The Coal Industry: A New Reality -- Risks and Opportunities Related to Proposed Regulation of Carbon Emissions

Reed Smith is pleased to announce the next teleseminar in the series "The Coal Industry:  A New Reality."

Risks and Opportunities Related to Proposed Regulation of Carbon Emissions

In the last few weeks, there have been many developments related to the U.S. Environmental Protection Agency's efforts to regulate carbon emissions. In this 30 minute presentation we will address the developments, indentify environmental risks and opportunities, and discuss possible next steps. Our topics include:

  • EPA’s plan to reduce carbon emissions from existing coal-fired power plan
  • A new focus on an individual state’s implementation plan
  • The creation of regional carbon-trading programs
  • The possible impact of a recent U.S. Supreme Court decision related to the regulation of carbon emissions

Date:  Wednesday, July 16, 2014

Time:  12:00 PM - 12:30 PM ET / 9:00 AM - 9:30 AM PT / 4:00 PM - 4:30 PM GMT

Speaker:  David W. Wagner

Register here

About the series: Companies must adjust to maintain a global role in the world of energy. What are the challenges facing coal producers and users? Where is the coal industry thriving? How can coal companies better position themselves? What are some economic and regulatory issues to watch? We are addressing these and other issues in our series.

On Wednesday, September 17, Robert P. Simons will discuss "Headlines in the Coal Industry."

The Coal Industry: A New Reality

Reed Smith is pleased to announce its upcoming teleseminar series entitled "The Coal Industry: A New Reality".

The first half-hour program to kick-off the series will be offered on Tuesday, March 4 at 8:00 AM pacific/ 12:00 PM eastern. See below for full details.

Coal Industry Survival Guide

Date: March 4, 2014
Time: 12:00 PM - 12:30 PM ET/ 9:00 AM - 9:30 AM PT/ 4:00 PM - 4:30 PM GMT

With expanded regulatory schemes and global economic shifts related to coal production, use and sales, the coal industry is facing significant changes and challenges. To help navigate this new reality, Reed Smith invites you to the first in a series of teleseminars that will address key industry issues.

Our kickoff program, called the Coal Industry Survival Guide, will include:

  • How the recent chemical spill by Freedom Industries in West Virginia has created renewed national interest in the treatment of environmental claims in bankruptcy cases and what this means to the coal industry
  • How to get your corporate house in order and avoid officer and director, contingent, and successor liability
  • Updates and implications of recent cases and transactions

SPEAKER: Robert P. Simons

TO REGISTER: CLICK HERE

ABOUT THE SERIES: Companies must adjust to maintain a global role in the world of energy. Where is the coal industry thriving? How can coal companies better position themselves? What are some economic and regulatory issues to watch? These are some examples of the issues to be discussed in the coming series.

The next teleseminar in the series will be April 15, 2014. David W. Wagner of our Energy and Natural Resources Practice in Pittsburgh will focus on upcoming environmental regulations, especially the U.S. Environmental Protection Agency’s proposed emission standards and guidelines for existing coal-fired power plants.

 

If you require additional information, contact Lina Carollo at lcarollo@reedsmith.com.

Potential Impact of New California Fracking Disclosure Requirements

This post was written by Todd Maiden, Marilyn Moberg, and Michael Mandell

On November 15, 2013, the California Department of Conservation, Division of Oil, Gas, and Geothermal Resources (DOGGR) released draft regulations affecting hydraulic fracturing activities within the state that some state officials are touting as the "toughest in the nation." These proposed regulations include a public disclosure requirement of the chemicals used in "well stimulation activities" (including hydraulic fracturing and acid stimulation treatment).

Specifically, DOGGR’s proposed regulations, based on California Senate Bill 4 (S.B. 4), require operators to post publically on the Chemical Disclosure Registry the trade name, supplier, and descriptions of the additives used in their fracking fluids within 60 days after an operation ends. In Wyoming, which enacted similar legislation in 2010, there has already been litigation regarding issues of trade secrets protection. Wyoming’s regulation requires that the owner or operator of a well provide the Wyoming Oil and Gas Conservation Commission with, inter alia, the identity of all compounds contained in fracturing fluid additives for each fracturing operation. Wyo. Admin. Code OIL GEN Ch. 3 § 45(d)(ii). However, the regulation exempted information from disclosure to the public if an operator requested, and the Commission supervisor found that the information was a trade secret. See Id. at § 45(f) ("confidentiality protection shall be provided consistent with WYO. STAT. ANN. § 16-4-203(d)(v) of the the Wyoming Public Records Act, for the following records: ‘trade secrets, privileged information and confidential commercial, financial, geological or geophysical data furnished by or obtained from any person.’"). On November 20, the Wyoming Supreme Court heard arguments over whether a trade secret exemption could be invoked to prevent disclosure of the chemicals used in hydraulic fracturing. See Powder River Basin Resource Council v. Wyoming Oil & Gas Conservation Commission, No. S-13-0120. In contrast, S.B. 4 specifically provides that the following information is not a trade secret:

  • Identification of the chemical constituents of additives
  • The concentrations of the additives;  
  • Pollution monitoring data;
  • Health and safety data ; and  
  • Chemical composition of the flowback fluid following well stimulation.

In addition to trade secret issues, there has also been litigation involving fracking where plaintiffs allege negligence, strict liability, medical monitoring trust funds and nuisance against oil and gas companies. See, e.g., Fiorentino v. Cabot Oil & Gas Corp., 750 F. Supp. 2d 506 (M.D. Pa. 2010) (asserting, inter alia, causes of action for negligence, private nuisance, medical monitoring trust funds, and gross negligence). Thus far, courts have been unwilling to dismiss these claims until fact investigation ends. See, e.g., Fiorentino, 750 F. Supp. 2d at 509–510 (M.D. Pa. 2010) (deferring judgment on plaintiff’s claims until the end of discovery); Kamuck v. Shell Energy Holdings GP, LLC. No. 4:11–1425, 2012 WL 1463594 (M.D. Pa. Mar. 19, 2012) (same); Berish v. Southwestern Energy Production Co. 763 F. Supp. 2d 702, 704 (M.D. Pa. 2011) (same). For instance, in Pennsylvania, plaintiffs—63 individuals who executed leases giving an oil and gas company the right to extract natural gas from their properties—alleged the defendants improperly conducted hydraulic fracturing that allowed the release of methane, natural gas, and other toxins onto their land and into their groundwater. Fiorentino, 750 F. Supp. 2d at 509–10. These plaintiffs claimed that they experienced property damage and physical illness, that they live in constant fear of future illness, and that they suffer severe emotional distress. Thus, they requested an injunction prohibiting future natural gas operations, damages (under strict liability theory), and the cost of future health monitoring. Id. On ruling on the defendants’ motion to dismiss, the Fiorentino court refused to dismiss the plaintiffs’ claims until the record was more fully developed and instead instructed the defendants to reassert their arguments at the summary judgment stage. Id. at 512-13. Firoentino is just now entering the summary judgment stage—two years after the court denied the defendants’ motion to dismiss.

Reed Smith has extensive experience in hydraulic fracturing issues and commercial and toxic tort litigation and is following these issues closely. If you have any further questions, please contact one of the authors of this post.

Slides and Audio from December 4th Environmental and Energy Law Teleseminar

Year-End Local and Global Climate Change Analysis:
COP 19, California’s November Auction
and Quebec’s December Auction 

On December 4th our lawyers presented the latest Environmental and Energy Law teleseminar with impacting news and updates on GHG regulation globally and in California.

The 19th session of the Conference of the Parties (COP 19) to the United Nations Framework Convention on Climate Change (UNFCCC) took place from November 11-22 at the National Stadium in Warsaw, Poland. Our market-leading UK Climate Change lawyer provided a high-level discussion of COP 19 from London. Developments from California’s November 19th Auction and Quebec's first auction were also presented.

Topics:

  • COP 19 Overview and Observations 
  • California November Auction Update 
  • Quebec December Auction Update 
  • California/Oregon/Washington/British Columbia Pact 
  • AB32 Litigation Update

Speakers: David Wagner (Pittsburgh), Todd Maiden (San Francisco), Jamon Bollock (San Francisco), and Peter Zaman (London). To read more about our speakers, please click the attorney's name.

The slides and audio are available here.

The 19th Conference of the Parties (COP 19) - Daily Alerts

This post was written by Peter Zaman, Pryderi Diebschlag, and Felix Attafuah

A European team of Reed Smith lawyers presented a series of daily alerts from COP 19 which was held from 11 to 22 November 2013 in Warsaw, Poland. An abstract of each alert is set out below, please click the links to read the full entries.

Setting Expectations - The 19th Conference of the Parties (“COP”) to the United Nations Framework Convention on Climate Change (the “Convention”) opens today at the National Stadium in Warsaw, the Republic of Poland. For those who recall COP 14 in Poznań just before the Copenhagen COP, many will feel a strong sense of déjà vu as this COP also is one that is leading up to a more significant COP in Paris in 2015.

Day 1 - The Conference opened yesterday in Warsaw with speeches by the newly elected President of COP 19/CMP 9, His Excellency Marcin Korolec (Poland’s Environment Minister), and Ms. Christiana Figueres (Executive Secretary of the UNFCCC). Cutting through the usual soundbites, a poignant statement was made by the Philippines’ Climate Commissioner, Naderev Sano, who told the Conference that, in light of the destruction caused by typhoon Haiyan, he "will voluntarily refrain from eating food (during the conference) until a meaningful outcome is in sight".

Day 2 - Having completed the formalities of COP 19 on Day 1, Day 2 opened with a plenary meeting of the AWG-DP. Through the course of the day, contact groups, informal consultations, workshops and other events convened under the AWG-DP, SBI and SBSTA. This alert covers some of the issues discussed at these meetings.

Day 3 - Day 3 continued where day 2 left off, with more meetings, contact groups, informal discussions, workshops and other events taking place under the COP, AWG-DP, SBSTA and SBI. Poland’s decision to host a coal industry summit next week on the side lines of COP 19/CMP 9 has put the United Nations in a quandary. One of the purposes of COP 19/CMP 9 is to provide parties with a platform to discuss processes for slowing global warming (usually with a focus on phasing out fossil fuels like coal in favour of renewable energies like solar or wind power). Instead, the focus next week will also be on coal as Poland (a country that generates 90 percent of its electricity from coal) tries to engage COP 19/CMP 9 on a coal debate.

Day 4 - Frantic meeting schedules continued at the Conference against the back drop of news that Japan will announce a reduction in its 2020 greenhouse gases (GHGs) emissions target. Japan is expected to announce today that it will now target a 2020 emissions reduction of 3.8 per cent from its 2005 emissions levels. This new target is in stark contrast to Japan’s previous target of achieving a 25 per cent reduction from its 1990 levels. Furthermore, under the Kyoto Protocol (which Japan has subsequently opted out of), Japan pledged to cut GHGs emissions by 6 per cent a year on average over a five-year period to March 2013. In anticipation of this announcement by Japan, China has been most vocal, with the Chinese lead negotiator expressing his "deep concern" and "dismay".

Day 5, 6 and 7 - As expected, Japan duly announced its intention to cut its greenhouse gas emissions by 3.8% (from 2005 levels) by 2020. By comparison to Japan’s earlier goal of a 25% reduction from 1990 levels by 2020, this new target allows a 3.1% increase in emissions from 1990 levels. Friday’s meetings continued the trend of informal consultations and contacts groups, slowing striving towards substantive progress. The closure of the 39th SBSTA and SBI meetings, and the associated closing plenaries, provided an excellent opportunity to assess precisely how much or how little substantive progress has been achieved thus far.

Day 8 - The second week of the conference began with the COP President calling an informal stocktaking session, aiming to unite and focus the parties ahead of a week of hopefully more productive negotiations as the ministers begin to arrive. Simultaneously, the closing plenary session of the SBI reconvened, determined to conclude its meeting after a long weekend of negotiations.

Day 9 - Tuesday saw the opening ceremony of the high-level segment at COP 19 and CMP 9. As is customary, the curtain raiser began with numerous statements from a variety of heads of state and government ministers. UN Secretary-General Ban Ki-moon set out a number of key objectives for the parties in Warsaw which were substantially echoed by UNFCCC Executive Secretary Christiana Figueres. These include promoting the ratification of the second commitment period under the Kyoto Protocol, increasing ambition levels across mitigation, adaptation and finance, and paving a route forward for an agreement in 2015.

Day 10 -The high-level ministerial discussions continued on Wednesday with a focus on trying to reach a consensus as to scaling up finance to the "magic number"of US$100 billion per year by 2020.The usual array of contact groups, informal consultations and meetings under the COP, CMP and AWG-DP workstreams continued throughout the day, culminating in the COP/CMP President convening another informal stocktaking plenary in the evening.

 

Day 11 - The focus of Thursday’s high-level ministerial discussions turned to the Durban Platform and sought to capitalise on the common ground that was established yesterday in the AWG-DP. As before, the array of contact groups, informal consultations and meetings under the COP, CMP and AWG-DP workstreams continued throughout the day, culminating in the COP/CMP President convening another informal stocktaking plenary session in the evening.

 

The Impact of Present and Future UK Green Initiatives

This post was written by Nav Sahota, Siobhan Hayes, Maricela Robles Garza and Daniel Kyriakides.

There have been so many green initiatives from the UK government that it can be hard for companies owning or occupying property to work out what is really going to affect them and their bottom line. We are of the view that UK property owners and many occupiers are gradually going to implement more energy efficiency measures in their buildings. Some of the highest profile corporate occupiers have on-going programmes for reducing power consumption and improving their impact on the environment but others may be persuaded by the costs savings or required by some of these new laws and regulations to turn green (or at least pale green).

EPC Ratings - Investors of buildings which are let to multiple occupiers or have a long term tenant in them may not think of carrying out works to improve the energy efficiency of the building unless these are recoverable under their service charge provisions. Not all service charge clauses allow for the costs of improvements to be recovered.

However carrying out energy efficient improvements may help owners avoid the looming issue of buildings no longer being lettable where they have a low EPC rating. We posted on this topic back in April 2012 and it remains the case that from April 2018, it will be unlawful to rent out a residential or business property that does not reach a minimum energy efficiency standard (expected to be EPC rating 'E'). It now appears that even pre-existing lettings might become unlawful in April 2018 but we await draft Regulations to be sure.

To read the full Real Estate blog entry, please click here.

Slides and Audio for November 6th Environmental and Energy Law Teleseminar

 Pennsylvania Shale Gas Update:
Criminal Enforcement of Pennsylvania Environmental Laws

Did you know that violation of Pennsylvania environmental laws can result not only in civil fines and court ordered supplemental environmental projects, but also in criminal convictions, both for the charged entity and the people who manage it?

On November 6th, we discussed criminal enforcement of environmental laws that impact the Shale Gas Industry in Pennsylvania. The teleseminar was designed to help companies identify when a criminal penalty might be applicable to violations of environmental law, the internal guidelines which should be in place to deal with potential criminal actions and how the criminal process works in Pennsylvania.

Topics included:

  • A discussion of the criminal provisions of Pennsylvania’s environmental statutes, including the strict liability provisions of the Solid Waste Management Act
  • The procedural aspects of criminal enforcement in Pennsylvania
  • A discussion of the ways you can minimize the potential for criminal enforcement actions and the relationship with civil enforcement actions.

The slides and audio are available here for download.

 

West Coast Governors Announce Ambitious Plan to Coordinate Action on Climate Change

This post was written by Jennifer Smokelin, Jamon Bollock, and Todd Maiden

Once again, the states prove to be the first movers on climate change issues and the incubators for novel climate change policies. On the federal level, climate change bills get stuck in congressional committees. But governors on the West Coast are trying to spur action.

On October 28, 2013, British Columbia, California, Oregon and Washington signed the Pacific Coast Action Plan on Climate & Energy (the "Plan"), a "comprehensive and far-reaching strategic alignment to combat climate change and promote clean energy." (See Pacific Coast Collaborative, Press Release, October 28, 2013, p. 1). According to the statement released by Offices of the Governors of California, Oregon and Washington and the Office of the Premier of British Columbia, the "Action Plan represents the best of what Pacific Coast governments are already doing, and calls on each of us to do more—together—to create jobs by leading in the clean energy economy, and to meet our moral obligation to future generations." (Id.)

The Plan’s broad goals include addressing climate change comprehensively across many segments of the economy. The Plan will touch on the transportation sector, for example, through expanding the use of zero-emission vehicles (with a goal of ten percent of public and private fleet purchases by as early as 2016), adopting low carbon fuel standards, and exploring the development of high-speed rail across the region. (See Plan, Sections II(1), II(2), and II(3).) The Plan will also impact the commercial and residential building sector by transforming the market for energy efficiency and leading the way to "net-zero" buildings. (See Section III(1).) Additionally, the Plan will address the energy sector by focusing on streamlining the permitting of renewable energy infrastructure, supporting strong federal policy on greenhouse gas emissions from power plants, and supporting integration of the region’s electricity grids. (See Sections III(2), III(4), and III(5).)

 

Continue Reading...

California Public Utilities Commission Adopts Energy Storage Procurement Targets

This post was written by Donald G. Ousterhout and Amy S. Koch

California continues to lead the way on integration of renewable energy, improvement of grid reliability and reduction of greenhouse gas emissions with the adoption by the California Public Utilities Commission (CPUC) of the first mandatory energy storage procurement targets in the nation. Additionally, with the requirement that a majority of storage resources be owned by third parties and a strong preference for utility-owned storage to be independently developed, the CPUC has created a substantial new market for energy project developers and energy storage equipment vendors.

To read the full entry, please click here.

The Battle Over EPA's Proposed New Source Performance Standards For Coal Fired EGUs: Adequately Demonstrated or Impermissible Technology Forcing?

This post is written by Lawrence A. Demase, David W. Wagner, Christopher L. Rissetto, Jennifer A. Smokelin

On September 20, 2013, EPA, under the authority of section 111(b) of the Clean Air Act (CAA), re-proposed its New Source Performance Standards (NSPS) for CO2 emissions from coal-fired utility boilers and integrated gasification combined cycle (IGCC) electric generating units. The proposed limits for these facilities are based on the use of partial carbon capture and storage (CCS).

The proposed rule raises many questions, and two threshold issues are (1) whether EPA can effectively preclude the use of coal for electric generation in places where the use of CCS is not feasible, and (2) whether EPA can impose a technology based standard on projects in planning or still in development, or must CCS be demonstrated on a working, existing system. This Reed Smith Client Alert examines these issues.

To read the full entry, please click here.

Slides and Audio for September 30th Joint Seminar with the Environmental Law Institute

President Obama's Climate Action Plan in the Near Term: Expectations, Concerns, and Opportunities

On September 30th our lawyers participated in a joint seminar alongside a panel which discussed the President's priorities and upcoming benchmarks related to climate issues.The rollout of regulations under President Obama's Climate Action Plan has begun, including rules aimed at reducing greenhouse gas emissions. One of the early key dates is September 20, the deadline for a new proposal from EPA for Clean Air Act carbon emissions standards for new or future power plants. The Supreme Court is also expected to decide whether to grant certiorari on challenges to EPA's suite of existing Clean Air Act climate rules by the end of September.

The panel provided their reaction to the Climate Action Plan and identified possible shortcomings and suggested areas to emphasize, including implementation concerns as well as business opportunities and risks.

PANELISTS:

David W. Wagner, Associate, Reed Smith LLP (moderator)
Elliot Diringer, Executive Vice President, Center for Climate and Energy Solutions
Jennifer A. Smokelin, Counsel, Reed Smith LLP
Dan Utech, Deputy Director for Energy and Climate Change, White House Domestic Policy Council

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The slides and audio are available from the Environmental Law Institute website: click here.

Do the New Hydro Bills Really Mean New Opportunities?

This post was written by Amy Koch

This article, recently published in Law360, discusses the new Hydropower Regulatory Efficiency Act and the Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act. While both pieces of legislation streamline certain permitting requirements for small hydro projects, conventional and conduit, the notion that these reforms could lead to the development of a full 60,000 MW of new hydro by 2025 is a bit optimistic.

 

Slides and Audio for Reed Smith's August 29th Environmental and Energy Law Resource Teleseminar

On August 29th, Reed Smith's Energy and Natural Resources group presented the latest updates on cap and trade. The primary focus was on the August 16th California GHG allowance auction, where offerings included 2013 current vintage allowances and 2016 future vintage allowances.

The half hour program also surrounded discussion on relevant legislative updates and CARB regulatory updates.

The slides and audio are available here for download.

