensure that the community remained insurable, it was important to begin implementing a plan to address this issue. … Chairman Ruvin noted the Task Force members had heard enough information to understand the necessity of developing a plan to address sea level rise.  He said that there were global engineering firms with entire divisions devoted to sea level rise, and suggested that the County conduct a competitive process to retain the services of some of these firms to develop this plan.

It remains to be seen, of course, whether the task force's recommendations will be accepted.

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

June 14, 2014 11:02
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

Negligent Operation of a Storm Sewer: A New Theory of Climate Change Liability

May 2, 2014 00:08
by J. Wylie Donald

We have written many times about the flawed design of the nation's flood maps in an era of climate change.  And spoken about the potential for claims against professionals for failure to consider the effects of climate change in what they do.  On April 16, 2014 those two ideas manifested in a 143 page lawsuit filed in Cook County, Illinois asserting that local governments are at fault for flood damage that insurance companies had to pay for.  Illinois Farmers Insurance Co. v. The Metropolitan Water Reclamation District of Greater Chicago (attached).  Let us explain.

Flood maps are based on the historical record. Lots and lots of data over lots and lots of years, with one major underlying assumption:  the past is a reasonable basis for predicting the future. But what if it is not?  In that case a 100-year flood plain may actually be a 50-year or 25-year flood plain, or perhaps a 200-year flood plain. One can't know, absent some effort to predict the future.

This issue is not limited to FEMA flood maps. Storm water systems are sized based on the predicted 20-year or 50-year or even 100-year storm event. We have seen that terminology before and it signifies a similar result:  culvert sizing and flood protections suffer from the same defect as flood plain mapping - a retrospective view is not enough.  One might theorize that civil engineers, planners, and others involved in the design, construction and operation of stormwater systems have a duty to recognize this state of affairs and incorporate climate change effects into their activities.

On April 18 and 19, 2013 heavy rains in Cook County and elsewhere resulted in flooding.  Insurance companies paid millions on the claims.  Now Illinois Farmers Insurance Co. and others are seeking to recover those millions in the form of a class action on behalf of other insurers and property owners against the water reclamation district and municipal and county governments.  Of itself, that would not be particularly interesting.  But the allegations vault this case, and six other similar cases, to the top of the climate change litigation pantheon. 

The central theme in the complaint is that the local governments are at fault for flooding caused by mis-operated stormwater systems:  the “common, central and fundamental issue in this action is whether the Defendants have failed to safely operate retention basins, detention basins, tributary enclosed sewer and tributary open sewers/drains for the purpose of safely conveying storm water within Defendants' territorial jurisdictions"  ¶ 27. 

The defendant governments allegedly knew their systems were undersized.  In anticipation of heavy rains, they would pump down reservoirs and tunnels.  Climate change set the context:   "During the past 40 years, climate change in Cook County has caused rains to be of greater volume, greater intensity and greater duration than pre-1970 rainfall history evidenced, rendering the rainfall frequency return tables employed by the Reclamation District and each Named Municipal Defendant inaccurate and obsolete." ¶ 48. Plaintiffs assert that the climate change effects are admitted:  "In or around 2008, the Reclamation District, the County of Cook, the City of Chicago and other Municipal Defendants adopted the scientific principle that climate change has caused increases in rain fall amount, intensity and duration during a rain in Cook County as evidenced by their adoption of the Chicago Climate Action Plan. " ¶ 49.  

Next comes the allegation of knowledge of the specific hazard:  "This defendant knew that because of climate change causing increased rainfall, this defendant had to increase stormwater storage capacity of its stormwater sewer system(s) to prevent sewer water invasions." ¶ 51.  Thus, the local governments were alleged to be on notice that their infrastructure was insufficient to prevent harm to individuals and businesses.  The final point was that, notwithstanding this notice, in the face of a heavy rain (heavy, but not out of the ordinary based on either the historical record or a climate model), the governments failed to take steps to remedy the defect (i.e., the lack of storage capacity and conveyance capacity to address the rainfall).

With that prelude, plaintiffs allege three counts:  negligent maintenance of the stormwater system by failing to utilize temporary stormwater protection systems, failure to remedy a known dangerous condition (where stormwater invasions had occurred before), and an unlawful “taking” in that the governments had (it is alleged) appropriated the property of others for diversion and retention basins, etc.

This is a complaint we knew was coming, although we will candidly admit that we did not anticipate the plaintiffs. An insurance company as the plaintiff raises an interesting question.  Is the insurance industry intent on cannibalizing itself?  If Illinois Farmers prevails, it will start to establish a standard of care for both design professionals whose work is impacted by climate change, and for those who rely on such professionals.  Third parties injured by the failure of a stormwater system may bring claims against entities responsible for the systems.  So we will have theories of liability that will trigger liability policies, errors and omissions policies, and even directors and officers policies.  If all of them subrogate, like Illinois Farmers did, it takes no imagination to see the mess that will be created.  Even without subrogation, if the theory is successful, it will cut wide and deep.  It is surprising that an insurer would advocate for it.  

