Emissions – Global Power Law & Policy

Ensuring Energy Security Section in the Inflation Reduction Act of 2022

Aug 10 2022

On 27 July, Senators Manchin and Schumer announced a deal on the successor to the Build Back Better Act, which is expected to pass in the Senate on Saturday (6 August 2022) and the House the following Friday. This new legislation, called the Inflation Reduction Act of 2022, includes US$370 billion in programs and tax credits to boost renewable energy production in the United States.

That said, page 644 of the draft includes language that ties federal solar, wind and offshore wind development to federal lease sales for oil and gas.

The Details

The section of the bill titled “Ensuring Energy Security” prohibits the Bureau of Land Management (BLM) from issuing rights-of-way (ROW) for wind or solar development on federal land unless an onshore oil and gas lease sale has occurred within 120 days before the wind or solar lease issuance. In addition, these wind and solar ROWs would not be allowed unless, in the previous year, BLM completed onshore oil and gas lease sales covering 2,000,000 acres or 50% of the acreage in which interested parties have expressed interest, whichever is lower. (Note: Wind and solar projects that impact federal land are authorized by ROWs.)

Offshore wind (OSW) is similarly impacted by this provision, as it prohibits the Bureau of Ocean Energy Management (BOEM) from issuing an OSW lease unless an oil and gas offshore lease sale of at least 60 million acres is held during the year before the OSW lease issuance.

The Impact

This section of the agreement is intended to force the Biden Administration to restart the regularly scheduled oil and gas lease sales that it has been cancelling since 2021, while at the same time allowing the Biden Administration to conduct fewer annual oil and gas lease sales than currently required.

The Mineral Leasing Act requires four onshore oil and gas leases per year; the language in this bill requires three onshore oil and gas leases per year, as a prerequisite to solar and wind development on federal land. BOEM offshore oil and gas five-year leasing programs require two offshore oil and gas lease sales in most years; this bill requires one sale per year, in order to allow solar and wind development on federal land.

Furthermore, the acreage requirements for oil and gas sales outlined in the bill are in line with previous sales. And for the onshore oil and gas lease sales, just in case BLM falls shore of the 2,000,000 acre requirement, they can sell leases for 50% of the acreage that parties are interested in.

The Compromise

This Inflation Reduction Act of 2022 is a compromise forged by Senate Democrats with the slimmest of majorities. The Ensuring Energy Security section is Energy and Natural Resources Committee Chair Joe Manchin’s way of requiring an all of the above energy policy for the country.

Carbon Quarterly – Volume 6

Jul 07 2022

By: Ankur K. Tohan, Molly K. Barker, Tad J. Macfarlan, Samuel R. Boden, David J. Raphael, Matthew P. Clark, Alyssa A. Moir, Melissa M. Malstrom, Laurie B. Purpuro, Brianna K. Marshall

No matter your views on climate change policy, there is no avoiding an increasing focus on carbon regulation, resiliency planning, and energy efficiency at nearly every level of government and business. Changes in carbon—and more broadly greenhouse gas—policies have the potential to broadly impact our lives and livelihoods. The Carbon Quarterly offers a rundown of the latest developments.

IN THIS ISSUE:

Carbon Policy

The 2023 Farm Bill and the Growing Climate Solutions Act

Carbon Litigation and Regulation

Supreme Court Advances Major Questions Doctrine and Limits EPA’s Authority to Regulate Power Plant Carbon Emissions
The Courts Again Allow Agencies to Weigh Carbon
USDA to Invest US$1 Billion in Climate-Smart Agriculture and Forestry

Carbon Business

Continuing Carbon Offset Opportunities in Agriculture and Forestry

Carbon Spotlight

Weyerhaeuser’s Climate Change Solutions

READ VOLUME 6

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CARBON QUARTERLY – VOLUME 5

Jan 11 2022

By: Ankur K. Tohan, Laurie B. Purpuro, Tad J. Macfarlan, Alyssa A. Moir, Cliff L. Rothenstein, David L. Wochner, Elizabeth C. Crouse, Natalie J. Reid, Matthew P. Clark, Christina A. Elles, Samuel R. Boden

Carbon Quarterly is a newsletter covering developments in carbon policy, law, and innovation. No matter your views on climate change policy, there is no avoiding an increasing focus on carbon regulation, resiliency planning, and energy efficiency at nearly every level of government and business. Changes in carbon—and more broadly greenhouse gas—policies have the potential to broadly impact our lives and livelihoods. Carbon Quarterly offers a rundown of attention-worthy developments.