President Obama's Climate Action Plan and California's Carbon Market

This alert was written by Jennifer A. Smokelin , Tom Galligan (summer associate), Larry Demase, Todd Maiden, David Wagner, and Peter Zaman

In June, President Obama unveiled his Climate Action Plan (the Plan). As we reported in a previous Client Alert, President Obama emphasized three overarching goals: (1) reduce domestic carbon dioxide emissions by 17 percent between 2005 and 2020; (2) prepare the United States for the impacts of climate change; and (3) lead international efforts to combat climate change. While few specifics were offered, to achieve these goals, President Obama's Climate Change Action Plan includes more than 30 new actions, such as efforts to reduce methane emissions from oil and gas development and the expanded use of renewables, and the President's plan directs the U.S. Environmental Protection Agency (USEPA) to work quickly to complete carbon emission standards for new and existing power plants. This Reed Smith client alert will address the Climate Action Plan's possible impact on the nascent California carbon market given (1) the likely increase in opportunities in renewable energy projects, and (2) the effect of federal efforts and regulation of existing power plants.

To read the full entry, please click here.

New Opportunities for Hydro?

This post was written by Amy S. Koch

On August 9, 2013, President Obama signed into law two pieces of legislation designed to foster the development of new hydropower in the U.S. Both bills, the Hydropower Regulatory Efficiency Act of 2013 (HREA) and the Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act (Reclamation Act Amendment), were passed in both houses of Congress with significant bipartisan support.

Key findings in HREA focused on the fact that only about 3 percent of the 80,000 existing dams in the U.S. have hydropower generation, and that the legislation could create 700,000 new jobs over the next 13 years, based on a Navigant study finding that the U.S. could add approximately 60,000 MWs of new hydro capacity by 2025.

To read the full entry, please click here.

EPA Updates Oil and Gas Standards for Storage Tanks

This post was written by Edward V. Walsh

On August 5, 2013 the U.S. Environmental Protection Agency (EPA) issued updates to its April 2012 oil and natural gas standards for storage tanks. The updates will phase in emission control deadlines, starting with higher-emitting tanks first. EPA says it is making the changes based on information received after the 2012 standards were issued that shows more storage tanks will come online than the agency originally estimated.

Storage tanks that emit 6 or more tons of volatile organic compounds (VOCs) a year must reduce emissions by 95 percent. The rule establishes two emission control deadlines:

  • tanks that come online after April 12, 2013 are likely to have higher emissions and must control VOC emissions within 60 days or by April 15, 2014, whichever is later; and
  • tanks that came online before April 12, 2013 are likely to have lower emissions and must control VOC emissions by April 15, 2015.

The updated rule also establish an alternative emissions limit that would allow owners/operators to remove controls from tanks if they can demonstrate that the tanks emit less than 4 tons per year of VOC emissions without controls. In addition, EPA says the rule streamlines compliance and monitoring requirements for tanks that have already installed controls. The oil and natural gas industry uses tanks for temporary storage of crude oil, condensate and other liquids, before those liquids are moved to a pipeline, sold or moved for disposal. These storage tanks can be sources of emissions of regulated constituents including ozone-forming VOCs, along with several labeled toxic air pollutants, such as benzene. The rule does not affect the April 2012 standards for capturing natural gas from hydraulically fractured wells.
 

Update: UK Electricity Market Reform

This post was written by Nicholas Rock, Richard A. Ceeney, Christopher Parrott

Background

The UK government’s Electricity Market Reform (EMR) programme represents the single biggest change to this country’s electricity market in a generation.

It has very significant implications for generators, suppliers, developers and consumers of electricity from both traditional (fossil) and renewable fuel sources, as well as for those considering financing some of the estimated £110 billion worth of new generation, transmission and other assets envisaged by EMR.

The development of EMR has been underway for nearly three years. Even so, considerable uncertainty remains as to the precise scope and impact of the reforms, most of which will not be implemented before at least 2014.

Indeed, this has tended to exacerbate some of the very problems EMR is designed to address (such as falling generation capacity margins and the inadequate pace of decarbonisation). Continuing uncertainty is tending to deter new investment until greater clarity exists, in turn rendering the reforms all the more urgent.

To read the full entry, please click here.

Slides and Audio for Reed Smith's July 24th Environmental and Energy Law Resource Teleseminar

On Wednesday, July 24th Reed Smith's experienced practitioners offered their take on recent developments stemming from the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). CERCLA has been around bedeviling those who come within its orbit for more than thirty (30) years, but it continues to evolve and important nuances affecting enforcement, settlement and private cost recovery have developed around core statutory provisions

Topics included: 

  • Emerging trends in “Arranger” liability post the U.S. Supreme Court’s 2009 decision in Burlington Northern v. Santé Fe Railway Co. v. U.S. – How are the Courts addressing the issues of intent and apportionment?
  • The evolving relationship between cost recovery and contribution after U.S. v. Atlantic Research, 551 U.S. 128 (2007)
  • New Vapor Intrusion Guidance and its impact on assessment and mitigation at NPL sites.
  • EPA guidance regarding “Affiliation” language in CERCLA’s BFP and Contiguous Property Owner Liability Protections.
  • Insuring contribution protection for Settling Defendants in a Private Cost Recovery Action.

The slides and audio are available here for download.

Understanding the Path for UK Shale Exploration

This post was written by Caspar Fox, Lynne Freeman, Christopher Parrott

The UK Government has recently published further details on a package of tax, planning and community benefits to help kick-start shale gas exploration in the UK. These measures will be welcomed by those in (or looking to enter) the industry, since they are generally favourable and increase the levels of clarity and certainty - pre-requisites for an industry which relies on long-term investment.

The relevant documents published last week are a Government consultation regarding a specific tax regime for shale gas, and guidelines to local authorities for considering planning requests for onshore oil and gas exploration and extraction.

These measures have followed soon after studies showing that the UK's shale gas resources are much larger than previously anticipated (as covered in a previous alert), and can be seen as the  "next step" in developing a thriving shale gas industry in the UK.

To read the full entry, please click here.

Conflict Minerals Regulation in the European Union versus the United States

This post was written by David W. Wagner, Nicholas Rock , Brian Willett (Summer Associate)

The European Union may soon join the United States in requiring certain companies to investigate and disclose whether certain minerals used in their products originated in conflict-affected or high-risk areas. On June 26, 2013, the European Commission (the Commission) closed its public consultation on the development of a conflict minerals regulation. While the information culled from responses to the Commission’s consultation questionnaire will have a significant impact on the nature of the regulations, we have analyzed the Commission’s statements and requests for information to anticipate the kind of regulations that will ultimately be put in place. Based on the information accompanying the public consultation, it is clear that the EU initiative may draw on the 2010 conflict minerals regulations in the United States as well as the 2011 Organisation for Economic Co-operation and Development (OECD) guidance related to conflict minerals. Our initial thoughts are below.

To read the full entry, please click here.

Reed Smith Attends International Carbon Conference

This post was written by Peter Zaman, Nicholas Rock, Jennifer Smokelin and Laith Najjar

Last week, Reed Smith attorneys attended CarbonExpo 2013. For those unfamiliar with CarbonExpo, it is the largest carbon market event of the year. Although there are now US and Asian events of a similar format, the European event (hosted in Cologne and Barcelona in alternate years) is the largest and most widely attended. According to the organizers, last year, there were 1800 attendees, this year there were 2070 attendees. This no doubt reflects the end results of the market consolidation process that took place between 2010-2012 and suggests that there is probably room for some growth in the market following that consolidation. This was the first year that Reed Smith was represented, in force, at CarbonExpo. There were attendees from Reed Smith’s Energy and Natural Resources Practice Group: Peter Zaman, Nick Rock and Laith Najjar (all London) and Jennifer Smokelin (Pittsburgh). Reed Smith were one of the only two law firms exhibiting at CarbonExpo.

We noticed a strong positive interest in the California market. Price indicators per ton have been promising and offsets are expected to be at a premium, triggering interest in legal advice on the California market. Also, on the margins of CarbonExpo, the International Emissions Trading Association (IETA) organized a meeting of its California Drafting Working Group which is presently tasked with the drafting of a standard emissions master trading agreement for the California market. Reed Smith is involved in this drafting effort and can report that significant progress was made on the draft agreement.

On the international side, the recent positive notes from China about adopting a cap on their emissions and the beginning of its own domestic voluntary scheme seems to have increased optimism for progress towards an international global agreement by 2015 to replace the Kyoto Protocol. The EU Emission Trading Scheme (EU ETS) remains in the doldrums until such time there is a fix for the excess allocation in Phase 3. We understand that legislative proposals from the European Commission are due in July 2013. On a final note, these positive sentiments did move EU ETS price up for the highest they have been in the last 14 weeks.

If you would like to discuss opportunities in the California carbon market or the international market, please contact your Reed Smith environmental team contact.
 

Continued Congressional Pressure on USEPA Related to Regulation of Chemical Plants

This post was written by Christopher L. Rissetto, Robert Helland, Lawrence A. Demase, Peter Cassidy, David W. Wagner

Last week, a Reed Smith client alert discussed pending legislation and possible regulatory responses related to chemical plant safety, in the aftermath of the recent West, Texas fertilizer plant explosion. The pressure to act continues to build. Most recent developments include a letter sent this week from Congressman Mike Pompeo (R-KS-4) to the U.S. Environmental Protection Agency (USEPA) addressing several issues, including: the scope of its authority to regulate chemical plant security under the General Duty Clause of the Clean Air Act; the EPA’s authority to mandate the use of “inherently safer technologies”; and its regulatory plans related to chemical plants. The Congressman also brought up these issues during testimony on May 16 by USEPA Acting Administrator Bob Perciasepe before the House Energy and Commerce Committee, Subcommittee on Energy and Power.

As we explained in the alert, it is the view of many – especially in the environmental community – that the General Duty Clause [Section 112(r)(1)] already provides the EPA with the authority to prevent the release of dangerous chemicals by requiring the use of “inherently safer technologies” i.e., replacing a chemical or chemical process when the use of that chemical is considered to be too dangerous. The EPA has not yet adopted this view - Acting Administrator Perciasepe did not commit to any position during his testimony on May 16 – but the possibility remains that the EPA might do so at any time. The letter from Rep. Pompeo underscores the concern of many lawmakers to such an interpretation of the General Duty Clause and follows legislation he sponsors, H.R. 888, the General Duty Clarification Act, which would prohibit USEPA from regulating “inherently safer technologies.”

As investigators continue to look at the explosion in Texas, the chances remain high that Congress and the EPA will take additional action on chemical plant safety.
 

Development of Cybersecurity Standards in the Utility Industry

This post was written by Timothy J. Nagle, Paul Bond and Amy S. Koch

Introduction

Electric Grid Vulnerability: Industry Responses Reveal Security Gaps,” by the staffs of U.S. Reps. Ed Markey (D-Mass.) and Henry Waxman (D-Cal.), resulted from a survey of more than 100 utilities. The report and the contemporaneous House Energy and Commerce Committee hearing on “Cyber Threats and Security Solutions” are indicators of the level of legislative and regulatory attention to these issues. The report’s findings included:

  • Attacks on critical infrastructure, including energy, are up 68 percent from 2011 levels
  • Many utilities reported “daily,” “constant,” or “frequent” attempted cyber attacks ranging from phishing to malware infection to unfriendly probes
  • The rate of cyber attacks against American corporate and government infrastructure is on the rise and unlikely to abate

Click here to read the full entry written by members of the Global Regulatory Enforcement Practice Group and Energy and Natural Resources Industry Group.

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Safety Among Chemical Plants: Will There Be Renewed Demand for Federal Regulation?

This post was written by Christopher L. Rissetto, Robert Helland, Lawrence A. Demase, Peter Cassidy, David W. Wagner

Introduction

The global demand for natural resources continues unabated. As revenues increase and profits soar in the face of this demand, there has been a resurgence of “resource nationalism” with resource-rich host states seeking greater control or a larger share of the revenue generated from its resources.

The issue of chemical plant safety has long been a target of environmental, and other, groups concerned with operational safety, as well as protection from terrorist intentions. The recent explosion at a Texas fertilizer plant provides further impetus to these groups, to some in Congress and with the Executive Branch agencies to act now on mandating at least some level of heightened safety standards. Rules are already in place requiring (1) chemical facilities to develop “risk management plans” that detail the potential effects of an accidental chemical release and outline the steps that are to be taken to prevent or address such an event; and (2) facilities identified as “high risk” to develop an effective site security plan. Safety and security concerns, whether from a release of chemicals that harms the public or from terrorist threats, add further pressure in support of a greater federal response; it may be that now is the time when new requirements are established. In this client alert, we identify pending legislation and possible regulatory responses for chemical plant safety, and discuss their potential for enactment.

To read the full entry, please click here.

Understanding the Basics of Transacting in Offsets under AB 32

This post was written by Jennifer Smokelin and Jamon Bollock

This client alert serves as an executive summary for a supplementary white paper, The Basics of Transacting in Offsets under AB 32, and will assist clients in addressing offset transaction risks.

The white paper offers an in-depth discussion of the following:

  • "Primary" vs. "Secondary" markets for offsets
  • Options and strategies for buying offset credits
  • Benefits and challenges of buying offset credits

To access the white paper, please click here.

To read the full client alert, please click here.

The Impact of "Resource Nationalism" on Infrastructure Projects

This post was written by Peter Cassidy and Joseph Otoo

Introduction

The global demand for natural resources continues unabated. As revenues increase and profits soar in the face of this demand, there has been a resurgence of “resource nationalism” with resource-rich host states seeking greater control or a larger share of the revenue generated from its resources.

Ernst & Young has recently ranked protectionism by governments through resource nationalism as the number one risk for mining companies in 2013. This alert looks at the impact of risks associated with resource nationalism on infrastructure projects and how those risks might be mitigated.

To read the full entry, please click here.

Under the 'Recovery Act' Oversight of Energy Spending Continues

This post was written by Christopher L. Rissetto and Robert Helland.

It’s been more than four years since President Obama signed the American Recovery and Reinvestment Act of 2009 (“Recovery Act”) into law February 17, 2009 (Public Law 111-5). Yet questions and issues regarding the spending of energy-related Recovery Act funding continue. The latest includes an audit from the Department of Energy Office of Inspector General that found problems with the use of Recovery Act funding in the Industrial Carbon Capture and Storage Program. In addition, the Vice Chair of the House Energy and Commerce Committee, Marsha Blackburn, has introduced legislation imposing additional restrictions on companies that receive federal funding from the Department of Energy,drafted in response to reports that at least one bankrupt recipient of Recovery Act funds is selling its assets to a Chinese auto manufacturer. Both of these events - along with the fact that millions in Recovery Act funding has still not been spent - indicate that both Congress and the Executive Branch will continue to pay attention to the spending of funds for renewable and energy-efficiency projects for some to come.

To read the full entry, please click here.

Slides and Video from Reed Smith's March 21 Environmental and Energy Law Resource Teleseminar

On Thursday, March 21st presenters from London, California and Pennsylvania spoke about compliance with environmental regulations affecting products. They discussed recent domestic and international requirements related to material sourcing, product design, use, and disposition.

With U.S. manufacturers, distributors and retailers faced with increasing environmental regulation of products, this program was designed to help regulated entities understand the prohibitions, restrictions and requirements they need to know. In particular, key requirements and legal developments were addressed:

  • The SEC's conflict minerals regulations
  • California's Green Chemistry Law
  • The European Union's Restriction on Hazardous Substances (RoHS) and REACH laws
  • Product takeback, especially electronic waste legislation

The slides are available for download. To watch the video presentation please click here.

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.

California Bill May Place Moratorium on Hydraulic Fracturing Permits

This post was written by Julia Butler, Don Ousterhout, and Todd Maiden.

On March 11, 2013, California State Senator Fran Pavley (D – Agoura Hills) introduced an amendment to Senate Bill 4, which the Senator herself had introduced on December 3, 2012, to further regulate hydraulic fracturing in California. Among other things, the amendment would (1) require the Secretary of the State Natural Resources Agency to conduct an extensive, independent and peer-reviewed scientific study of the potential hazards and risks that hydraulic fracturing treatments pose to natural resources and public, occupational, and environmental health and safety, and (2) preclude the Division of Oil, Gas, and Geothermal Resources (DOGGR) from issuing hydraulic fracturing permits from and after January 1, 2015, until the study, including the peer review component, has been completed. While the fracking permit moratorium would not go into effect until 2015 and the amendment theoretically requires the study to be completed before that date, the extensive requirements of the study, including the peer review component, suggest that completion of the study may take considerably longer and thus result in a lengthy period during which fracking would not be allowed to occur. This bill is set for hearing on April 9 before the Senate Natural Resources and Water Committee.

We will continue to monitor and report on legislative and regulatory developments regarding hydraulic fracturing in California.
 

Federal Government Approves New Solar Projects in Solar Energy Zones

This post was written by Phillip H. Babich

The U.S. Department of Interior (DOI) has approved three major renewable energy projects. Two have been sited in California, and another is sited in Nevada. The two California projects are solar energy facilities. The McCoy Solar Energy Project is a 750-megawatt photovoltaic solar facility that would be one of the largest solar projects in the world. A 12.5-mile generation transmission line would connect the project to Southern California Edison’s Colorado River Substation. The Desert Harvest Solar Farm is a 150-megawatt photovoltaic facility. The project also includes an on-site substation and 230-kilovolt line to the Red Bluff Substation, which will connect the project to the Southern California Edison regional transmission grid. Both projects will be located in California’s Riverside East Solar Energy Zone (SEZ), one of 18 such zones on land held by the Bureau of Land Management (BLM), a division of the DOI. The Nevada-based project is the Searchlight Wind Energy Project, a 200-megawatt project that will be located on BLM land about 60 miles southeast of Las Vegas.

The two California solar projects, approved on March 13, 2013, add to the DOI’s progress in furthering the Obama Administration’s goals on solar energy which were articulated in the Department’s Solar Programmatic Environmental Impact Statement (Solar PEIS).

In January, the BLM approved a new SEZ in Arizona. Known as the Agua Caliente SEZ, this area opens up 2,550 more acres of BLM land to be used for utility-scale solar energy development under the Solar PEIS, which was approved and adopted as amended by a Record of Decision (ROD) on October 12, 2012.

The Agua Caliente SEZ is located approximately 120 miles south east of Phoenix and is part of the Yuma Resources Management Plan (RMP). The BLM chose this location for its proximity to transmission lines or systems, roads and infrastructure. The SEZ also has known environmental or cultural constraints that have been deemed acceptable for purposes of solar development.

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Don't ROC the boat

This post was written by Richard A. Ceeney, Christopher Parrott, Stefan Schmitz

In December 2012 the UK government published its response to the consultation on the Renewables Obligation banding review. This will result in the level of Renewables Obligation (RO) support being cut for solar projects commissioned after 31 March 2013, with further cuts to follow.

Although the cuts will not be as severe as initially proposed, the reduction from the current 2 Renewable Obligation Certificates per megawatt hour will still be more severe than many in the solar industry had been hoping for and will have an effect on the number of viable projects. At the time of writing, we are already seeing a huge rush of large-scale projects under construction – or to be constructed – in order to be accredited before 31 March deadline. For example, Solarcentury is hoping to complete the construction of a 6.3MWp park at Chalcroft Farm near Southampton within three months; Hive Energy is investing £72 million in nine solar parks, all of which it hopes to be operational by the end of March.

A report by market analyst Solarbuzz notes that this push to complete large-scale projects will mean that the UK solar market will exceed 1.6GWp; 94% of this capacity will have been installed within the past two years. But what will happen after 31 March? We have set out below a few issues that will need to be considered when ascertaining whether a project will be viable.
 

To read the full article please click here.

Energy Production and Project Delivery Act of 2013

This post was written by Christopher L. Rissetto and Robert Helland.

In a move to coalesce Republican energy demands, and move the energy debate forward, on February 27, Senator David Vitter (R-LA) and Representative Rob Bishop (R-UT-01) stated that they would introduce the Energy Production and Project Delivery Act of 2013.

The bill is intended to address three pressing policies: (1) Energy: by “unleashing domestic energy resources;” (2) Employment: by “creating thousands of well-paying jobs;” and (3) Revenue Generation: by “generating significant federal revenues from energy production.”
 

To read the full entry, please click here.

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Proposed Hydraulic Fracturing ("Fracking") Legislation in Illinois Would Impose Strict Standards

This post was written by Edward Walsh.

Proposed hydraulic fracturing legislation in Illinois, with strong bi-partisan support and the backing of Illinois Governor Quinn, would impose strict controls on fracking companies relative to most other states where fracking occurs, including chemical disclosure requirements and in the case of water pollution, a presumption of liability.