 

20140416 Illinois Farmers Ins. v. Metro. Water Reclamation Dist. of Greater Chicago.pdf (4.58 mb)

Climate Change Effects | Regulation

Report on Carbon Capture and Storage from the House

February 20, 2014 22:37
by J. Wylie Donald

Would an 80% premium steer you away from an energy source that was low-carbon, naturally abundant in the United States, not subject to the vicissitudes of weather, incapable of nuclear meltdown and accompanied by a well-established infrastructure?  Suppose the premium was only 40%?

Hearings last week before the House Energy and Commerce Committee’s Subcommittee on Oversight and Investigation explored that topic in connection with the development of carbon capture and storage technology. In prepared remarks Dr. Julio Friedmann, Deputy Assistant Secretary for Clean Coal with the Department of Energy, delivered an update on the status of CCS.

Coal fuels approximately 40% of the nation's energy needs.  "Because it is abundant, the clean and efficient use of coal is a key part of President Obama's all-of-the-above energy strategy."  A central component of the President's program is the Clean Coal Research Program, which " is designed to enhance [the nation's] energy security and reduce environmental concerns over the future use of coal by developing a portfolio of cutting-edge clean coal technologies."  To accomplish this the Department of Energy is focusing on research to capture carbon dioxide directly from the fuel stream (pre-combustion), from the stack gas (post-combustion) and from combustion in nearly pure oxygen (oxy-combustion, which yields nearly pure CO2 and water, which are easily separated). 

Dr. Friedmann went on to discuss the Regional Carbon Sequestration Partnerships, which are investigating the viability of CCS projects in a variety of circumstances.  "Together, the Partnerships form a network of capability, knowledge, and infrastructure that will help enable geologic storage technology to play a role in the clean energy economy. They represent regions encompassing 97 percent of coal-fired CO2 emissions, 97 percent of industrial CO2 emissions, 96 percent of the total land mass, and essentially all the geologic storage sites that can potentially be available for geologic carbon storage.”

Last, Dr. Friedmann addressed the commercialization of CCS.  This has two components:  the operation of CCS facilities, and the utilization of the captured CO2.  The idea behind utilization in activities such as enhanced oil recovery and algae production is to "provide a technology bridge" which can smooth the  " transition to the deployment of the large-scale, stand-alone geologic sequestration operations that will ultimately be needed to achieve the much larger emissions reductions required ..."  As for those operations, Dr. Friedmann acknowledged dozens of projects, including 5 he listed by name, where CCS is being tested in commercial environments.

But the real interest of the committee, at least as reported in the trade press, was in cost. As reported  in Power and Power Engineering International,  Dr. Friedman  advised that implementing CCS "looks something like a 70% or 80% increase on the wholesale price of electricity."  Second generation technologies could cut that in half. But half is still a 40% increase.

Some might pull the plug on CCS right now.  If it is going to raise the price by 40%, that is simply too much.  To our mind, however, that is antediluvian thinking.  Regulation of carbon dioxide emissions is already happening. Climate change is not taking a wait-and-see approach. Inexorably the earth warms, the oceans rise, the world of yesterday is not the world of tomorrow. CCS has a place at the energy banquet. 

Further, before turning off CCS, it is useful to consider the costs of the alternatives.  The Energy Information Administration has calculated the "levelized" cost of various energy sources. "Levelized cost is often cited as a convenient summary measure of the overall competiveness of different generating technologies. It represents the per-kilowatthour cost (in real dollars) of building and operating a generating plant over an assumed financial life and duty cycle."  Two things relevant here come out of the EIA table.  First, among dispatchable power (i.e., power that can respond when it is needed), with or without CCS, the most cost-effective power source is natural gas.  Second, when non-dispatchable power is included, even with CCS, coal is more cost-effective than offshore wind and both photovoltaic and thermal solar. 

In other words, if the issue is solely cost, coal loses to natural gas and the effect of CCS does not change the outcome.  If the issues are non-cost values, then coal with CCS comes to the table with green credentials, high power density, dispatchable output, good jobs, national security bona fides, and installed infrastructure, many of which coal's renewable competition cannot match. 

