Environmental Law ReSource : Environmental Lawyer & Attorney : Reed Smith Law Firm : Climate Change, Sustainability

This post was written by Nicolle Snyder Bagnell.

Pennsylvania Department of Environmental Protection's Secretary John Hanger announced today that the Department plans to open a new office of its Oil and Gas Management division in Scranton, Lackawanna County, Pennsylvania. Although the exact location has not yet been decided, the purpose of the office will be to decrease travel time and locate regulators closer to the oil and gas wells they regulate, particularly the new Marcellus Shale wells planned in that part of the state. You can find the Department's press release here.

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This post was written by Nicolle Snyder Bagnell.

On January 8, 2010, West Virginia's Department of Environmental Protection (WVDEP) finalized its industry guidance for oil and gas drilling in the Marcellus Shale. The guidance focuses on large water volume fracture treatments and addresses the use and disposal of frac fluids. As discussed in the guidance, horizontal drilling, coupled with large volume hydraulic fracture treatments, is becoming a common exploration technique. Large amounts of water mixed with sand and other additives are pumped into the shale formation under high pressure to fracture the rock around the well to create a permeability conduit to the well bore. Water used in the hydraulic fracturing process, often referred to as “frac fluid,” must be processed in one of three ways. It can be injected in permitted disposal wells, treated to remove generated pollutants then disposed of properly, or reused.

The WVDEP also added a "Well Work Permit Application Addendum" as part of its natural gas drilling permit application requirements.

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This post was written by Nicolle Snyder Bagnell.

Last week the U.S. Environmental Protection Agency (USEPA) launched its new "Eyes on Drilling" tipline. The toll free number and email address were created by USEPA to help address growing public concern about oil and natural gas drilling in the Marcellus Shale. In particular, they are asking citizens to report illegal disposal of wastes or other suspicious activity related to oil and gas drilling. Information about the tipline, as well as what the agency is asking citizens to include in their report, can be found here.

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This post was written by Nicolle Snyder Bagnell.

Pennsylvania's Department of Environmental Protection (DEP) has just made available its proposed draft regulations for public comment. Comments must be received by the DEP by March 2, 2010. A copy of the regulations can be found here.

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This post was written by Nicolle Snyder Bagnell.

In a move described as an "Aggressive Action to Protect Public, Environment as Marcellus Drilling Operations Expands," Pennsylvania's Governor Ed Rendell directed the Pennsylvania Department of Environmental Protection ("DEP") to hire 68 new staff members today to work on natural gas well inspections and related oil and gas regulation. The additions will be made despite a moratorium on hiring at the DEP and will be funded entirely from the higher permit fees instituted last year for oil and gas drilling permits. In addition, Rendell commented on the DEP's proposed amendments to the current oil and gas regulations, which will be available for public comment beginning tomorrow, January 29, 2010, saying that the new regulations will:

• Require the casings of Marcellus Shale and other high-pressure wells to be tested and constructed with specific, oilfield-grade cement;
• Clarify the drilling industry’s responsibility to restore or replace water supplies affected by drilling;
• Establish procedures for operators to identify and correct gas migration problems without waiting for direction from DEP;
• Require drilling operators to notify DEP and local emergency responders immediately of gas migration problems;
• Require well operators to inspect every existing well quarterly to ensure each well is structurally sound, and report the results of those inspections to DEP annually; and
• Require well operators to notify DEP immediately if problems such as over-pressurized wells and defective casings are found during inspections.

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This post was written by Larrry Demase, Jennifer Smokelin, Todd Maiden and David Wagner.

In this client update, Reed Smith attorneys (including COP15 delegates Larry Demase and Jennifer Smokelin) reflect on what transpired in Copenhagen and offer some advice regarding what regulated entities should do next.

