Sustainability Law Blog

In November 2007, the federal Minerals Management Service (MMS) announced an interim policy to lease offshore areas on the Outer Continental Shelf for information-gathering on the potential for wind, wave and tidal renewable energy development. Sixteen specific lease areas were identified, each inviting proposals to enter into five-year leases.

In July 2008, MMS announced that leasing would proceed on twelve of the sixteen sites off the coasts of New Jersey, Delaware, Georgia, Florida and California. The four other sites received competing bids, but due to budgetary and time constraints at MMS, further action on those leases will be delayed. Now, MMS will proceed with environmental review under NEPA and consultation with federal agencies for issuance of the leases.

In related news, the MMS formed a new Office of Offshore Alternative Energy Programs to handle alternative energy issues within MMS's jurisdiction.

These actions by MMS are hopeful signals, as MMS has previously been viewed as an extraction-oriented agency with little appetite or enthusiasm for renewable project development of areas under its jurisdiction. Further, confusion and tension has long reigned as to the demarcation of authority for offshore energy development between MMS and the Federal Energy Regulatory Commission (FERC), which has been viewed as much more receptive to alternative energy development offshore. Perhaps the logjam is clearing and these important agencies are moving toward an era of cooperation and mutual advancement of offshore renewable energy development.

For more information on MMS's interim policy click here. For more information on MMS's announcement, see its press release here.

Posted by David J. Petersen, partner practicing in the Sustainability and Real Estate & Land Use Practice Groups.

GE Energy Financial Services recently released a study showing that the tax revenues lost due to the federal production tax credit (PTC) for wind energy are more than made up by increased tax revenues from other sources. These additional taxes come in the form of taxes on project income, vendors' profits and individual worker wages, and future tax revenue after the PTCs expire in 10 years. In fact, GE's study estimates that the U.S. Treasury saw a net present value benefit of $250 million in increased tax revenues just from wind projects built in 2007. In addition, the study estimates those wind projects coming online in 2007 generated $6 million per year in local property taxes, $15 million in state income taxes, and operating tax revenue of about $1.5 million per year.

It is critical for the health of renewable energy development in the U.S. that Congress pass long-term extensions of both the PTC for wind energy projects and the related investment tax credit for solar projects this year. Much of the debate in Congress holding up renewal of the PTC is how to pay for the lost revenue. Congress perhaps could avoid this thorny issue by realizing that the tax credits more than pay for themselves.

Posted by David J. Petersen, partner practicing in the Sustainability and Real Estate & Land Use Practice Groups.

Despite the U.S. Supreme Court ruling over a year ago in Massachusetts v. EPA that the EPA had the authority under the Clean Air Act to regulate greenhouse gas emissions, confusion still reigns within the executive branch and no progress is being made. On July 11, the EPA announced it would defer a regulatory decision on whether or not greenhouse gas emissions endanger public health and welfare, a necessary finding before regulation under the Clean Air Act can take place. Instead, the EPA has set a 120-day comment period on the issue.

The EPA's action triggered immediate responses from other executive branch agencies. Most notably, the Office of Management and Budget criticized the EPA's proposal, arguing that the Clean Air Act is "fundamentally ill-suited" for greenhouse gas regulation. Other federal agencies issued similar responses, including the Departments of Agriculture, Transportation and Commerce, and the Small Business Administration. Critics decried OMB's actions as an attempt to delay greenhouse gas regulation without directly forbidding it, which would contradict the Supreme Court ruling.

Effectively, the EPA's action has pushed any action on greenhouse gases under the Clean Air Act onto the next administration. With only 100 days left until the 2008 elections, the comment period will expire weeks before the new administration takes office. Perhaps that administration will be better at taking a comprehensive approach to global warming issues that is consistent with the Supreme Court's ruling.

Posted by David J. Petersen, partner practicing in the Sustainability and Real Estate & Land Use Practice Groups.

Yesterday we discussed the upcoming auction of carbon dioxide emissions allowances at RGGI. Today we focus on developments at RGGI's western cousin, the Western Climate Initiative (WCI). The WCI is a consortium of seven western states and three Canadian provinces that just added its fourth Canadian member, the province of Ontario, on July 18.

