Posted on February 13, 2014
A former federal district judge was fond of telling his law clerks that Fifth Circuit Court of Appeals opinions were like the Old Testament. “You can find something there to support about any proposition you want.” The January 31, 2014 release of the State Department’s Final Supplemental Environmental Impact Statement for the Keystone XL Pipeline Project brought Judge Roberts’ words to mind.
The Keystone XL Pipeline Project backers tout the report’s conclusion that because the Canadian tar sands oil will be developed with or without the construction of the pipeline, it will not “significantly exacerbate the effects of carbon pollution” (to use the President’s avowed standards for pipeline permit approval). On the other hand, pipeline opponents point to the fact the report does not specifically address the project’s greenhouse gas emissions. Both are valid points, but the gist of the report appears to be the project has finally cleared its environmental hurdle.
That said, other hurdles remain. While this long-awaited environmental impact statement is an important step in the process, it is just that, a step. Ultimately, the final decision on the pipeline permit will involve something more akin to the common standard for law firm attorney compensation, the so-called “all factors considered” standard. In this instance, that decision will involve economic and national and international political concerns, as well as how the project affects U.S. and international climate policy.
With the issuance of the report, the 90-day interagency consultation period begins. Once EPA, and the Departments of Energy, Defense, Transportation, Justice, Interior, Commerce, and Homeland Security weigh in, the Secretary of State will at some point make to President Obama a permit recommendation. The President, of course, has the final say.
Stay tuned; the project appears to have cleared another hurdle, but the five year and counting race is far from over.
Posted on October 4, 2013
EPA is still working the kinks out of its New Source Performance Standards (NSPS) for the Oil and Natural Gas Sector, i.e., 40 C.F.R. 60 Subpart OOOO, referred to by many as the “Oil and Gas NSPS” and by some as simply “Quad O”. EPA first published the proposed Oil and Gas NSPS on August 23, 2011, in conjunction with proposed revisions to three other air regulations affecting various segments of oil and natural gas operations. The proposal prompted more than 150,000 public comments and kindled a national discussion on emissions at natural gas well sites. The final Oil and Gas NSPS rule was published in August 2012. Although the rule is most famous for establishing the first federal air standards for hydraulically-fractured natural gas wells, the rule also set significant volatile organic compound (VOC) standards for “storage vessels” used by the oil and natural gas industries.
Several stakeholders responded to the August 2012 rulemaking by filing petitions for administrative reconsideration of the Oil and Gas NSPS. On April 12, 2013, EPA published a notice granting reconsideration for a number of issues and proposing revisions to the storage vessel standards, in particular. Evidently, EPA significantly underestimated the number of storage vessels coming online in the field when it developed the August 2012 final rule, which required individual storage tanks with VOC emissions of 6 tons or more per year to achieve at least 95% reduction in VOC emissions. Tanks are commonly used at natural gas well sites, for example, to store condensate, crude oil, and produced water. In light of an updated tank estimate, EPA recognized that additional time would be needed for manufacturers to produce a sufficient number of VOC control devices.
Most recently, on September 23, 2013, EPA published final revisions to the storage vessel requirements in the 2012 Oil and Gas NSPS. Per the revised rule, which was immediately effective, an individual tank may be considered an affected facility if its construction, modification or reconstruction commenced after August 23, 2011; it has potential VOC emissions of 6 tons or more per year; and it contains crude oil, condensate, intermediate hydrocarbon liquids, or produced water. EPA made a number of important adjustments in the revised rule, chief among them an extension of the compliance date to give tank owners and operators more time to purchase and install controls. For the so-called “Group 1” storage vessels (which were constructed, modified or reconstructed between the August 2011 original proposal and the April 2013 proposal), the deadline to control VOC emissions is now April 15, 2015. For “Group 2” storage vessels (i.e., vessels that come online after April 12, 2013), the compliance deadline is April 15, 2014. Notably, pursuant to the revised Oil and Gas NSPS, operators only have until October 15, 2013 to estimate potential VOC emissions of Group 1 storage vessels for purposes of determining whether the rule applies.
Meanwhile, the agency is continuing to evaluate other issues raised in the reconsideration petitions that were submitted in response to the August 2012 rulemaking. EPA has stated in the past that it intends to address the remaining issues by the end of 2014.
Posted on September 26, 2013
“Shoot first, ask questions later” is how Congressman Chris Stewart described EPA’s efforts to link groundwater contamination to hydraulic fracturing. Stewart is the Chair of the Environmental Subcommittee of the House Committee on Science, Space and Technology, chairing the July 24 hearing on “Lessons Learned: EPA’s Investigations of Hydraulic Fracturing.” Specifically at issue was the EPA’s investigation in Pavillion, Wyoming.
In December, 2011, the EPA issued a “draft” report which concluded that hydraulic fracturing in the Pavillion, Wyoming gas field had caused pollution of the deep drinking water aquifer. The draft report was based upon sample results from two EPA monitor wells and was issued without peer review or stakeholder input.
There were serious flaws with EPA’s work. For starters, EPA failed to complete the monitor wells according to its own guidelines. Annular sealants were not properly installed, allowing cement to impact the water quality. A landowner’s complaint that EPA had an anti-freeze leak during drilling operations was not disclosed in the draft report. EPA exposed the wellbores to painted low-carbon steel casing and welding materials, which are known to contain various organic and metal compounds, yet the report inaccurately stated that stainless steel casing had been used. Moreover, several of the constituents which the EPA attributed to hydraulic fracturing fluids (e.g. glycols, 2-butoxyethanol and phenols) are known to be associated with the high pH cement that the EPA used to complete the wells. The bottom line is that the EPA’s own operations introduced the contaminants that it blamed on hydraulic fracturing fluids.
Subsequent testing by the USGS was unable to verify the EPA’s results. The USGS was unable to find some of the compounds that EPA claimed were present, and other constituents were found at significantly lower levels. The USGS was unable to sample one of the two wells due to improper well construction.
The EPA has now walked away from its flawed study, turning the entire investigation over to the State of Wyoming. The EPA has stated that the draft report will not be peer reviewed or finalized, and that the results will not be used in its national hydraulic fracturing study. Nevertheless, the EPA’s handling of Pavillion has cast doubt over the EPA’s national investigation of hydraulic fracturing intended to develop regulatory policy for unconventional reserves, causing Chairman Stewart to conclude, “given EPA’s rush to judgment in Wyoming…we should question whether the Agency’s ongoing study is a genuine, fact-finding, scientific exercise, or a witch-hunt to find a pretext to regulate.”
Posted on September 4, 2013
There has been a flood (no pun of course) of new stories this month about rising sea levels, acidifying oceans, drought-driven wildfires, and extreme weather events in the U.S. and globally. At the same time, with the official release of the eagerly-awaited Fifth Assessment Report of the Intergovernmental Panel on Climate Change due in several weeks, leaks of a draft portion of the Report are coming out in the media, indicating increasing confidence in the underlying science and in a substantial human role in warming, primarily as a result of burning fossil fuels. Additionally, as reported in the N.Y. Times, it appears that the draft projects that sea level could rise by only about 10 inches by 2100 under the “most “optimistic” scenario. But “at the other extreme,” with emissions continuing to swiftly increase, “sea-level rise could be expected to rise at least 21 inches and might increase a bit more than three feet” by the end of this century—which “would endanger many of the world’s great cities — among them New York, London, Shanghai, Venice, Sydney, Australia, Miami, and New Orleans.” Some believe that the FAR will still understate the likely forthcoming climate disruptions.