Among other issues, the update discusses how to position your GHG-intensive business to minimize compliance costs in a carbon-constrained economy. It also addresses how to position your GHG emission reduction credits to serve as an asset. For example, regulated entities should make sure they have documented and verified all of the GHG credits to which they are entitled. One group of potential GHG credits that comes to mind after the economic downturn last year are credits available as a result of reduced GHG emissions. Consider: Have your facilities reduced GHG emissions in the past year, because of plant idling or reduced production capacity? Have you reduced your carbon footprint measurably and permanently? Or are you beginning to reduce your GHG emissions to improve efficiency? If so, some of these reductions in GHG emissions may be eligible for credits. These credits, which must be properly documented and verified, could potentially be sold or traded on various mandatory and voluntary markets (EU-ETS and/or the Chicago Climate Exchange, for example), or banked for compliance with the inevitable domestic cap-and-trade program.

In short, there may be opportunity here. Reed Smith can work with you to determine which GHG reductions at your facilities are eligible for credits, and help plan how to maximize the potential opportunities, or even how to profit from these credits.

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This post was written by Larry Demase and Jennifer Smokelin.

As they return from two weeks at the COP in Copenhagen, Reed Smith lawyers Lawrence Demase and Jennifer Smokelin reflect on what transpired and offer some advice regarding what to look for in the future:

The Copenhagen Accord, negotiated by only five countries and outside of the UN process, lays out the high-level agreements in principle of the largest emitters that are not party to the Kyoto Protocol: China, the United States, and India. The most significant outcome is the agreement with regard to greenhouse gas (GHG) reduction by non-Kyoto parties, particularly China and the United States. With China's use of oil increasing at an incredible rate, even modest commitments (like a decrease in GHG intensity), could be a significant undertaking. The impact of the Copenhagen Accord may be felt more in the price of oil than in the reduction of emissions of GHG.

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This post was written by Larry Demase.

Just like our Day 1 report from Copenhagen, we are back to a bunch of “C” words. This time they include: commitments, cost, China, closed door meetings, and, of course, confusion. We will certainly post a COP-15 recap and try to explain “what it all means.”

As of this 22:00 GMT posting, it is being reported that “developed and developing countries have now agreed to listing their national actions and commitments, a finance mechanism, to set a mitigation target of 2 degrees Celsius and to provide information on the implementation of their actions through national communications, with provisions for international consultations and analysis under clearly defined guidelines.”

It remains to be seen how this agreement compares to the last (and fourth) draft of the “Copenhagen Accord”. The fourth draft had called for global GHG emissions to be cut by 50% from 1990 levels by 2050, with Annex I Parties (industrialized nations except the United States) committing to reductions of 80% by the same time. Other nations would “implement mitigation actions”, in the form of national action plans, that would be updated every two years. The fourth draft also acknowledged the scientific view that nations need to keep emissions below a level that stops the global average temperature exceeding a 2 degrees Celsius increase above pre-industrialized levels.

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This post was written by Larry Demase.

Prior to being replaced, Connie Hedegaard analogized the last minute nature of the COP to procrastinating elementary school students, stating, “It’s just like schoolchildren. If they have a very long deadline to deliver an exercise they will wait for the last moment…. It’s basically as simple as that.” With one full day left, COP-15 is in countdown mode and we’ll see if the parties finish their homework on time.

Underscoring the urgency, political heavyweights are here and making the rounds, including Prime Minister Gordon Brown, US Secretary of State Hillary Clinton, former Vice President Al Gore, and Senator John Kerry. In a plenary session, Prime Minister Brown stated that there was no insurmountable obstacle to an agreement in Copenhagen which could be turned into a binding treaty in 6-12 months. He called for (a) long term goal of 2 degree temperature increase; (b) immediate (ok, year 2012) aid of $10 billion to developing countries; (c) $100 billion in long term financing to developing countries; and (d) a commitment by all countries to reduce emissions to a degree consistent with their “highest ambition”.

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This post was written by Larry Demase.

In addition to the official proceedings, much of the activity at and around the COP centers on what is not said or said unofficially or (hearsay notwithstanding) just heard from other delegates. For example:

• At a side event this morning hosted by the International Energy Agency, the Swedish Deputy Prime Minister, who was the keynote speaker, did not discuss the resignation of Connie Hedegaard, the Danish chairwoman in charge of COP-15. Lars Lokke Rasmussen, the Danish Prime Minister took over for her purportedly because he was not happy with pace of negotiations. That is in contrast with the official statement that the takeover was planned. Regardless, there is buzz among delegates that the Danish Prime Minister is trying to politically hijack the conference.