Carbon Dioxide | Regulation | Utilities

Wind Project "Take" Permits Extended to 30 Years - Eagles Nonplussed

January 7, 2014 10:52
by J. Wylie Donald

Tomorrow bald and golden eagles will sleep less soundly.  On January 8 the Fish and Wildlife Service’s new rule revising the regulations for permits for the taking of golden eagles and bald eagles goes into effect.  According to the FWS, “This change will facilitate the responsible development of renewable energy and other projects designed to operate for decades, while continuing to protect eagles consistent with our statutory mandates.”

Eagles and other migratory birds are a substantial threat to wind projects and not because they will cause turbine blades to fail.  Rather, turbine blades (and to a lesser extent, towers, guy wires, transmission lines and other constructions in the air space) can be lethal to birds.  This poses a serious problem for wind energy companies as birds are legally protected by the Migratory Bird Treaty Act (16 U.S.C. §§ 703-712) and eagles further protected by the Bald and Golden Eagle Protection Act (16 USC §§ 668-668d)

Duke Energy Renewables, Inc. recently ran afoul of these requirements at its 176 turbine Campbell Hill and Top of the World wind projects in Wyoming, where at least 14 golden eagles died between 2009 and 2013.   In November Duke accepted a plea agreement in “the first ever criminal enforcement of the Migratory Bird Treaty Act for unpermitted avian takings at wind projects.”  It included:

• Fines - $400,000 
• Restitution - $100,000 to the State of Wyoming
• Community Service - $160,000 payment to the National Fish and Wildlife Foundation for eagle preservation projects
• Conservation funding - $340,000 to a conservation fund for the purchase of land or conservation easements
• Probation – five years
• Compliance Plan – implementation of a plan at a cost of $600,000 per year with “specific measures to avoid and minimize golden eagle and other avian wildlife mortalities at company’s four commercial wind projects in Wyoming.”
• Permit – required application for a Programmatic Eagle Take Permit.

The last is directly tied to tomorrow’s rule.  “Take” is defined in the regulations as “pursue, shoot, shoot at, poison, wound, kill, capture, trap, collect, destroy, molest, or disturb.” 50 CFR § 22.3.  “Programmatic take” is “take that is recurring, is not caused solely by indirect effects, and that occurs over the long term or in a location or locations that cannot be specifically identified.”  Id.  The regulations at 50 CFR § 22.26 provide for permits to take bald eagles and golden eagles when the taking is associated with, but not the purpose of, an otherwise lawful activity.  Programmatic permits authorize take that “is unavoidable even though advanced conservation practices are being implemented.”  The new rule commentary notes that permits may authorize “lethal take … such as mortalities caused by collisions with wind turbines, powerline electrocutions, and other potential sources of incidental take.”

Under the current rule, a take permit was good for only 5 years, which inserted much uncertainty into wind farm projects.  The new rule permits wind energy developers to obtain a take permit that runs for 30 years, 50 CFR § 22.26(i), which “better correspond[s] to the operational timeframe of renewable energy projects.”  The risk that a wind project will cause unforeseen harm to eagles during this much longer period is mitigated by a new requirement for 5 year reviews, in which the FWS “will determine if trigger points specified in the permit have been reached that would indicate that additional conservation measures ... should be implemented to potentially reduce eagle mortalities, or if additional mitigation measures are needed.”  Id. at § 22.26(h).  Additional actions that might be taken as the result of the review could be permit changes, including implementation of additional conservation measures and updating of monitoring requirements.  Id.  Even suspension or revocation of the permit is possible.  Id.

That the FWS is serious about protecting eagles is demonstrated by the enforcement action against Duke.  But the FWS also recognizes that development is necessary.  The 30 year permit period appears to be a reasonable compromise (unless one is an eagle).

Regulation | Wind Energy | Utilities

The Top 6 at 12: Highlights of the Top Climate Change Legal Stories in the Second Half of 2013

January 1, 2014 00:01
by J. Wylie Donald

2013 has drawn to a close; here is our take on the top six climate change legal stories in the last six months.
 
1.  Climate Change Assessments - Blockbuster legislation may have been evaded once more but that has not stopped those in the trenches. Assessments of climate change risk are becoming more routine. For example, the September 2013 Record of Decision for the Gowanus Canal Superfund Site required assessment of “periods of high rainfall, including future rainfall increases that may result from climate change” in implementing certain aspects of the cleanup remedy.  Another example was provided by the Department of Housing and Urban Development, which in November required in its second round of community block grants for disaster relief that prospective grantees consider in their Comprehensive Risk Analysis “a broad range of information and best available data, including forward-looking analyses of risks to infrastructure sectors from climate change and other hazards, such as the Northeast United States Regional Climate Trends and Scenarios from the U.S. National Climate Assessment, the Sea Level Rise Tool for Sandy Recovery, or comparable peer-reviewed information."  Even the Nuclear Regulatory Commission looked at climate change with regard to its September draft generic environmental impact statement for the long-term continued storage of spent nuclear fuel. 