Coincidentally (or not?), those of you who still subscribe to the National Geographic Magazine would have seen in August a cover story entitled “Rising Seas”, which leads off with questions a panel of ACOEL members will (coincidentally?) in part be addressing at our Annual Meeting in Boston: “As the planet warms, the sea rises. Coastlines flood. What will we protect? What will we abandon? How will we face the danger of rising seas?” . And rising sea levels are especially of relevance to any ACOEL member living in a state on the Atlantic coast, because sea levels have been rising three to four times more rapidly off the Atlantic Coast than the global average, according to a recent study. For those of you living between the coasts, the San Francisco water supply and Yosemite National Park are both threatened by an out-of-control wildfire, while the western United States are experiencing significant drought.
And while forests burn and seas warm, acidify, and rise, one good news story was the recent launching in Maine of the first grid-connected floating wind turbine outside of Europe.
It also is the first concrete-composite floating wind turbine in the world, using advanced material systems with a unique floating hull and tower design. The 65 ft tall turbine prototype is a one-eight-scale version of a 6 MW, 423 ft rotor diameter design. Currently being developed by the University of Maine and beginning preliminary environmental and permitting work, Maine Aqua Ventus I had been selected by the Department of Energy early this year out of 70 competing proposals as one of 7 winners of $4 million in initial funding. The project is now a finalist for an additional $46.6 million in funding. This project is critical, because floating offshore wind energy projects have the potential to generate large quantities of pollutant-free electricity near many of the world’s major population centers (but far enough away, in water depths up to 400’, to not be visible from shore), and thus to help reduce the ongoing and projected economic, health, and environmental damages from climate change. Wind speeds over water also are stronger and more consistent than over land, and have a gross potential generating capacity four times greater than the nation’s present electric capacity.
(Full disclosure: I am legal counsel for the project)
Posted on August 26, 2013
On August 20, 2013, the U.S. Court of Appeals for the 3rd Circuit in Bell et al. v. Cheswick Generating Station, GenOn Power Midwest, L.P. answered a question of first impression: “whether the Clean Air Act preempts state law tort claims brought by private property owners against a source of pollution located within the state?” In this case, Plaintiffs filed claims under state tort law against the GenOn’s Cheswick Generating Station, a 570-megawatt coal-fired electrical generation facility in Springdale, Pennsylvania for allegations of ash and contaminants settling on their residential property (located within a mile of the plant). The Appeals Court held that “(b)ased on the plain language of the Clean Air Act and controlling Supreme Court precedent, we conclude that such source state common law actions are not preempted.”
This decision was based upon the U.S. Supreme Court precedent found in Intl. Paper Co. v. Ouellette. The question presented by Intl. Paper Co. v. Ouellette was “whether the [Clean Water] Act pre-empts a common-law nuisance suit filed in a Vermont court under Vermont law, when the source of the alleged injury is located in New York.” The U.S. Supreme Court held that: (1) Clean Water Act preempted Vermont nuisance law to extent that that law sought to impose liability on New York point source, but (2) Act did not bar aggrieved individuals from bringing nuisance claim pursuant to law of source state.
The Supreme Court of Appeals of West Virginia has previously applied the Intl. Paper Co. v. Ouellette decision to the Clean Air Act in Ashland Oil, Inc. v. Kaufman. In the Ashland Oil case The Supreme Court of Appeals of West Virginia held that Intl. Paper Co. v. Ouellette “requires the application of the statutory or common law of the source state to an interstate pollution dispute when the pollutants in question are regulated by the Clean Air Act. However, the procedural law of West Virginia shall be followed when the issues are being litigated in this State's courts.”
Thus, it appears, at least in the 3rd Circuit, that while interstate common law disputes are preempted by the Clean Air Act, intrastate disputes are not.
Posted on August 19, 2013
For years the nuclear power industry, which could serve as a climate neutral bridge to a more carbon neutral energy policy, has been hampered by the high cost of electricity production and difficulty in securing new licenses and license renewals. A not insignificant contributor to the cost of nuclear power, and one of the arguments raised against relicensing of older nuclear power plants, has been the necessity for the operators of nuclear power plants to store spent nuclear fuel onsite for an indefinite period of time. This was not supposed to be the case. Years ago Congress passed and the President signed into the law the Nuclear Waste Policy Act, which mandated the Department of Energy to develop a permanent repository for spent reactor fuel.
On August 13, a panel of the United States Court of Appeals for the District of Columbia Circuit, in In Re Aiken County issued a rare order, a writ of mandamus, compelling the Nuclear Regulatory Commission to resume the licensing proceeding on the Department of Energy’s application for a permit to construct a permanent repository for nuclear waste at Yucca Mountain in Nevada. That process was to have been completed in June of 2011 under the Nuclear Waste Policy Act, but the DOE, acting on the President’s direct order, tried to withdraw its license application in 2010 and, though the NRC Licensing Board rejected DOE’s efforts, the Chairman of the NRC, also acting at the President’s request, shut the process down anyway.
The case was brought by two states, two counties, three individuals residing near current temporary nuclear waste storage sites, and the association of regulatory commissioners. The Yucca Mountain project has been controversial for years, having been opposed by environmentalists and local politicians in Nevada. DOE’s failure to find a central long-term repository for nuclear waste has forced the nuclear power industry to continue to store spent nuclear fuel in on-site casks or water filled pools, creating what is perceived by critics as enhanced risk of release of radionuclides to the environment. The decision contains a detailed, lengthy and fascinating discussion of the Executive Branch’s authority to exercise prosecutorial discretion and how that discretion is far different than its discretion to ignore clear statutory mandates.
The majority of the panel held that the Executive Branch, including the President (and by extension executive and independent agencies like the NRC), has no authority to disregard congressional mandates based on policy disagreements with the law in question. The panel concluded that the Nuclear Waste Policy Act and Congressional funding of the NRC’s permit review process created a clear mandate to the NRC to make a decision on the permit application pending since 2011. Finding that the NRC is “simply flouting the law, ” and has “no current intention of complying with the law,” the majority opinion by Judge Kavenaugh (joined by Judge Randolph), flatly rejected the defenses offered by the NRC. The court rejected the argument that Congress had appropriated insufficient funds to complete the project, finding that annual congressional appropriations never provide enough money to finish a multi year project, and that over $11 million exists to continue it. The court also rejected the argument that the NRC’s decision to ignore the law was justified because Congress might not provide funding in the future, concluding that allowing an agency to ignore a clear mandate would “gravely upset the balance of powers between the Branches and represent a major unwarranted expansion of the Executive’s power at the expense of Congress.”
The court also rejected the argument that the failure of Congress to provide future appropriations for the Yucca project demonstrates congressional intent to shut down the process. The Court opined that the measure of congressional intent is in the laws it passes, not what it debates, and that repeal by implication is inappropriate where previously appropriated funds are not taken back and remain available to advance the project. The court accordingly concluded that there is “no justification” for ignoring the clear statutory mandate. Finally, the court rejected the suggestion that an agency’s policy dispute with Congress’s decision is “not a lawful ground” for the NRC or the President to decline to follow the law.
In a dissent, Chief Judge Garland argued that all the NRC did was suspend the proceeding because there were not “sufficient funds to finish the licensing process and that the court should defer to the agency on this judgment, and therefore mandamus should be denied. The majority rejected this, noting that the NRC’s continued repeated and unjustified disregard for the law despite the repeated warnings given by the court rendered mandamus appropriate.
The D.C. Circuit mandamus order will in all likelihood be appealed, and it is certain that the Yucca Mountain project will remain the subject of intense controversy. The stakes for the nuclear energy industry in having the spent fuel storage problem resolved are large. Stay tuned.