• A Japanese negotiator lamented that he stayed up all night to negotiate and was depressed over prospects – although he said he thought there was still a chance for a political agreement. 

• The European Union wants a reduction based on 1.5 degree (C) in temperature but there has been significant discussion among delegates that this level of reduction is unworkable.

Scuttlebutt, protests and general chaos aside, where does that leave us? For the next two days, the COP is left to focus on the deadlock in the negotiations over payment to the developing countries and the level of emission target reductions. 

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This post was written by Larry Demase.

It’s time to add a corollary to our earlier statement that it’s not just what you know and who you know but what you are called. Our corollary is that it’s also what kind of credentials you have.  The Bella Centre was a mob scene this morning and it turned away thousands of registrants. Still, for the 20,000 registrants who didn’t get in, it’s hard to say what they missed. 

The high level negotiations between countries have reached a critical point with various alliances being formed on a number of issues. Nonetheless, the possibility of a broad based agreement may be fading. Of course, things may change but the Kyoto Protocol parties (along with the United States) are likely to leave with an agreement to finish their work either at a June meeting or at the next annual U.N. conference in late 2010 in Mexico City.  

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This post was written by Larry Demase.

After a relatively quiet weekend (in which we took a two-day blogging break), tempers flared as today was a day of protest at the COP.

First, observer-delegate protests. Protestors - including a group of activists dressed as polar bears urging the talks to “save the humans” - inside the Bella Center delayed registration and attendance: five thousand delegate hopefuls were queued up outside the Bella Center trying to get in at 2 p.m., most having waited in the weather since 7:30 a.m. this morning.

Then, party-delegate protests. For five hours today (Monday), just four days before world leaders are due to forge a deal in Copenhagen, African countries backed by 135 developing countries including China and India staged a boycott of negotiations claiming rich nations are trying to avoid new, legally binding promises by ditching the Kyoto Protocol; the boycott ended when rich nations assured the Africans they were willing to discuss Kyoto commitments However, precious time was lost – in a week where there was already no time to spare (see blog posts from last week re key negotiators’ lament for “more time”).

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This post was written by Jennifer Smokelin.

Overtaking the position from American golf star Tiger Woods, “Copenhagen” (as in COP-15) is now the number one search query on the world’s leading internet search engine Google, according to Treehugger.com.  And the numbers continue to add up: 113 heads of state are scheduled to arrive next week, the most at any Conference of the Parties (COP).  There have been over 35,000 registrants for an event center that can only hold 15,000. By comparison, Kyoto, where the Protocol was agreed to, had 11,000 registrants. Now, in a move never seen before at a COP, the UNFCCC has resorted to implementing a secondary badge system to restrict access, mostly for non-governmental organizations, next week.  That certainly underscores the unprecedented convergence of public opinion and politics on this issue.

But will the COP be successful? That depends, of course, on how you define success. Todd Stern, the top US climate negotiator said “absolutely I think there is a deal to be done here”. But what are the terms? Let’s consider an easier question: are the negotiators making progress? At the early morning plenary COP/MOP (Meeting of the Parties), chairs of the key working groups KP and LCA put forth drafts that seemed at least to Executive Secretariat of the UNFCCC Yvo de Boer to set forth the beginnings of a framework for meaningful action.   Some experts state that the negotiations are precisely where they need to be before heads of state step in: all issues open but the choices sharpened. But Mr. de Boer admitted that now, going in to the weekend (not waiting until midweek), was the time to focus on the “big picture” items, e.g., whether the world should seek to keep global temperatures from rising beyond a ceiling of either 2.7 or 3.6 degrees Fahrenheit above pre-industrial levels and what countries should commit to with regard to short term and long term financial aid. On the latter issue, the European Union stepped up and pledged $3 billion in climate aid to poor countries. Let’s see the United States match that.

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This post Is written by Jennifer Smokelin.