The Illinois Hydraulic Fracturing Regulatory Act (H.B. 2615) grants authority to the Illinois Department of Natural Resources to write rules, grant permits, inspect fracking sites, and enforce the proposed law. Although energy companies are not currently engaged in fracking in Illinois, a number of companies have expressed interest in, and have acquired drilling rights in, the New Albany shale deposits region of southeastern Illinois.

The proposed legislation also provides:

  • citizen private right of action rules;
  • notice, comment, and hearing rules allowing for public input when fracking permits are issued;
  • strict setback rules in connection with nearby water sources;
  • well construction standards;
  • waste fluid management rules, including wastewater testing;
  • water monitoring requirements;

The bill reportedly has the support of both the business community and environmental groups, and is expected to pass.

To read the full bill, please click here.
 

Your Rights in an OSHA Inspection

This post was written by Edward Walsh.

A workplace inspection by the Occupational Safety and Health Administration (OSHA) can result in substantial penalties where violations are found. Employers need to know their rights during an inspection, including the right to say “no” to an OSHA compliance officer (inspector) when he or she seeks to inspect a work place. The protocols to be followed by your company need to be established and understood by supervisory as well as non-supervisory employees ahead of time, and reinforced from time to time. All supervisory employees should be well-versed in the company’s OSHA access policy and must have familiarity with OSHA regulations and the company’s programs for compliance. Non-supervisory employees should understand that they have no right to grant OSHA access and should refer any such attempt to management. They also should be briefed on their rights if interviewed by OSHA in the course of an inspection.

To read the full text, please click here.

Treasury ARRA Grants May Be Hit By Sequestration

This post was written by Christopher L. Rissetto, Arnold E. Grant and Robert Helland.

The Sequestration steamroller is set to hit March 1, 2013 and we continue to monitor negotiations between the White House and Congress. The impact for Federal Fiscal Year 2013 will be compressed, given that the fiscal year is almost one-half over. While final spending decisions are not yet made, it is clear that federal grant and other assistance programs will be hit by the sequestration cuts. This includes funding for renewable-energy grant programs.

Recently, the Executive Office of Management and Budget (OMB) included the Section 1603 Treasury Grant Program - created within the American Recovery and Reinvestment Act of 2009 (ARRA) - among those subject to the sequester of funds. This proposed action galvanized the renewables industry into lobbying action in an effort to convince the OMB and Treasury Department to rethink this inclusion. In a letter of January 24, 2013, the Solar Energy Industries Association (SEIA) argued that the Section 1603 Program was "unique . . . designed to transfer a financial benefit originating from a tax credit."The SEIA also argued that the Section 1603 grant payments were very closely analogous to "obligated balances," which were not subject to sequestration. Limiting amounts received under Section 1603 artificially increases risk, including default risk under federal financing bank loans. Finally, SEIA asserted that, even without actual default, developers and private equity investors would suffer significant financial losses, even though all grant conditions were fully observed.

We see many other renewable industries reaching out as well, in an effort to redefine the law's impact, including by using the argument that unpaid Section 1603 balances should be considered "obligated"once the facility is placed in service. We expect this debate to intensify as the budget axe begins to fall.

Without Any Night Light, Will France Save Energy or Fall Asleep?

This post was written by Stéphane Illouz and Diane Le Chevallier

As of 12 July 2013, and applicable to all buildings that are used for professional activities, the lights will need to be switched off after working hours.

On 25 January 2013 the French government enacted a new decree (the Decree) that implements new restrictions as to night lighting of non-residential buildings. The Decree follows the French Regulation n°2012-118 - dated 30 January 2012 - implementing the law on illuminated-billboard advertising (the Regulation). Both pieces of legislation have been adopted as part of the government's objective to regulate energy consumption: the implementation of the Decree should enable the early saving of 2 TWh, corresponding to the energy consumption of 750,000 households.

The Decree will enter into force on 12 July 2013; but its approximate wording could raise some issues:

  • the Decree provides that shop-window lighting must not be turned on prior to 7 a.m. or for more than one hour prior to opening; and will have to be turned off by 1 a.m. or within one hour following the end of the occupation of the premises; the question of how to control the occupation of the premises remains opened;
  • the Decree also provides that lighting of building facades must not be turned on before sunset and shall need to be turned off by 1 a.m. As the time of sunset changes daily, the enforceability of this provision seems uncertain;
  • the interior lighting of "premises used for professional activities" will need to be switched off within one hour following the end of the occupation of the premises. This wording is not likely to achieve what the Government intended since the appropriate criteria for determining whether there are "professional activities" has been strictly defined by French Case Law by reference to intellectual activities – quite different from the commercial activities of, say, a bank!

Non-compliance with the Decree will be sanctioned by a fine, the amount of which is still under discussion. The French government is also working on the nature and extent of the control over compliance with the Decree and will have to find the right balance between control of energy consumption and freedom for businesses to operate.
 

Slides and Audio from Reed Smith's December 6 Environmental and Energy Law Resource Teleseminar

On December 6, 2012 Reed Smith proided an update and discussion on the California Cap and Trade auction with insight from guest speakers from the California Manufacturers & Technology Association (CMTA) and Noble Americas Corp.

Topics included:

  • Auction Comments
  • Price Containment
  • Resource Shuffling
  • Offset Update

The slides and audio are available for download.

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.

Shale Gas in the UK: One Year On...

 This post was written by Lynne Freeman and Christopher Parrott

Following changes in personnel in the UK Government, opportunities may be on the horizon in the budding UK shale gas industry. Last year, we reported on the challenges in achieving large scale shale gas production in the UK, summarising them as:

  • The impact of Governmental decisions on energy policy;
  • Obtaining planning and other permissions to access the land and develop the shale reserves;
  • Overcoming environmental and safety concerns;
  • The influence of lobbyists and environmental pressure groups; and
  • Access to funding for exploration.

One year on, this Reed Smith Client Alert considers the progress in respect of these challenges, what has changed and what remains to be done before the impact of shale gas on the UK’s energy needs can be determined. 

2012 Election Results and Congressional Movement

This post was written by Christopher L. Rissetto and Robert Helland 

As the last outstanding Congressional races are being decided, we note what has not changed as a result of the 2012 elections. For one thing, the Democrats still control the White House and Senate and the Republicans still control the House of Representatives. For another, none of the issues facing Congress and the President – put on hold for the campaigns – have left. Decisions still need to be made on appropriate tax and spending levels; the implementation of a federal budget for the remainder of the fiscal year; long-term support levels for our nation’s farmers; the ongoing implementation (and funding) of the Patient Protection and Affordable Care Act (Public Law 111-148); and the support of renewable energy.

To view the entire entry please click here.

The SEC's New Rules on Conflict Minerals

This post was written by Leigh Hansson, Jeffrey Orenstein, and Carlos Aksel Valdivia.

What do the SEC and Leonardo DiCaprio have in common? Both have brought attention to the area of "conflict resources" in Africa. But whereas Leo has acted in a movie about so-called "blood diamonds," the SEC is turning the spotlight on "conflict minerals". Regrettably, the public will not be enjoying an SEC-produced summer blockbuster regarding the matter, but instead will face new rules implementing the Dodd-Frank reforms.

Please click here to read the issued Client Alert.

 

President Obama Follows CFIUS Recommendation, Orders Divestiture on Ralls Wind Farm Deal

This post was written by Gregory S. Jacobs.

As many expected, today President Obama issued an Order exercising his statutory authority to block foreign investment in the United States that he finds to impair national security - in this case, the acquisition of wind farms in Oregon by Ralls Corporation, a firm owned by Chinese nationals. As previously reported, following CFIUS' interim measures to prevent Ralls from moving forward with the investment (as CFIUS claimed, to maintain the status quo), Ralls filed suit in federal court. Though Ralls and the Committee reached an agreement that effectively suspended the court challenge, the relief for the Chinese investors was short-lived: the President's Order not only requires divestiture and removal of all equipment, it also prohibits the Ralls owners and their representatives from physically entering the site.

For Ralls, the options moving forward appear limited. By statute, the President's decisions are not subject to judicial review - any attempts by Ralls to challenge that provision would like run directly into the President's inherent authority over national security. Perhaps more likely, Ralls may pursue monetary relief under the Constitution's Takings Clause, under the theory that its private property (investment in the wind farms) has been seized and that just compensation is owed.

For the CFIUS process generally, this high-profile denial of seemingly innocuous investment may make Chinese purchasers more skittish about the uncertainties of U.S. investment. Whether it will ultimately curtail investment remains to be seen. But it is likely, especially in the short term, that nearly all purchases of U.S. businesses that include a real estate component will be notified to CFIUS. Given the experience of Ralls, and Firstgold before it, why would the parties take the chance?

President Obama to Decide Whether Chinese Companies Can Acquire Wind Farm Near U.S. Navy Training Site

This post was written by Gregory S. Jacobs

In a closely-watched case that will have important implications for future Chinese investment in the U.S. renewable energy market, President Obama is expected to rule in the next day or so on whether Ralls Corporation can go ahead with the acquisition of a wind farm that happens to be located near restricted airspace used for training exercises conducted by the U.S. Navy.

Ralls is privately owned by two Chinese nationals. In March 2012, Ralls was the latest purchaser of four wind farm projects formed by an Oregon energy company. The wind farms are expected to make up less than 0.4% of the regional power grid’s total generating capacity, and the Federal Aviation Administration had already approved each of the twenty planned turbines at the proposed location. However, CFIUS reviewed the transaction (after the Department of Defense learned about it in Wind Power Monthly), first at its own initiative, and then on the basis of a voluntary notice filed by Ralls. When CFIUS took interim action to block the deal pending a determination from President Obama, Ralls filed suit in federal court, arguing that the Committee had exceeded its power. The parties then reached agreement under which Ralls could move forward with some limited development of the project, pending the President’s decision.

With the September 28 deadline looming, President Obama faces potential negative consequences with either approving or rejecting the deal. If he follows CFIUS’ conclusion that the transaction involves national security concerns that cannot be mitigated, he may feed recent criticism that his administration has been protectionist and too closed in trade with China. If he elects to disregard the Committee’s conclusions and approve the deal, he will almost certainly be criticized for ignoring the advice of the very national security experts tasked with evaluating these transactions. Complicating the issue is that, at least publicly, there does not appear to be significant evidence of a national security concern with this transaction. This dilemma may well lead the administration, through CFIUS, to seek a compromise with Ralls to mitigate the perceived security issues, while still granting the parties the economic benefits of the deal. 

Reed Smith’s John Zhang has commented on this issue and the concerns it poses for Chinese investors in the Chinese publication, Caixin.

Amendment to U.S. Army's RFP Related to its Renewable Energy Program

This post was written by Amy Koch and Lorraine Campos

On the blog, we’ve discussed the U.S. Army's Engineering and Support Center’s (USACE) recent request for proposals that were issued for large-scale renewable projects related to $7 billion in renewable energy contracts over the next 10 years. The USACE recently issued its fifth amendment to the request for proposals for the Army Energy Initiatives Task Force Multiple Award Task Order Contract (MATOC) solicitation. In this Reed Smith Client Alert, we discuss the amendment, including the revised pricing criteria, the clarification of some aspects of small business participation and several changes to the bid preparation requirements.

Slides and Audio from Reed Smith's September 11 Environmental and Energy Law Resource Teleseminar

On September 11, 2012 Reed Smith focused on auctioning of California GHG credits during its quarterly teleseminar.

Topics included:

  • California (CA) Regulatory update
  • Cap and Trade Auction Issues (overview of "test" auction)
  • Lessons learned from EU ETS Auction
  • Recent changes to CA ARB regulations and proposed changes
  • Pending Climate Change Litigation

The slides and audio are available for download.

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.

U.S. Department of Defense's Renewable Energy Programs Moving Forward

This post was written by Amy Koch, Lorraine Campos, Stephanie Giese and Leslie Monahan

While August is generally quiet in Washington, D.C., so far this month, the U.S. Department of Defense (DOD) has made progress on two on-going efforts to secure power from renewable energy facilities, and has initiated a third. In this Reed Smith client alert, we discuss developments related to the following:

  • The U.S. Army's recent request for proposals that was issued for large-scale renewable projects related to $7 billion in renewable energy contracts over the next 10 years;
  • DOD and the Department of the Interior's (DOI) agreement that requires the agencies to hold an offshore wind military/industry forum before October 1, 2012, to initiate the sharing of information regarding the advancement of offshore wind development; and
  • The U.S Army's "sources-sought" notice for multimillion-dollar energy saving performance contracts.

White Paper: We have prepared a white paper on the RFP; if you would like a copy please contact Amy Koch at akoch@reedsmith.com.

Commonwealth Court of Pennsylvania Strikes Down Zoning and Setback Waiver Provisions of Act 13

This post was written by Emily Thomas and Kevin Abbott

Last week, a divided Commonwealth Court of Pennsylvania judicial panel struck down the provisions of the recent Pennsylvania Oil and Gas legislation, known as "Act 13," that created statewide uniform zoning for purposes of oil and natural gas development in Pennsylvania as unconstitutional by a vote of 4–3. The entire judicial panel also held that the portions of Act 13, which authorized the DEP to grant a waiver of certain setback requirements from water bodies and wetlands, were null and void. This Reed Smith client alert summarizes and analyzes the July 26 court opinion, and provides guidance related to the future procedural path of the case.

USEPA Delays Utility Cooling Rule Until 2013

This post was written by Douglas Everette and John Downing (Senior Scientist at Shaw Environmental and Infrastructure Group)

This week, the U.S. Environmental Protection Agency (USEPA) announced that it will defer until next year acting on a proposed Clean Water Act section 316(b) rule that could require expensive new construction at power plants to lower fish deaths. Under the proposed 316(b) rule, USEPA is planning to regulate man-made cooling reservoirs that are adjacent to power plants as if they were natural lakes needing protections for fish populations. It appears the delay was due in part to the confusion created by the public comment process and the volume of comments as well as election-year politics. In the attached joint client alert from Reed Smith and Shaw Environmental and Infrastructure Group, we discuss common issues raised by industry groups and what to look for next.

 

UK Renewables Obligation 2013-17 Banding Review Decisions Finally Announced

This post was written by Richard Ceeney, Nicholas Rock and Stefan Schmitz

Yesterday, the UK Government published its long awaited response to its October 2011 to January 2012 consultation on future levels of banded support under the UK Renewables Obligation (RO). The RO is currently the main UK mechanism aimed at giving developers of more expensive renewable generation technologies grid parity with fossil-fired generation. Under the RO, renewables developers receive a subsidy per megawatt hour of electricity generated. This comes in the form of certificates (ROCs) that can be sold to electricity suppliers, who are obligated by law to supply a certain minimum level of green power in the UK market. ROCs are currently traded at about £45 each. Although current plans are for the RO system to be closed for new entrants in 2017, with a Feed In Tariff Contract for Difference approach to apply subsequently, projects already subject to the RO system are to be “grandfathered”; therefore, the levels of RO support will remain critical for the lifetime of those projects accredited to the scheme before it closes. The government's report contains much that was expected based on last year’s consultation proposals, but also contains some surprises, particularly in respect of future levels of support for onshore wind projects after April 2014 and for all projects under 5MW after April 2013.

This Reed Smith client alert summarises the current position, as well as analyses the proposals and considers their likely effects and implications.
 

FAQs on the New European Union Registry for Carbon Credits

This post was written by Peter Zaman

A new world order for carbon trading in the EU Emissions Trading Scheme (the EU ETS) was ushered in on 20 June 2012 by the migration of the carbon trading account and registry system from separate Member State registries to a single Union Registry. These changes are borne out from a number of regulatory developments and market issues, such as the VAT fraud and the theft of carbon credits through cyber-phishing or hacking. The migration comes at the end of process whereby access to accounts were suspended on 3 June 2012 and reopened on 20 June 2012. A number of issues have already arisen with respect to the new registry infrastructure that were not anticipated. For instance, we now know that a significant number of account users across all Member State registries have failed to nominate an Additional Authorised Representative (AAR) ahead of the suspension. This means that under the new regulations, without such AARs being in place, it is not possible to now make a transfer from an account in the Union Registry. This has the potential to impact delivery obligations that are due in the immediacy of the lifting of the suspensions.

Similarly, there have been other "unknowns" prior to the migration of which we now know more. Although some "unknowns" remain, this Reed Smith Client Alert answers the frequently asked questions regarding the Union Registry.

Proposed Revisions Seek to Approve North American Electric Reliability Organization's Definition of Bulk Electric System

This post was written by Amy Koch

The Federal Energy Regulatory Energy Commission (FERC ) has issued a notice of proposed rulemaking regarding the North American Electric Reliability Corporation's (NERC) proposed modifications to the definition of "bulk electric system" and proposed a process to evaluate whether specific facilities should, or should not be, included as part of the "bulk power system." FERC is proposing to approve NERC's plans.

NERC's proposal is the result of Order No. 743, where FERC instructed NERC to revise its definition of the term "bulk electric system" to ensure that the definition encompasses all facilities necessary for the operation of an interconnected transmission network, and to address certain technical and policy concerns -- including inconsistencies in application among the Regional Entities and lack of NERC or FERC oversight. In Order No. 743, FERC stated that the best way to address these concerns is to eliminate the Regional Entities' discretion to define what comprises the "bulk electric system" with a bright line threshold that includes all facilities operated at or above 100 kV except defined radial facilities, and to adopt an exemption process and criteria for removing facilities from NERC's authority that are not necessary for operating the interconnected transmission network. This proposed rule will likely raise regulatory challenges and costs for electric generator and some industries.

 

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Global Carbon Market Total Reaches Record US $176 Billion

This post was written by Peter Zaman

The total value of the carbon market grew by 11 percent in 2011, to US $176 billion, and transaction volumes reached a new high of 10.3 billion tons of carbon dioxide equivalent (CO2e) according to a new report from the World Bank. According to the State and Trends of the Carbon Market 2012 this growth took place in the face of economic turbulence, growing long-term oversupply in the EU Emissions Trading Scheme (EU ETS) and plummeting carbon prices. Despite these challenges, legislation with both domestic and regional market mechanisms to mitigate climate change has been passed in Australia, California, Quebec, Mexico and South Korea.

The World Bank’s report, released at this week’s the CarbonExpo in Cologne, Germany, describes how even as prices declined, the value of the global carbon market increased in 2011, driven predominantly by a significant growth in financially motivated transactions. By far, the largest segment of the carbon market was that of EU Allowances (EUAs), valued at $148 billion. There was also a substantial increase in the volume of secondary Kyoto Protocol offsets (which grew by 43 percent, to 1.8 billion tons of CO2e, valued at US $23 billion) fueled by increased liquidity in the Certified Emission Reduction market and in the secondary Emission Reduction Unit market. Following the same pattern observed in previous years, the global carbon market in 2011 was primarily driven by the EU ETS.

It is also noteworthy that the market is starting to look beyond 2012 as the post-2012 primary Clean Development Mechanism market increased by 63 percent, to US $2 billion, despite depressed prices and limited long-term-visibility.

The World Bank’s report also features an article I wrote entitled "Trading around the risk of receiving stolen allowances" (see page 27 in the report) at the World Bank's request summarising the issues faced by market participants during the last two years from cyber thefts in the EU ETS. The article also reflects some thoughts on the effectiveness of the solutions proposed by the EU Commission.

Opportunities for Renewable Energy Projects in Saudi Arabia

This post was written by Stefan Schmitz, Hayley Steel, and Vincent Gordon

While traditionally regarded solely as the world's premier producer of oil, Saudi Arabia has recently started to look at alternative sources for its energy consumption, and, maybe not surprisingly, renewable energy ranks high on the list: the country has very high levels of solar irradiance and huge areas of desert, which make it an ideal location for solar projects, along with other renewable energy projects. The Saudi plans are very ambitious and many investors believe this is a good opportunity to get involved in this market.

To expand its renewable energy generation, Saudi Arabia plans to create a solar sector capable of providing 30 percent of its electricity by 2032. It wants to build very large amounts of solar projects in the near future - plans that will require about $109 billion of investment - with specific rules to be finalized soon. Along with plans to increase solar energy generation, Saudi Arabia is also planning to place more emphasis on renewable energy generation generally, with intentions to include wind, geothermal, waste-to-energy and nuclear energy generation plans in its strategy.