Posted on August 16, 2013
Ever since the shock of the oil embargo in 1973 we have been a nation in search of a comprehensive, sound energy policy. It was only a year later, in response to the proposal by Aristotle Onassis to locate an oil refinery on the coast of New Hampshire, that the New Hampshire Legislature adopted the first version of the State’s energy facility siting law.
Today, New Hampshire’s siting law, representing a balance of the need to develop new energy facilities with appropriate protection of the environment, preempts local authority and requires each project to undergo a rigorous comprehensive, consolidated evaluation before a panel of high-ranking State officials from the several different departments having jurisdiction over all the relevant permits. To obtain all State permits and a Certificate from the siting committee, the applicant must be prepared to present the project in a consolidated process, subject to formal discovery, at an adjudicative hearing before the committee. Interested parties and municipalities may intervene and the Attorney General appoints Public Counsel for the case to represent the broad public interest. To take positions in the broad public interest, Public Counsel is charged with the responsibility to represent the interests of the public as a whole, and not simply the narrower positions adopted by intervening parties. To discharge this responsibility, which derives directly from that of the Attorney General in all other cases, the Public Counsel must take positions that balance the public interest in developing new, diversified energy facilities and the need to take into account environmental regulation.
This highly structured, energy facility permitting process is significant regionally and nationally because its standards tend to drive the design of interstate facilities. Current energy policy and its direction may be discerned from trends reflected in the written decisions of the siting committee over time. Other states may be developing approaches to these issues.
Beginning in the late 1990s, a steady stream of energy projects have been presented to the committee. Until the mid-2000s, the majority of those projects involved fossil fuel generation, and in particular natural gas generating stations and transmission lines. As public policy, driven by concerns for global warming, has put increasing emphasis on renewable energy sources, there has been a significant increase in proposals to construct wind energy facilities. What is most striking from this perspective is that no energy project was rejected until 2013, although some facilities were subject to hundreds of conditions in their certificate.
This year, a proposed 30 megawatt wind farm in Antrim was rejected on its “aesthetics”, an indisputably highly subjective standard in search of criteria that will avoid arbitrary and capricious adjudications. Three previous wind power projects have all been approved with essentially the same characteristics, but for the first time the committee, at the urging of public counsel, has declined to approve the project rather than setting forth criteria and conditions that would bring essential predictability to this important technological advance in energy production.
The region and the nation will be well served by a steady expansion in the number of renewable energy projects, and this opportunity has the attention of large, even international, experienced and capable developers. Does the rejection of the Antrim project, despite public support, on the basis of the objections of special interests actively supported by public counsel risk a slowing down or abandonment by developers to the detriment of the region’s public interest in a diversified energy portfolio? Is it coincidence that a wind energy project was rejected recently in Maine, also on highly subjective grounds of aesthetics, a case that was referenced in the New Hampshire proceedings? And shouldn’t we ask whether advancing wind turbine technology is something we find in most places attractive, when it represents a great benefit to the environment and the public interest?
These cases bear watching. The New Hampshire case appears to be headed to the State Supreme Court. Will it turn out that these developments represent a turning away from favorable conditions promoting wind energy, so that wind energy development will decline in the years ahead? For environmentally sound economic development in this region and elsewhere we should hope not.
Posted on June 7, 2013
On the night of his re-election, President Obama told the nation that he wanted “our children to live in an America…that isn’t threatened by the destructive power of a warming planet.”
In the past year, we’ve seen extreme weather, fueled by carbon pollution, cost hundreds of American lives and nearly $100 billion in damage across the country. Yet right now we have no national standards to control carbon pollution from the biggest emitters—the 1500 existing power plants which are responsible for 40 percent of U.S. carbon pollution. NRDC has developed a plan for how the President could use his existing authority under the Clean Air Act to cut this climate-changing pollution from power plants, quickly and cost-effectively.
In a 2011 Supreme Court decision, American Electric Power v. Connecticut, the court ruled that it is the EPA’s responsibility to curb carbon pollution from power plants, new and existing. Carbon pollution limits for new power plants have been proposed and the EPA needs to make them final. But the step that will make the biggest difference is cutting pollution from existing power plants. Under section 111(d) of the Clean Air Act, the EPA could set state-specific standards for average emissions from existing power plants based on each state’s current energy mix. Then states and power plant owners would have broad flexibility in deciding how to meet those standards, using a range of cost-effective measures and technologies.
Not all states line up at the same starting point when it comes to carbon emissions—some are heavily coal dependent, while others rely more on lower-carbon fuels and clean, renewable energy. Developing state-specific standards will give heavily coal-reliant states more realistic targets, while still moving them toward a cleaner energy supply. In addition, states and power plant owners can keep costs down by using a variety of measures to achieve compliance, whether it’s installing a new boiler in an old coal-fired plant, or investing in a home-weatherization program to reduce energy demand. These efficiency measures will help keep energy bills low and also create thousands of jobs that can’t be outsourced.
All in all, NRDC’s flexible, cost-effective proposal can achieve a 26 percent reduction (from 2005 levels) in carbon pollution from power plants by 2020, according to modeling done by the same firm the EPA uses for much of its air pollution modeling. The cost of compliance, about $4 billion, is comparatively low, and is vastly outweighed by the benefits--$25 to $60 billion in savings. These benefits come in the form of 3,600 lives saved, and thousands of asthma attacks and other illness prevented each year due to less air pollution, as well as the value of reducing carbon pollution by 560 million tons. This is twice the reduction that will be achieved by clean car standards.
The President has been very clear about the need to do something to curb global warming. This cost-effective proposal could be his biggest opportunity to take decisive action. He can dramatically reduce carbon pollution from power plants--while creating major health benefits and jobs--using his existing authority under the Clean Air Act.
Posted on May 30, 2013
On Friday, May 17, the Department of Energy (DOE) announced it had conditionally authorized Freeport LNG Expansion, L.P. and FLNG Liquefaction, LLC (collectively Freeport) to export domestically produced liquefied natural gas (LNG) to countries that do not have a Free Trade Agreement (FTA) with the United States from the Freeport LNG Terminal on Quintana Island, Texas. This marks only the second time that the DOE has granted a natural gas export license to non-FTA countries, and only the first after DOE ceased action on all applications pending a study of the economic impacts of LNG exports. The Freeport approval marks a noticeable, but likely incremental shift in US policy towards increased export of natural gas to non-FTA nations, opening up new markets for the boom in domestic natural gas production.
The DOE rejected opponents’ arguments that the project would be inconsistent with the public interest. Among other reasons, the DOE found that the proposed exports are likely to yield net economic benefits to the US, would enhance energy security for the US and its allies, and were unlikely to affect adversely domestic gas availability, prices or volatility. Accordingly, DOE conditionally granted Freeport’s Application, subject to satisfactory completion of an environmental review pursuant to the National Environmental Policy Act (NEPA) by the Federal Energy Regulatory Commission (FERC) and DOE. FERC will serve as the lead NEPA review agency. DOE will subsequently reconsider the conditional order in light of the NEPA analysis led by FERC and include the results in any final opinion and order.
Environmental issues will now take center stage as interested stakeholders seek to influence the government’s conclusions in the NEPA review. In support of its application, Freeport extolled the following environmental benefits of the project:
• Natural gas, the cleanest burning fossil fuel, would replace coal-fired power resulting in substantial reductions in greenhouse gas and traditional air pollutants.
• Compared to the average coal-fired plant, natural gas fired plants emit half as much carbon dioxide (CO2), less than a third of the nitrogen oxides, and one percent of the sulfur oxides.