It’s Day 4 of the Conference of the Parties (COP) and there is still some confusion among non-governmental groups (NGOs) – and let’s hope not among the Parties – as to the differing responsibilities of the two working groups at the COP: the Ad Hoc Working Group on Long-Term Cooperative Action under the Climate Convention (AWG-LCA) and the Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG-KP) [see Day 2 post for details]. 

At today’s AWG-KP civil society briefing, a question from the floor asked how the AWG-KP working group was progressing with regard to the Nationally Appropriate Mitigation Actions (NAMAs) and certain financing issues.  After consultation with the KP committee chairs on the dais, Chair John Ashe (Antigua and Barbuda) carefully explained that the question from the floor got it wrong:  this was the briefing for the “good guys” - you know, the ones who have already made commitments - and that questions regarding NAMAs and financing were being discussed by the AWG-LCA (by implication, the not so good guys).  Care to take a guess where the United States falls? 

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This post is written by Jennifer Smokelin.

As I think back on last evening’s buzz and today’s speeches, including remarks by USEPA Administrator Lisa Jackson at the Conference of the Parties (COP), the loud speaker system at the nearby United States’ pavilion blares an old Marvin Gaye song: “it takes two, baby. Me and you, just takes two.”  And one wonders whether the US delegation has resorted to delivering a subliminal musical message to industrialized countries (Annex I parties) and developing countries (Annex II parties) when it comes to greenhouse gas (GHG) emission reductions. 

Last evening and into today, much of the buzz at the Bella Centre in Copenhagen focused on a “Danish Text” for a political agreement on climate change. It’s been criticized as favoring industrialized countries by seeking to preserve their economic dominance. Another text believed to be drafted by China favored, not surprisingly, developing countries. The Chinese text, for example, made no mention of specific commitments by developing countries. Also weighing in today was Todd Stern, the top U.S. climate negotiator. He emphasized that any international climate change agreement must include commitments from developing, especially fast-growing, countries such as China. This takes us back to what we mentioned in our Day 1 posting, namely, that the four issues capturing the most attention in Copenhagen center on industrialized targets, commitments to and by developing countries, financing and the legal shape of the agreement.   So to address climate change in a meaningful way, just sing along: “To make a dream come true, it just takes two.”

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This post was written by Jennifer Smokelin.

Here in Copenhagen, it’s not just what you know and who you know but what you are called. In addition to the government negotiating teams, the delegates are categorized by acronyms: BINGOs, RINGOs, ENGOs, YUNGOs, and several others. As delegates for the Environmental Markets Association, my colleague Larry Demase and I are BINGOs: Business and Industry Non-Governmental Organizations. (RINGOs are Research-oriented and Independent NGO, ENGOs are Environmental NGOs and YOUNGOs are Youth NGOs). In addition to observing the negotiations, these additional groups organize side events and daily briefings with negotiators to ensure that all key issues are considered and addressed in the climate negotiations.

And to follow the climate negotiations, there are a few more acronyms to learn. In 2007, the Conference of the Parties adopted the Bali Action Plan and Bali Roadmap. The key negotiating groups under the Bali Action Plan and Roadmap are the Ad Hoc Working Group on Long-Term Cooperative Action under the Climate Convention (AWG-LCA) and the Ad Hoc Working Group on Further Commitments for Annex I Parties under the Kyoto Protocol (AWG-KP). The names for both groups are fairly self-explanatory. The AWG-LCA focuses on long-term cooperation including mitigation, adaptation, finance and technology/capacity-building. The AWG-KP focuses on emission reductions by Annex I countries (i.e., developed countries) beyond 2012. The road for both of these groups is supposed to end with reports for the larger Conference of the Parties (COP-15) to consider in Copenhagen at the end of this week.

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This post was written by Jennifer Smokelin.

As you know, the United Nations climate conference began today in Copenhagen, Denmark. And Reed Smith is here. Actually it’s the 15th conference of its kind and it is properly known as Conference of the Parties or COP-15 under the United Nations Framework Convention on Climate Change (UNFCCC). COP-15 may not yield a new global climate treaty with every minor detail in place. But hopefully it will close with agreements on four political essentials, thereby creating some clarity the world – not least the financially struck business world – needs. Stay tuned to this site to find out, day by day, how close the parties some on these issues.

