Sustainability Law Blog

The much-heralded Wall Street bailout bill was approved by the House and signed into law by President Bush today as House Resolution 1424. Included within the bill is a one-year extension of the production tax credit for wind energy projects and a six-year extension of the investement tax credit for solar and fuel cell energy projects. Extensions of both credits have been the top federal legislative priority of renewable energy advocates this year. With these extensions, the wind and solar energy industries can carry forward their recent strong growth into 2009 and continue to be two of the few bright spots in our otherwise troubled economy.

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

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Today the U.S. Senate approved, by a 93-2 vote, legislation extending the crucial wind energy Production Tax Credit (PTC) through December 31, 2009. The bill, H.R. 6049, also would create a new investment tax credit for purchases of small wind systems used to power homes, farms and small businesses. The bill now moves to the House of Representatives for a vote later this week. This vote is probably the last opportunity to extend the PTC before its current expiration date at the end of this year.

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

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Yesterday the House of Representatives passed HR 6899 by a vote of 236-189. While the offshore oil drilling aspects of the bill will get the most press attention, the bill also contains provisions vital to the renewable energy sector.

Specifically, HR 6899 would extend the wind energy production tax credit under Internal Revenue Code (IRC) Section 45 for an additional year, to January 1, 2010. It also would extend the production tax credit for other renewable energy facilities such as biomass, geothermal, solar and small hydropower for three years, to January 1, 2012. HR 6899 also adds marine renewables (i.e. wave and tidal energy) to the list of energy sources eligible for the credit.

HR 6899 also would extend the investment tax credit for certain renewables under IRC Section 48 for an additional eight years, to January 1, 2017. This tax credit is primarily used to finance commercial solar energy projects.

Finally, HR 6899 would implement a federal renewable portfolio standard (RPS), similar to RPS's in effect in more than half of the states. The federal RPS would require retail electric suppliers with an annual load of not less than 1 million megawatt-hours to generate a certain percentage of their base load from renewable resources. The minimum percentage would start at 2.75% in 2010 and increase incrementally to 15% by 2020. Rural electric cooperatives, government agencies (i.e. BPA) and electric suppliers in Hawaii would be exempt from the RPS requirement.

The production and investment tax credit extensions are crucial to the continued growth of the renewable energy sector in the U.S., especially for wind and solar. The federal RPS also would help boost the industry nationwide, although for most states that already have RPS's in place (like Oregon and Washington), the federal standard would be less rigorous than state standards already in place. The Senate should act quickly and decisively to put this bill on the President's desk as soon as possible.

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

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A few nights ago I attended an event with Sen. Max Baucus (D-MT), chair of the influential Senate Finance Committee which will consider extension of the federal production and investment tax credit that benefits the deployment of renewable energy sources. The extension has been held up in part due to disagreements over oil drilling.

Baucus, who was joined at the Portland event by his Senate Finance Committee colleague, Sen. Ron Wyden (D-OR), confidently assured that the extension would be passed before the current Congress adjourns. He was optimistic that an agreement on the extension could be reached and passed perhaps even before Election Day.

This year Congress is weighing extensions of tax credits totaling more than $50 billion over the next decade. The renewable energy production tax credit would cost $7 billion and two solar investment credits would cost $2.7 billion over 10 years. Despite the certainty Baucus expressed on the likelihood of an extension of the production and investment tax credits, Baucus cautioned that the total cost of the extension, and thereby the full availability of credits, might be reduced from current proposed levels in order to reach consensus.

Posted by Jack Isselmann, partner practicing in the Government Relations and Public Policy and Sustainability Practice Groups.

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The U.S. Environmental Protection Agency and the U.S. Army Corps of Engineers recently issued revised regulations to the Clean Water Act . The new regulations govern compensatory mitigation for the fill of wetlands, streams, and other waters of the United States. The Clean Water Act states that compensatory mitigation is required to replace the unavoidable loss of wetland, stream, and/or other aquatic resource functions and area due to dredging and filling.

The new rule, effective June 9, 2008, encourages mitigation banking as the preferred option over in-lieu fees programs and permittee-responsible mitigation. EPA and the Corps explained in the comments to the new rule that mitigation banking is preferred because "mitigation banks must have an approved mitigation plan and other assurances in place before credits can be provided to permittees…Because of the requirements imposed on mitigation banks, they generally involve less risk and uncertainty than in-lieu fee programs and permittee-responsible mitigation.”

Until now, mitigation banks accounted for 33% of mitigation, while permittee-responsible mitigation accounted for 60%. In-lieu fee mitigation already was the minority at 7%. Under the new rule these percentages are certain to shift, and will likely cause a boost in the mitigation banking industry. It remains to be seen whether or not this new rule will result in filled wetlands being replaced by more ecologically viable wetlands. Dr. Joy Zedler, Chair of the 2001 National Resources Council Wetlands Mitigation Study Committee, put it best: "It could be the best of all worlds…or it could be the same old same old…It's all in the implementation."

Posted by Jeanette C. Schuster, attorney practicing in the Sustainability and Real Estate & Land Use Practice Groups.

