Upcoming in 2012: 10 Environmental and Energy Issues to Watch in the United States

This post was written by Lawrence Demase, Douglas Everette, Robert Frank, Arnold Grant, Todd Maiden, Jennifer Smokelin, Robert Vilter and David Wagner.

As we look forward to 2012, the environmental and energy attorneys at Reed Smith will be on top of a range of issues, and offer the following analysis of what we view, in no particular order, to be 10 key issues likely to affect you and your business in 2012. This post is based on input and analysis from Reed Smith attorneys across the United States. The 10 issues to watch are:

  1. Offshore wind power generation
  2. Renewable energy incentive programs
  3. Hydraulic fracturing regulation
  4. Aggregation
  5. Greenhouse gas litigation
  6. California's cap-and-trade program
  7. California's Green Chemistry program
  8. New mercury standards for coal and oil-burning power plants
  9. Fallout from CERCLA decision in Burlington Northern and Santa Fe Railway Co. v. U.S.
  10. Conflict minerals and disclosure requirements

Please return to blog regularly and participate in our quarterly teleseminar to get updates and analysis on these and many other environmental and energy issues.

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Slides and Audio from Reed Smith's January 25 Environmental and Energy Law Resource Teleseminar

On Wednesday, Reed Smith held its quarterly environmental and energy law resource teleseminar and the slides and audio are available for download. We were ambitious and discussed 10 key issues likely to affect you and your business in 2012. Our high level discussion was on the following:

  1. Offshore wind power generation
  2. Renewable energy incentive programs
  3. Hydraulic fracturing regulation
  4. Aggregation
  5. Greenhouse gas litigation
  6. California's cap-and-trade program
  7. California's Green Chemistry program
  8. New mercury standards for coal and oil-burning power plants
  9. Fallout from CERCLA decision in Burlington Northern and Santa Fe Railway Co. v. U.S.
  10. Conflict minerals and disclosure requirements

Be sure that we will monitor and analyze these issues and many other environmental and energy issues through the year on our blog and in future teleseminars.

Pennsylvania Seeks Comment on Revised Oil and Gas Erosion Control Permit

This post was written by  Jennifer Smokelin.

On January 20, the Pennsylvania Department of Environmental Protection (DEP) announced it will publish a revised version of its erosion and sediment control general permit for earth disturbance associated with oil and gas activities, along with four other supporting documents, including a draft permit application and a policy explaining the permit requirements. Look for publication in the Pennsylvania Bulletin. In reviewing the draft technical guidance, note that DEP will no longer offer expedited review of permit applications for projects that: have the potential to discharge sediment and runoff to exceptional-value or high-quality watersheds; have well pads that lie within floodplains; or would take place on contaminated lands. This may have a significant effect on some proposed oil and gas projects. The revisions mandate that staff will complete the non-expedited review within 60 days but DEP maintains the right to "stop the [60 day] clock" on a permit application if it has certain administrative or technical problems. The draft technical guidance also changes some documentation necessary when submitting a notice of intent to construct and provide guidance on "best management practices" for (1) erosion and sedimentation control, and (2) restoration after completion of the well.

DEP will accept comments on the documents from January 21 to March 21, 2012. Here's the fine print: written comments may be submitted on the draft technical guidance document for 60 days after publication in the Pennsylvania Bulletin. DEP will accept comments submitted by email; no comments submitted by facsimile will be accepted. Written comments should be submitted to Joseph Adams, DEP Office of Oil and Gas Management, P.O. Box 8765, Harrisburg, PA 17105-8765 or by email to josepadams@pa.gov. Be sure to include a return name and address in each email transmission.

Join Us on Jan. 25 for Reed Smith's Environmental and Energy Law Resource Teleseminar: Top 10 Environmental and Energy issues in 2012

Please join us for this upcoming one-hour teleseminar. As part of our quarterly teleseminar series, the Reed Smith Energy and Natural Resources group will provide insight into the top ten environmental and energy issues to watch in 2012. This complimentary program is on Wednesday, January 25, 2012 from 12 to 1 pm ET. Please use the link below to register.