Saudi Arabia's plan, known as the King Abdullah City for Atomic and Renewable Energy (K.A.CARE), was set up in 2010 to provide the framework for developing an alternative energy capacity for the Kingdom. And this month, K.A.CARE introduced a proposal for a new renewable energy policy. Key elements of the proposal include:

  • Feed-in tariffs to build out the program
  • No maximum project size
  • Minimum project size is 5 MW
  • Term for the power purchase agreement is 20 years
  • Evaluation criteria include price and non-price factors

In this Reed Smith client alert, we discuss K.A.CARE's proposals as it relates to solar energy, nuclear energy and the opportunities for investment. As discussed in the alert, the investment required to implement the aims of the K.A.CARE plan is vast and may be worthwhile for potential investors, developers and manufacturers to examine these opportunities.

Second AEITF Renewable Energy Industry Day Announced

This post was written by Amy Koch and Lorraine Campos.

The Army Energy Initiatives Task Force (AEITF) has announced its second renewable energy industry day to be held on June 12, 2012, at the Crystal City Marriot in Crystal City, Virginia. The AEITF’s first industry day was held in early 2012, before it released its draft request for proposals, which set out the processes by which it intends to procure up to $7 billion in renewable energy. The second industry day may prove to be even more useful than the first because it is being held jointly with the U.S. Air Force. Both the Army and Air Force have 1 gigawatt (GW) renewable energy goals and need to rely on private sector investment to meet those targets. The upcoming industry day is intended to provide specific direction on each Service’s renewable energy goals, as well as the processes through which they are seeking to establish partnerships with the private sector.

Participation will be limited to 800 people and this link will lead you to the AEITF’s website for the June 12th industry day and a registration form.

For those interested in renewable energy development with the Army and Air Force, attendance at this event should be present a good opportunity to learn about how each Service intends to meet its renewable energy target and to meet senior Army and Air Force officials leading those efforts.

If you have any questions about the AEITF renewable energy industry day or Department of Defense renewable opportunities in general, please contact Amy Koch or Lorraine Campos.

 

Record Highs and Lows in New Jersey's Uncertain Solar Market

This post was written by Jim McGuire, Henry King, Ferd Convery, and Marshall McLean

The New Jersey solar SREC market is significantly over-supplied. The renewable portfolio standards (“RPS”) for Energy Year (“EY”) 2012 (June 1, 2011-May 31, 2012) requires that a total of 368 MWs in solar generation capacity be installed by May 31, 2012. That requirement was satisfied in June 2011, only one month into EY 2012. BPU staff estimates that installed solar capacity will exceed the solar RPS through at least energy year 2014 and, depending on the near-term installation rate; the solar capacity may exceed New Jersey solar RPS through EY 2016. As noted by BPU staff in its solar transition straw proposal the pace of construction, installation and operations in the New Jersey solar market is not sustainable within the current solar RPS.

This week legislation (S-1925) was introduced by Senators Smith and Sweeney which proposes long awaited relief to the New Jersey solar market. The bill, which is not yet publicly available, is expected to be scheduled for hearings before the Senate Energy and Environment Committee chaired by Senator Smith on an expedited basis. S-1925 will likely seek to regain lost momentum in New Jersey’s solar market by focusing on: revised RPS and solar alternative compliance payment ("SACPs") schedules, preference for location of solar facilities on brownfields and landfills rather than on farmland, grid connected projects, net metering requirements including clarification of what it means to be connected to the distribution system, and an aggregated net metering program for local government and school districts.

In this client alert, we discuss the proposed legislative remedy as well as regulatory remedies. For additional information please contact one of the authors listed above.

U.S. Department of Interior Releases Draft Rule on Public Disclosure of Chemicals Used in Hydraulic Fracturing on Public and Indian Lands

This post was written by David Wagner

A few months ago, our blog previewed this year's top 10 environmental legal issues related to shale gas. Late last week, there were developments in two of them. On May 4, the U. S. Department of the Interior (DOI) released its proposed rule to require companies to publicly disclose the chemicals used in hydraulic fracturing operations on public and Indian lands. The proposed rule, from DOI’s Bureau of Land Management (BLM), will soon be published in the Federal Register. At that point, a 60-day public comment period will begin, during which the public, governments, industry and other stakeholders can provide their input.

The proposal identifies requirements for extensive information filings prior to drilling and reporting of what was done after the fracturing. For example, the proposed rule would require BLM’s approval of all well stimulation activity. In addition, an operator would be required to submit a drilling plan, including elements such as a detailed description of the well stimulation engineering design for BLM approval.

An operator would also have to submit the estimated or calculated fracture length and height anticipated as a result of the stimulation. The actual total volume of fluid used would have to be reported after the fracturing was performed. Further, the operator would have to report the actual handling and disposal of recovered fluids.

The information obtained by BLM is intended to be posted on a public web site, and BLM is working with the Ground Water Protection Council to determine whether the disclosure can be integrated into website FracFocus.org.
 

USEPA's Draft Guidance for Diesel Fuel in Hydraulic Fracturing Clarifies Compliance with Safe Drinking Water Act

This post was written by Jennifer Smokelin

Here's another environmental legal development we previewed at the beginning of the year. In 2005, Congress exempted hydraulic fracturing from requirements to obtain an underground injection permit under the Safe Drinking Water Act (SDWA), but still required a permit when diesel fuel is used as a fracturing fluid. On May 4, the U.S. Environmental Protection Agency (USEPA) published draft guidance for SDWA permits issued to oil and gas companies that use diesel fuels during hydraulic fracturing. The draft guidance outlines requirements for diesel fuels used for hydraulic fracturing wells, technical recommendations for permitting these wells, and a description of diesel fuels for USEPA underground injection control permitting. Note that the draft guidance only applies to USEPA permit writers and where USEPA is the permitting authority, The draft guidance includes six categories of fuels (based on CAS abstract numbers) deemed to be considered diesel, while stopping short of an outright ban on the use of the fuel. If these categories of fuels are being used, drillers will need to apply for a specific permit and this could delay drilling. The guidance does not address possible liability for companies that used diesel fuel in the past to fracture rock formations to free trapped natural gas.

USEPA will take public comment on the draft guidance for 60 days upon publication in the Federal Register to allow for stakeholder input before it is finalized.
 

Slides and Audio from Reed Smith's Teleseminar on Shale Gas

This post was written by David Wagner

With all of the recent attention given to shale gas, we featured the issue in our quarterly Environmental and Energy Teleseminar. Here are the slides and audio from yesterday’s event. In particular, we discussed:

  • Recent developments related to aggregation and U.S. Environmental Protection Agency’s new air emission rules for the oil and gas industry
  • Hydraulic fracturing and chemical disclosure requirements, especially in state jurisdictions
  • Overview of fracking regulations and developments on federal level
  • Pending shale gas legislation in California
  • Overview of international shale plays

Look for our next quarterly teleseminar this summer.
 

USEPA's New Air Emission Rules for Oil and Gas Industry Address Some Industry Concerns but Raise Others

This post was written by Jennifer Smokelin

On April 17, the U.S. Environmental Protection Agency (EPA) promulgated the first-ever final regulation setting limits on air pollution from natural gas production aimed at reducing toxic air pollution from the natural-gas drilling process called fracking. EPA updated its New Source Performance Standards (NSPSs) and National Emission Standards for Hazardous Air Pollutants (NESHAPs) to include emissions from oil and gas production. The new standards will reduce the amount of methane, volatile organic compounds, and other emissions coming from fracking operations by requiring that all newly fractured or refractured wells incorporate reduced emissions controls (RECs). The regulations will also target emissions from compressors, oil storage tanks and other oil-and-gas sector equipment.

The biggest news is that, under the final rules, EPA delayed the deadline for requiring the use of RECs or “green completions”. In its proposed rule, “green completions” were required 60 days after final publication of the rule in the Federal Register. Now, under the final rule, well operator and owners have until January 1, 2015 before they need to conduct green completions. Between now and 2015, compliance with the rules can be achieved via reductions using flaring or other approved combustion methods, although early adoption of green completion is "encouraged".

In addition, there are a few other exemptions from compliance under the final rules. For example, wells drilled in low-pressure areas, such as coal-bed methane reserves, are exempt because these wells release less pollution during completion. And companies that choose to re-fracture wells using the pollution-reducing equipment prior to the January 2015 deadline would not be covered by the NSPS. These are significant changes from the rule as proposed in July 2011.

Despite these changes, industry still remains concerned about federal regulation of the oil and gas industry, including issues of “regulation overlap” (that is, where one federal agency will require one thing while another federal agency will regulate the industry another way). As we reported on the blog last week, President Obama announced the formation of a high-level task force last week charged with coordinating oversight of fracking in an effort to reassure industry groups that are concerned about overlapping federal regulations. Of course, it remains to be seen whether this will be successful.
 

 

DECC Publishes Report Advising UK Government on Hydraulic Fracturing

This post was written by Lynne Freeman and Laura Riddeck

A report commissioned by the Department of Energy and Climate Change (DECC) advising the UK Government that the controversial process of hydraulic fracturing, or “fracking”, should be allowed to continue, was published today. This is likely to thrust the process back into the spotlight, with Cuadrilla Resources Ltd likely to resume its activities and other companies to look to get a piece of shale gas action.

Background

Cuadrilla Resources Ltd began using fracking to explore sites for shale gas in Lancashire, north England, in March 2011.In April and May 2011, however, two seismic tremors were detected in the Blackpool region. These were immediately suspected to be linked to fracking processes in wells operated by Cuadrilla during exploration of a shale gas reservoir. As a result of the tremors, operations were suspended and Cuadrilla commissioned a number of studies examining the relationship between the fracking operations and the seismic activity.
 

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President Obama Intends to Strengthen Federal Oversight of Hydraulic Fracturing Process

This post was written by Christopher Rissetto and Ariel Nieland

On April 13, the White House released an Executive Order calling for the creation of an "Interagency Working Group" (Working Group) charged with "overseeing the safe and responsible development of unconventional domestic natural gas resources." The Order defines the functions of the Working Group to include: (i) coordination of agency policy activities; (ii) coordination of the sharing of scientific, environmental, and technical and economic information; (iii) engagement in long-term planning with respect to research, natural resource assessment, and infrastructure development; (iv) promotion of interagency communications with outside stakeholders; and (v) consultation with other agencies and offices. The Working Group will be comprised of members from 13 different high-level agencies and departments, including, among others, the Department of Defense, the Environmental Protection Agency, the Department of Energy, the Department of Transportation, and the Department of Homeland Security.

The Order was issued approximately two months after the American Petroleum Institute requested that the Administration designate an agency to take the lead in coordinating federal policy and regulation efforts with regard to unconventional oil and gas. According to news reports, the unconventional gas policy group will be led by President Obama's top energy and climate advisor, Heather Zichal.

The Administration's efforts precede issuance of rulemakings by the Bureau of Land Management and the Environmental Protection Agency that will also impact oil and natural gas production.
 

Local Zoning Laws Remain in Place for the Pennsylvania Oil and Gas Industry - For Now

This post was written by Nicolle Bagnell and Luke Liben

When Pennsylvania’s new Marcellus Shale drilling law (known as Act 13) goes into effect on April 14, the section that preempts local drilling ordinances will be temporarily put on hold. Although Act 13 specifically overrides local zoning laws related to oil and gas operations, yesterday the Pennsylvania Commonwealth Court granted an injunction of the enactment of all provisions addressing the state’s preemption of oil and gas zoning laws. In the matter Robinson Township, Washington County, Pennsylvania v. Commonwealth of Pennsylvania, No. 284 M.D. 2012, the court issued a 120-day injunction that will extend the time period that municipalities have to craft new ordinances to comply with Act 13. The plaintiffs in the case, mostly municipal officials and two individuals, stated that the injunction was necessary to avoid any uncertainty that would otherwise arise in this 120-day period. No other aspects of Act 13 will be affected by the injunction.

 

Great Lakes Offshore Wind Power MOU to Facilitate Evaluation of Proposed Projects and Expedite Permitting

This post was written by Robert Vilter, Amy Koch, Stefan Schmitz, and Patrick Elder

On March 30, 2012, ten federal agencies and the governors of Illinois, Michigan, Minnesota, New York and Pennsylvania signed a new memorandum of understanding (MOU) to develop a roadmap within 15 months that would describe the regulatory review process and data needed to “inform efficient review” of proposed offshore facilities in the Great Lakes. The MOU is designed to speed review of proposed offshore wind projects by increasing collaboration between federal and state agencies.

According to the U.S. Department of Energy, the Great Lakes' region is home to the largest offshore wind potential of any U.S. waters – 742.5 GW, or one-fifth of all potential wind energy in the United States. Each gigawatt of offshore wind power installed could produce electricity for 300,000 homes.

The MOU will not eliminate any of the myriad federal and state approvals needed to construct and operate an offshore wind project in the Great Lakes, but may ultimately result in one or more roadmaps that could be of real assistance to developers. In this client alert, we discuss some of the interest and opposition to offshore wind development in the region.

 

USEPA Withdraws Range Resources' Imminent and Substantial Endangerment Order in Fifth Circuit

This post was written by Jennifer Smokelin

As we've discussed on the blog, in late 2010, homeowners who lived near drilling operations of Range Resources in Parker County, Texas, reported problems with their tap water, complaining that it was bubbling and even flammable. On December 7, 2010, the U.S. Environmental Protection Agency (USEPA) issued an emergency order under the Safe Drinking Water Act to the company to take immediate action to protect the homeowners. Range Resources protested the order and the case was hard fought for over a year. In short, Range Resources argued that it was entitled to pre-enforcement review and that USEPA is obligated to show facts supporting the underlying elements of the violation in court to secure injunctive relief and impose civil penalties. A few days ago, USEPA withdrew the order, according to documents filed last week in the U.S. District Court of the Northern District of Texas.

USEPA's surprise withdrawal came less than a week after the unanimous U.S. Supreme Court decision is Sackett v. United States Environmental Protection Agency, et al., (Case 10-1062) (Sackett). In Sackett, the U.S. Supreme Court held that USEPA's order under the Clean Water Act directing a homeowner to remove fill material from an area that USEPA alleged included regulated wetlands was final, ripe, and immediately reviewable. We connected the dots and discussed that, while Sackett was decided under a different statute (the Clean Water Act), there were implications in Sackett to the Range Resources case under the Safe Drinking Water Act. Even though USEPA's documents withdrawing the order in the Range Resources case do not rely on Sackett expressly, one can surmise based on the breadth of the Sackett opinion and the analysis previously provided in this blog that the holding in Sackett had at least something (if not everything) to do with it. Drawing from these recent events, recipients of any USEPA administrative enforcement order have increased incentives to carefully analyze their options about challenging the order prior to enforcement.

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Next Steps in New Jersey's Solar Transition

This post was written by Jim McGuire, Henry King, Ferd Convery and Marshall McLean

The New Jersey Board of Public Utilities (BPU) will hold a Public Hearing on March 22, 2012 starting at 9:30 am at its Trenton Office, 44 South Clinton Avenue. The purpose of the Public Hearing is to provide an opportunity for further public comment on a BPU Staff Straw Proposal on the next steps in the transition of NJ's Solar Program including: extension of the solar renewable energy credit (SREC) financing program administered by the four electric distribution companies (EDCs) located in the state; and related changes to the Solar Renewable Portfolio Standards (RPS). Initial Comments are due, in writing, by close of business on Friday, March 16 with final comments due at the close of the Public Hearing on March 22.

The BPU directed its staff to develop options and recommendations for next steps in response to rapid expansion of its Solar Program. The Solar Program expanded from an initial goal of 90 MW of installed solar during the five year period from 2003- 2008 to installation of more than 80 MWs in a single month during January 2012. As a result of this rapid expansion, New Jersey is projected to have an excess supply of installed solar capacity through at least energy year (EY) 2014 and perhaps through EY 2016. This excess supply has resulted in a dramatic drop in SREC prices from more than $600 per SREC in the spot market during the Summer of 2011, to about $200, and with the most recent EDC Auction in February 2012 yielding a price of $170. 
 

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U.S. Army Looking for $7 Billion in Renewable Energy Over the Next 10 Years

This post was written by Amy Koch and Lorraine Campos

The U.S. Army began its long-awaited process for signing up to $7 billion in renewable energy power purchase agreements (PPAs) over the next ten years. On February 24, 2012, the Army Energy Initiatives Task Force (AEITF) issued a notice seeking comment on a draft request for proposals (Draft RFP). The Draft RFP sets out the AEITF’s proposed process for signing 30-year power PPA or "equivalent contracts" for projects located at Army installations and on non-installation property. This program could present an excellent opportunity for renewable energy developers -- provided they can meet the Department of Defense's government contracting rules. That's where we come in. Reed Smith has both the energy development and government contracts expertise to assist potential renewable energy bidders in the AEITF process.

You can find more details in our client alert and feel free to contact us for additional information.

Key Environmental and Safety Provisions in New Pennsylvania Gas Act

This post was written by Jennifer Smokelin

On February 14, 2012, Pennsylvania Governor Corbett signed House Bill 1950 into law as Act 13 of 2012, the Unconventional Gas Well Impact Fee Act (Act 13). This long bill (174 pages) provides for an impact fee, Oil and Gas Act (Title 58) amendments and local ordinance standards. We followed the legislative progression of the Act and, as promised, offer more detailed analysis of the environmental aspects of the Act here. In short, Act 13 provides for new well fees to be assessed on unconventional wells as well as restrictions on local government’s authority to impose burdens on oil and gas activities over and above those required by the state (which some municipalities are preparing to challenge). There are also new environmental and safety provisions for both surface and subsurface activities, some of which will be effective immediately while other will require a rulemaking by the Environmental Quality Board before becoming effective. This article discusses five significant “specifics” of the new environmental and safety provisions imposed by Act 13 and the implications on future permitting and operation of unconventional natural gas development.

 

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In New Jersey, Solar Renewable Energy Credit Auction Prices Fall Below $200

This post was written by Henry King, Ferd Convery, Jim McGuire, and Marshall McLean

The fundamental question for the future of the New Jersey solar market is the impact of the recent decline in solar renewable energy credit (SREC) prices on development of new projects to meet New Jersey’s ambitious renewable portfolio standard (RPS) targets. The $600+ per SREC prices in 2010 and 2011 attracted a tremendous amount of development activity. Now, the decline in SREC prices and the unavailability of long-term SREC contracts have caused developers to question whether to continue to invest in New Jersey. The legislature has contemplated (but not approved) adjustments to the RPS system, including restrictions on large projects and increasing the RPS targets to increase demand. From our perspective, however, these proposed adjustments would not calm the market and encourage new development because of the fundamental uncertainty of the market-based system.

The four New Jersey electric distribution companies hold quarterly auctions to sell SRECs that they have procured from their solar programs. The auction is open to all market participants, including basic generation service and third-party suppliers that must comply with the New Jersey renewable portfolio standard requirements. The February 2012 SREC auction conducted by the four New Jersey electric distribution companies resulted in an auction price of $171.63 per SREC. The SRECs sold were generated between June 1, 2011 and December 31, 2011, which is in the 2012 Energy Year. A total of 26,488 SRECs were sold at this auction.
 

 

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Potential Outcomes Following Oral Argument in the Court Challenge to USEPA's Greenhouse Gas Rulemakings

This post was written by Jennifer Smokelin

The U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) heard arguments in late February on judicial review of the U.S. Environmental Protection Agency’s (USEPA) greenhouse gas (GHG) regulatory program. In the case Coalition for Responsible Regulation v. EPA, the petitioners – a coalition of oil and gas, manufacturing, construction and other industry groups and states – are challenging USEPA’s authority under the Clean Air Act to regulate GHG emissions under four rules: (1) the Endangerment Finding; (2) the Tailpipe Rule; (3) the application of GHG permitting requirements to the existing federal Prevention of Significant Deterioration (PSD) program (referred to as the "Grounds Arising After" case); and (4) "Tailoring" and "Timing" rules.

Oral argument was heard over two days before a very hot bench. Although tea leaves are very hard to read in any case, especially in this particular case where the judges seemed to leave all avenues open, here is a brief synopsis of the issues and potential outcomes:

 

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U.S. Shale Gas in 2012: Top 10 Environmental Legal Issues to Watch

This post was written by David Wagner and Jennifer Smokelin.

This article was published in Rigzone on February 16, 2012.

In his State of the Union address in late January, President Obama offered his support to further develop natural gas as an energy source and stated that “my administration will take every possible action to safely develop this energy.” The president also underscored that this development requires environmental safeguards. He added: “I'm requiring all companies that drill for gas on public lands to disclose the chemicals they use. America will develop this resource without putting the health and safety of our citizens at risk.” In this context, what can we expect from environmental regulators this year? In our outlook for 2012, we identify 10 environmental legal issues to watch.