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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.

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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.

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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.

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Two bills are under consideration by the Washington state legislature to achieve aggressive emission reduction targets set in 2007. The first, HB 2815, would convert the goals passed in 2007 to concrete targets, then direct the statewide Department of Ecology to design a cap-and-trade system, a monitoring and reporting system, and a comprehensive emissions inventory for point-source emitters. These efforts would be coordinated with the Western Climate Initiative, of which Washington is a member. The program should be designed for implementation by 2012.

While HB 2815 appears to have broad support, another bill, HB 2797, is more controversial. This bill would focus on land use and transportation planning as a method for reducing emissions, rather than targeting point-source emissions as HB 2815 does. Specifically, HB 2797 would add a climate change goal to the state's Growth Management Act, require cities and counties to adapt their comprehensive plans and zoning ordinances to further that goal, and take other actions that require consideration of climate change issues by local governments when making land use decisions.

It is too early to tell how either bill will emerge, if at all, from the legislature for the Governor's signature. However, given the large role that transportation and land development play in greenhouse gas emissions, it seems likely that a point-source emissions law will not be enough to meet Washington's aggressive targets. Thus, some variation of HB 2797 will eventually be needed, even if it does not become law in 2008.

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

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The recent listing of polar bears as a threatened species under the Endangered Species Act (ESA) has sparked controversy about whether or not greenhouse gas emissions can be regulated under the ESA.

The Bush administration is adamant that they cannot. Alaskan Governor Sarah Palin, whose state produces 15% of the nation's oil, couldn't agree more. On May 21, Governor Palin announced that the state of Alaska intends to sue to challenge the polar bears' listing. The Governor's overriding concern is not for the bears, she thinks they're doing just fine, but is for the oil and gas industry whose operations take place in prime polar bear habitat.

Specifically, the state intends to sue under the Administrative Procedure Act and the ESA based on the argument that the models that predict continued loss of sea ice, the main habitat of polar bears, are wrong. Considering that Alaska touts itself as "the premier destination for adventure and ecotourists seeking a personal connection with nature, wilderness and the local people," the Governor's position seems to be selling the state of Alaska short.

(To see satellite images of the decline in sea ice since 1979, click here).

Posted by Jeanette C. Schuster, attorney practicing in the Real Estate and Land Use Group.

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Forced by court order, the U.S. Department of the Interior (DOI) Secretary Kempthorne capitulated on May 14 and listed the polar bear as a threatened species under the Endangered Species Act (ESA). While acknowledging that the best science available predicts a continued steady decline in sea ice and that the threat to polar bears comes from global climate change and its effect on sea ice, the DOI took several steps to bar any action designed to reduce greenhouse gas emissions as a result of the listing. Sepcifically, Secretary Kempthorne announced plans to propose amendments to the ESA, which he characterized as one of "the most inflexible laws Congress has passed," and he ordered the Fish and Wildlife Service to issue guidance to its staff declaring that the best scientific data available today cannot make a causal connection between harm to polar bears and greenhouse gas emissions from a specific facility, or resource development project, or government action.

In addition, the DOI directed the U.S. Fish and Wildlife Service to issue a rule that would allow activities that are permissible under the Marine Mammal Protection Act (MMPA) to also be permissible under the ESA. Most controversially, the MMPA permits oil and gas drilling and exploration. Consequently, the DOI's recent listing and related directives could have inapposite results under the ESA—on the one hand, the DOI's actions would allow fossil fuel production in prime polar bear habitat, while on the other hand, they could potentially force the agency to protect the bears against the products of fossil fuel combustion, greenhouse gases.

You can read the full remarks by Secretary Kempthorne from the press conference on the polar bear listing May 14, 2008 here.

Posted by Jeanette C. Schuster, attorney practicing in the Real Estate & Land Use Practice Group.

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The EPA notified Congress on March 27 that it will request public comment this spring on regulation of greenhouse gases under the federal Clean Air Act. Taking public comment is the first step toward formal regulatory action, which EPA is pursuing to comply with the Supreme Court's 2007 decision in Massachusetts v. EPA. In that case, the Court ruled that greenhouse gas emissions are "air pollutants" within the scope of the EPA's regulatory power under the Clean Air Act.

Congressional Democrats, some states and some environmental groups decried the public comment period as a stall tactic to what they view as an inevitable finding that greenhouse gas emissions endanger public health, a necessary precursor to regulation under the Act. The EPA responded that proceeding without public input would be irresponsible. Whatever your view on EPA's tactics, watch for a formal call for public comment later this year and be sure to participate.

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

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Federal energy law requires payment to public utilities of 1.5 cents per kilowatt-hour (adjusted for inflation) for renewable energy generation developed by those utilities. This "Renewable Energy Production Incentive" (REPI) was initially enacted in 1992 as the public counterpart to the private production tax credit (PTC). However, inconsistent payment from the feds has discouraged many public utilities from pursuing renewable projects on their own because they can't compete financially with private developers who benefit from the PTC. Also, the Bush Administration has reduced the REPI appropriation to zero in FY 2009.