Topics will include:

  • Hydraulic fracturing regulation
  • Aggregation
  • Greenhouse gas litigation
  • California's cap-and-trade program
  • Chemicals regulation (possible TSCA reform and California's Green Chemistry)
  • New mercury standards for coal and oil-burning power plants
  • Renewable energy incentive programs
  • Offshore wind power generation
  • CERCLA: Fallout from Burlington Northern and Santa Fe Railway Co. v. U.S.
  • Conflict minerals and disclosure requirements

Speakers: Larry Demase (Pittsburgh), Douglas Everette (Washington D.C.), Bob Frank (Philadelphia), Arnold Grant (Chicago), Todd Maiden (San Francisco), Jennifer Smokelin (Pittsburgh), Robert Vilter (New York), and David Wagner (Pittsburgh). To read more about our speakers, please click the attorney's name.

After registration, you will be provided with the dial-in number and a link to view the presentation on the web. At the conclusion, you will have the opportunity to participate in a question-and-answer session. We look forward to you joining us!

TO REGISTER: Please, click here.

Legislation Adopted in West Virginia Raises Rates on Shale Drills

This post was written by Luke Liben and Nicolle Bagnell.

As anticipated, on December 22, West Virginia’s Governor Earl Ray Tomblin signed the Natural Gas Horizontal Wells Control Act, calling it “a milestone piece of legislation and a significant achievement in [West Virginia’s] history.” You can find a summary of the Act in an earlier post but note that this legislation increases the fee for wells from $400 per well to $10,000 for an initial well, and another $5,000 for each additional well placed on a single pad. It also requires the disclosure of fracking additives to the West Virginia Department of Environmental Protection.

Thirteen More Substances Proposed for EU Ban

This post was written by David Wagner.

As we discussed early in 2011, the European Commission agreed to ban six substances under the European Union’s REACH law. Now, with the year winding down, 13 more substances have been submitted to the Commission for inclusion of the list of banned substances. On December 21, the European Chemicals Agency formally submitted to the European Commission a list of 13 substances it said should be banned under REACH. If a ban is imposed, companies will be able to request authorization to continue to use the substances in specific cases if no alternatives are available.

The substances are seven chromium compounds (chromium trioxide, chromic acid, sodium dichromate, potassium dichromate, ammonium dichromate, potassium chromate, and sodium chromate), five cobalt compounds (cobalt sulphate, cobalt dichloride, cobalt dinitrate, cobalt carbonate, and cobalt diacetate), and the solvent trichloroethylene. These thirteen substances already are listed as “substances of very high concern” under REACH.

Proposed Legislation in Pennsylvania Would Give Public Utility Commission Regulatory Powers over Gas Lines

This post was written by Luke Liben and Nicolle Bagnell.

The Pennsylvania Senate recently approved House Bill 344 that would give the state’s Public Utility Commission (PUC) regulatory oversight of any and all natural gas pipelines in Pennsylvania. Pursuant to this power, the PUC would be permitted to conduct safety inspections and investigations with the U.S. Department of Transportation’s Pipeline and Hazardous Material Safety Administration. PUC would not, however, be required to deem any pipelines as public utilities, and the bill therefore avoids the extension of eminent domain powers. The bill’s sponsor, Representative Matt Baker, emphasized that “[o]ut of the 31 natural gas producing states in the nation, we are one of only two that does not have statutory authority to regulate natural gas pipelines within its boundaries.” Apparently agreeing with Rep. Baker that “[t]his is a public safety issue that needs to be corrected as soon as possible,” the bill was supported by the PUC, the United States Department of Transportation, and the Pennsylvania Consumer Advocate, among others.

The bill now goes back to the Pennsylvania House for concurrence.

Proposed Legislation in West Virginia Would Raise Rates on Shale Drills

This post was written by Luke Liben and Nicolle Bagnell.