• Natural gas, if used as a transportation fuel, also produces approximately 25 to 30 percent less CO2 than gasoline or diesel when used in vehicles, and is not a significant contributor to acid rain or smog formation.
Opponents of the project, however, are less convinced of its environmental benefits. These include the Sierra Club, the Delaware Riverkeeper Network (consisting of 80 organizations), NRDC, among others. Specifically, they assert that LNG exports will increase demand for natural gas, thereby increasing negative environmental and economic consequences associated with fracking, the process used for shale gas production. They argue that the DOE’s two-part study of the economic impacts of LNG exports, upon which DOE relied in conditionally granting Freeport’s application, failed to consider the cost of the environmental externalities that would follow such exports, which include:
• Environmental costs associated with producing more shale gas to support LNG exports;
• Opportunity costs associated with the construction of natural gas production, transport, and export facilities, as opposed to investing in renewable or sustainable energy infrastructure;
• Costs and implications associated with eminent domain necessary to build new pipelines to transport natural gas; and
• Potential for switching from natural gas-fired electric generation to coal-fired generation, if higher domestic prices cause domestic electric generation to favor coal-fired generation at the margins.
Sierra Club and other organizations have previously challenged the adequacy of FERC’s and DOE’s NEPA determinations in other LNG export applications. In the first LNG export license approval for Sabine Pass Liquefaction, LLC (DOE Docket. No. 10-111-LNG), Sierra Club, as an intervener in the FERC proceeding, challenged the adequacy of FERC’s NEPA compliance, and the lawfulness of the FERC’s determination to authorize the Project facilities. The FERC addressed these concerns and found that if a series of 55 enumerated conditions were met, the Project would not constitute a major Federal action significantly affecting the quality of the human environment.
After FERC authorized the Liquefaction project, Sierra Club filed a motion to intervene out of time before DOE , again challenging FERC’s NEPA determinations. DOE rejected Sierra Club’s motion, and granted the final order approving the LNG export on August 7, 2012. Sierra Club subsequently sought a rehearing on the final order which was also rejected by the DOE in a January 25, 2013 order.
Similarly, earlier this month, Sierra Club and other environmental organizations objected to the proposed Dominion Cove Point LNG export terminal in Maryland, arguing the project would harm the Chesapeake Bay’s economy and ecology, increase air pollution, and hasten fracking and drilling in neighboring states. On May 3, 2013, the coalition filed public comments and a timely motion to intervene in the proceedings calling on FERC to conduct a thorough environmental review, or prepare an EIS, of the project. The proposed terminal will be the only LNG export facility in the east coast, providing foreign markets with access to natural gas from the Marcellus Shale.
Posted on May 14, 2013
Cheap gas prices driven by a boom in new shale gas development, coupled with more stringent emissions controls for coal fired plants, are causing a shift from coal to natural gas as the primary source of electric power in the United States. In the short term, most welcome this shift because natural gas produces significantly fewer greenhouse gas (“GHG”) emissions. But it appears increasingly certain that in the long run, this shift will result in decreased energy grid reliability and significantly higher electricity costs due to natural gas price volatility.
A recent Duke University study concludes that the cost of compliance with new emissions standards could make almost two-thirds of existing coal fired plants “as expensive as natural gas even if natural gas prices rise.” This combination of low gas prices and the high cost of coal emissions compliance already has resulted in replacement of many coal plants instead of retro-fitting them with expensive environmental controls. Add to that the uncertainty of potential future GHG emissions standards, and construction of new coal fired power plants is at a near standstill.
The Rocky Mountain Coal Mining Institute (“RMCMI”) estimates that these factors will combine to force closure of up to 100 gigawatts of coal plant capacity, or approximately one third of the coal-fired fleet, resulting in a net increase of 32 gigawatts of gas capacity in the next three years. By 2020, RMCMI estimates that gas generating capacity will exceed that of coal, nuclear, and hydroelectric combined. The RMCMI further projects that the shift to natural gas generation will cause the demand for natural gas to exceed even the most rosy new shale gas production predictions, causing volatile natural gas price swings.
Grid reliability problems and gas price volatility were highlighted by Gordon van Welie, the head of New England’s power grid, during recent testimony before Congress. He observed that more than half of New England's electricity is generated from natural gas, which has displaced a more diversified mix of oil, coal, gas and nuclear power over the past ten years.
He testified that even though natural gas generally is plentiful, New England’s inadequate gas pipeline capacity limits supplies during peak usage. For example, during a recent extreme cold snap in New England, “natural gas prices in late January spiked to $34/MMBtu, in contrast to prices below $4/MMBtu across most of the country.” The high gas prices caused wholesale electricity price spikes of more than 100% in January and 300% in February 2013 compared with 2012. There also were “multiple instances where generators could not get fuel to run,” including one instance when more than 6,000 MW were offline due to fuel shortages. Testimony at 7. To avoid even worse problems in the future, he urges increased construction of pipeline infrastructure, but construction of gas pipelines will take time. In the short and intermediate term, he predicts continued price volatility and grid reliability problems during peak usage.
In addition to pressures from increased usage of natural gas in the United States, there also is increasing support within the Obama Administration to side with those seeking to export liquefied natural gas because prices in foreign markets are much higher. If the export of natural gas becomes a reality, then domestic gas prices likely will increase even more.
Although the vast shale gas reserves are fueling a shift to natural gas power generation with a corresponding reduction in GHGs, over-reliance on natural gas will almost certainly have the unintended consequence of causing grid reliability problems and volatile price spikes. This likelihood argues for a more balanced energy portfolio with a broad mix of power from renewable, hydropower, coal, oil, nuclear, and natural gas. To insure future stable energy prices and reliable energy production, electric utilities and state and federal regulators should take a long term view when deciding whether to shift to natural gas generation and decommission existing coal and nuclear plants.
Posted on May 10, 2013
Proposals to export liquefied natural gas (“LNG”) produced in large part from shale gas recovered by hydraulic fracturing techniques or “fracing” continue the public debate about the desirability of exports of other energy resources. This political, regulatory, environmental and trade debate engages powerful politicians, lobbyists, environmental groups, trade associations, developers, producers, state regulatory authorities, consultants, academics, and landowners, and a broad spectrum of the press and public.
On its face, the notion of substantial exports of LNG to both countries with which the U.S. has free trade agreements (FTA) in place and those it does not, seems highly attractive. Such exports would improve the balance of trade deficits, create new jobs associated with the production; and produce tax revenue. And, from the broad environmental perspective, LNG exports would lower greenhouse gas emissions (GHG) in countries with heavy reliance now and in the future on coal or oil for electric generation, or in countries with need for replacement of nuclear facilities.
Query then, what are the factors that engender the impassioned debate on energy resource export policy? Key are: (1) fears of massive development of “frac” gas, freighted with concern over impacts on water, air, and use. Analogous to the Keystone XL battle, another concern is development of the unconventional gas for the benefit of foreign interests, particularly those without an FTA in place with the U.S. (export to those countries with FTA agreements with the U.S. is deemed by law to be in the public interest). (2) A second issue in contention on LNG is the impact on domestic energy prices if significant LNG exports limit availability of natural gas for domestic industrial and other uses. (This issue harkens back to the energy crises of the 1970s when natural gas availability was tight and energy prices sky high.)
So, although not explicitly an environmental-based objection, such opponents of LNG exports find friendly bedfellows with the environmental objectors and the commercial interests concerned about their ability to rely upon and benefit from increased gas supply. Industrial interests argue that stopping exports to non-FTA countries, particularly the insatiable Asian markets, will result in an industrial renaissance with jobs and development growing significantly. And, some opponents of LNG exports to non-FTA countries ironically, (to this blogger at least) express little regard for overall environmental benefit to potential importing countries and thus the globe. Rather, the impact on the United States from development of unconventionally sourced gas supply has been their focus point. Yet, LNG is only part of the energy export debate.