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Does It FiT? UK Government Consults on "Improvements" to the Feed in Tariff Scheme

This post was written by Richard Ceeney, Stefan Schmitz and Christopher Parrott.

If you're involved in energy generation in the UK (e.g., energy companies, investors, financiers, or suppliers of fuels, plant or infrastructure), take notice: earlier this month, the UK government published its second consultation on the Feed in Tariff regime for solar PV installations, and it proposes further cuts to the subsidy provided for solar power. This Energy and Natural Resources Client Alert from Reed Smith's London office considers the implications of the consultation, including the positive commitment the government have made to the expansion of the solar industry.

Legislative Watch: Pennsylvania Governor Signs Marcellus Shale Regulatory and Impact Fee Legislation

This post was written by Jennifer Smokelin

Yesterday, Pennsylvania Governor Tom Corbett announced he signed into law House Bill 1950, the Marcellus Shale bill. Under the legislation, Pennsylvania's counties will have the option of imposing a flat fee on well operators for each natural gas-producing well located in their county. It is likely that all counties will impose the fee. The flat fee, which may be retroactive in some cases, will be $40,000 to $60,000 for each well in its first year of operation, depending on the price of natural gas and inflation, with the annual fee declining over 15 years. In addition to the retroactive revenue-raising provisions in the legislation, there are also reporting requirements imposed on well operators. We will provide a detailed analysis in a later post, but high points of the legislation include:

  • Establishes an impact fee (tax) on a sliding scale over 15 years for each well drilled, to be split 60/40, with 60 percent going to the county and 40 percent to the state.
  • Municipalities can no longer regulate gas drilling in their borders, but they can still enact zoning restrictions to address truck traffic, noise, light and other industrial effects from drilling. If a driller believes a local zoning law is too restrictive, the driller can appeal it to the Public Utility Commission, who now becomes the referee for such disputes.
  • Property owners within 3,000 of a well permit must be notified of the new permit (used to be 1,000 feet).
  • New wells must be drilled at least 500 feet away from existing buildings or water wells (used to be 200 feet), and if it’s a supply point for public water supplies, the setback must be 1,000 feet.
  • New wells must be drilled at least 300 feet away from streams, springs, bodies of water or wetlands greater than one acre (used to be 100 feet).
  • Increases the amount of blanket bonds from $25,000 up to $600,000.
  • Drillers must start using FracFocus.org to publicly disclose all chemicals used in the fracking of individual wells.
  • Creates a Natural Gas Energy Development Program with incentives to convert truck fleets to compressed natural gas, liquefied natural gas, or bi-fuel vehicles. At least 50 percent of the funds must be used for grants to local transportation organizations, including mass transit agencies.

In terms of timing, the provisions authorizing counties to adopt ordinances imposing an impact fee go into effect immediately, and the remainder of the law takes effect in 60 days from February 14.
 

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.

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.

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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California Air Resources Board Approves Final Cap-and-Trade Regulations

This post was written by Todd Maiden, Donald Ousterhout and Brendan McNallen.

On October 20, the California Air Resources Board ("CARB") approved the final regulation for the California cap-and-trade program authorized by California's Global Warming Solutions Act (AB 32). As anticipated, CARB approved recent modifications to the regulation proposed in July and September 2011, paving the way for a cap-and-trade program with a compliance start date of January 1, 2013 for most entities covered by the regulation.

Under the cap-and-trade program, certain facility operators, including the operators of electricity generating facilities located in California, electricity importers and self-generators of electricity, will need to comply with California's mandatory reporting regulation if such entity's reported annual emissions in any year from 2008 to 2011 equal or exceed thresholds identified in the regulation. The applicability threshold for most facility operators, including electricity generating facilities, is currently set at 25,000 metric tons or more of carbon dioxide equivalent ("CO2e") per data year. An entity that has emissions from combustion of biomass-derived fuels is required to report and verify its emissions under the mandatory reporting regulation, but emissions from certain source categories (including the geothermal generating units and facilities) and certain biomass fuels (including biodiesel, fuel ethanol and agricultural crops or waste) will not be subject to the compliance obligation.

An entity that meets or exceeds the thresholds in the regulation in any year from 2008 to 2011 must register with CARB by January 31, 2012. An entity cannot hold a compliance instrument discussed below until the CARB Executive Officer approves the entity's registration.

The final regulation incorporates modifications to the regulation proposed in July and September 2011, including adjusting the start date for the first compliance period from January 1, 2012 to January 1, 2013. A covered entity must surrender one compliance instrument for each metric ton of CO2e emissions to meet its annual and triennial compliance obligations (as calculated pursuant to formulas set out in the regulation) beginning with the emissions data report for 2013 emissions, and for each subsequent year in which the covered entity has a compliance obligation.

Compliance instruments include allowances, CARB offset credits or sector-based offsets credits. Two auctions for emissions allowances are slated for 2012—on August 15 and November 14—and auctions will then be held quarterly beginning in 2013. The final regulations set forth the requirements for, and procedures for obtaining, CARB-issued offset credits, registry offset credits and sector-based offset credits, including the requirement that greenhouse gas emission reductions must be real, additional, permanent, quantifiable, verifiable and enforceable.

If you would like additional information about the California cap-and-trade program or have questions about your company's compliance obligations, please contact one of the the authors.

Trespass by Well Drilling in the UK

This post was written by Siobhan Hayes.

In a number of the recent UK Government publications on shale gas the statement has been made that land owners in the UK do not own the mineral rights to petroleum under their land (under the relevant statute this includes mineral oils, hydrocarbons and natural gas in their natural condition in sub surface strata). Potential exploiters of shale gas will be granted licences by the Government to explore and exploit shale gas reserves but their project planning will need to understand that without proper procedures being followed it is possible for them to be exposed to actionable trespass even where wells are drilled under licence.

Historically, property owners in England and Wales own the surface of the land and the heavens above and strata below. How far down that ownership extends has been the subject of recent case law (Star Energy v Bocardo in 2010). In the Star Energy case, the Supreme Court ruled that an oil company had trespassed on an owner’s land by drilling from a well head close to the boundary of the two properties diagonally downwards and under the adjoining land. One of the strange features of trespass is that damages are paid to the occupier or owner whether or not they have suffered damage.

The oil company had not negotiated any consent from the neighbour and they had not applied for the relevant statutory rights to do so. The land owner was therefore entitled to damages. The good news outcome for those extracting oil or gas onshore is that compensation was assessed on the least costly basis. It was assessed as the value that would be paid if the right to drill had been compulsorily acquired. There was a procedure under which the oil company could have made a claim for a statutory right to drill the well but they had not done this. The compensation did not depend on the value that the oil company got from using the wells. It was a hard fought battle that resulted in a 3:2 split between the Supreme Court Judges.

The legislation which gives oil companies the rights to extract oil and gas in practice was drafted before there were thoughts of shale gas development and the shale gas industry may want to consider seeking a change in this part of the law to address concerns specific to shale gas exploration.

Slides and Audio from Reed Smith's Quarterly Environmental and Energy Law Resource Telesiminar

This post was written by David Wagner.

On Wednesday, Reed Smith held its quarterly environmental and energy law resource teleseminar and the slides and audio are available. We discussed current or emerging issues under five general categories. The categories and discussion included:

  • Legislation/Rules — We reviewed the key points and effective dates related to the New Source Performance Standards for the oil and gas industry as well as for utilities and refineries.
  • Litigation — A big environmental litigation issue involving the oil and gas industry is the aggregation of air emissions from diverse sources and we discussed recent challenges to air permits involving this issue. We also discussed the U.S. Supreme Court's recent denial of certiorari in Morrison Enterprises v. Dravo Corporation and the implications on CERCLA cost recovery and contribution claims.
  • Policy and Technology — On this front, our presentation focused on a recent DOE report on the need for additional disclosure, and the policy implications related to the interplay between the U.S. Environmental Protection Agency and Federal Energy Regulatory Commission.
  • International Issues — Here we provided a brief preview of the upcoming COP in South Africa and the fate of the Kyoto Protocol
  • State Issues — On the state level, we focused on California and summarized recent developments regarding the implementation of the California Global Warming Solutions Act (aka AB32) and California's “Green Chemistry” Initiative.
     

Federal "Frack Panel" Testifies on State vs. Federal Regulation of Shale Gas

This post was written by Jennifer Smokelin.

Our blog has discussed the U.S. Department of Energy's creation of a panel to examine exploration and extraction in the Marcellus Shale (and I discussed the matter in more detail in my July article in The Legal Intelligencer ’s annual Energy Law report -- titled "The Frack Panel: Drilling Down on Representation and Timing Issues"). On October 4, members of the Frack Panel testified in front of the Senate Energy and Natural Resources Committee and would not commit to endorsing either state or a federal regulation as preferable for shale drilling. The panel, created earlier this year by Steven Chu, the Secretary of the U.S. Department of Energy Secretary, was originally tasked to make recommendations about how to make drilling safer, particularly hydraulic fracturing and offer advice to other agencies on how they could better protect the environment from shale gas drilling. Increasingly, the panel has been brought into the state-vs.-federal regulation of shale gas drilling debate.

The testimony comes on the heels of an Intermim Report drafted by the 7 member panel that was published in August. Four of the seven subcommittee members who wrote the report testified at the Senate hearing this week, including Chairman of the IHS Cambridge Energy Research Associates Dr. Daniel Yergin. While the group recommended some federal oversight of safety standards and best practices, and outlined 20 recommendations for the hydraulic fracturing, or "fracking," industry, the witnesses generally expressed opposition to federal regulation of fracking, suggesting state level oversight and industry self-regulation was, in nearly all cases, preferable.

Pennsylvania Governor Releases Plan for Marcellus Shale Impact Fee and New Drilling Regulations

This post was written by Nicolle Bagnell and Ariel Nieland.

Yesterday, Pennsylvania Governor Tom Corbett finally released his new Marcellus Shale oversight plan, much of which is based on the Marcellus Shale Advisory Commission's report provided to him in July. Gov. Corbett's plan provides for a county-assessed annual impact fee of $40,000 per well during the first year of production. The fee would decrease to $30,000 and then $20,000 for the second and third years of production respectively. After that, producers would be assessed at $10,000 per well for the subsequent seven years. The estimated $120 million in revenue generated from the fee in its pilot year would be distributed primarily to counties and municipalities hosting natural gas drilling, with the remainder going to state agencies such as PennDOT, the Pennsylvania Emergency Management Agency, the State Fire Commissioner, the Department of Health, the Public Utility Commission, and the Department of Environmental Protection. The Corbett administration estimates that the fee would generate up to $195 million by the sixth year.

In addition to the impact fee, Gov. Corbett also proposes to increase the minimum setback distance between gas wells and water supplies as well as expand the presumption of liability distance for producers from 1,000 feet to 2,500 feet. In addition, bond payments and penalties for civil violations would be stepped-up. The Governor's plan also incentivizes schools and mass transit systems to convert to natural gas for fuel and provides for natural gas fueling stations every 50 miles along new "green corridors" throughout the state.

The next step is for the plan to go before the Pennsylvania legislature for approval and state agencies for execution.

Is Pennsylvania Township's Ballot Initiative Banning Fracking a Violation of State Law?

This post was written by Steve Regan and Jennifer Smokelin.

As reported in last week's Wall Street Journal, challengers to natural gas drilling in Peters Township, Pennsylvania are taking a new approach: township residents will vote this fall on an initiative seeking to ban drilling in the Marcellus Shale basin that amends the township's home rule charter on the ballot. This is believed to be the nation's first voter initiative seeking to ban fracking activity. The amendment to the Peters Township home rule charter was drafted by the Community Environmental Legal Defense Fund, the same organization that drafted the City of Pittsburgh's ordinance banning natural gas drilling. The Peters Township charter amendment contains some of the same subject-to-challenge provisions as the City of Pittsburgh ordinance, including provisions that purport to deny corporations their rights under the commerce and contracts clauses of the United States and Pennsylvania constitutions and the right to challenge the Peters Township charter amendment in court. Moreover, a drilling ban ordinance substantially similar to the Peters Township charter amendment, and drafted and advocated by the same advocacy group, was struck down by the U.S. District Court for the Western District of Pennsylvania in a case involving another Washington County municipality, Blaine Township.

More than 100 towns in the state have already passed ordinances related to drilling. But the drilling industry argues that complete bans are pre-empted by state mineral extraction laws. Moreover, Peters Twp is attempting to ban drilling through an amendment to its home rule charter. Under the Pennsylvania Home Rule Charter and Optional Plans Law (Home Rule Law), a municipality that has adopted a home rule charter may exercise any powers and perform any function not denied by the Constitution of Pennsylvania, statute or by its home rule charter. Here, Peters Township's attempt to ban the exploration and production of natural gas through an amendment of its home rule charter is subject to challenge because such a ban is a violation of the Home Rule Law. Under the Home Rule Law, a municipality may not exercise powers that are contrary to, or in limitation or enlargement of, powers granted by statutes applicable in every part of the state. For instance, the Pennsylvania Oil and Gas Act is applicable in every part of Pennsylvania, and Peters Township's charter amendment banning the extraction of natural gas would be contrary to the Oil and Gas Act - including the Oil and Gas Act's stated purpose to permit the optimal development of oil and gas resources in Pennsylvania.

Peters Township's proposed charter amendments also rest on shaky legal ground because home rule municipalities may not determine the duties, responsibilities or requirements placed on businesses, occupations and employers. The Peters Township charter amendment, which bans the extraction of natural gas in Peters Township and deprives corporations engaged in the extraction of natural gas rights and protections afforded under the United States and Pennsylvania constitutions, arguably impermissibly regulates businesses and employers by prohibiting an activity that is expressly permitted and regulated by Pennsylvania law.
 

Marcellus Shale Report Released by Pennsylvania

This post was written by Nicolle Bagnell.

As mentioned in our earlier blog post, Pennsylvania Governor Tom Corbett's Marcellus Shale Advisory Commission issued their written report today. The 137 page document identifies the numerous recommendations including enacting an impact fee, increasing setbacks from public water sources, increasing fines for environmental violations and minimizing disruption to surface area in state forest lands. A copy of the full report can be found at this link.

New Federal Interim Rule Requires Changes To Bring About More Green Contracting

This post was written by Lorraine Campos and Amy Koch.

Coming soon: Most of the U.S. government's future acquisitions will have to be green and environmentally sustainable. In this Reed Smith alert, we discuss a recently issued interim rule (PDF) that would require federal agencies to conduct their environmental, transportation, and energy-related activities in an environmentally, economically, integrated, efficient, and sustainable manner. The interim rule would seek to lower greenhouse gas emissions from sources owned or controlled by federal agencies and otherwise promote the creation of a "clean energy economy." In addition, the interim rule would require federal agencies to leverage agency acquisitions to foster markets for sustainable technologies, materials, products, and services by ensuring that 95 percent of new contract actions, including task and delivery orders, for products and services are energy-efficient, water-efficient, biobased, environmentally preferable, non-ozone depleting, contain recycled content, or are non-toxic or less-toxic alternatives. Federal agencies are also required to implement high-performance sustainable building design, construction, renovation, repair, commissioning, operation and maintenance, management, and deconstruction practices. On May 31, 2011, the U.S. Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration issued this interim rule amending the Federal Acquisition Regulation (FAR) by implementing Executive Orders 13514 and 13423.

The interim rule (PDF) should further open up opportunities for contractors with sustainable technologies, materials, products, and services to sell to federal agencies. Contractors with strong views on these FAR changes should prepare comments and submit them prior to August 1, 2011, to ensure that their views are considered. Reed Smith attorneys, including the authors of this post and more detailed alert, are tracking changes to the FAR as they evolve.

In Case You Missed It, Here Are Slides and Audio from Reed Smith's June 16 Climate Change Event

This post was written by David Wagner.

Last week, we discussed recent international and U.S. developments related to greenhouse gas regulation, and here are the slides and audio from the event. In particular, we addressed:

  • How the uncertain future of the Kyoto Protocol and the Clean Development Mechanism affect U.S. business (You can also find details on this issue here)
  • What your business needs to know for compliance and planning related to step 2 of USEPA's greenhouse gas Tailoring Rule
  • Implications of the court's "cap and trade" ruling in Association of Irritated Residents v. California Air Resources Board
  • Developments in state courts including upcoming decisions on insurers' obligation to defend and/or indemnify covered insureds for public nuisance, and other types of claims based on third-party allegations of damages from climate change
     

$25 million in Funding Available for U.S. Companies and Organizations Under New U.S.-India Clean Energy Program

This post was written by David Wagner.

On May 16, the U.S. Department of Energy (DOE) announced that it will commit $25 million over the next five years to support the U.S.-India Joint Clean Energy Research and Development Center (JCERDC). This fall, DOE intends to begin awarding the funding to U.S. companies and other organizations involved in: (1) building energy efficiency (2) second generation biofuels, and (3) solar energy research and development. Together the United States and India intend to invest $100 million in public and private funds in JCERDC consortia. Click here for Reed Smith's summary of the program and possible opportunities.

 

New Pennsylvania Law Establishes Spacing Requirements Between Natural Gas "Well Clusters" and Workable Coal Seams

This post was written by Nicolle Bagnell and Ariel Nieland.

On May 13, 2011, Pennsylvania Governor Tom Corbett signed Senate Bill 265 into legislation. SB 265 sets a minimum distance between natural gas "well clusters" (defined as the area within a well pad holding horizontal wells and comprising an area of no more than 5,000 square feet) overlying workable coal seams, and provides for coordination of gas well drilling and coal mining. Under the new legislation, the Department of Environmental Protection (DEP) will issue no new permits for any well unless that well's cluster is at least 2,000 feet from the nearest well cluster or the operator of the well and owner of any workable coal seams underlying the proposed well provide written consent to spacing of less than 2,000 feet. In addition, no permits will be issued for wells located less than 1,000 feet from any other wells (excluding injection wells not penetrating workable coal seams, plugged wells, nonproducing wells drilled prior to November 30, 1955, or storage wells). The bill also requires well operators intending to drill in any operating coal mine to attach the written consent of the mine operator to permit applications.

New Federal Energy Subcommittee to Review Fracking; Group Includes Former Pennsylvania Department of Environmental Protection Chief Kathleen McGinty

This post was written by Jennifer Smokelin.

Following through on President Obama’s request to look at shale gas drilling safety, Steven Chu, the Secretary of the U.S. Department of Energy Secretary, expanded a panel of experts and ordered recommendations. After the Secretary’s Energy Advisory Board created a three-member Natural Gas Subcommittee in January, it expanded to seven members last week. It was also given the mandate to make recommendations within 90 days about how to make drilling safer, particularly hydraulic fracturing. Within six months, the group is to offer advice to other agencies on how they could better protect the environment from shale gas drilling. The four new members are former Pennsylvania Department of Environmental Protection chief Kathleen McGinty, Stephen Holditch, chairman of the Department of Petroleum Engineering at Texas A&M University, Environmental Defense Fund President Fred Krupp, and Stanford University geophysics professor Mark Zoback.

It's Official: the Environmental Law Resource is a Top 50 Environmental Law Blog

This post was written by David Wagner.

We’re in – LexisNexis has selected Reed Smith's Environmental Law Resource blog as one of the Top 50 Environmental Law & Climate Change Blogs for 2011. We were recognized as "preeminent thought leaders in the blogosphere" who "offer some of the best writing out there." LexisNexis found that our blog contains "a wealth of information for all segments of the environmental law and climate change industry, and includes timely news items, expert analysis, practice tips, frequent postings and helpful links to other sites and sources."

The 50 honorees were grouped into 10 categories and our blog was one of just 4 blogs honored under the "Litigation" category.

We’re thrilled and certainly appreciate the recognition. Even more importantly, we appreciate your interest in our blog.

Second of Three Teleseminars on Marcellus Shale Clean Air Permits Examined Greenhouse Gas Issues

This post was written by David Wagner.

This week, Reed Smith teamed up with AECOM to present its second seminar on clean air permit issues related to oil and gas development in the Marcellus Shale. At the event, we discussed greenhouse gas (GHG) emission sources, GHG reporting requirements, the federal Tailoring Rule (including Prevention of Significant Deterioration and Title V issues), New Source Performance Standards, and single stationary source determinations for the oil and gas industry. If you missed it, here are the slides and audio. The event featured Jennifer Smokelin and David Wagner of Reed Smith and Tom Bianca of AECOM.