2.  Low Carbon Fuel Standards - In Rocky Mountain Farmers Union v. Corey the Ninth Circuit reversed several district court rulings limiting under the “dormant Commerce clause” the California Air Resources Board’s Low Carbon Fuel Standard.  Although the Commerce clause of the Constitution, U.S. Const., art. I, § 8, cl. 3. “does not explicitly control the several states,” it "has long been understood to have a ‘negative’ aspect that denies the States the power unjustifiably to discriminate against or burden the interstate flow of articles of commerce.’” Rocky Mountain at 31 (citation omitted). California’s Low Carbon Fuel Standard supported carbon dioxide emission reduction “by reducing the carbon intensity [i.e., the amount of carbon dioxide emitted per unit of energy produced] of transportation fuels that are burned in California.”  It thus potentially burdened producers of ethanol in the Midwest and petroleum producers outside California, but that did not matter.  Specifically, the court held that the LCFS was not facially impermissibly discriminatory in favor of ethanol, was not improperly extraterritorial and did not discriminate against petroleum fuels.  Accordingly, California is still on its path to a reduction in the carbon intensity of its fuels by 10% by 2020, as mandated by the 2006 Global Warming Solutions Act.

3.  The Cost of the Grid - On November 14, the Arizona Corporation Commission ruled that Arizona's net metering program should spread the cost of maintaining a reliable grid among all of Arizona Public Service's customers, including its rooftop solar customers. Up to that point rooftop solar customers were paid for the electricity they provided to the grid at retail rates, without any adjustment for the cost of the grid. The Commission concluded that this resulted in a "cost shift" from customers that were paying for the grid, to rooftop solar customers, who weren't.  APS put on a good case demonstrating that rooftop solar customers were substantially benefitting from the grid by drawing power at night, during cloudy weather and during the periods of daylight when solar power production did not exceed the customer's needs. Many have criticized solar power as unfairly subsidized. In Arizona at least, one of those subsidies is being addressed.

4.  New Carbon Dioxide Emission Standards - Following over 2.5 million comments, EPA rescinded its proposed rule governing carbon dioxide emissions from new coal-fired power plants.  In its place it proposed on September 20 a rule setting CO2 emission standards for new large natural gas power plants (1,000 lbs/MW-hr), new small natural gas power plants (1,100 lbs/MW-hr), and new coal-fired power plants (1,100 lbs/MW-hr).  From our perspective, the most significant facet of this new rule is that it actually will apply to plants that are being built.  The withdrawn proposed rule only applied to new coal plants, which EPA concluded would not be built anyway before 2030.  Equally significant, as pointed out in EPA’s news release  on the proposal, is that “EPA has initiated outreach to a wide variety of stakeholders that will help inform the development of emission guidelines for existing power plants.”

5.  The Fifth Assessment Report of the Intergovernmental Panel on Climate Change – The IPCC’s Working Group I issued The Physical Science Basis, its part of the Fifth Assessment Report.  Working Groups II and III will publish in 2014.  Among other things WG I concluded:  "Unequivocal evidence from in situ observations and ice core records shows that the atmospheric concentrations of important greenhouse gases such as carbon dioxide, methane, and nitrous oxides have increased over the last few centuries."  "The temperature measurements in the oceans show a continuing increase in the heat content of the oceans.  Analyses based on measurements of the Earth's radiative budget suggest a small positive energy imbalance that serves to increase the global heat content of the Earth system.  Observations from satellites and in situ measurements show a trend of significant reductions in the mass balance of most land ice masses and in Arctic sea ice. The ocean's uptake of carbon dioxide is having a significant effect on the chemistry of sea water."  But if one remains skeptical, this consensus view of the world’s leading climate scientists should not cause one alarm, the climate change skeptics have not thrown in the towel.  For example, according to one website, “climate science as proclaimed by the IPCC is a morass where what is scientific knowledge cannot be easily separated from speculation and what is wrong.”  One won't find seafarers plying the Northern Sea Route in the skeptic camp, however.  Russia logged a record year of transits in 2013 (over 200), up from just 4 in 2010. 

6.  Climate Change Liability Lawsuits - For the first time since 2005, when Comer v. Nationwide Mutual Insurance was filed, there is no climate change liability lawsuit on the docket anywhere. All have been defeated. Comer was the last to succumb, with its opportunity to file a petition for certiorari expiring on or about August 14.  The IPCC Fifth Assessment establishes climate change is not going away, but we will have to wait to see if anyone is going to attempt to make someone pay for it.

Carbon Dioxide | Climate Change | Regulation | Solar Energy | Utilities | Year in Review


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