Four issues to follow are:

1. How much are industrialized countries willing to reduce their emissions of greenhouse gases? 
2. How much are major developing countries such as China and India willing to do to limit the growth of their emissions? 
3. How is the help needed by developing countries to engage in reducing their  emissions and adapting to the impacts of climate change going to be financed?
4. How is that money going to be managed?

As crowds of people arrive in Copenhagen, and amid an assortment of climate-related side events such as Hopenhagen Live, COP-15 opened today. Speakers focused on a lot of “C” words: how the conference marks the culmination of a two-year negotiating process to enhance international climate change cooperation, how countries and the negotiations must be constructive, and how there was hope for consensus. 

Much of the news for the day, it seems, was back in the United States. The U.S. Environmental Protection Agency (USEPA) announced its final endangerment finding that concludes greenhouse gas emissions endanger public health and welfare. The finding does not include any proposed regulations, but it will pave the way for several pending EPA rules. For example, USEPA will be able to finalize draft regulations to impose the first-ever federal tailpipe standards for greenhouse gases and to require the largest industrial sources to install the best available control technology to curb their emissions. EPA is expected to finalize both of those rules by March 2010.

The determination is expected to add to the Obama administration’s bargaining power in the absence of comprehensive U.S. energy and climate legislation. Also, President Obama shifted his visit to the Copenhagen talks from this week to the last day, indicating an increase in the administration’s commitment to, and hopes for, a successful outcome. The President also indicated that there appears to be an emerging consensus for developed nations to mobilize $10 billion a year by 2012 to support climate change adaptation and mitigation in developing countries.

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This post was written by David Wagner.

The final rule implementing USEPA's Mandatory Greenhouse Gas Reporting Program was published in the Federal Register on October 30, 2009, and the rule will become effective on December 29, 2009.  For more information and an analysis of the rule, please review our earlier posting.

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This post was written by Nicolle Bagnell and Stephanie Hadgkiss.

The Pennsylvania Department of Environmental Protection has fined Cabot Oil and Gas Corporation $56,650 following three spills which occurred over the course of one week at Cabot's Marcellus Shale natural gas drilling sites in Susquehanna County, Pennsylvania. The fine was assessed as for violations of the Clean Streams law, Solid Waste Management Act and the Oil and Gas Act.

In addition to the fine, from September 24 to October 16, the DEP imposed a three-week halt of hydraulic fracturing performed by Cabot in Susquehanna County. Hydraulic fracturing is a drilling technique being used to maximize natural gas extraction from the Marcellus Shale. A mixture of water, sand and other substances (sometimes referred to as "frac fluid") is forced into tiny fractures in underground shale rock layers at high pressure in order to release trapped natural gas.

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This post was written by Rose Standifer and Jennifer Smokelin.

Mandatory reporting of greenhouse gases (GHG) is now required nationwide. On Tuesday, September 22, 2009, the U.S. Environmental Project Agency (EPA) issued its Final Mandatory Reporting of Greenhouse Gases Rule. The final rule requires mandatory reporting of GHG from most large GHG emissions sources in the United States. The stated purpose of the rule is to collect accurate and timely emissions data to inform future policy decisions. Reporting requirements begin on January 1, 2010. Initial reports, covering emissions during 2010, are due on March 31, 2011.

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This post was written by Indeg Kerr, Siobhan Hayes and Tim Foster.

UK businesses need to know their carbon footprint because in 2010 the Carbon Reduction Commitment Order will apply. Since our CRC posting in December 2008, draft regulations have been published and are now subject to public consultation. This remains a scheme where businesses using a substantial amount of energy will have to report on their energy consumption, buy carbon allowances based on projected carbon emissions for each scheme year then surrender them at the end of each year when energy use is known. A league table will be published by the Environment Agency (EA) who will administer the scheme showing the relative energy efficiency of all those in the program. The best performing businesses will receive a refund of some of the costs of the allowances plus a bonus but the worst performing businesses will pay a penalty.