On July 23, the WCI unveiled new recommendations for the scope of a carbon cap-and-trade program that each member state or province can use to develop its own program. By following the WCI recommendations, the individual programs can be linked to form a regional program. Under the recommendations, facilities emitting 25,000 or more metric tons of carbon dioxide and five other greenhouse gases would be required to participate in the cap-and-trade programs.

California will likely be the first state to use the WCI recommendations to form a cap-and-trade program, which is required under Assembly Bill 32 passed by the state legislature in 2006. Other initiative members will likely follow suit after observing the initial performance of California's program.

Posted by David J. Petersen, partner practicing in the Sustainability and Real Estate & Land Use Practice Groups.

Two regional climate initiatives that are common topics on this blog, the Regional Greenhouse Gas Initiative (RGGI) in the northeast U.S., and the Western Climate Initiative (WCI) in the west, continue to move forward with development of regional carbon trading markets.

RGGI is a bit further along. On July 24, it issued a formal notice giving potential bidders for emissions trading allowances 60 days to prepare for the first allowances auction. Six eastern states – Connecticut, Maine, Maryland, Massachusetts, Rhode Island and Vermont – will auction 12.5 million carbon dioxide allowances in September. Each allowance, which will permit the emission of one ton of carbon dioxide, is initially priced at $1.86, but RGGI expects the winning bid prices to be much higher. Bidders must pre-qualify through an online process. Read more about the auction process here.

Check back tomorrow for a report on what's happening at the WCI.

Posted by David J. Petersen, partner practicing in the Sustainability and Real Estate & Land Use Practice Groups.

In the absence of comprehensive national legislation on climate change, cooperative regional agreements among individual states have emerged as the propelling force behind greenhouse gas reduction in North America.

This week, the Canadian province of Ontario became the 11th partner in the Western Climate Initiative (WCI), a group of U.S. western states and Canadian provinces committed to developing regional strategies to address climate change. (The WCI also includes 13 "observer" members from the U.S., Canada and Mexico.)

The WCI is laying the foundations for a regional cap-and-trade program to achieve its greenhouse gas reduction targets. Last year, the group announced its goal to achieve an aggregate reduction of 15% below 2005 levels by 2020. Last Wednesday, the WCI released the draft design for its cap-and-trade program, which is slated to be in place by 2012. Partners have considerable flexibility to decide how they will implement the program, reflecting the WCI's laudable effort to fight climate change without stifling economic growth or sending consumer prices sky-high.

Not everyone supports cap-and-trade, including the Canadian provinces of Saskatchewan and Alberta, who rejected cap-and-trade in mid-July, calling it a "cash grab" by Canada's resource-poor provinces. Others insist that the WCI proposal should be more aggressive about including emissions from transportation fuels, which account for a large percentage of greenhouse gas emissions.

In spite of some contention, however, regional cap-and-trade initiatives appear poised to make a dent in greenhouse gas emissions in the near future.

Post authored by Andrea Schmidt, summer associate at Tonkon Torp LLP.

The Oregon Public Utility Commission (OPUC) received wide praise yesterday from renewable energy businesses and organizations for its decision in response to a petition filed by PacifiCorp regarding development of solar energy in Oregon. PacifiCorp had questioned the legality of net metering small solar projects (a process by which owners of solar energy facilities sell excess power back to the utility in exchange for a credit on their bill), and whether installers of solar energy systems were "electricity service suppliers" subject to certain regulatory requirements.

The OPUC agreed with its staff, finding net metering legal and ruling that solar developers were not electricity service suppliers. This timely decision is crucial to 32 proposed solar projects slated for installation in Oregon in 2008, all of which had been put on hold by PacifiCorp's petition. Yesterday's decision leaves enough time before expiration of the federal investment tax credit at the end of the year for these projects to be built and qualify for the tax credit, which is crucial to the financial feasibility of these projects. The 32 projects under development would add 13 megawatts to Oregon's grid, which is more than twice the capacity of existing, online solar facilities.

Tonkon Torp LLP represented the Renewable Northwest Project, one of the parties to the case that responded to PacifiCorp's petition. In response to the ruling, Suzanne Leta Liou of RNP stated that "this decision will allow [Oregon's] growing solar market to blossom." The decision is a victory for solar power in particular and the overall strategy of the state of Oregon to become a leader in renewable energy.

Posted by David J. Petersen, partner practicing in the Sustainability and Real Estate & Land Use Practice Groups.