Earlier this week, the West Virginia House of Delegates approved the Natural Gas Horizontal Wells Control Act that would increase the fee for wells from $400 per well to $10,000 for an initial well, and another $5,000 for each additional well placed on a single pad. These funds, in part, would be used by the state to hire additional well inspectors. The legislation also increased the presumption of contamination as a result of water wells to a distance of 500 feet, and would require the disclosure of fracking additives to the West Virginia Department of Environmental Protection. Well casing and drilling requirements, survey notices and other operator obligations to surface owners, and permit requirement and water management plans would also be altered by the legislation.

The governor is expected to sign the legislation.

What to Make of the Durban Climate Change Agreement?

This post was written by Jennifer Smokelin.

The crowning achievement of COP 17 is the Durban Agreement. But is it a significant step toward implementing climate change policy in the global arena or basically an "agreement to do nothing for now"? The answer is, well, both.

Optimists herald the great achievement that’s been made in COP 17, the Durban Agreement. As quoted in a press release from the UN Framework Convention on Climate Change: "Countries meeting in Durban, South Africa, have delivered a breakthrough on the future of the international community’s response to climate change, whilst recognizing the urgent need to raise their collective level of ambition to reduce greenhouse gas emissions to keep the average global temperature rise below two degrees Celsius."

In the Durban agreement, countries agreed to negotiate a new climate change deal by 2015 to take force by 2020. It would assign emissions-reduction responsibilities to all major emitters, not developed countries only. The 194-party conference agreed to start negotiations on a new accord that would ensure that countries will be legally bound to carry out any pledges they make. Currently, only industrial countries have legally binding emissions targets under the 1997 Kyoto Protocol and the Protocol regulates only about a third of greenhouse gas emissions. These commitments expire next year, but they will be extended for at least another five years under the Durban Agreement adopted at COP 17, a key demand by developing countries seeking to preserve the only existing treaty regulating carbon emissions.

Note that China and India are not regulated under the Kyoto Protocol but have become two of the world's three biggest polluters in the 14 years since the Protocol was first approved. Under the Durban Agreement, China and India would have binding emission reduction commitments when the new protocol takes effect. By signaling their willingness to take on emissions cuts later, China and India won backing to extend the Kyoto Protocol's reductions past 2012, which will also extend the Clean Development Mechanism (CDM). Prices of CDM certificates have fallen by 54 percent in the past year as the weaker economy cut demand for offsets and concerns rose about the continuation of the program. China and India benefit from the CDM program because many projects are sited in those countries - and a higher certificate price benefits those projects.

From a glass half-empty perspective, the details of the big agreement don’t sound quite so definitive. No real treaty was reached. All that happened was that everyone agreed to try and reach a legal agreement by 2015. And if they do, it won’t come into effect until 2020. So not much happens for nine more years.

The hoopla surrounding the Durban Agreement is indicative of the fact that many watchers felt there was a very real prospect that nations would completely walk away from any organized commitment with regard to GHG regulation - and the fact that this did not happen in Durban is big news.

Shale Oversight Legislation in Pennsylvania Could Be Approved This Year - Stay Tuned

This post was written by Jennifer Smokelin.

As we've dicussed, the Pennsylvania House of Representatives and the Pennsylvania Senate passed versions of shale oversight legislation last month. The measures differ in several ways, including how to update the state's environmental rules and method for implementing and distributing a drilling impact fee. The House proposal, which mirrors much of what the governor outlined in his Marcellus Shale policy announcement, would allow for a fee on producing wells of up to $40,000 per well in the first year and decreasing annually to $10,000 in years four through ten. The Senate has offered a fee that starts at $50,000 per well, decreasing through a period of 20 years -- twice as long as the assessment in the House bill. There are other differences in the two bills that need to be discussed as well. Supporters had talked about getting a compromise piece of legislation on to the governor's desk by end of the year and time is running out -- the Senate has three session days left on the calendar for 2011, with six for the House. We'll keep you posted.

USEPA Draft Report Indicates Likely Ground Water Contamination From Fracking

This post was written by Mark Mustian.