Further complicating this analysis is the parallel potential increase in the export of U.S. coal to energy hungry nations, particularly in Asia. As noted above, there is a broader questioning on the entire topic of U.S. energy resources exports: LNG, oil or refined products and coal. In addition to the Keystone XL pipeline standoff, many environmentally oriented players (e.g., the Sierra Club) and political leaders have expressed reservations about the export of U.S. coal for two primary reasons – the impact on the U.S. of new infrastructure for storage, transportation and increased mining activities, and the increase in GHG emissions worldwide as a result of heavier coal-fired electric generation. And in the past months, several proposed coal export projects have been scrapped. This energy export issue makes for a complicated stew of federal, local and regional politics. What makes the entire public war of words (and the behind the scenes maneuvering) so fascinating is the question of who or what decides where and with what restrictions U.S. energy resources are to be marketed to the world – the federal agencies, the state and local governmental entities, or the market? The next few months may provide guidance on LNG and perhaps the Keystone XL pipeline, however, the national and international implications of these decisions are so important that it is unlikely that peace will settle on these matters for decades.
Posted on April 18, 2013
You may know that Washington State Governor Jay Inslee is a climate champion, first as a long-serving member of Congress and now as Governor. But you may not know that he just finished leading a bipartisan effort that succeeded in passing climate change legislation.
His climate action bill passed the State House March 25th on a bipartisan 61 to 32 vote. The bill earlier passed the Republican-controlled State Senate on a 37 to 12 vote. And a few days ago it headed to Governor Inslee’s desk for a well-earned signature.
The bill commissions an independent evaluation of climate pollution reduction programs in other states and Canadian provinces, and of opportunities for new job-producing investments in Washington relating to cleaner energy and greater energy efficiency. Then it requires the Governor and legislative leaders to use that survey data to plot out together what set of policies will get the State to hit its climate pollution limits established by earlier legislation, including a greenhouse gas emission reduction to 1990 levels by the year 2020.
“The Governor’s climate action bill keeps our state in the game – requiring leaders to map out a strategy to grow our clean energy economy and reduce climate pollution,” said Joan Crooks, executive director of Washington Environmental Council.
And here — in sharp contrast to the other Washington — Republicans and conservative Democrats agreed.
Posted on April 3, 2013
Two items hit my inbox on the same day:
(1) The U.S. is predicted to become the world's largest oil producer and North America to become a net petroleum-exporting region according to the International Energy Agency, and
(2) The Obama Administration is renewing its commitment to wean U.S. cars off of petroleum.
Some might argue that it makes sense to wean cars off petroleum even if we have a lot of it because of the threat of global climate change, but instead the stated justification was “to create jobs and help lower energy costs for middle class families.”
Then came the news that the operating unit of China's largest solar panel company, Suntech Power, recently filed for bankruptcy. Meanwhile, the Obama Administration proposes the creation of a $2 billion Energy Security Trust, funded by revenues from offshore oil leases matching those provided by the Chinese, to subsidize investments in this supposedly vital emerging field.
The disparity between such news and the government actions being taken started me questioning whether it is possible for governments to manage a field as dynamic and ever changing as future energy supplies. "Regulatory lag" has long been a familiar concept in utility rate regulation: by the time regulators get around to approving new rates, the situation has changed. And human beings are justly famous for "winning the last war": by the time that we understand something well enough to develop a broadly-shared consensus, the situation has changed.
This is nothing personal against the Obama Administration or support for renewable energy. I have been teaching a course at the Yale Law School this semester on the history of energy policy in the U.S. since World War II. A theme that runs throughout the course is how policies designed to manage energy supply, regardless of political outlook, lag as much as a decade or two behind the times. For example, Nixon's 1971 oil price freeze lasted until 1981; Eisenhower's 1959 oil import quotas lasted until 1973. In both instances, government policy did a lot of unnecessary harm because the energy supply situation changed much faster than government policies do.
I often wonder why environmental law and energy law are so different. One difference is that environmental problems tend to stand still (or get worse) long enough for us to mobilize the slow processes of government to solve them. We studied and debated acid rain for over a decade before the 1990 amendments to the Clean Air Act, which mandated a 50% reduction in sulfur dioxide emissions over the following decade. Energy markets change within months as new sources of supply and technologies come on line. It makes one wonder whether government policy will inevitably be a day late and a dollar short when it tries to manage future energy sources.
Posted on March 13, 2013
We’ve all seen the head shaking over how energy conservation efforts in the United States are dwarfed by energy consumption increases in India and China. But, what about Africa?
The African continent, with close to 600 million people, 15% of the world’s population, now consumes about 3% of world energy production. However, Africa’s energy picture is changing rapidly due to growing investment, upgraded infrastructure, and success in tackling corruption. Africa always rich in natural resources, is expected to replace more basic energy sources with more efficient and environmentally friendly sources like oil and gas. However, huge areas in Africa — the Sudan, Uganda and even Kenya lack national electricity grid systems. But improving infrastructure and abundant energy resources hold promise for the future.
Most of Africa is not flicking a switch for lights, but instead is using matches to light a kerosene lamp or igniting a charcoal stove for heating or cooking. This will continue for the foreseeable future, which means more tree-cutting for fuel, more wood burning, and thus, more harmful air emissions. Using kerosene lanterns and charcoal stoves correlates directly with increased respiratory disease. Unfortunately, environmental health and safety will, in the short term, take a back seat to the need to rely on fossil fuels.
Renewables? Why shouldn’t a continent known for its hot sun be a natural for solar power? In Africa, questions about reliability and the lack of trained personnel are being taken seriously. So for the foreseeable future, the more likely result is that fossil fuels will increase, and renewables will take aback seat. The developing world views energy/environment trade-offs as part of the price for advancement, particularly in nations where energy resources and infrastructure is so underdeveloped. Opportunities are enormous, but so are the challenges and risks. Africa’s test will be how much financing, regulation and environmental mitigation is needed to propel the continent forward.
Posted on December 19, 2012
The attached article will be published in the upcoming issue of the Lewis & Clark Law School Environmental Law Review. The article is among the first to integrate current climate change science, particularly ongoing impacts and predicted impacts, with a detailed roadmap for substantial reform of our environmental processes for reviewing proposed renewable energy projects.
Most existing articles either focus only on climate science or on minor modifications to the regulatory system. Using offshore wind power as a case study, this article demonstrates how, in an increasingly carbon-constrained world, our existing environmental laws and regulatory process no longer achieve their underlying goals of long-term ecosystem conservation. To the contrary, these laws and regulations are supporting a system with increasing greenhouse gas emissions that is annually costing trillions of dollars.
We have little time left to create a practical path to achieving an 80% reduction in greenhouse gases by 2050—with failure resulting in average global temperatures rising more than the internationally-agreed targeted ceiling of 2°C. After examining the obstacles confronting a potential developer of offshore wind, this article clearly lays out why and how the existing regulatory process should be quickly reformed so that offshore wind and other clean renewable energy sources can help us escape the escalating consequences of our carbon-intensive economic system.
Posted on December 14, 2012
On December 12, 2012 U.S. Energy Secretary Steven Chu announced competitive awards of $4 million each for 7 offshore wind projects from Maine to Oregon, in 6 different states. I am the lawyer for the University of Maine's project, which involves plans to install a pilot floating offshore wind farm with two, six-megawatt direct-drive turbines on concrete, semi-submersible foundations. I am also working on permitting a smaller-scale pilot project for UMaine that would be deployed in early to mid-2013 as the first floating offshore wind project in North America.
