Sustainability Law Blog

By a slim 219-212 margin, the U.S. House passed the American Clean Energy and Security Act, known more commonly by the names of its authors, Representatives Henry Waxman and Edward Markey. The bill will cut U.S. carbon emissions by 17% by 2020, by 42% by 2030, and 83% by 2050, as compared to 2005 levels. The bill also establishes a cap-and-trade system for greenhouse gas emissions credits that applies to all electricity generation sources, and to other industrial sources that emit more than 25,000 tons of carbon dioxide per year. The bill also empowers the Environmental Protection Agency to regulate greenhouse gas sources emitting more than 10,000 tons per year. The bill establishes a sliding scale as to how emissions credits are distributed – at first, most credits will be distributed at no cost, but over time a greater percentage of credits will be auctioned, with proceeds used for low-income energy assistance programs.

Additionally, the bill establishes a federal renewable portfolio standard requiring 6% of energy to be generated from renewable sources nationwide by 2012, increasing to 9.5% in 2014, 13% in 2016, 16.5% in 2018 and 20% in 2021. The bill also strengthens numerous energy efficiency standards, and of particular importance to western states, the bill gives the Federal Energy Regulatory Commission authority over siting high-priority transmission lines in the Western U.S.

The bill's prospects in the Senate are uncertain.

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

As the Oregon legislative session wrapped up June 29, numerous bills headed to the Governor's desk for signature or veto. The two most controversial bills are HB 2472b and 2940b. The first bill rolls back the Business Energy Tax Credit for large renewable energy projects by reducing the maximum available credit from 50% of eligible costs or $20 million, to 35% of eligible costs or $10 million. HB 2940b expands the list of resources eligible for credit against the state's renewable portfolio standard by allowing utilities to count biomass facilities built before 1995. Renewable energy advocates are pressuring the Governor to veto these two bills.

Several other less controversial bills also passed the Legislature, which the Governor is expected to sign. They include:

• SB 101a, which establishes a greenhouse gas emissions standard of 1,100 pounds of carbon dioxide per megawatt hour of electricity generated, a standard that effectively prohibits construction of any new coal-fired generation in the state.
• HB 2190, which eliminates the residential and business energy tax credits for hybrid gasoline-electric vehicles and instead extends the business energy tax credit to electric vehicle manufacturing facilities.
• HB 3039b, which establishes a solar power feed-in tariff pilot project. See my blog at the start of the legislative session for more information on the benefits of a feed-in tariff.

Finally, the Governor signed SB 76b, which caps at $180 million the possible exposure of PacifiCorp customers for the cost of removing four hydroelectric dams on the Klamath River as part of a tentative agreement between Oregon, California, the Department of Interior and several Indian tribes. This would result in about a $1.50 monthly increase to PacifiCorp ratepayers for about 10 years. Total dam removal costs are estimated at about $450 million.

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

Most of us who have been working with the alternative energy industries went into this session of the Oregon Legislature with fear and loathing. Given the budget crisis, it was easy to see the Business Energy Tax Credits (BETC) as a likely victim in the effort to shore up the state's sagging revenues. This hasn't been the case with respect to alternative energy manufacturing. In fact, the major reform of the BETC program (HB2472) pointedly rejected any attempt to weaken this valuable tool for recruiting these industries to the state. This bill passed out of the Revenue Committee with a 6-2 vote and one of the "no's" voted that way because he likes the program as it is and didn't want to make even the minor changes that were made (mostly impacting large wind generating projects and biomass projects).

The House Sustainability and Economic Development Committee expanded, somewhat, the use of BETC's with HB2180. This bill allows limited use of the BETC for co-generation projects and authorizes the Department of Energy to adopt rules that will clarify how one qualifies for a biomass project. It also extends the program to the purchasers of "plug-in hybrid vehicles." The net result of this bill should be to encourage legitimate projects in many of the alternative energy fields go forward, while allowing the Department to be selective by creating rules that will give them the ability to deny the credit on more questionable projects. This bill has passed the first committee and now has subsequent referral to House Revenue.

This is a great recognition on the part of the House of Representatives of the importance of alternative energy manufacturing in the long-term revenue picture for the State of Oregon. It is also standing about as firm as one could expect on the commitment to a "greener Oregon." In this budget climate that's about all we can hope for.

Post authored by Tom Hughes, consultant in the Government Relations and Public Policy Group.

The Oregon Public Utility Commission recently published proposed rules implementing the renewable portfolio standards. This third phase of the Commission's rulemaking focuses on compliance with the Renewable Portfolio Standards under the Oregon Renewable Energy Act (ORS 469A.005 through ORS 469A.210). Electric companies must comply with the standards starting in 2011.

The proposed new rules implement critical portions of the renewable portfolio standard in Oregon. These include:

• the method for calculating the incremental cost of compliance;
• the requirements for implementation plans that must be filed every two years;
• alternative compliance rates and use;
• compliance standards including most importantly application of the cost limit;
• compliance reports

A key part of the new proposed rules is the cost limit contained in the Oregon Renewable Energy Act, which excuses electric companies from compliance with the renewable portfolio standards to the extent that the cost of complying exceeds 4% of a utility's revenue requirement. The proposed rules establish the method for calculating incremental cost of compliance and other key provisions for this "off ramp" from the renewable portfolio standards.

While these rules are technical and detailed, they are extraordinarily important for the development of renewables in Oregon and the Pacific Northwest. It is likely that the Commission will fine-tune these rules as the RPS takes effect in 2011 but important policies are being established with these proposed rules.