At the first teleseminar, we discussed the Pennsylvania Department of Environmental Protection’s (DEP) air permitting process, focusing on the general permits applicable to oil and gas activities (GP-5, GP-9, GP-11), requests for determinations, and the permit exemption list, as well as DEP’s proposals to narrow the oil and gas permit exemption list and modify GP-5. Check back for details on the remaining teleseminar that will address aggregation issues.

Proposed Federal Legislation Would Incentivize Carbon Capture and Storage

This post was written by David Wagner.

On March 31, 2011, a bill (S. 699) was introduced in the U.S. Senate that would authorize the U.S. Department of Energy (DOE) to enter into cooperative agreements to provide financial and technical assistance to as many as 10 large-scale (1 million tons of injected carbon dioxide or more) carbon capture and storage (CCS) demonstration projects at industrial sources. Along with three co-sponsors, Sen. Jeff Bingaman (D-NM) introduced the bi-partisan bill and it was referred to the Senate Committee on Energy and Natural Resources. This is the first step in the legislative process and it’s likely that the next step will be a public hearing on the proposal.

The proposed bill provides liability protection and federal indemnification for the CCS demonstration projects. Under the bill, DOE is authorized to indemnify projects up to $10 billion for personal, property and environmental damages that might be above what is covered by insurance or other financial assurance measures. Upon receiving the closure certificate for the injection site, the site may be turned over to the federal government for long-term site management and ownership. The proposed bill also outlines criteria for site closure certification and includes provisions for siting the demonstration projects on public land. In addition, it would establish and fund a CCS training program for state regulators.

By the way, this new proposed legislation (S. 699) is extremely similar to a 2009 bill (S. 1013) that was reported out of the Senate Committee on Energy and Natural Resources but died on the Senate floor as part of a larger energy legislative package that same year.

Uncle Sam Wants Your Input on a Clean Energy Standard

This post was written by David Wagner.

Last week Senators Jeff Bingaman (D-NM) and Lisa Murkowski (R-AK) released a white paper soliciting input on a clean energy standard (“CES”) from a broad range of interested parties. The white paper lays out some of the key questions and potential design elements of a CES and seeks responses to six general policy questions that the Senate Energy and Natural Resources Committee is considering in the development of a CES program. This effort builds on the 2011 State of the Union address in which President Obama urged lawmakers to establish a CES with a goal of 80 percent of the nation’s electricity to come from “clean” sources by 2035. The President emphasized that a CES would recognize electricity from not only renewable energy sources but also nuclear, coal with carbon capture and storage technology and natural gas.

Your response to the white paper is due by April 11, 2011.

Another Severance Tax Bill Related to Marcellus Shale is Proposed in Pennsylvania

This post was written by Nicolle Bagnell and Ariel Nieland.

The Marcellus Shale legislative season remains in full bloom as another severance tax bill was introduced in the Pennsylvania General Assembly this week. Senate Bill 905 proposes a 2% tax on the gross value of natural gas at the wellhead where the amount produced is between 60,000 to 150,000 cubic feet/day (cf/d). For wells that have been in production longer than three years, the tax rate would increase to 5%. As with House Bill 833, SB 905 provides for "stripper wells" (those wells producing less than 60,000 cf/d) to be exempted from the tax unless certain exceptions apply. SB 905 also provides for the establishment of a Natural Gas Severance Tax Fund, which would be distributed at the county and municipality level to preserve and improve local water supplies, maintain and improve wastewater systems, and for other purposes related to "the health, welfare and safety consequences of severing natural gas in municipalities within the county."

Your Invitation to an April 12 Teleseminar on Marcellus Shale and Greenhouse Gas Reporting

This post was written by David Wagner.

Please join us for the second of three teleseminars on air quality issues affecting oil and gas development in Marcellus Shale On Tuesday, April 12, 2011 from 12 p.m. - 1 p.m., Reed Smith and AECOM will discuss the Pennsylvania Department of Environmental Protection’s issues related to greenhouse gases in the Marcellus Shale. In particular, we will cover (1) sources of greenhouse gases, (2) reporting, and (3) Title V implications. This event will feature Jennifer Smokelin and David Wagner of Reed Smith and Tom Bianca of AECOM. To participate, please contact Sandy Petrakis by April 11.

Implementation of California's Global Warming Solutions Act Hits a Setback

This post was Eric McLaughlin and John Lynn Smith.

The California Air Resources Board (CARB) hit a road block on the way to implementing a key element of its plan to reduce global warming when a California court found that the agency’s adoption of the plan violates the California Environmental Quality Act (CEQA), creating uncertainty for the regulated community whose operations are subject to the cap-and-trade program central to that plan.

At issue is CARB’s implementation of its Scoping Plan, the key document that specifies the various greenhouse gas (GHG) reduction measures to achieve the goals of California’s Global Warming Solutions Act of 2006, commonly known as AB 32. A ruling by San Francisco Superior Court Judge Ernest Goldsmith, finalized on March 18, 2011 (Ruling), granted a Petition for Writ of Mandate challenging the Scoping Plan, primarily due to the agency’s failure to adequately consider alternatives to its adopted cap-and-trade program.

While the Ruling is a significant impediment to the GHG reduction measures in CARB’s Scoping Plan and AB 32 as a whole, it is a temporary one that is unlikely to threaten the long-term implementation of those measures. The Ruling does, however, require CARB to analyze the impacts of alternatives to the Scoping Plan’s cap-and-trade program, and to provide that analysis to the public, in order for the Scoping Plan to move forward. In the interim, the Ruling creates uncertainty for those members of the regulated community whose operations are subject to the first round of the cap-and-trade program, which is scheduled to take effect in January 2012.
 

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Slides and Audio for Reed Smith's 1st Quarter Climate Change Report

This post was written by David Wagner .

As always, we covered the latest in greenhouse gas regulation in our quarterly teleseminar and here are the audio and slides from yesterday’s event. We discussed:

  • Possible delays in the implementation of the Tailoring Rule (Larry Demase)
  • GHG permitting and biomass: EPA's permitting deferral and its affect on industries that use biomass (Jennifer Smokelin)
  • Congressional efforts to develop a Clean Energy Standard (David Wagner)
  • Developments in a recent California court decision addressing what additional work the California Air Resources Board must perform prior to implementing AB32 (Todd Maiden)

Notes from the USEPA's Science Advisory Board Panel for the Review of Hydraulic Fracturing Study Plan

This post was written by Nicolle Bagnell and Ariel Nieland.

Reed Smith, represented by Nicolle Bagnell, attended the Science Advisory Board Panel's public meeting on March 7, 2011 in Washington D.C. The purpose of the panel, comprised of a distinguished group of 22 professors and practitioners ranging in expertise from public health, hydrogeology, water quality engineering and environmental justice, is to provide an independent review of the U.S. Environmental Protection Agency's (USEPA's) proposed Hydraulic Fracturing Study Plan for scientific soundness of the draft plan. The panel was selected from nominations made in response to a request in the Federal Register last July. In addition to the Panel's review, USEPA received over 300 sets of public comments on the draft plan. There were also twelve speakers who provided 5-minute commentaries either in person or by phone and roughly 50 members of the public who attended the meetings.

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Testing for Radioactivity of Pennsylvania River Water Downstream of Marcellus Water Treatment Plants Shows Water Is Safe

This post was written by Jennifer Smokelin.

The Pennsylvania Department of Environmental Protection (DEP) yesterday announced results of in-stream water quality monitoring for radioactive material in seven of the Commonwealth’s rivers. Seven river testing stations – which monitor “raw water” in the river before it enters public water suppliers’ intakes where the water receives further treatment – that were evaluated are Monongahela at Charleroi in Washington County, South Fork Ten Mile Creek in Greene County, Conemaugh in Indiana County, Allegheny at Kennerdell in Venango County, Beaver in Beaver County, Tioga in Tioga County, and the West Branch of the Susquehanna in Lycoming County. All seven samples showed levels at or below the normal naturally occurring background levels of radioactivity.

According to the Associated Press, a review of state records shows most of the gas-drilling wastewater that was treated and discharged by sewage plants in the second half of 2010 found its way into eight (8) waterways, seven of which were tested (above) by DEP. The eighth waterway, Blacklick Creek in southwestern Pennsylvania - is a tributary of the Conemaugh, one of the 7 tested locations. The tests were conducted in November and December of 2010 at stations downstream of wastewater treatment plants that accept flowback and production water from Marcellus Shale drilling. DEP said that these sampling stations were installed last fall specifically to monitor stream quality for potential impacts of Marcellus development.

Proposed Pennsylvania Bill Would Result in Lease Expiration as to Land Not Being Used for Oil or Gas Production

This post was written by Nicolle Bagnell and Ariel Nieland.

In addition to a number of other Marcellus Shale-related bills introduced in the Pennsylvania House and Senate over the past few months, Senate Bill 722 was also laid on the table last week. The bill proposes to amend the Oil and Gas Act in order to spell out exactly what would happen to leased land that neither contains a well nor is included in a production unit. The bill is, in effect, a statutory version of a Pugh Clause commonly found in oil and gas leases. According to the language of the bill, any land covered by a lease, but not included in the unit, would be released.

Marcellus Shale-related Bills Introduced in Pennsylvania in 2011

This post was written by Nicolle Bagnell and Ariel Nieland.

Several new Marcellus Shale-related bills have been introduced in the Pennsylvania Senate and House of Representatives since the start of 2011. House Bill 833, first introduced on March 1, 2011 and known as the Natural Gas Severance Tax Act, proposes to impose a tax on natural gas extraction of 30 cents per 1,000 cubic feet. The bill also provides an exemption for wells with low production rates (less than 60,000 cubic feet/day) known as "stripper wells" to incentivize operators' continued use of those wells in lieu of drilling new wells. House Bill 33, which was introduced on February 9, 2011 and shares many of the same legislative sponsors as H.B. 833, proposes a tax of 5% on all gas extracted plus an additional 4.6 cents per 1,000 cubic feet. This tax rate is the same as that proposed under Senate Bill 352, which was introduced on February 1, 2011. House Bill 234, introduced on January 26, 2011, would provide for further reporting requirements for operators producing gas from "unconventional shale formations" (including the Marcellus, Burket, Utica, Mandata, and Rhinestreet Shale formations, etc.). House Bill 232, also introduced on January 26, 2011, provides for additional restrictions on well locations and permits, as well as wastewater disposal requirements and a cumulative impacts study.

In addition to the introduction of new bills, several new regulations addressing well casing requirements, which the Pennsylvania General Assembly approved in the fall of 2010, went into effect in early February upon publication in the Pennsylvania Bulletin. We previewed these requirements in November 2010.

In Pennsylvania, the Corbett Administration Rescinds Another Marcellus-Related Policy and Takes Unusual Action to Re-Open Public Comment

This post was written by Jennifer Smokelin.

Here’s another change in environmental policy related to Marcellus Shale by the new Pennsylvania Governor. On February 26, 2011, the Pennsylvania Department of Environmental Protection (DEP) published a notice rescinding the Interim Guidance for Performing Single Stationary Source Determinations for the Oil and Gas Industries (initially published in December 2010). They also announced the intent to re-open the public comment period on the proposed Air Quality Permit Exemptions Policy and Proposed Revisions to the General Plan Approval and/or General Operating Permit for Nonroad Engines (found here).

In its notice, DEP indicated that it is appropriate to seek a comprehensive public comment period on all three of these topics together to guide the Department on what, if any, guidance or action might be taken on any one or more of them. Further, DEP acknowledged outright that there are a number of potentially interrelated air quality topics regarding gas exploration and extraction activities within the Marcellus Shale which should be considered together, that is: (1) performing single stationary source determinations; (2) General Plan Approval and/or General Operating Permit BAQ-GPA/GP-11; and (3) the list of air quality plan approval and operating permit exemptions which were topics covered in the actions noted previously. With regard to the exemption list, DEP is particularly interested in comments related to Exemption B.38 on oil and gas exploration and production facilities and operations. Public comments will be accepted until May 26, 2011.

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Reed Smith's (Free) Quarterly Climate Change Teleseminar is March 16

This post was written by David Wagner.

We’re celebrating one year’s worth of climate change teleseminars with, you guessed it, another climate change teleseminar. Please join us on Wednesday, March 16 from Noon to 1 p.m. (EDT) for the First Quarterly Report on Climate Change in 2011. In this one-hour teleseminar, Larry Demase, Jennifer Smokelin, Todd Maiden and Dave Wagner will provide a regulatory update on significant international, national and state issues concerning climate change and the future of GHG regulation. In particular, the topics are:

  • A delay in the implementation of the Tailoring Rule? An exemption for GHG permit applications in process prior to January 2, 2011?
  • GHG permitting and biomass: EPA's permitting deferral and its affect on industries that use biomass.
  • Congressional efforts to develop a Clean Energy Standard that would require electric utilities to generate electricity from "clean" energy sources, including nuclear, coal with carbon capture and storage, and natural gas.
  • Developments in a recent California court decision addressing what additional work the California Air Resources Board must perform prior to implementing AB32.

If you would like to attend, please email Sandy Petrakis.

The Environmental Law Resource Nominated for LexisNexis Top 50 Environmental Law Blogs

This post was written by David Wagner.

It's really nice to be recognized. In fact, we're thrilled that LexisNexis has nominated Reed Smith's Environmental Law Resource as one of the Top 50 Environmental Law & Climate Change Blogs for 2011. Even better, they grouped the 50 nominees into 11 categories and our blog was one of just 7 blogs nominated under the "Litigation" category. LexisNexis selected the nominees based on "timely topics, quality writing, frequent posts and that certain something 'extra' that keeps a web audience coming back for more."

We certainly appreciate your interest in our blog and, if you want to support our nomination, LexisNexis is inviting comments.

 

Pennsylvania Rescinds EIS Policy for Well Operators Seeking to Drill on State Land

This post was written by Nicolle Bagnell and Ariel Nieland.

Last week, Pennsylvania Governor Tom Corbett rescinded a policy that required well operators who wanted to drill for natural gas in state park and forest land to obtain an environmental impact assessment statement from the Pennsylvania Department of Conservation and Natural Resources (DCNR) before applying for a drilling permit. The 4-month old policy, which former Governor Rendell imposed in October 2010, provided for increased cooperation among the Department of Environmental Protection (DEP), the DCNR, and well operators in addressing drilling permit applications. The policy was applicable in situations where the state owned the surface rights to the land, but the subsurface mineral rights were privately held. According to former DCNR Secretary, John Quigley, the policy was a "common-sense approach to mitigating or avoiding any environmental, recreational and aesthetic impacts from the well drilling." The Corbett administration, however, has described the newly-rescinded policy as "unnecessary and redundant" as operators are already required to mitigate environmental damage and are held to responsible drilling practices by the DCNR and DEP.

Some commentators have viewed the rescission as Governor Corbett's first step towards fulfilling his promise to lift Pennsylvania's current moratorium, also imposed by Rendell in October, on new leasing of state forest lands for natural gas drilling where the state does own the mineral rights.

 

New ASTM Standard for Measuring Energy Performance in Commercial Buildings

This post was written by Lou Naugle and David Wagner.

With an increasing number of local and state governments adopting regulations that require reporting on building energy usage, ASTM International just made things easier by releasing a standard for collecting, compiling, and analyzing energy use in commercial buildings. The standard, which is a set of guidelines called the Standard Practice for Building Energy Performance Assessment for a Building Involved in a Real Estate Transaction (E2797-11), has a variety of uses. It can be used to develop data to assess building energy performance as part of a commercial real estate transaction, comply with regulatory reporting requirements, or develop plans for improving a commercial building’s energy efficiency improvements. You can purchase this new standard from ASTM here.

How Buyers, Owners and Lenders May Use the ASTM Standard

Keep in mind that, although it is not a certification or benchmarking tool, the standard is designed to be used in connection with programs such as LEED and Energy Star. The data collected under the standard offers more detail than an Energy Star rating and, unlike LEED certification, can be used to assess energy use within the time constraints of a real estate transaction.

With commercial building buyers and tenants using energy efficiency and related green building criteria as a key element of determining a site to purchase or lease, look for building owners to use the standard to reduce energy usage, and, in turn, improve a building’s score in required reports, increase its value, make it more attractive to potential buyers or tenants, or receive an energy efficiency loan. Lenders also may analyze the data to identify where a building could improve its energy efficiency before offering loans for retrofits.

The First of Three Teleseminars on Air Quality Issues Affecting Oil & Gas Development in Marcellus Shale

This post was written by David Wagner.

Reed Smith has teamed up with AECOM to present three teleseminars on air quality issues affecting oil and gas development in the Marcellus Shale. At the first teleseminar on February 11, 2011, we discussed the Pennsylvania Department of Environmental Protection’s (DEP) air permitting process, focusing on the general permits applicable to oil and gas activities (GP-5, GP-9, GP-11), requests for determinations (RFDs) and the permit exemption list, as well as DEP’s proposals to narrow the oil and gas permit exemption list and modify GP-5. Click here for the teleseminar’s audio recording and here for the handout. The event featured Larry Demase and Jennifer Smokelin of Reed Smith and Tom Bianca of AECOM.

Check back for details on the remaining two teleseminars that will address greenhouse gases and aggregation.

Will a Clean Energy Standard "Win the Future"?

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

In the 2011 State of the Union address, President Obama urged lawmakers to establish a clean energy standard (CES) with a goal of 80 percent of the nation’s electricity to come from “clean” sources by 2035. The President emphasized that a CES would recognize electricity from not only renewable energy sources but also nuclear, coal with carbon capture and storage technology and natural gas. Calling the clean energy push “our generation’s Sputnik moment,” the President’s speech framed a clean energy standard in the larger context of improving the United States’ competitiveness in the global economy.

With this announcement, it’s fair to say we’ve officially shifted the federal political climate change discussion from cap and trade to the creation of a clean energy standard. Putting aside a comparison of the two approaches, here are a few things to know and watch for in the upcoming debate on a clean energy standard.

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Pennsylvania DEP Study Finds No Negative Impacts to Air Quality Related to Marcellus Shale Operations

This post was written by Nicolle Bagnell and Ariel Nieland.

Yesterday the Pennsylvania Department of Environmental Protection (DEP) released the results of its short-term study of potential negative impacts to air quality resulting from Marcellus Shale natural gas operations in Northeastern Pennsylvania. According to the DEP, the results from the study indicated no emissions levels of any compounds that would trigger cause for concern over air-related health issues associated with drilling activities in the region. To collect samples for the study, the DEP conducted air monitoring surveys over a period of four weeks at various drilling sites in Susquehanna County, including an operating gas well, compressor stations, and a well site currently being fracked, as well as in Loyalsock State Forest in Sullivan County. The survey was aimed at monitoring for volatile organic compounds generally associated with petroleum products, such as benzene and xylene, along with other pollutants. Although the sampling did detect emissions of various natural gas constituents and related compounds (ethane, methane, carbon monoxide, etc.), none of the emissions were at concentrations that would rise to the level of constituting a health concern.

California Review Panel Determines that Carbon Capture and Storage Could Help Reduce State GHG Emissions

This post was written by Todd Maiden and  David Wagner.

As we mentioned in a recent blog post, carbon capture and storage momentum continues to build. Last week, California’s Carbon Capture and Storage Review Panel released its findings and recommendations for resolving legal, regulatory and financial issues that currently impede the deployment of carbon capture and storage (CCS) in the state. Among the key findings are:

  • There is a public benefit from long-term geologic storage of carbon dioxide as a strategy for reducing GHG emissions to the atmosphere.
  • Technology exists that can safely and effectively capture, transport and storage CO2 from power plants and other large industrial facilities.
  • There is a need for clear rules under AB32 regarding the treatment of CO2 emissions reductions from CCS projects.
  • There is a need for clear, efficient, and consistent regulatory requirements and authority for permitting all phases of CCS projects in California, including CO2 capture, transport, and storage.

Among others, the CCS Review Panel recommends that the state:

  • Recognize CO2 emission reductions achieved through CCS satisfy California’s requirements for GHG emission reductions under AB32.
  • Designate specific state regulatory agencies as the lead agencies for different aspects and activities related to CCS.
  • Consider legislation establishing an industry-funded trust fund to manage and be responsible for geologic site operations in the post-closure phase.
  • Declare that the surface owner is the owner of the subsurface “pore space” needed to store CO2.

 

11 Climate Change Issues in 2011

This post was written by Jennifer Smokelin and  David Wagner .