The Department of Energy Department made the awards with the goal of beginning to speed the deployment of stronger, more efficient offshore wind power technologies and showcase innovative technologies -- helping to further lower costs and drive performance improvements.
In year 1, each project will receive up to $4 million to complete 50% of the design process, and to begin outreach, environmental studies and permitting work. DOE will in early 2014 select up to three of the projects for follow-on phases that focus on siting, construction and installation, and aim to achieve commercial operation by 2017.The final projects will receive up to $47 million each over four years, subject to congressional appropriations.
Click HERE to read the full article from the U.S. Department of Energy.
Posted on December 13, 2012
On November 30, 2012, the United States Fish and Wildlife Service (“FWS”) announced its proposal to list the Lesser Prairie Chicken (“LPC”) as threatened under the Endangered Species Act (“ESA”). The proposed rule resulted from a comprehensive 2011 settlement agreement approved by the D.C. Circuit in In re Endangered Species Act Section 4 Deadline Litigation 2011, whereby FWS agreed to review over 250 candidate species and make a determination as to each species whether to issue a proposed listing rule or to issue a finding that the listing is not warranted, over a six-year period. Under the ESA, an endangered species is one that is in danger of extinction throughout all or a significant portion of its range, while a threatened species is likely to become endangered within the foreseeable future. FWS will make a final determination on whether to list the LPC as threatened by September 30, 2013.
The LPC is found across a five-state span, including Colorado, Oklahoma, New Mexico, Texas, and Kansas. Activities identified by FWS as threats to the species include habitat loss, fragmentation, modification, and degradation within the species’ range. Other threats include land uses related to wind energy and transmission development. If FWS ultimately lists the LPC as a threatened species, energy industry operations that could potentially harm the species would be affected. Specifically, due to the species’ avoidance of tall, vertical objects, FWS has identified oil and gas wellheads and wind turbines as features that may cause habitat displacement for the bird. Section 9 of the ESA prohibits the “take” of a listed wildlife species by a private or public entity. Because “take” is defined quite broadly under the ESA, even activities that are not designed or intended to harm a species, but could do so indirectly, such as operation of these tall structures, could potentially constitute a violation.
Unlike endangered species, in regard to a species listed as threatened, FWS has the authority under ESA Section 4(d) to tailor the “take” prohibitions to the conservation needs of the species. The FWS may use its Section 4(d) authority to incentivize participation in conservation plans that will support recovery of the LPC. Additionally, there are conservation plans that may be entered into by energy companies before a species is listed under the ESA. Called Candidate Conservation Agreements with Assurances (“CCAAs”), these agreements, allow non-federal property owners to commit to implement voluntary conservation measures for a candidate species in return for regulatory assurances that additional conservation measures will not be required, and additional land, water, or resource use restrictions will not be imposed, should the species become listed in the future. Furthermore, the proactive conservation efforts performed through CCAAs may remove or reduce threats to the covered species, so that listing the species under the ESA may become unnecessary. CCAAs, therefore, provide a significant opportunity for a compliant energy company to potentially insulate itself from liability in the event the LPC is listed as threatened. CCAAs have been developed for the LPC in New Mexico and Texas, and Oklahoma, under the leadership of the Oklahoma Department of Wildlife Conservation, has submitted a CCAA to FWS for review. Notably, because the final listing determination for the LPC must be made September 30, 2013, time is of the essence for energy companies to consider entering into a CCAA.
See the FWS’s Proposed Listing
See the FWS’s News Release Regarding the Proposed Listing
See the FWS’s Facts Regarding the Proposed Listing
Posted on December 6, 2012
There is a vital need for attorneys and other professionals to understand and discuss the past, current, and future role of our public lands system in the energy policy of the nation. In April of 2013, ABA SEER is hosting a symposium in partnership with The Public Land and Resources Law Review (PLRLR) at The University of Montana titled Balancing Act and Paradigm Shift: The Role of Public Lands in America’s Energy Future. The PRLR’s 35th Public Land Law Conference and ABA SEER’s 41st National Spring Conference on the Environment will combine to create an academic symposium to discuss the role of America’s three major sources of public lands and resources: river systems, terrestrial lands, and oceans.
If your work involves public lands, public resources or energy, this conference will be of interest to you. If you work with law students (in J.D. or LL.M. programs) with an interest in public lands and resources, I hope you will alert them to this opportunity and encourage them to submit an article. Entries should demonstrate original thought on a question of legal and/or policy significance relating to the symposium topic of the role of public lands and resources in America’s energy future. The topic is not confined to any particular type of public land or issue in energy or environmental law or policy. Any relevant article, case comment, note, or essay may be submitted, including writing submitted for academic credit. Jointly authored pieces are eligible only if all authors are students and consent to submit.
The winning submissions will receive a $1,000, $500, and $250 cash prize for 1st, 2nd, and 3rd place submissions, respectively. First and second place entries will be invited to attend the symposium on April 18, 2013 in Missoula, MT, with travel support from ABA-SEER. The first place entry will be published in the symposium edition of the Public Land & Resources Law Review in the summer of 2013.
The deadline for the student writing competition is January 14, 2013. For full details on entry requirements, click here.
Posted on June 8, 2012
On June 6, Oregon Governor John Kitzhaber released his draft 10-Year Energy Action Plan. Written comments on the draft plan may be submitted to firstname.lastname@example.org and accepted through July 31. Three public workshops will be held at times and places to be announced.
The plan consists of a broad range of goals for the state government, private sector and public-private collaboration to address what the Governor calls the:
fundamental challenge—that is, to develop a comprehensive energy strategy that meets the state’s carbon reduction, energy conservation and renewable energy goals and timetables, and that balances complex needs– including affordability and reliability – while enhancing Oregon’s economic objectives.
The plan seeks to build off of existing programs and redirect funding to advance its three central strategies, the details of which are to be developed through a lot of public participation:
1. Maximizing energy efficiency and conservation to meet 100 percent of new electric load growth. The plan is unclear as to when this goal would be achieved, but refers to the Northwest Power and Conservation Council’s goal of using conservation to meet new electric demand by 2020. Key to implementing this goal is creation of a new State Building Innovation Lab. The Lab would focus initially on improving efficiency in four million square feet of state office space and then using the Lab as a model and resource for others.
2. Enhancing clean energy infrastructure development by removing finance and regulatory barriers. Streamlining the siting process, including use of a strong project manager to help navigate state regulatory requirements, would bring certainty to developers of facilities. Also, conducting planning on a “landscape level” would help to ensure protection of natural resources.
3. Accelerating the market transition to a more efficient, cleaner transportation system. Central to this goal, over the next ten years the plan would convert 20% of large fleets to electric, compressed or liquefied natural gas or other alternative fuel vehicles.
The plan is self-congratulatory on various initiatives already in place and reads like a compendium of good ideas on how to secure a clean energy future. So ambitious a plan requires continual commitment over a long period of time—at the highest levels of state government—to keep it from becoming yet another plan on the shelf. Such sustained effort of course is not assured.
In the early 1980s I was chair of the City of Portland Energy Commission whose job it was to further develop the City’s Energy Conservation Policy, which at the time was seen as cutting edge. Then as now, energy planning was a hot topic for policy makers. Champions arise to push forward change. In those days it was Mayor Neil Goldschmidt and Commissioner Mike Lindberg, today it is Governor Kitzhaber. While Portland has made progress, many of the elements of the Governor’s plan echo what we were talking about back then. I hope that the Governor builds a governance platform to continue work on the plan after he departs the scene.