Comments regarding the proposed rules may be filed anytime before May 21, 2009. A public hearing will be held May 18, 2009, at the Commission.

Post authored by David White, partner practicing in the Sustainability Practice Group.

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.

Parties responsible for the remediation or cleaning up of contaminated sites under Superfund or RCRA may not be aware that the U.S. Environmental Protection Agency could provide enforcement and liability relief to them under EPA's innovative Environmentally Responsible Redevelopment and Reuse initiative ("ER3"). ER3 requires participants to perform the cleanup of contaminated sites using "green remediation" techniques such as reducing energy requirements of the treatment system and minimizing land disturbance and ecosystem impacts. EPA launched ER3 because EPA felt that the fear of liability continued to stall or prevent the revitalization of contaminated property despite the 2002 Brownfields amendments (which limited the liability of so-called "bona fide purchasers" of contaminated property). Consequently, with the ER3 initiative, EPA hopes to spur cleanup that would otherwise not occur.

ER3 consists of the following three primary components:

• Identify and provide enforcement and Agency-wide incentives to developers and property owners to encourage sustainable cleanup and development.
• Develop partnerships with federal, state, public, and private entities to establish a network of expertise on sustainable development issues.
• Promote sustainable redevelopment of contaminated properties through education and outreach.

The first project to obtain redevelopment approval under ER3 was a "green" hotel project in Empire Canyon, Park City, Utah. The hotel's developer obtained relief from certain future enforcement actions by EPA in exchange for the developer's agreement to redevelop a former ore mining and processing area into a sustainable hotel and resort. The planned luxury hotel, the Montage Resort & Spa, is planned to open in late 2010. Another ER3-approved project is an integrated solid waste management and ethanol manufacturing facility located on the site of a former army ammunition manufacturing plant in Mead, Nebraska. For this project EPA provided the company developing the site with a comfort letter. A "comfort letter" is a letter written by EPA for a site owner, lending institution or other interested party that clearly and realistically describes EPA's intentions with regard to property in question. The comfort letter allowed the company to secure a $70 million loan for the construction of the facility.

Given the fact that the President recently signed into law the $787 billion stimulus package, it now would likely be a great time for companies to submit proposals to EPA under ER3. Interested parties should click here to find a link to examples of potential ER3 candidates and projects that incorporate principles of sustainable development, as well as an ER Sustainability Project at Redevelopment Site proposal form.

Post authored by Jeanette Schuster, attorney practicing in the Sustainability and Real Estate and Land Use Groups.

On January 15, 2009, the U.S. Senate passed the Omnibus Public Land Management Act of 2009 (S.22). This legislation will designate approximately two million of acres of land as components of the National Wilderness Preservation System, which confers the government's highest level of protection on land, in addition to making amendments to a variety of other public laws. The fate of the legislation, which is actually a collection of about 160 bills more than a decade in the making, now rests with the U.S. House of Representatives where a vote was expected in the first half of February (and which was presumably delayed by the federal stimulus package).

Oregonians have a stake in this legislation because it contains the following seven land bills:

(1) The Lewis and Clark Mount Hood Wilderness Act of 2007— Preserves almost 127,000 acres of national forest on Mt. Hood and adds nearly 80 miles of Oregon rivers to the National Wild and Scenic River System;

(2) The Copper Salmon Wilderness Act—Designates 9.3 miles of rivers as Wild and Scenic and designates as wilderness over 13,000 acres of old growth and cedar forests in central Oregon;

(3) The Oregon Badlands Wilderness Act of 2008—Designates as wilderness almost 30,000 acres of high desert east of Bend;

Continue reading "Fundamental Sustainability—Protecting the Wilderness that Sustains Us" »

On February 4, I wrote about the renewable energy provisions of the initial stimulus bill from the House of Representatives. For the most part, those provisions emerged unscathed from the bill-writing process. Today, President Obama signed the American Recovery and Reinvestment Act of 2009, which compares to the original House bill with respect to renewable energy as follows:

• The Act provides $16.8 billion (down from $18.5 billion) to promote energy efficiency and renewable energy. No specific allocation is made for renewable energy research and development, but the funds to promote development of advanced battery technologies have increased from $1 billion to $2 billion.
• The Act maintains $4.5 billion to fund "smart grid" research and improvements.
• As in the original bill, the Act authorizes $3.25 billion in loans to the Western Area Power Administration for transmission system upgrades, and gives the Bonneville Power Administration authority to borrow up to $3.25 billion to improve its transmission system in the Pacific Northwest.
• As in the original bill, the Act extends the production tax credit for wind energy to the end of 2013, and for other renewables (including biomass and geothermal) to the end of 2014.
• As in the original bill, the Act terminates a rule reducing the cost basis for government-subsidized renewable energy projects.

As I discussed on February 4, the truly new ground in the Act concerns alternative financing for renewable energy projects. Section 1602 of the original bill survived as Section 1102 of the Act, and allows developers of PTC-eligible facilities the option to take the investment tax credit instead. For wind energy projects to elect the ITC, the credit must be taken by 2012. For all other projects eligible for the PTC, the election must be made by 2013.

Finally, and perhaps most importantly, Section 1721 of the original bill survived as Section 1603 of the Act. That Section allows renewable projects of all types to receive a grant from the Department of Energy of up to 30% of the cost basis of the facility, in lieu of tax credits (either the PTC or the ITC). To qualify for a grant, construction of the project must start by December 31, 2010.

On February 4, I suggested renewable energy advocates had a lot to smile about in the original House bill. Now that the Act bears the President's signature, they can keep on smiling.

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