As we look forward to 2011, the Environmental Team at Reed Smith will be on top of a range of environmental issues, but offers the following analysis of what we view, in no particular order, to be 11 key climate change or greenhouse gas-related issues likely to affect you and your business in 2011 – call it “11 Climate Change Issues for ’11.” This post focuses on regulatory and transactional issues and we will analyze the outcomes of GHG-related court challenges as they unfold. Please return to blog regularly for updates and analysis on these and many other issues.

The 11 climate change issues are listed below.

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Settlement between Pennsylvania and Cabot to Resolve Drinking Water Problems Linked to Gas Migration

This post was written by Nicolle Bagnell and Ariel Nieland.

After announcing in October that Cabot Oil & Gas Corporation would be held responsible for the cost of a 5.5-mile, $11.8 million water line construction project to provide residents of Dimock with quality drinking water, the Pennsylvania Department of Environmental Protection (DEP) has now reached a $4.1 million settlement with Cabot.  According to DEP, Cabot's natural gas drilling activities in Susquehannah County are believed to be the source of gas migration and water contamination problems affecting Dimock residents' water wells, which the DEP began investigating in January 2009. The terms of the settlement agreement will require Cabot to reimburse DEP with $500,000 for the cost of investigating the gas migration, as well as to enable all 19 of the affected families to resolve their water-related issues based on their particular circumstances (with a minimum payment of $50,000), including offering, installing, and paying for whole-house gas mitigation water treatment systems.
 

 

Know When to Hold (Sequester) 'Em: Is USEPA Giving Away Its Hand Regarding CCS?

This post was written by Jennifer Smokelin.

From the U.S. Environmental Protection Agency’s (USEPA’s) BACT guidance to recent rules finalized by USEPA, all signs appear a “go” for USEPA to give the nod to carbon capture and sequestration (CCS) as a control technology of greenhouse gas (GHG) emissions in the future. In the second “niche” article on the blog, this post takes a look at USEPA’s references in the BACT guidance to carbon sequestration and asks whether this portends CCS being listed in USEPA’s central data base of air pollution technology information known as the RACT/BACT/LAER Clearinghouse in the near future. At this point, the answer is definitely possibly.

Prior to the release of the BACT guidance, industry groups had worried that USEPA would require facilities to use costly CCS technology to trap carbon dioxide and store it underground, but the guidance does not go that far.

The guidance states that: “[w]hile CCS is a promising technology, EPA does not believe that at this time CCS will be a technically feasible [best available control technology, or BACT] option in certain cases.”" It adds that ”[a] permitting authority may conclude that CCS is not applicable to a particular source, and consequently not technically feasible, even if the type of equipment needed to accomplish the compression, capture, and storage of GHGs are determined to be generally available from commercial vendors.” The BACT Guidance also states that “there may be cases at present where the economics of CCS are more favorable (for example, where the captured CO2 could be readily sold for enhanced oil recovery)….

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Stronger Gas Well Construction Standards are One Step Closer in Pennsylvania

This post was written by Nicolle Bagnell and Ariel Nieland.

On November 18, 2010, the Pennsylvania Independent Regulatory Review Commission (IRRC) voted unanimously in favor of imposing more stringent standards on construction of natural gas wells. Some of the key features of the proposed regulations include a provision requiring operators to implement a pressure barrier plan to minimize well control events, a provision requiring operators to condition the wellbore to ensure an adequate bond between the cement, casing and the formation, a requirement for the use of centralizers to ensure casings are properly positioned in the wellbore, and a provision improving the quality of the cement placed in the casing to protect fresh groundwater. In drafting the regulations, the Pennsylvania Department of Environmental Protection relied on input and comments from the public solicited as part of a series of public meetings held by the Environmental Quality Board this summer. The new gas well regulations have already been approved by the House and Senate Environmental Resources and Energy committees, and must now go before the Office of the Attorney General for final review and approval.

International Energy Agency (With Help from Reed Smith) Publishes Legal Framework for Carbon Capture and Storage

This post was written by David Wagner.

Earlier this month, the International Energy Agency released the Carbon Capture and Storage Model Regulatory Framework. Reed Smith environmental attorneys Dave Wagner, Jennifer Smokelin, Steve Nolan and Ariel Nieland were core contributors to the development and drafting of the Model Regulatory Framework. The Model Framework aims to assist national and regional development of regulatory frameworks for carbon capture and storage (CCS) by harnessing the regulatory work of early-movers such as Australia, Europe and the United States. Building on the progress to date, the Model Framework proposes key principles for addressing a broad range of regulatory issues associated with capturing, transporting and storing carbon dioxide.

Significant analysis by the International Energy Agency indicates that CCS will play a vital role in worldwide, least-cost efforts to limit global warming, contributing around one-fifth of required emissions reductions in 2050. For CCS to reach this potential, rapid deployment of CCS technology is necessary. The International Energy Agency estimates that about 100 CCS projects must be implemented by 2020 and over 3,000 by 2050. Such rapid deployment raises many regulatory issues that must be considered before this scale of deployment can occur.
 

Altogether, 29 critical regulatory issues for CCS are addressed in the Model Framework, which provides an explanation of each issue and examples of how the issue has been addressed in existing legislation. The Model Framework also provides model legislative text for countries to consult in developing their own national carbon capture and storage regulatory framework. It is also structured to provide guidance to authorities around the world, operating in diverse legal and regulatory environments and with varying levels of existing legislation. Obviously, if you have an interest or want further information, you can contact us for some "inside" perspective.

Proposed Bill Would Provide Tax Credit for Creating a Marcellus Shale Job in Pennsylvania

This post was written by Dan Dixon.

In an effort to maximize local economic growth related to Marcellus Shale, last week 18 senators from the Pennsylvania State Senate introduced a new bill titled the "Marcellus Shale Job Creation Tax Credit" that, if enacted, would provide a "tax credit" of $2,500 per new job created for a Pennsylvania resident. As introduced, the bill requires that the jobs created must pay 350% of the Federal Minimum wage, include benefits, and be "family sustaining." A company taking the credit must express intent to maintain operations in Pennsylvania for a period of five years (after its certified to receive the credits). Preference will be given to companies employing residents who meet certain classifications (terminated due to plant closure, geographically difficult to employ, etc.).

Under the current version of the proposed legislation, the Department of Revenue would be permitted to award over $24M in total tax credits per year. These credits could be applied to a company's Pennsylvania income or franchise tax (up to 100% of the liability). Importantly, the credits could be transferred to an affiliated entity and applied to the affiliates Pennsylvania income or franchise tax liability. We will provide additional posts as this legislation progresses through the Senate and House.

In France, a "Green New Deal" for Wind Turbines

This post was written by Stéphane Illouz.

In France, the “Grenelle II” law (known in English as “The French Green New Deal”) has significantly changed the regulatory approach related to onshore wind turbines. Before this law was passed in July 2010, requirements for onshore wind turbines were fairly straightforward. For the installation of an onshore wind turbine, owners had to obtain a building permit. For wind turbines higher than 50 meters, owners had to complete an impact report (“étude d’impact”) and a public enquiry (“enquête publique”).

Under Grenelle II, the requirements for wind turbines higher than 50 meters have increased. Onshore wind turbines of this size are now also subject to a specific classified installation process (“Installations Classées pour la Protection de l’Environnement” or “ICPE”). This issue was the subject of significant debate in the French Parliament because the ICPE process is usually only applicable to polluting or dangerous activities -- activities typically not associated with wind turbine installation.

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To Address Drinking Water Problems Caused by Gas Migration, Pennsylvania Decides to Act Now and Recover Costs Later

This post was written by Nicolle Bagnell and Ariel Nieland.

On October 19, 2010, the Pennsylvania Department of Environmental Protection (DEP) issued an open letter to all Susquehanna County citizens who have been affected by issues related to the apparent migration of natural gas from neighboring Marcellus Shale well sites into water supplies. In the letter, Secretary John Hanger states that the DEP has determined, based on "overwhelming evidence," that Cabot Oil & Gas Corporation is responsible for various instances of drinking water contamination in Dimock, PA. He also states that because Cabot has denied responsibility for the contamination and refused to "fix the problem," an agency called PENNVEST will provide the estimated $11.8 million in funds necessary to construct a water line from the Pennsylvania American Water Company treatment plant in Lake Montrose to Dimock residents so that they will have adequate water service in the interim. The state will then pursue recovery of the cost of the project directly from Cabot. Hanger notes that all residents along Route 29 will have the option to connect to the water line and that the construction project will not result in an increase in local taxes.

One Step Closer to a Marcellus Shale Gas Severance Tax in Pennsylvania

This post was written by Nicolle Bagnell and Ariel Nieland.

Last night, the Pennsylvania House of Representatives voted 104-94 in favor of passing Senate Bill 1155, the state's first natural gas severance tax. Currently, Pennsylvania is the only Marcellus Shale state that does not impose a tax on natural gas production. The proposed tax, which is likely to be scaled back once it goes before the Senate for a vote, would also be one of the highest of its kind in the nation, at 39 cents per 1,000 cubic feet (Mcf) of natural gas. A similar severance tax currently in place in West Virginia, 5% of the value of the gas plus 4.7 cents per Mcf, is more akin to the rate favored by Pennsylvania Governor Ed Rendell. Although many opponents are concerned that the tax would kill job growth and stifle what has been seen as "one of the few bright spots in Pennsylvania's economy," supporters of the tax contend that it would enable the state to put environmental safeguards in place, while compensating Pennsylvania citizens for the use of their state's natural resources.
 

New Analysis of Potential Jobs and State Revenue Following a Pennsylvania Severance Tax on Natural Gas Extraction

This post was written by Nicolle Bagnell and Ariel Nieland.

A recent report from researchers at the Pennsylvania State University indicates that, athough a state severance tax on natural gas extraction would have negative economic consequences on gas production companies, the overall benefit of state and local spending of revenue from the tax could increase population in the state by 1,300 people, add 1,400 new workers, and boost business sales by $80 million as well as personal income by $20 million. Pennsylvania state lawmakers are currently considering approval of a severance tax provision in time for the October 1, 2010 deadline mandated as part of the Pennsylvania General Assembly's passage of the state budget earlier this summer. Pennsylvania remains the only major natural gas-producing state without a severance tax. Governor Rendell and supporters of the tax hope that revenue generated from the tax can be used to help fund local government and environmental initiatives.

USEPA Requests Information on Fracking Fluid Constituents

This post was written by Nicolle Bagnell and Ariel Nieland.

The U.S. Environmental Protection Agency ("USEPA") announced yesterday that it sent voluntary information requests to nine companies in the oil and gas industry requesting information regarding hydraulic fracturing. Specifically, USEPA stated that it is "seeking information on the chemical composition of fluids used in the hydraulic fracturing process, data on the impacts of the chemicals on human health and the environment, standard operating procedures at their hydraulic fracturing sites and the locations of sites where fracturing has been conducted." USEPA indicated that it is seeking data as part of a broad scientific study, which Congress in 2009 directed the Agency to conduct to determine whether hydraulic fracturing has an impact on drinking water and public health. Responses to these requests have been requested within 30 days and USEPA has asked the nine recipients of the requests to inform them within 7 days if they do not plan to provide all of the requested information.

 

New Marcellus Shale Laws in Pennsylvania Would Impact Subsurface Property Rights and Pooling

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

Two new Marcellus Shale laws are currently in the works in Pennsylvania. The first, known as the Mineral Rights Act (House Bill No. 1436), which passed "first consideration" muster in the Pennsylvania House of Representatives earlier this summer, provides for the reassignment of abandoned mineral rights on privately owned lands. According to State Representative Jesse White (D-46), one of the bill's proponents, the law would promote Marcellus Shale activity in the state by providing procedural guidelines for resolving legal disputes over title to subsurface property.  Any mineral interests that have not been utilized, transferred, sold, leased or mortgaged for a period of ten years would be subject to a claim by the surface owner to have the property declared abandoned. The rightful owners of any mineral interest deemed abandoned would then have three years to file a claim of interest to preserve their rights for an additional ten years, after which time the mineral rights would be declared abandoned if left unused.  The goal of the proposed bill is to fill in gaps in ownership of subsurface mineral rights while ensuring that the rights of current mineral owners are protected.

The second Marcellus Shale-related law, for which House Representatives Gergely (D-35) and Everett (R-84) are currently seeking co-sponsorship, is entitled the "Conservation Pooling Act." This legislation seeks to enhance conservation efforts while simultaneously protecting landowners impacted by natural gas drilling. Some of the most important features of the law include limiting the number of well pads allowed to be constructed on drilling units, enhancing royalty owners' ability to maximize the economic benefit of their Marcellus Shale leases, and providing for no surface trespass rules and fair compensation for non-mineral interest owners who are pooled into a unit.
 

Climate Change Legislation is Dead. Long Live Climate Change Regulation!

This post was written by Larry Demase, Jennifer Smokelin and David Wagner.

Although an energy bill is now on the Senate floor, it is limited to energy conservation and issues related to the oil spill. It does not include a price on carbon in the form of cap and trade for any sector, and we are unlikely to see comprehensive climate legislation in September or later this year. So now what? Congressional failure to act now or later in 2010 means that, on the federal level, the U.S. Environmental Protection Agency ("USEPA") will step in and use its authority under the Clean Air Act to regulate greenhouse gases ("GHGs") from the utility, transportation and industrial sectors, and there is a small possibility that such regulation by USEPA will include a cap-and-trade program. To be sure, USEPA has already taken several steps to regulate GHGs. 

The following post discusses what will likely come out of Congress and USEPA's ongoing efforts to enact measures that regulate GHGs.

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Stakeholders Speak Out to USEPA on Hydraulic Fracturing

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

Reed Smith joined an audience of 1,200 attendees at last night's "Opportunity for Stakeholder Input on Criteria for Selecting Case Studies for Consideration in USEPA's Hydraulic Fracturing Research Study" meeting in Southpointe, PA, just outside of Pittsburgh. The standing-room only event marked the largest turnout yet in this series of public hearings sponsored by the U.S. Environmental Protection Agency (USEPA). Approximately 600 people attended the first hearing in Fort Worth, Texas on July 8, while nearly 350 attended in Denver, CO on July 13. The last hearing in the series of four will take place in Binghamton, NY on August 12.

USEPA has explained that the purpose of the hearings is to solicit input from community and industry stakeholders on the design of USEPA's upcoming study of the potential impact of hydraulic fracturing ("hydro-fracking")­—which involves pumping large volumes of water mixed with frac fluid and sand into geologic formations to extract natural gas—on groundwater and drinking water. To facilitate this goal, USEPA welcomed members of the community to register for two-minute slots of speaking time during which they could address their thoughts on the scope and design of the study, as well as on the potential costs and benefits posed by Marcellus Shale natural gas production in Pennsylvania.

It became clear from the comments of the 130 or so speakers that public concern over the potential adverse environmental and health impacts of hydro-fracking has reached fever pitch. Some concerned community members advocated for a moratorium to be placed on all Pennsylvania natural gas drilling, similar to the one currently in effect in New York state, until USEPA completes its hydro-fracking study (expected sometime in late 2012). Industry supporters expressed fears that over-regulation could chill the significant increases in job opportunities and government revenue expected in Pennsylvania as a result of Marcellus Shale natural gas development and production.

According to USEPA, the study is scheduled to begin in early 2011, with preliminary study results expected in 2012. In addition to conducting the series of four public hearings, USEPA is also soliciting comments from the public via email at hydraulic.fracturing@epa.gov on the following inquiries: (1) where should USEPA prioritize its efforts?; (2) where are gaps in current knowledge?; (3) is there data and information already in existence that USEPA should be aware of?; and (4) are there potential candidate sites or case studies that would be useful for the study?

Pennsylvania Regulators Amend Public Meeting Schedule for Proposed Regulations for Casing and Cementing Wells

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

On July 21, 2010, Pennsylvania's Environmental Quality Board (EQB) amended the public meeting schedule for proposed regulations that aim to improve the safety of state oil and gas wells and protect the state’s water resources from contamination. According to the EQB's press release, the public meeting schedule is as follows:

  • July 21, 2010 - 7:00 p.m. - Lycoming College, Helm Science Center Bldg., Rm G-11, 700 College Place, Williamsport
  • July 22, 2010 - 7:00 p.m. - DEP Northwest Regional Office, 1st Floor Conference Rm, 230 Chestnut Street, Meadville
  • July 22, 2010 - 7:00 p.m. - DEP Southwest Regional Office, Waterfront Conf. Rm A & B, 400 Waterfront Dr., Pittsburgh
  • July 26, 2010 - 7:00 p.m. - DEP Southwest Regional Office, Waterfront Conf. Rm A & B, 400 Waterfront Dr., Pittsburgh

Pennsylvania Proposes Oil & Gas Well Casing and Cementing Rules

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

On July 10, 2010, the Pennsylvania Environmental Quality Board (EQB) published its proposed rulemaking measures to update existing state requirements for drilling, casing, cementing, testing, monitoring and plugging of oil and gas wells. The proposed rulemaking, originally adopted by the EQB in May, is now open for public comment until August 9, 2010. Once the period for public comment is over, the proposal will go before the Pennsylvania Independent Regulatory Review Commission for review and final publication.

According to the EQB, a large portion of the updates contained in the proposal are already employed as part of best management practices among operators. However, the new regulations are said to further decrease any risk of gas migration from well sites to neighboring water supplies. The proposed rulemaking was prompted, in part, by public concern over the potential impact that the increasing number of Marcellus Shale wells could have on groundwater and drinking water supplies. Although the Pennsylvania Department of Environmental Protection's review of current well site construction and operation practices revealed that "many, if not all, Marcellus well operators met or exceeded the current well casing and cementing regulations[,] . . . the current regulations were not specific enough" in detailing guidelines for proper well construction or requirements for operators to respond to complaints over gas migration. The current updates would provide for more specificity in these areas, as well as establish a requirement that well operators conduct quarterly inspections of the structural integrity of all wells in operation. 

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Follow-up on Reed Smith's Quarterly Climate Change Report

This post was written by David Wagner.

If you missed Reed Smith's Quarterly Report on Climate Change, feel free to listen to an audio recording of the event. In addition, the slideshow presentation is available here. The report covered a lot of information and featured:

  • A status report on Congressional action on comprehensive climate regulation;
  • A summary of issues regarding the GHG cap-and-trade scheme under AB 32 in California;
  • An overview of the legal issues related to carbon capture and storage; and
  • A discussion of offset projects in the United States.

 

Pennsylvania PUC Issues Proposed Rulemaking on Pipeline Safety

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

The Pennsylvania Public Utility Commission issued a proposed rulemaking today that adopts applicable federal regulations and brings its safety regulations in line with the Federal Pipeline Safety Program. The proposed amendment will increase the PUC's enforcement and safety capabilities in regulating hazardous materials and liquid fuels. Public comments will be accepted for 30 days after publication of the proposed changes in the Pennsylvania Bulletin.

 

Canada to Develop Carbon Capture and Storage Standard

This post was written by David Wagner.

Seeking to gain public and regulator confidence in carbon capture and storage (CCS), in late June two Canadian standards organizations announced plans to develop the first industry-wide standard for the underground storage of captured carbon emissions. CSA Standards, a certification firm, and the International Performance Assessment Centre for Geologic Storage of Carbon Dioxide will work together to develop a CCS standard. The two groups said that the completed standard with technical and safety guidelines will be submitted to the Standards Council of Canada for recognition, and would be the world's first formally recognized CCS standard for underground storage. CSA Standards said that it hoped the new standard would also be used as the basis for an international standard endorsed through the International Organization for Standardization (ISO).

CCS technology can reduce carbon dioxide emissions from power plants and carbon emission-intensive industries, and a formally recognized national or international standard will work to improve public confidence in the safety of the long term storage of carbon dioxide. In particular, a carbon dioxide storage standard would help to ensure risks are identified and then addressed. A standard should also remain flexible to address site-specific characteristics and improvements, especially given that technical CCS expertise is still evolving.

Pennsylvania Gets Tough on Trucks Hauling Waste Water from Drilling Operations

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

According to a press release this week by the Pennsylvania Department of Environmental Protection, the "Pennsylvania State Police placed 250 commercial vehicles out of service" earlier this month as part of an effort to enforce various environmental and traffic safety laws in areas that have seen an increase in heavy truck traffic as a result of Marcellus Shale drilling operations. Of the 1,137 trucks inspected, waste water trucks received the highest proportion of citations and written warnings. Commissioner Frank E. Pawlowski explained in a June 23 announcement that because hydro-fracking requires substantial volumes of water to be delivered to and from well sites, the number of waste water trucks, in particular, on Pennsylvania roads has increased significantly.