Most recently, Energy Northwest put its 50 MW Reardan Twin Buttes Wind Project west of Spokane, WA up for sale, citing inconsistent REPI payments. The Washington legislature is considering taking up the slack, but any bill will be a stopgap solution and will of course only apply in Washington. With a change in administrations in Washington, D.C., hopefully we will see a renewed commitment to renewable energy development on a national scale, not only by fully funding the REPI but also by providing a long-term extension of the PTC. The need is great enough and the opportunities are broad enough that all who seek to develop renewable power, public or private, should be encouraged to do so.

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

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The Regional Greenhouse Gas Initiative (RGGI), made up of 10 eastern states, announced that the first auction of carbon dioxide emissions allowances will take place on September 10, 2008, with a second auction on December 17, 2008. Currently, the RGGI initiative applies only to power plants. Member states have agreed to implement an emissions allowances program to stabilize emissions by 2014 and then reduce emissions by 2.5% each of the next four years.

Concurrently, the U.S. Environmental Protection Agency issued an economic analysis of the Lieberman-Warmer Climate Security Act of 2008, which if passed would implement a national carbon cap-and-trade system. EPA concluded that the bill would reduce greenhouse gas emissions to 11% below 1990 levels by 2030 and to 56% below 1990 levels by 2050, while only reducing GDP growth during the same period by about 1%. The EPA also concluded that the bill would cause electricity prices to rise by 44% by 2030, but it notably did not evaluate the economic benefits of greenhouse gas reductions that would result in savings to consumers significantly offsetting the increased price of electricity.

Both these developments are promising steps toward meaningful control of carbon emissions. The practical progress being made by RGGI shows that a cooperative spirit can result in a workable carbon emissions reduction program, and the EPA study shows that the economic sky will not fall by doing so.

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

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The latest House bill to extend various renewable energy production tax credits (HR 5351) is an important lynchpin to keeping the country moving forward as it weans itself from fossil fuels. The bill deserves the support of everyone interested in renewable energy and sustainability issues. The current bill would extend the production tax credit (used mostly for wind, biomass and landfill gas projects) to December 31, 2011, and would extend the investment tax credit (used primarily for solar projects) to December 31, 2016. It also would create a new, 50 cent-per-gallon tax credit to produce cellulosic ethanol, a $4,000 tax credit for plug-in hybrid vehicles, and modify various other, smaller renewable energy tax credit and bond programs.

As with similar legislation that stalled in 2007, the bill pays for the cost of these tax credits by repealing certain tax deductions enjoyed by the oil and gas industries. Repeal of these deductions was the source of Republican and administration opposition in 2007, and a repeat of those objections should be expected this year.

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

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Yesterday I outlined failed or stalled attempts by Massachusetts, California and other states to curb vehicle GHG emissions. While Massachusetts v. EPA is a stalled victory at best, and denial of California's Clean Air Act waiver request is so far a major setback for the states, the states have achieved one recent victory.

In Center for Biological Diversity v. National Highway Traffic Safety Administration, 50 F.3d 508 (9th Cir. 2007), the Ninth Circuit ruled that the National Environmental Policy Act requires all federal projects to be evaluated for both project-specific and cumulative GHG emissions impacts.

The NHTSA (National Highway Traffic Safety Administration) has petitioned for a full court rehearing of the case. If the decision stands, it will have a major impact on NEPA analysis for a wide range of federal activities. Among the requirements will be that carbon dioxide emissions must be monetized in any cost-benefit analysis of a particular project. (The NHTSA had concluded that since the value of carbon dioxide emissions could not be easily determined, they should be valued at zero.)

Continue reading "One Winner in Reducing GHG Emissions from Vehicles " »

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In the absence of federal regulation of greenhouse gas emissions from vehicles, states have tried to take action but so far have had mixed results in the legal arena.

In Massachusetts v. EPA, 127 S.Ct. 1438 (2007), the Supreme Court ruled that carbon dioxide is an air pollutant under the Clean Air Act. This decision obligates the EPA to set emissions standards if it determines that carbon dioxide causes or contributes to air pollution that may endanger public health and welfare. Despite the Supreme Court's order, on February 29th the EPA said it has "no specific timeline" for making that determination. Given the lame duck status of the current administration, I'd be very surprised if anything further happens before 2009.

More significant to regulating vehicle GHG's in the near-term is the status of California's 2005 request for EPA to waive Clean Air Act standards and thereby allow the state to implement standards that would regulate vehicle emissions more strictly. While the Act gives only California the right to request a waiver, if it is granted, other states may follow. Oregon is among 18 states that have adopted or are adopting California’s standards.

Under pressure from Congress, the courts and the states to make a decision, in December 2007 the EPA denied California’s waiver request. Ironically, the denial came mere hours after President Bush signed the Energy Independence and Security Act of 2007 which, among other things, increased automobile fuel efficiency standards for the first time in decades.

Continue reading "Mixed Success on State Efforts to Reduce Vehicle GHG Emissions " »

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