On December 8, U.S. Environmental Protection Agency (USEPA) Region 8 released a draft report detailing the results from an investigation of suspected ground water contamination from natural gas drilling and gas production near Pavillion, Wyoming. After four rounds of sampling, detailed analysis, and an evaluation of various explanations, USEPA concluded that "the data indicates likely impact to ground water that can be explained by hydraulic fracturing." Furthermore, EPA stated that the data suggested "enhanced migration of gas has occurred within groundwater at depths used for domestic water to supply and to domestic wells." In its study, USEPA measured a variety of organic compounds, including benzene, xylenes, gasoline range organics, and diesel range organics. USEPA also measure measured pH, alkalinity and inorganic chemical compounds which were indicative of chemicals used in fracking solutions. The concentrations and depth profiles were such that USEPA was unable to identify an alternative contamination scenario which would explain the findings. The explanation which best fit the facts was that "inorganic and organic constituents associated with hydraulic fracturing have contaminated ground water supply at and below the depth used for domestic water supply."

Though opponents of hydraulic fracturing may seize upon this report as proof of the dangers of shale gas production, it is important to look beyond the surface of this report to understand that the situation in Pavillion, Wyoming is unique, and is not indicative of conditions in other parts of the country. Hydraulic fracturing in the Pavillion gas field occurred within zones of gas which were located within an underground source of drinking water. Hydraulic fracturing occurred at unusually shallow depths in the region, while many domestic water wells are screened unusually deep. USEPA's review of well completion reports showed instances of poor cement bonding on the completed wells. Furthermore, the geology of the region shows little lateral and vertical continuity of hydraulically fractured tight sandstones and no laterally continuous shale units to stop upward vertical migration of constituents of hydraulic fracturing. Finally, there were numerous unlined surface pits in the area used for storage of drilling wastes and produced water. In other words, the conditions in the region were unique and not like the conditions present in other parts of the country where hydraulic fracturing is utilized.

The report is interesting, and in some ways, useful. But it is just one link in a long chain of information which much be collected in order to properly understand the possible impacts of hydraulic fracturing and shale gas production.

USEPA Comments on Pennsylvania's Draft Aggregation Policy

This post was written by Luke Liben and Nicolle Bagnell.

As we've discussed, the Pennsylvania Department of Environmental Protection (PADEP) issued a draft policy regarding limitations on aggregating emissions from Marcellus shale gas facilities on October 12, 2011. The draft policy utilizes a distance of 1/4 mile as the main criteria for determining if plants in proximity to one another should be viewed as individual minor sources of emissions, or one major source of emissions. In a letter dated November 21, 2011, Diana Esher of the Environmental Protection Agency (EPA), Region III Air Protection Division, reportedly said the new draft policy “appears to alter the conventional way in which aggregation determinations have been made federally and by PADEP.” Ms. Esher also reportedly indicated that the draft policy could be interpreted to allow emissions sources to escape otherwise strict emission standards by shaking the designation of a “major” source. However, as noted by Kathryn Klaber, head of the Marcellus Shale Coalition, the bright line 1/4 mile test provides an easy to understand, easy to enforce, and predictable rule. The public comment period for PADEP’s draft policy closed on November 21, 2011.

USEPA Proposes Changes to March 2011 Rules for Boilers, Process Heaters and Incinerators

This post was written by Mark Mustian.

On December 2, the U.S. Environmental Protection Agency (USEPA) proposed revisions to a series of controversial regulations aimed at controlling emissions of hazardous air pollutants (HAPs) from industrial, commercial, and institutional boilers. These revisions are to regulations finalized in March, and then delayed in May. The regulations in question are actually three separate, but interrelated regulations. USEPA is proposing revisions to emission standards for (1) Major Source Industrial, Commercial, and Institutional Boilers and Process Heaters; (2)Area Source Industrial, Commercial, and Institutional Boilers; and (3) Commercial/Industrial Solid Waste Incinerators. By way of terminology, know that a major source is a stationary source which has the potential to emit 10 tons per year or more of any hazardous air pollutant or 25 tons per year or more of any combination of hazardous air pollutants. Also, an area source is a stationary source that is not a major source. And a commercial/industrial incinerator is any unit at a commercial or industrial facility which combust solid wastes.