Implementation of the plan depends on new legislation and regulatory reform among several state and local agencies. Whether the plan can develop the consensus necessary to achieve such change will depend on how the details emerge over the coming months and the enthusiasm the plan can garner.
Posted on June 1, 2012
How can each of us leave the world to our children and grandchildren at least as healthy as when we were born? How can we more quickly move from fossil-driven economies to ones more based on renewable sources, in an increasingly carbon-stressed world? And how can policy makers, at various governmental levels, make changes in how energy projects are evaluated and developed before we use up too much of the atmosphere’s and oceans’ capacities to safely absorb carbon dioxide?
These and similar questions were tackled at two recent conferences in which I participated: a small climate change justice forum at Chicago Law School, and the much larger World Renewable Energy Forum in Denver. In Chicago, participants tackled approaches to bridging the who-pays-how-much gap between developing and developed nations – should it be per capita, or total carbon shares based on past emissions (if so from when), or a polluter-pays approach bridging past and future (next 20 years) CO2 emissions? Some say the US should pay less than China and India, others say more. Ultimately, all agreed that human-induced climate change is the single greatest threat facing human society—not just environmental, but also posing huge economic, public health, and military security costs.
Denver discussions focused on how to quickly increase the amount of renewable energy used for electricity, heat and transportation. My presentation, “U.S. Renewable Law and Policy: Catch Up or The Clock Strikes Midnight”, provided an overview of existing and predicted impacts from the still-increasing carbon dioxide emissions accumulating in our air and oceans; a comparison of the direct and indirect costs of different fossil and renewable energy sources; a summary of the permitting and regulatory hurdles facing renewable energy projects; and a roadmap to level the regulatory playing field to help renewables catch up.
Brief high (or low) lights: In April 2012, the International Energy Administration warned that, under current policies, energy use and CO2 emissions will increase by a third by 2020, and almost double by 2050 – sending global temperatures at least 6⁰C higher. What would the world look like with such an increase?
What are the “true” costs of energy to be factored into pricing? In 2009, the National Research Council’s “Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use” estimated in 2005 dollars (higher now) that non-climate damages from our use of fossil fuels exceed $120 billion, with climate damages possibly being equally as large – and both numbers exclude ecosystem, infrastructure, insurance, and national security costs.
Those bucks stop with each of us and this generation.
Posted on April 18, 2012
USEPA continues its program of death by a thousand cuts to the coal industry, but does the agency’s actions reflect a coherent national energy policy? On March 27, 2012 the EPA issued its new source performance standards for new power plants limiting CO2 emissions per megawatt-hour of produced electricity to a level about that of state-of-the-art, combined-cycle, gas-fired power plants. Importantly, industry observers claim that the level is far below what the best coal-fired power plants can achieve at least without commercially unavailable and quite expensive carbon capture technology. While certain exceptions within the rule preclude stating that EPA has banned the use of coal in new plants, it comes pretty close. That reminds me of an often repeated statement of an old client of mine back in the 1970’s whose recycled solvent fuel business and the EPA just didn’t get along that well—he would remark that “if coal were discovered today, EPA would never allow it to be burned.” He appears to have been ahead of his time.
Of course one winner in this is natural gas. With new sources of natural gas from shale and fracking having driven natural gas prices downward relative to coal and oil, old King Coal has been facing a distinct price disadvantage for years. EPA had further disadvantaged coal and oil as a result of last year’s cross-state air pollution rule. Last December, EPA’s MATS rule (mercury and air toxics standards) for power plants further adversely affected coal. Is EPA’s latest effort merely the coup de grace?
Don’t get me wrong. I’m not a coal apologist. One need not be a fan or sworn enemy of either natural gas or coal, of free markets or environmental regulation, to realize that something is going on that is important to our national energy situation with no one particularly in charge. After all, coal mining, transportation and existing uses drive tens of thousands of jobs and the economy of such disadvantaged states as West Virginia. Presidents and presidential candidates have decried our lack of a national energy policy for 30 years with meager results.
My point is otherwise: What does the overall national interest—economic, energy and environment—have to say about the relative use of coal vs. natural gas vs. petroleum vs. nuclear power? Should EPA’s rule, based on concerns for global warming and not immediate health and safety, trump everything else? Should we increase our reliance on natural gas at the expense of coal? Should we be at the mercy of market forces without regard to our long term, sustainable future? Should we simply use a bumper sticker (“Drill, baby, drill”) instead of reasoned policy?
What passes as policy is a series of regulatory silos each with its own raison d’etre—FERC, NRC, EPA, DOE. And, of course, Congress, some of whose members can’t wait to kill alternative energy policies (solar), decry subsidization for renewables while rejecting as nearly immoral attempts to eliminate out of date tax subsidies for oil and gas (Subsidies at today’s prices? Give me a break!). EPA’s new rule, in isolation from everything else, is merely another example of our lack of a coherent national policy on energy. It may be a good environmental rule, but is it good for the country?
Posted on April 12, 2012
Many environmental lawyers get involved in alternative energy development projects. But some may not have the engineering or technical background to understand some of the nuances of such projects.
Recently, a local municipal corporation installed three 1.5 MW wind turbines at its wastewater treatment facility, with the attendant publicity regarding reducing its electric energy consumption from the local distribution utility. The turbines have been up for some time but are not operating. Why not? Because, prior to erecting the turbines, the corporation did not negotiate, execute and implement an interconnection agreement with the local distribution company. And it may be some time before such agreement is executed and the interconnection is made.
Meanwhile, the turbines stand erect and motionless. While some may find this visually pleasing, what most do not realize is that wind effects on a motionless turbine – even when the turbine blades are feathered – produce considerable strain on the turbine components and may result in metal fatigue or breakage sooner than anticipated, with the consequent increase in unbudgeted maintenance and replacement costs. Such costs could have a material effect on the economic viability of the project.
Sign and implement the interconnection agreement first. You have been warned.
Posted on March 9, 2012
Even as a latent issue, subsidies to the oil and gas industry have the potential to be a political hot potato. But with President Obama putting them front and center in his recent speech at New Hampshire’s Nashua Community College, the issue joins the already crowded landscape of political fodder heading into the fall elections. President Obama’s “all of the above” energy program covers a variety of activities, including production of oil and gas, funding renewable energy sources, and encouraging innovation of new technologies. In the end, fossil fuels are an exhaustible source of energy that cannot be the total answer to our energy needs, as even oil and gas companies recognize. And they come with a real set of hazards, as the recent Deepwater Horizon settlement reminds us.
Although not directly part of his “all of the above” energy program, President Obama is rightfully addressing government subsidies for oil and gas that could be migrating towards increasing subsidies for solar farms and wind turbines. While fossil fuels will eventually run out, wind, solar, and biomass will not, but have yet to enjoy the level of support afforded to the oil and gas industry. According to a recent analysis of the economics of energy by experts at the Imperial College London and the UK Energy Research Center electricity from wind power may, in five years, be less expensive than electricity from natural gas in the U.K. if current levels of government subsidies were transferred to renewable energy sources.
While the study is specific to the United Kingdom, there are takeaways applicable in the U.S. First the analysis recognizes the important support that subsidies provided to oil, gas, and nuclear energy development when each were in infancy. Through those subsidies, energy companies were encouraged to develop technologies, survey areas that were geologically ripe for oil and gas exploration, and hire workers to help build up the industry. Second, now that oil, gas and, to a lesser extent, nuclear energy sources are more completely developed, those subsidies should be transferred to the development of renewable energy. In addition, the gains made by the wind and solar industry should not be set aside in search of the elusive promise of cheaper oil through more drilling. Fossil fuels will run out. If “all of the above” is to be a real strategy, then it must provide more of an equal opportunity for all sources of energy.