Some industries are high intensity energy users and already have to comply with the EU’s Emissions Trading System. The CRC scheme will capture lower intensity energy users who used a significant amount of electricity in 2008 and may include large offices, chains of retail outlets, hotels, banks, chains of restaurants as well as industry.
This posting outlines the types of business that may need to comply with the CRC scheme, the basic requirements of the program, some cost issues, and next steps to consider.
 

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This post was written by Nicolle Snyder Bagnell and Stephanie Hadgkiss.

Facing a projected budget deficit of $2.3 billion, Pennsylvania Governor Ed Rendell has proposed a "severance" tax on gas extracted from the Marcellus shale formation, the proceeds of which would go to the General Fund in order to offset revenue shortfalls in the state's budget. This proposal was reported in the Feb. 20, 2009 edition of the Oil and Gas Journal.

According to the article, Governor Rendell proposes to tax producers in the state 5% at the wellhead, plus 4.7 cents per thousand cubic feet of production --an approach identical to that of West Virginia. The tax would be paid monthly to the Pennsylvania Department of Revenue beginning Oct. 1, 2009 and has been projected to raise an estimated $1.82 billion over five years.

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This post was written by Mark Mustian. 

Mountain-top mining has probably generated more controversy in the United States than any other current resource extraction process, and recent USEPA activities have significantly increased attention to the process. Before discussing the regulatory developments, some background information may be helpful. Mountain-top mining is utilized to remove low-sulfur coal from the tops of mountains in the Appalachian region. The mining company timbers the mountain-top and removes the topsoil. The company then uses explosives to remove the overburden rock to expose the coal seams. The overburden is typically pushed into a nearby valley, creating a valley fill. The coal is excavated and washed (creating a significant amount of coal slurry waste), and the top of the mountain is reclaimed and revegetated. The process results in permanent changes to the topography and permanent impacts to the regions streams and water quality.

Mountain-top mining is allowed under section 515(c)(1) of the Surface Mining Control and Reclamation Act (SMCRA). However, in order to deposit the overburden into the valley, and the valley watershed, the mining company must obtain a permit from the U.S. Army Corps of Engineers (USACE). A permit is required under section 404 of the Clean Water Act (CWA) in order to discharge dredged or fill material into the waters of the United States. The permit is issued by the USACE using the guidelines developed by the Environmental Protection Agency (EPA). Under Section 404(c) of the CWA, the EPA has the authority to deny a permit for the discharge of dredged or fill material if it determines that "that the discharge of such materials into such area will have an unacceptable adverse effect on municipal water supplies, shellfish beds and fishery areas (including spawning and breeding areas), wildlife, or recreational areas."

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This post was written by Nicolle Snyder Bagnell.

Pennsylvania's Environmental Quality Board, a 20 member board which includes representatives from 11 state agencies, 5 members from the Citizens Advisory Council, and 4 members from the Pennsylvania Senate and House and is chaired by the Secretary of the Department of Environmental Protection (DEP), voted last month to increase permit fees for oil and gas wells. The new fees increase the base cost for a Marcellus Shale drilling permit from $100 to $900 for wells up to 1,500 feet deep plus a fee of $100 for every additional 500 feet beyond the initial 1500 feet, resulting in potential permit fees of thousands of dollars per well. The fee increases must still be approved by the Independent Regulatory Review Commission and the State Attorney General. If approved, the new permit fees will likely be applied beginning in March or April of 2009 and would be the first increase in oil and gas well permit fees in Pennsylvania in 25 years.
 

As discussed in the DEP's fact sheet, the Marcellus Shale is a rock formation in Pennsylvania and parts of New York and West Virginia that may hold trillions of cubic feet of natural gas. Recent advances in drilling technology and rising natural gas prices have led to new interest in this previously untapped formation.
 

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This post was written by Sara Mo.

The approved Scoping Plan includes measures that expand and strengthen existing energy efficiency programs as well as building and appliance standards. 