 

USEPA to Host Public Meetings on Hydraulic Fracturing and its Potential Impact on Drinking Water

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

Starting in July, the U.S. Environmental Protection Agency (USEPA) will begin holding a series of public information meetings to discuss a newly proposed study of the potential adverse effects of hydro-fracking on drinking water, including one scheduled at the Hilton Garden Hotel in Southpointe, Pennsylvania on July 22 from 6 p.m. to 10 p.m. Other meetings are in Fort Worth, Texas on July 8; Denver, Colorado on July 13; and Binghamton, New York on August 12. The purpose of the meetings is to provide the public with information about the study itself, which is still in its initial planning stages, as well as to solicit comments on its design and scope. According to USEPA, "[n]atural gas plays a key role in our nation’s clean energy future and hydraulic fracturing is one way of accessing this vital resource." However, due to the "serious concerns" that have been raised about the possible impact of hydro-fracking on human health and the environment, the relationship between the fracking technique, which involves the pumping of frac fluid (water and chemicals) and sand into shale formations to create fractures through which natural gas can flow to production wells, and its effects on water supplies needs to be better understood.

 

USEPA Proposal Would Require a Clean Water Act Permit for Certain Pesticide Applications

This post was written by David Wagner.

For the application of pesticides, the U.S. Environmental Protection Agency (USEPA) is taking a new position – it now aims to bring pesticide applicators under the Clean Water Act’s (CWA) permitting program. Earlier this month, USEPA released a draft CWA National Pollutant Discharge Elimination System (NPDES) pesticide general permit for point source discharges from the application of pesticides to waters of the United States. Under the Bush Administration, USEPA had issued a rule stating that these Clean Water Act permits were not required for applications of pesticides to U.S. waters. An appeals court decision vacated the rule in April 2009 and triggered the development of this proposal.

USEPA estimates that the court’s decision will require approximately 365,000 pesticide applicators nationwide, including farmers, land managers and other entities, to obtain NPDES permits by April 2011. The draft pesticide general permit covers applicators of biological pesticides and chemical pesticides that leave a residue in four categories of pesticide uses:

  • Mosquito and other flying insect pest control
  • Aquatic weed and algae control
  • Aquatic nuisance animal control
  • Forest canopy pest control
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U.S. Department of Energy Seeks Comment on Environmental Impact of Carbon Capture Projects in Texas and West Virginia

This post was written by David Wagner.

Indicating growing federal interest in carbon capture and storage, the U.S. Department of Energy (DOE) is seeking public comment on proposals to capture and store carbon dioxide emissions from electric power plants in Texas and West Virginia. In a June 2 notice, DOE announced that it intends to prepare an environmental impact statement on a plan to provide about $350 million for the Texas Clean Energy Project, a proposed combined power and chemical plant near Odessa, Texas, through the Clean Coal Power Initiative. The environmental impact statements will help the Department determine whether to provide funding for the project.

According to a another notice published on June 7, DOE intends to produce an environmental impact statement on a plan to provide up to $334 million for a West Virginia plant, about half of the total cost. The West Virginia project involves fitting the existing Mountaineer coal-fired power plant, operated by American Electric Power near New Haven, with carbon dioxide capture and storage. As with the proposed Texas project, the Department would provide funding for the project through the Clean Coal Power Initiative, a program to provide partial financing for new technologies that can help utilities reduce their emissions of sulfur dioxide, nitrogen oxide, mercury, and greenhouse gases from power plants.

Information on public meetings and comment submission deadlines is available in the notices.

Government Assessment Underscores Pennsylvania's Carbon Dioxide Storage Potential and the Need for Substantive Legal Changes

This post was written by David Wagner.

Pennsylvania’s Department of Conservation and Natural Resources (DCNR) recently posted two reports concluding that, with substantive changes to laws governing subsurface ownership rights and long-term liability issues, Pennsylvania’s geology could store carbon dioxide in a cost-competitive and manageable way. The reports also concluded that another key step is to identify specific storage areas.

A carbon capture and storage (CCS) network would collect carbon dioxide from coal-fired electricity generating plants and other industrial sources, compress it into a liquid, and then transport it through pipelines deep underground where it would be injected into the rock formations or other suitable geologic features.

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Wyoming Passes Landmark Mandatory Disclosure Rules for Fracking Chemicals

This post was written by Ariel Nieland.

The Wyoming Oil and Gas Conservation Commission voted unanimously yesterday to pass two new regulations that require energy companies to disclose all chemicals used in the fracking process as well as to identify all groundwater sources and state-licensed wells in proximity to well heads. One of the major industry concerns over such disclosure requirements is the protection of trade secrets, i.e. what chemicals comprise each company's frac fluid and in what proportion. To address this concern, the regulations impose confidentiality requirements on state regulators in possession of proprietary information. The disclosure requirement is the first of its kind in the nation; however, other states, including Pennsylvania have proposed similar regulations.

 

U.S. Department of Energy Announces Grants for Solar, Marine and Hydrokinetic Technologies

This post was written by Christopher Risetto, Henry King and Robert Helland.

In May, the U.S. Department of Energy (DOE) announced the availability of more than $171 million in grants, cooperative agreements, and technology-investment agreements "to expand and accelerate the development, commercialization, and use of solar and water power technologies throughout the United States". This funding continues a strong emphasis in the DOE, since the passage of the Recovery Act, on projects that promote alternative energy development, sustainability, and green jobs. The goal is to further the development of "evolving technologies," i.e., those that are not existing commercial technologies. In this Client Alert, Reed Smith provides key details behind the two major initiatives included within these announcements, particularly what information is necessary to complete a competitive application.

If Congressional Climate and Energy Legislation Fails to Pass in the U.S., What Happens?

This post was written by Phil Lookadoo and Jennifer Smokelin.

The future of greenhouse gas (GHG) regulation in the United States, as well as the future mix of electric power generation sources, is linked to the fate of climate and energy legislation in Congress. With all eyes on the Senate recently released Kerry-Leiberman comprehensive climate and energy legislation and what by most accounts is its slim chances for passage, let’s consider the possibility that Congress will fail to pass climate or energy legislation.

If that is the case, this does not mean no regulation of greenhouse gases and no energy reform. It simply moves the discussion to another government branch, namely, the Executive Branch, and in particular the U.S. Environmental Protection Agency (USEPA) and the Federal Energy Regulatory Commission (FERC). In other words, if Congressional climate and energy legislation fails to pass, executive branch initiatives gain in importance, and these initiatives will proceed apace regardless of Congressional inaction.

A Shift to USEPA Regulation of GHGs

USEPA can be expected to move forward with regard to regulating GHGs from stationary sources. On December 7, 2009, in compliance with the US Supreme Court’s decision in Massachusetts v. EPA, 549 U.S. 497 (2007), USEPA issued its Endangerment Finding, opening the door to USEPA regulation of GHGs under the existing Clean Air Act (CAA). Although the Endangerment Finding is currently being challenged in the Federal Circuit, challenges to the Endangerment Finding will not likely impede further EPA action to regulate GHGs under the CAA. However, challenges to these USEPA further actions are likely.

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Stricter Wastewater Regulations Advance in Pennsylvania

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

The Pennsylvania Environmental Quality Board approved two regulations this week to address concerns over the potential for Marcellus Shale fracking operations to lead to groundwater and drinking water contamination. The first measure aims to limit the amount of "total dissolved solid," a measure of combined chemical substances dissolved in water, allowed to reenter streams and other bodies of water by requiring operators to treat all "frac water" containing over a certain amount of the pollutant before releasing it. The second measure would impose a requirement on all new Marcellus Shale developments to have 150-foot "buffer zones" separating them from high-quality streams. These new measures are now en route to the environmental committees of the Pennsylvania House and Senate for further review. The Independent Regulatory Review Commission, along with environmental and gas industry officials will also have an opportunity to provide comments.

Pennsylvania Commonwealth Court Decides Foundation Case in favor of DEP and Natural Gas Producer

This post was written by Nicolle Snyder Bagnell.

In a unanimous opinion authored by President Judge Leadbetter, the Commonwealth Court affirmed the Environmental Hearing Board's opinion last week in Foundation Coal Resources Corp. v. DEP, No. 619 C.D. 2009, ---A.2d --- (Pa. Commw. April 27, 2010), in a case involving objections filed by a coal owner to an oil and gas producer's natural gas well permit application. The Board had held that the coal company, Foundation, did not have standing to bring an objection under Section 202 of the Oil and Gas Act, which allows owners of "projected and platted but not yet operating" coal mines to object to the proposed location of a producer's well. The Commonwealth Court agreed that where a coal company owned the mine, but where the mine was not "projected and platted" it did not have standing to to make such an objection.

Foundation also challenged the Department of Environmental Protection's decision to issue permits to the gas producer without imposing five "special conditions" that the coal company had proposed. The Board had previously determined that the conditions were beyond the scope of the Department's authority to impose where they tried "to rewrite the Oil and Gas Act under the guise of necessary special conditions to ensure safety..." EHB's Adjudication at 54. The Commonwealth Court agreed, finding that while the Department has the authority to impose conditions "where it has been shown to be necessary for the safe operation of a particular mine, it has no obligation to do so where such necessity has not been shown."

Pennsylvania Department of Environmental Protection to Meet with Drilling Companies to Discuss Gas Migration from Wells

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

According to an announcement this week by John Hanger, Secretary of the Pennsylvania Department of Environmental Protection (DEP), the DEP plans to hold a meeting on May 13, 2010 with oil and gas companies who have drilling permits in the Marcellus Shale to discuss preventive measures for protecting against gas migration from wells. The DEP is concerned that gas migration from wells can lead to groundwater and drinking water contamination. In addition to facilitating discussion about the issue among the various stakeholders, Mr. Hanger stated that the DEP is also proposing an increase in oversight, as well as "tougher regulations to meet the growing demand and new drilling technologies including improving well construction standards to protect from gas migration.”

 

Pennsylvania Department of Environmental Protection Warns of Water Pollution Threat from Dissolved Chemicals

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

In a statement released yesterday, John Hanger, Secretary of the Pennsylvania Department of Environmental Protection, championed the proposal of new rules aimed at keeping Pennsylvania streams, drinking water, and rivers free from a pollutant known as "total dissolved solid" (TDS), which is a measure of chemical substances dissolved in water. In addition to natural gas drilling, sources of TDS include abandoned mine drainage, agricultural runoff, and discharges from industrial or sewage treatment plants. Mr. Hanger's hope is to establish the necessary regulations now that will prevent TDS from becoming a source of contamination later. In the press release, Mr. Hanger focused on the high TDS concentrations related to natural gas drilling, stating that “Marcellus drilling is growing rapidly and our rules must be strengthened now to prevent our waterways from being seriously harmed in the future.”

In Pennsylvania, Proposed Regulation to Require Public Disclosure of Chemicals Used in Hydraulic Fracturing

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

During a Marcellus Shale public forum meeting held last week near Scranton, Pennsylvania, the Pennsylvania Department of Environmental Protection (DEP) proposed a new regulation to be added to the most recent draft of proposed legislation regulating well construction. Under the proposed regulation, gas drilling companies would have to provide information about chemical usage on a well-by-well basis. This new proposal would require each company, upon completion of well construction, to disclose in a report a list containing all the names and total volume of chemicals used in the hydraulic fracturing process. The new proposal will be presented at a Pennsylvania Environmental Quality Board meeting for discussion on May 19, 2010. Scott Perry, director of DEP's Bureau of Oil and Gas Management, explained that this proposed regulation was drafted in response to a growing desire by the public for increased transparency with respect to well site development.

Pennsylvania DEP Provides Some Details on Marcellus Shale Regulatory Requirements

This post was written by Ariel Nieland.

On March 31, 2010, the Pennsylvania Department of Environmental Protection (DEP) held a Marcellus Shale regulatory requirements training seminar in Harrisburg, PA, and Reed Smith was there. The general message of the DEP seemed to be that conscientious well site planning and operation at the outset on the part of operators will be met with a willingness on the part of regulatory authorities to promote development and production of the resource.

The seminar covered a range of environmental topics associated with Marcellus Shale development. The segment on protecting streams and wetlands addressed the general permitting requirements for well sites located within 100 feet of streams, springs, or other bodies of water. The next segment, covering spill reporting requirements, underscored the importance of establishing a "Preparedness, Prevention and Contingency" plan, a requirement for well operators under the Clean Streams Law, that sets forth guidelines for waste disposal and emergency response measures. The session on water management plans provided an overview of the requirements for identifying water sources -- including public water supplies, surface or groundwater, wastewater, and frac flowback -- to be used in Marcellus Shale development as well as best management practices for water use. The seminar next focused on dam safety permit requirements for centralized impoundment areas in Marcellus Shale gas well sites, including the best management practices for the construction of impoundment areas, use of synthetic liners, and impoundment site management. The segment on chemical analysis of residual waste addressed submission requirements for identifying specific chemicals contained in well site waste (including flowback water, brines, muds, and cuttings), the reporting, monitoring, and recordkeeping requirements for that residual waste, and waste transportation guidelines. Finally, the session on erosion and sediment control provided an overview of best management practices for constructing site access roadways, waterbars, sediment barriers and channels, and culverts in order to meet the DEP's general permitting requirements.

The program was an abridged version of a two-day comprehensive training program on Marcellus Shale regulatory requirements offered at Pennsylania State University in January 2010.

Pennsylvania Marcellus Shale Update: New Recordkeeping and Reporting Requirements

This post was written by Ariel Nieland.

On March 22, 2010, Governor Rendell signed Senate Bill 297 into law in the Commonwealth of Pennsylvania. This bill, originally proposed by Senator Yaw in February of 2009, provides for increased record-keeping and reporting requirements including requiring Marcellus Shale well operators to submit annual and semi-annual reports specifying, among other things, "the amount of production on the most well-specific basis available" and the status of each well. The bill also requires the DEP to post Marcellus Shale well data online. This new requirement will significantly impact the availability of natural gas producers' production information, which was previously kept confidential for five years.
 

Pennsylvania Supreme Court Holds In Favor of Gas Industry in Minimum Royalty Act Litigation

This post was written by Kevin Abbott and Nicolle Snyder Bagnell.

The Pennsylvania Supreme Court issued a much-anticipated opinion interpreting Pennsylvania's Minimum Royalty Act, 58 P.S. 33, today, holding that royalties should be calculated "at the wellhead, as provided by the net-back method in the Lease…" The case, as well as 70 others filed in Pennsylvania, were brought by lessors unhappy with their leases because the recent interest in natural gas in the Marcellus Shale resulted in some of their neighbors getting better lease terms. The Plaintiffs argued that the Act requires a guaranteed minimum royalty on the gross proceeds of the sale of the natural gas and, as a result, any contractual agreement to share in post-production costs necessarily reduces the royalty that the lessor receives. They sought an interpretation of the Act which would result in the invalidation of tens of thousands of leases entered into since 1979. Such a result would have crippled the revival of the natural gas exploration industry in the Commonwealth. The defendants and the industry argued that the plain language of the Act does not prohibit lessors and lessees from agreeing to share in post-production costs. The sole purpose of the Act, as evidenced by its companion provision in 58 P.S. § 34, was to prohibit lessees from paying a flat rate for production -- a common practice prior to the Act’s passage in 1979 -- and to instead require a minimum royalty of one-eighth of the gas produced. The Court's opinion today resolves that issue squarely in favor of the oil and gas industry. Not only did the Court decline to invalidate the leases at issue, but also determined that post production expenses could be permissibly deducted under the Act.

Kevin Abbott and Nicolle Bagnell of Reed Smith represented the Industry Amicus, the Pennsylvania Oil and Gas Association, the Independent Oil and Gas Association and Chesapeake Appalachia LLC.

It's a Gas, Gas, Gas. . . USEPA's Proposes GHG Reporting from Oil and Gas Facilities

This post was written by Jennifer Smokelin.

The U.S. Environmental Protection Agency (USEPA) is proposing to include additional emissions sources in its first-ever national mandatory greenhouse gas (GHG) reporting system. On March 22, 2010, USEPA signed a proposed rule for the mandatory reporting of vented and fugitive methane (CH4) and carbon dioxide (CO2) emissions from petroleum and natural gas industry facilities emitting 25,000 metric tons or more of carbon dioxide equivalent per year. USEPA estimates the total cost of reporting to the private sector would be about $60 million for the first year and $25 million in subsequent years. This translates to an estimated average cost of $18,000 per facility for the first year and $8,000 in subsequent years.

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USEPA to Focus on Impacts from Hydraulic Fracturing in Marcellus and other Shales

This post was written by Nicolle Snyder Bagnell.

The U.S. Environmental Protection Agency (USEPA) officially announced its plans today to initiate a study of hydraulic fracturing and its potential impact on water quality and public health. USEPA is re-allocating $1.9 million for this comprehensive study in 2010 and seeks additional funding for 2011. Hydraulic fracturing has gained the attention of Congress this year in large part due to the increased scrutiny of its use in the development of the Marcellus Shale in Pennsylvania, New York, West Virginia and other Appalachian states. USEPA is still in the early stages of designing the study and is seeking input from its Science Advisory Board. Click here for more information.

Triggered by Marcellus Shale Demand, Pennsylvania Plans to Open a New Oil and Gas Management Office

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.

More from the Marcellus Shale: West Virginia's Department of Environmental Protection Finalizes Guidelines for Fracking

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.

USEPA Establishes an "Eyes on Drilling" Tipline

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.

Pennsylvania's Proposed Drilling Regulations for Oil and Gas Wells Now Available for Public Comment

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.

Pennsylvania Department of Environmental Protection to Hire 68 New Oil and Gas Regulators

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.

 

Climate Change Regulation After Copenhagen: Now What? For Starters, Consider Turning Your GHG Emission Reductions into an Asset

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.

The Copenhagen Accord and COP-15: Brokenhagen or Some Version of Hopenhagen?

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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Day 12: Report from Reed Smith Delegates in Copenhagen at the United Nations Climate Change Conference

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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Day 11: Report from Reed Smith Delegates in Copenhagen at the United Nations Climate Change Conference

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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Day 10: Report from Reed Smith Delegates in Copenhagen at the United Nations Climate Change Conference

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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Day 9: Report from Reed Smith Delegates in Copenhagen at the United Nations Climate Change Conference

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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Day 8: Report from Reed Smith Delegates in Copenhagen at the United Nations Climate Change Conference

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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Day 5: Report from Reed Smith Delegates in Copenhagen at the United Nations Climate Change Conference

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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Day 4: Report from Reed Smith Delegates in Copenhagen at the United Nations Climate Change Conference

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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Day 3: Report from Reed Smith Delegates in Copenhagen at the United Nations Climate Change Conference

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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Day 2: Report from Reed Smith Delegates in Copenhagen at the United Nations Climate Change Conference

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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Day 1: Report from Reed Smith Delegates in Copenhagen at the United Nations Climate Change Conference

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.

USEPA Publishes Final Mandatory Greenhouse Gas Reporting Rule

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.

Pennsylvania DEP Fines Company for September Spills at Marcellus Drill Site

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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USEPA Finalizes First Nationwide Mandatory Greenhouse Gas Reporting Requirements

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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Why UK Businesses Cannot Ignore the Carbon Reduction Commitment (CRC)

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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Marcellus Shale: Severance Tax Update in Pennsylvania

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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In the US, the End of Mountaintop Mining?

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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Increased Drilling Fees for Pennsylvania's Marcellus Shale

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.
 

California Air Resources Board Approves Climate Change Scoping Plan: Energy Efficiency

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.

New York Governor Approves Two Green Building Laws For Residential And State Structures

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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Congress Enacts Five-Year Extension of Tax Incentives for Green Buildings

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.

California PUC and Energy Commission Release Joint Proposed Opinion on Strategies for Reducing GHG Emissions

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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New Workshops To Guide Allocations From California's Clean Transportation Funds

The California Energy Commission has scheduled two additional workshops in the ongoing development of AB 118, a funding source for clean transportation technologies, such as alternative and renewable fuels. Many recent headlines about the environment have focused on climate change and the various regulatory mechanisms that could be used to reduce greenhouse gas emissions. This is especially so in California, the first state to enact a climate change law, the Global Warming Solutions Act of 2006. Given California’s ambitious greenhouse gas reduction mandate, many companies are concerned about forthcoming regulations that will require costly actions to reduce their carbon footprints. Awareness of global warming has also spawned the vibrant new “cleantech” sector, with emerging companies developing technologies for new energy sources; transmission and storage; efficient energy management; carbon reduction in construction, manufacturing and agriculture; and waste management and recycling. 

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California Adopts New Green Building Code Impacting Developers, Lenders and Tenants

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.

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