The new proposed regulations are revisions to the regulations finalized back in March. USEPA is not proposing to revoke the previously finalized regulations. Instead, they are proposing to amend the existing regulations, based upon additional data and upon the input from the regulated community and interested parties. The impact of each proposal is discussed after the jump.

As you'll see below, USEPA is not proposing to significantly modify the structure of regulation developed for the March rulemaking but the proposed changes will increase flexibility and reduce some monitoring requirements and cost. Nonetheless, we still expect that many existing boilers will not be able to comply with the new requirements. In order to comply, they will likely need to look at alternatives, such as fuel switching, boiler rebuild or add-on controls, which will likely increase costs for the facility. The facilities most affected by these regulations will be major source facilities, facilities operating large solid fuel boilers, and solid waste incinerators. Those groups in particular need to start preparing for compliance. Unless the regulations get tossed out by the courts, it is likely that the requirements in their current form will be imposed upon the regulated community.

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Where Do Things Stand in the Second Week of the U.N's Climate Change Conference?

This post was written by Jennifer Smokelin.

After one week of discussions at COP 17 in Durban, serious doubt hangs over the future of a new commitment period under the Kyoto Protocol, whose first commitment period on tackling climate change expires at the end of next year. The other major issue for debate is how to obtain financing to help poorer nations adapt to a warmer planet in an economic environment where the developed world wrestles with sovereign debt problems and a slow economy. Negotiations are not progressing well on this front either.

Regarding the future commitment period under the Kyoto Protocol, know that the commitment period for the developed nations to cut emissions by a minimum of five percent is just one clause in the Kyoto Protocol, the companion legislation to the United Nations Framework Convention on Climate Change (UNFCCC). Without a new commitment period, the rest of the related agreements remain intact, but do not enforce action on lowering emissions.

A further commitment period is unlikely because the European Union, a large supporter until recently of a new commitment period, has been undermined by the huge strain it is under from a sovereign debt crisis that is threatening to destroy the Euro. It is hoped a credible plan to prop up the Euro will emerge at an EU summit on Friday, which is also the last day of COP 17. But that is likely too late to have any effect at COP 17.

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Climate Change Talks in Durban Kick Off Amid Low Expectations

This post was written by Jennifer Smokelin.

Durban, South Africa is the setting for the 17th Conference of the Parties (COP 17) to the U.N. Framework Convention on Climate Change (UNFCCC). The two weeks of meetings will draw representatives of 194 countries and nearly 12,000 delegates. The delegates are expected to include several heads of state and government, ministers, UN officials, members of civil society and journalists. COP 17 is scheduled to run until December 9.

The COP 17 agenda includes efforts to make progress on a new commitment period for carbon reduction under the Kyoto Protocol and to provide assistance for developing nations facing the worst effects of climate change. Nonetheless, COP 17 is not expected to make much progress on either agenda item. In the current global economic crisis the linkages between emission reduction and economic growth will make any progress on emission reduction a hard sell for politicians and governments back home. Given the likely failure to achieve these big-ticket agenda items, what accomplishments can we expect in Durban? According to the UNFCCC, the discussions will seek to advance, in a balanced fashion, the implementation of the Framework Convention and the Kyoto Protocol, as well as the Bali Action Plan, agreed at COP 13 in 2007, and the Cancun Agreements, reached at COP 16 last December. What does that mean? Delegates in Durban will be addressing relatively small and, to many, arcane questions of process and finance. Negotiators, having entered the United Nations climate talks at Copenhagen two years ago with grand ambitions and having left with disillusion, are now defining expectations down and hoping to keep the process alive through modest steps. Last year in Cancun, Mexico, delegates produced an agreement that set up a fund to help poor countries adapt to climate changes, created mechanisms for the transfer of clean-energy technology, provided compensation for the preservation of tropical forests and enshrined the emissions reductions promises that came out of the Copenhagen meeting. Delegates in Durban will look to produce similar outcomes.