The Department of Energy recently announced $150 million in grants under its ARPA-E program. This money is intended for development of cutting-edge energy technologies so that they can gain the necessary traction to be self-sufficient. The announcement follows on the heels of an additional $30 million offered under the ARPA-E program toward development of natural gas-based vehicles. Both these numbers pale in comparison to the $4 billion in yearly subsidies for oil and gas developers. Even shifting half of the oil and gas subsidies into renewable and developing technologies could well make a dramatic difference in our overall energy future by encouraging the build-out of wind, solar, and biomass businesses into viable and self-sufficient industries. There will come a time for a full discussion of the value of energy subsidies as a whole, but this would provide a fair start toward creating parity with fossil fuels.
The Deepwater Horizon disaster is a reminder of the cost associated with use of fossil fuels. Significant government subsidies provided to the oil and gas industry played an important part in encouraging their initial and ongoing development. Programs such as ARPA-E can provide a jump-start for emerging energy technologies, and shifting subsidies can offer a chance for “all of the above” to be a real solution.
Posted on February 6, 2012
Just a few years ago, the price of natural gas was high enough to encourage development of liquefied natural gas (LNG) import terminals to receive LNG from foreign gas producers and then “re-gassify” such gas before sending it to existing interstate pipelines. Three such facilities were proposed in Oregon, after a failed attempt to site an LNG terminal in California. The presumption had been that due to the high capital cost of the terminal and related pipeline, and because of market constraints, there would be but one terminal on the West Coast.
That dynamic has shifted with discovery of abundant domestic shale gas deposits and attendant lowering of gas prices, and LNG terminal developers are thinking “export,” instead of import. Should this change in the LNG business model matter to anyone?
Of the proposed Oregon projects, two remain: at the Port of Coos Bay and on the Skipanon Peninsula in Youngs Bay, at the mouth of the Columbia. The projects have generated controversy, with opponents asserting public safety concerns (i.e. uncontrolled “blast zones”), harm to aquatic habitat, creation of a terrorist target, usurpation of land owner rights along the pipeline route, and all apparently with no benefit to Oregon because the gas may only be shipped to our evil sister to the south, California. Of course, these are all issues that the FERC and state permitting reviews are designed to uncover, assess and prescribe mitigation for and those processes are incomplete.
Natural gas prices have come down to the point that an LNG import facility may no longer make sense. On the other hand, demand for natural gas in Asia is high, particularly in Japan following the Fukushima nuclear disaster, which in turn raises prices. Thus, the two remaining Oregon LNG projects are actively considering conversion to export facilities, and there is enough global demand—and plenty of surplus Canadian and U.S. natural gas—that more than one would be needed to make much of a dent in that surplus. This result has enraged environmental activists, as though it is somehow unfair to change the economic model on which a proposed project is based.
There is nothing about a LNG export facility that is so different—either in form or impact on land or resources—such that it should affect how the public views LNG. The two concepts have approximately the same footprints, and to the untrained observer, would look the same. In the case of the Skipanon Peninsula project, tanks are the most prominent structures; import and export tanks are identical, except that an export facility would require only two, whereas an import terminal requires three. The dock/pier arrangements for import or export facilities are identical. The two concepts have very similar (and very limited) environmental impacts, all of which will be reviewed in detail in the various state and FERC regulatory processes. In addition, an LNG export facility would provide four times as many construction jobs (about 10,000 man-years) and almost twice the amount of long-term employment originally anticipated from the project. The project represents a $5 billion investment in a region with no apparent industrial development alternatives on the horizon, and with property tax rates right around 1%, such a project would infuse approximately $50 million in local annual tax assessments.
There are some who suggest allowing exports of LNG would raise domestic natural gas prices and thereby place the U.S. economy at a disadvantage. But of course the U. S. participates in a global economy and gas prices are driven by global market conditions. A commodity will find a market, seeking the highest prices available, wherever it originates. The U. S. exports approximately 50 million metric tons of grain every year and that probably raises U.S. domestic food prices a little, but would anybody seriously argue that we should stop grain exports?
Markets will determine whether a shift to exporting LNG makes economic sense. Environmental effects and other public interest issues related to an LNG export terminal and related pipeline projects should be judged on their merits by the federal and state agencies charged to do so.
Posted on December 29, 2011
According to news reports of the December 21 opinion rendered by the European Court of Justice, the ECJ’s decision upheld imposition of the European Union’s Emission Trading Scheme (“ETS”) upon non-EU airlines that take off or land at airports in an EU member state. However, those news reports fail to note what the ECJ did not decide.
In December 2009 the Air Transport Association of American and three US member carriers brought suit in the UK against the UK Secretary of State for Energy and Climate Change to reverse inclusion of non-EU airlines in the EU ETS. They argued that such inclusion violated the US/EU Open Skies Agreement precluding the signatories from imposing import restrictions, taxes, duties, and similar fees and charges on fuel used by air carriers in international air transport. They also argued that such inclusion violated the Chicago Convention and the Kyoto Protocol.
The Chicago Convention provides for adoption of international standards and recommended practices on air navigation “safety, regularity, and efficiency” by the International Civil Aviation Organization (ICAO), a United Nations specialized agency that oversees civil aviation. The ICAO has adopted aircraft noise and engine emission standards in Annex 16 to the Convention. The Chicago Convention also provides for resolution of signatory country disagreements over interpretation or application of the Convention and its Annexes by decision of the ICAO Council which can then be appealed to an arbitral tribunal or to the Permanent Court of International Justice (now the International Court of Justice). The Kyoto Protocol in turn provides for signatory states to address limitations on or reductions to greenhouse gas emissions from aircraft fuels through the ICAO.
For several years member signatories to the Chicago Convention have been considering mechanisms to address greenhouse gas emissions from commercial carriers. Spurred on by EU plans to impose its ETS on non-EU airlines, the ICAO hopes to have a mechanism in place by the end of 2012 for ICAO decisionmaking at its 2013 meeting. At the present time a number of market based mechanisms are being considered, including some form of emission trading, carbon taxes on fuel use, levies on departing passengers and cargo, and carbon offsets. The EU has said that it would exempt non-EU carriers from the EU ETS if they adopt “equivalent” measures.
In its decision the ECJ concluded, in the context of the UK court’s preliminary ruling, that it cannot examine the validity of the ETS under the Chicago Convention because the EU (as opposed to the EU member states who would perform their obligations under that Convention) was not a signatory to, and thus not bound by, the Chicago Convention. It also concluded that the Kyoto Protocol provisions for addressing greenhouse gas emissions from aviation fuel through the ICAO “cannot . . . be considered to be unconditional and sufficiently precise” to be relied upon by the plaintiffs in contesting application of the EU ETS. Thus, its rulings were limited to consideration of the Open Skies Agreement and customary international law. With respect to the former, the ECJ concluded that the tax and fee exemption for aircraft fuel used by carriers engaged in international travel between the EU and the US does not prohibit implementation of the EU ETS. The court likewise concluded that the EU Directive imposing the ETS was valid under customary law principles.
It remains to be seen what path the plaintiffs, or other interested countries or carriers, may choose to take regarding the court’s interpretation of the Open Skies Agreement and customary international law as they apply to the EU ETS. Even more interesting is the question of how the ECJ interpretation relates to the decisionmaking power vested in the ICAO. It is of course possible that the ICAO will implement “equivalent” measures for addressing greenhouse gas emissions before any further judicial decision is rendered. Nevertheless, additional legal action is highly likely, given the number of interested parties.