The plan establishes new targets for statewide annual energy demand reductions of 32,000 gigawatt hours and 800 million therms from businesses. In addition, the plan sets forth the following energy efficiency strategies:

• Cross-cutting Strategy for Buildings– Construction of “Zero Net Energy” buildings that regulate building energy use over the course of a typical year by reserving surplus energy to a grid and drawing from the grid when additional energy is needed;
• Codes and Standards Strategies– More stringent building codes and appliance efficiency standards; broader standards for new types of appliances and for water efficiency; improved compliance and enforcement of existing standards; voluntary efficiency and green building targets beyond mandatory codes;
• Strategies for Existing Buildings – Voluntary and mandatory whole-building retrofits for existing buildings; innovative financing to overcome first-cost and split incentives for energy efficiency on site, renewables and high efficiency distributed generation;
• Existing and Improved Utility Programs – More aggressive utility programs to achieve long-term savings; and
• Other Needed Strategies – Water system and water use efficiency and conservation measures; local government programs that lead by example and tap into local authority over planning, development, and code compliance; additional industrial and agricultural efficiency incentives; providing real time energy information technologies to help consumers conserve and optimize energy performance.

The Scoping Plan also promotes the use of solar water heating systems and builds on existing legislation, such as the Solar Water and Efficiency Act of 2007, which authorized a ten-year, $250 million incentive program for solar water heaters with a goal of promoting installation of 200,000 systems in California by 2017. In addition, the plan recommends developing combined heat and power systems rather than building new power plants or replacing existing ones.

The Scoping Plan accounts for other innovative approaches that may be used to motivate private investment in efficiency improvements. For example the cap and trade program [link to Cap and Trade], will provide incentives to pursue projects to reduce GHG emissions, such as the bundling of energy efficiency improvements for small businesses. California will also pursue comparable investment in energy efficiency from all retail providers of electricity in California, including both investor-owned and publicly owned utilities.

Click here to return to Scoping Plan overview.

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This post was written by Eric M. McLaughlin and Keisha M. Williams.

In late September, New York became the latest state to give the green light to “green building,” after Gov. David Paterson signed two bills introducing green building performance standards for construction and renovation of New York state government buildings, and a Grants Program for green residential builds. The new laws aim to encourage and incentivize the construction of energy-efficient, sustainable buildings, using recyclable and environmentally friendly materials, and are in line with the governor’s “15 x 15” plan to reduce energy use by 15 percent of expected levels by 2015. New York’s new laws highlight the fact that buildings account for nearly 40 percent of the nation’s greenhouse gas emissions and more than 70 percent of its electricity consumption, and that these impacts can be reduced by regulations governing design and construction.

The State Green Building Construction Act (A. 2005) (State Building Act) will require all new state-owned buildings, and substantial renovations of existing state-owned buildings, to comply with green construction principles set forth in standards to be developed by the Department of Environmental Conservation (DEC) and the New York State Energy Research and Development Authority (NYSERDA). State agencies will also be required to prepare annual building performance reports containing information on their green credentials, including energy consumption, waste reduction, and how indoor air quality compares with set benchmarks. The State Building Act takes effect 180 days after signature, on or about March 25, 2009.

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This post was written by Ruth N. Holzman, James R. Eskilson, Todd O. Maiden, Eric M. McLaughlin, and Jennifer Smokelin.

There’s good news for commercial building owners who have wanted to “go green,” but have been waiting to see whether the tax incentives for green buildings, set to expire at the end of 2008, would be extended. The historic financial rescue bill (H.R. 1424), signed by President Bush on Friday, Oct. 3, 2008, also included the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 (“TEAMTRA”). Among the tax-extenders in TEAMTRA was a five-year extension of the tax incentives for “green” commercial buildings.

Internal Revenue Code Section 179D gives owners of commercial real property a tax break by allowing them to deduct the cost of certain energy-efficient property. It applies to both new construction and to retrofits of existing construction. Prior to TEAMTRA, this tax break only applied to property placed in service on or prior to Dec. 31, 2008. With the extension of this provision to Dec. 31, 2013, property owners now have sufficient time to design, construct and complete projects that will qualify for this tax break. Although numerous bills had been introduced in Congress that would have raised the amount deductible under Section 179D, TEAMTRA did not contain any increase in this amount. The deduction is still limited to the product of $1.80 multiplied by the square footage of the building.

