Sustainability Law Blog

The U.S. Department of the Treasury anticipates publishing guidelines in the next few weeks to govern the dissemination of funds for renewable energy, energy efficiency and related projects under the American Reinvestment and Recovery Act, commonly known as the stimulus bill. Expectations are that regulations governing the ability to obtain grants in lieu of tax credits under Section 1603 of the Act will largely be nondiscretionary; i.e. applicants either will or will not qualify based on objective criteria.

Observers expect one or more federal renewable portfolio standards (RPS) to be introduced in Congress over the next few months, such as the recent proposed American Clean Energy and Security Act of 2009. Given the change in administrations and the more Democratic makeup of Congress, these bills are expected to propose more aggressive standards than the RPS that passed the House in the last Congress. Also, new RPS proposals are expected to lower the threshold for the size of utilities that would be subject to the RPS (i.e., thereby including more utilities in the regulations). Advocates of a federal RPS expect the real action to be at the respective committees for RPS legislation in the House and Senate; most feel that the votes are there on the floor of each body. One significant area of dispute is whether, or to what extent, to count hydropower in the determination of compliance with a federal RPS.

Both of these developments are welcome news for the renewable energy industry. The grant option under Section 1603 of the stimulus bill will help rectify the current financing crunch for renewable energy given the sharp drop in interest in tax credit investments. A federal RPS would go a long way towards establishing a long-term, stable market for renewable energy that will drive investment and the development of new technology.

Post authored by David Petersen, partner practicing in the Sustainability and Real Estate and Land Use Groups.

Draft bills have been introduced in Congress in the past few weeks to begin efforts at implementing federal carbon regulation. One bill, authored by House Energy and Commerce Committee Chair Henry Waxman of California and Ed Markey of Massachusetts, proposes a cap-and-trade system to reduce carbon emissions by 20% by 2020.

On the other hand, Rep. Chris Van Hollen of Maryland and others have introduced a competing draft bill called "cap and dividend" which effectively is a straight carbon tax, with no accompanying trading scheme.

The notable difference in the Van Hollen proposal is that it identifies who pays – revenues from the sale of emission permits would be distributed to taxpayers. The Waxman/Markey bill, in contrast, leaves open the question of whether initial emission credits would be auctioned or given away.

Similar competing approaches have been proposed in Oregon. Governor Kulongoski's proposal, SB 80, would authorize a cap-and-trade scheme similar to the Waxman/Markey bill, and in accordance with the carbon regulation scheme being developed by the Western Climate Initiative. State Senator Vicki Waker, on the other hand, is leading a team of legislators who have made an alternative proposal for a carbon tax, with the revenues slated for renewable energy, conservation, energy efficiency and similar projects.

Each system has its advantages and disadvantages. The cap and trade system would rely on the market to set the cost of carbon emissions, but could be vulnerable to manipulation and would be inherently more complex. A carbon tax has the benefit of simplicity, but requires more governmental involvement in setting the price of emissions and can trigger more instinctual opposition from anti-tax advocates. It will be interesting which direction the state and the feds follow, and whether or not their efforts will continue to move in parallel.

Post authored by David Petersen, partner practicing in the Sustainability and Real Estate and Land Use Groups.

A group of four U.S. Senators and fifteen U.S. Congressmen, all Republicans, recently sent a letter to the Western Climate Initiative criticizing the relative costs and benefits of the WCI's proposed greenhouse gas cap-and-trade program. Based on a study commissioned from the Western Business Roundtable, a Colorado-based property rights and deregulation advocacy group, the authors concluded that the WCI plan would cause significant job losses and new costs without making a significant dent in rising global temperatures. The WBR analysis also concluded that the WCI plan would prohibit any new fossil fuel or nuclear-powered electricity generation through 2020.

The WCI's initial response has been to declare the study "fundamentally flawed" because it misunderstood or mischaracterized several aspects of the WCI cap-and-trade plan, which is still under development. According to the WCI, the WBR report failed to recognize that many of the WCI's assumptions about new renewables are derived directly from the mandates of the participating states' renewable portfolio standards. Moreover, the WCI justified the exclusion of carbon-capture-and-storage (CCS) technology from its projections because no commercially proven CCS technology yet exists and likely won't until 2020 at least. The WCI plan does encourage further research on CCS.

With respect to fossil fuel and nuclear power, the WCI notes that some individual states, like California and Washington, already have regulatory systems in place that effectively prohibit new coal-fired plants from being built, and there are no new nuclear proposals in the pipeline in any member WCI states that could conceivably be permitted by 2020. Thus, the WCI believes that exclusion of these options from its analysis of the likely 2020 energy mix is justified, but its plan "should not be construed as a policy that would limit the deployment of such resources."

The WBR study and the Congressional letter to WCI is much too premature. The authors of the letter would better serve our national interest in reducing greenhouse gas emissions by waiting to review the final WCI proposal for greenhouse gas controls in its member jurisdictions. By criticizing the plan in its formative stages, the authors come across as politically motivated to kill carbon regulation at the starting gate, rather than as genuinely interested in an economically effective solution to global warming.

Post authored by David J. Petersen, partner practicing in the Sustainability and Real Estate and Land Use Groups.

Interior Secretary Ken Salazar recently issued a secretarial order that Department of Interior staff shall make production, development and delivery of renewable energy from public lands a top priority. Secretary Salazar formed an energy and climate change task force to prioritize and streamline permitting, environmental review, and transmission capacity development for renewable projects on federal land. See my March 17, 2009 blog for a prequel of this order, describing an agreement between the Bureau of Land Management (an Interior agency) and the Oregon Department of Energy to facilitate renewable energy development on federal lands in Oregon.

Post authored by David Petersen, partner practicing in the Sustainability and Real Estate and Land Use Groups.

Portland-based Bonneville Power Administration (BPA) has approved a new 500 kV transmission project. The line will connect BPA's McNary and John Day substations along the Columbia River in Oregon.

BPA intends to break ground this spring and create up to 700 new jobs during the peak of construction. This project has been made possible in part by additional borrowing authority granted to BPA by the American Recovery and Reinvestment Act of 2009, better known as the stimulus package. When complete in 2012, the line will provide transmission capacity between eastern and western Oregon of up to 870 MW, including more than 700 MW of wind-generated electricity.

Transmission capacity between the sources of renewable power and the load centers is a major long-term issue that needs to be resolved if renewable power is going to reach its potential as a major domestic energy source. BPA has taken an important step by providing new transmission between wind-rich eastern Oregon and customer-rich western Oregon.

Post authored by David Petersen, partner practicing in the Sustainability and Real Estate and Land Use Groups.