For a brief overview of the Section 179D deduction for “green” buildings, see “New Tax Incentives for ‘Green’ Buildings Have Owners Seeing Green,” in The Critical Path, Fall 2006; for a more detailed discussion, see "New Tax Incentives for 'Green' Buildings Have Owners Seeing Green," in the ABA's The Construction Lawyer, Summer 2007.

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This post was written by Todd O. Maiden and Rose L. Standifer.

On Sept. 12, 2008, the California Public Utilities Commission ("CPUC") and the California Energy Commission ("CEC") released their joint proposed opinion on strategies to help reduce greenhouse gas ("GHG") emissions and meet the goals of AB 32, the California Global Warming Solutions Act of 2006. The Proposed Final Opinion on Greenhouse Gas Regulatory Strategies, prepared jointly by CPUC President Michael Peevey, and CEC Chairman Jackalyne Pfannenstiel and CEC Commissioner Jeffrey Byron, provides recommendations, and outlines a variety of options for the California Air Resources Board ("CARB") to consider in deciding how to design a program to achieve the GHG emission targets in the electricity sector. After public comments, the full CPUC and the full CEC will individually consider adopting the finalized opinion at their respective meetings Oct. 16, 2008.

An "Interim Opinion," adopted in March 2008 by the two Commissions, recommended aggressive regulatory measures that maximize energy efficiency and expand renewable energy development beyond the 20 percent goal, and consideration of a multi-sector cap-and-trade program to capture additional cost-effective reductions of GHG emissions. The Interim Opinion also recommended that the "deliverers" of electricity to the California grid would be responsible for complying with the AB 32 regulations.

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This post was written by James R. Eskilson, Ruth N. Holzman, Todd O. Maiden, and Simon Adams.
 

On July 17, 2008, California adopted a new California Green Building Standards Code that will change future construction standards and costs, and affect all new construction. The code, adopted by the California Building Standards Commission, is the first of its kind on a national level and has been marketed as setting an international precedent for resource preservation and combating global warming. 

The California Green Building Standards Code will affect planning and design of new construction projects; energy efficiency of new construction projects; water efficiency and conservation; material conservation and resource efficiency; and environmental air quality. The goal of the new standards is to reduce energy use by at least 15 percent. They will also reduce the use of toxic substances in new construction projects. These new standards will further California’s goals of reducing greenhouse gases, by 2020, to a level that will be 20 percent below those measured in 2005. Another beneficial result of the new standards is a 50 percent reduction in waste streams from construction sites. 

Beyond water and energy efficiency, compliance with the code will require developers to meet new standards regarding the use of eco-friendly flooring, carpeting, ceiling panels and insulation, among other things. The code also sets new standards for dual plumbing systems, for potable and recyclable water, and for the diversion of construction waste to landfills. While initial construction costs may be higher, supporters of the new code argue that the long-term operation and use of buildings meeting this new standard will result in cost savings. This will require additional due diligence on the part of investors and lenders regarding understanding cost-benefit analysis and predicting returns on investments.

Developers are already lobbying to receive greenhouse gas emission reduction credits for their investment in buildings with lower carbon footprints. How such emission reductions will be calculated and how associated emission reduction credits may be allocated, if at all, may dramatically impact the cost benefit analyses of all parties associated with the construction, lending, and long-term use of affected properties.

Compliance with the new building code is currently voluntary, but will become mandatory in 2010. To encourage developers to follow the new green standards during this period of voluntary compliance, California is looking at potential incentive programs, including tax breaks. 

Some of the federal income tax incentives for installing energy-efficient improvements in buildings expired at the end of 2007, and many more will expire after 2008 if Congress does not act to extend them. Although the House passed a bill this spring that would have extended these tax breaks for as long as five years, the Senate failed to vote on any “tax extender” bill before it recessed July 31. Senate Majority Leader Harry Reid has pledged that the Senate will work to pass an energy and “tax extenders” bill in September. We will continue to follow this issue and keep you updated.

From assistance with basic licensing and registration requirements, to contract negotiations and mechanics' lien matters, to resolution of disputes in virtually any forum, Reed Smith represents clients in all aspects of the construction process.

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