IN THIS ISSUE:

Carbon Policy

Hydrogen Gets a Lift in Federal Infrastructure Act

Carbon Litigation and Regulation

Illinois Equitable Climate Bill
California Offshore Wind Ramping Up

Carbon Business

CO₂ Shortage in United Kingdom
Intergovernmental Panel on Climate Change Releases Sixth Assessment Report, Unequivocally Finding That Human Activity Has Warmed the Atmosphere, Ocean, and Land
Chevron Expanding Green Hydrogen Portfolio

Carbon Spotlight

Clean Fuels for Flying—Honeywell’s Sustainable Aviation Fuels Initiative
U.S. Steel’s Best for All^SM Strategy Toward a Sustainable Future

READ VOLUME 5

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CARBON QUARTERLY – VOLUME 4

Sep 02 2021

By: Ankur K. Tohan, Elizabeth C. Crouse, Buck B. Endemann, Tad J. Macfarlan, Alyssa A. Moir, Laurie B. Purpuro, Cliff L. Rothenstein, Molly K. Barker, Matthew P. Clark, Christina A. Elles, Natalie J. Reid

IN THIS ISSUE:

Carbon Policy

Latest on the Energy Infrastructure Act of 2021
D.C. Circuit Confirms Sale of Offshore Wind Lease Does Not Trigger NEPA Review
U.S. Tax Updates for Carbon

Carbon Litigation and Regulation

Directly Targeting Indirect Sources—The Silver Bullet to Comprehensive Greenhouse Gas Management

Carbon Business

Offshore Wind Projects Take Off Under Biden Administration
Exxon CCUS Innovation Zone: Houston Ship Channel

Carbon Spotlight

Leading Harvest—Certifying Carbon Management in Agriculture

READ VOLUME 4

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Carbon Quarterly – Volume 3

Apr 22 2021

By: Ankur K. Tohan, Elizabeth C. Crouse, Eric E. Freedman, Tad J. Macfarlan, Alyssa A. Moir, Laurie B. Purpuro, Cliff L. Rothenstein, Molly K. Barker, Matthew P. Clark, Brigid Landy Khuri, Natalie J. Reid, Dean Brower

No matter your views on climate change policy, there is no avoiding an increasing focus on carbon regulation, resiliency planning, and energy efficiency at nearly every level of government and business. Changes in carbon—and more broadly greenhouse gas—policies have the potential to broadly impact our lives and livelihoods. Carbon Quarterly offers a rundown of the latest developments.

IN THIS ISSUE:

Carbon Policy
- U.S. House Democrats Propose Comprehensive Legislation to Address Climate Change
- Social Cost of Carbon Returns to US$51 Per Ton (For Now)
- Scale Act Overview
- Aligning Carbon Capture and Environmental Justice
Carbon Litigation and Regulation
- Climate Change Litigation Reaches the Supreme Court
- The Past—and Future—for Federal Regulation of Power Plant Carbon Emissions
Carbon Business
- Utilities are Looking to Green Hydrogen to Provide Energy Storage
- Compulsory Corporate Disclosures on Climate Commitments and Risk: Leveling the Playing Field or Mandating a New Field
- Microsoft Carbon Removal Project
Carbon Spotlight
- NextDecade–Taking Energy to the Next Level

READ VOLUME 3

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To Kill a Mockingbird: Federal Court invalidates Department of Interior’s MBTA Opinion Letter

Aug 14 2020

Authors: Ankur K. Tohan and Gabrielle E. Thompson

In her opening statement to an August 11 opinion, United States District Court Judge Valerie Caproni writes:

“It is not only a sin to kill a mockingbird, it is also a crime.”

Judge Caproni’s literary reference is the launching point for addressing the matter at hand: the validity of the Department of Interior’s December 22, 2017, Memorandum M-37050, which concludes that the Migratory Bird Treaty Act (MBTA) prohibition on the “taking” or “killing” of migratory birds applies only to deliberate acts intended to take a migratory bird. The M-Opinion announced the Trump administration’s view of the take prohibition in the MBTA, and states that the Trump administration will not seek criminal penalties against individuals and industries —such as oil and gas, as well as renewable energy— for incidentally taking migratory birds. The M-Opinion significantly limited the scope of the take prohibition in the MBTA, reducing the potential liability for development of infrastructure and renewable energy projects.

Judge Caproni writes that Interior’s opinion violates the letter of the law for the past century and contradicts Interior’s long held position that even incidental take or kill of a migratory bird violated the MBTA “irrespective of whether the activities targeted birds or were intended to take or kill birds.” Now, Judge Caproni stated,

“[I]f the Department of the Interior has its way, many mockingbirds and other migratory birds that delight people and support ecosystems throughout the country will be killed without legal consequence.”

Judge Caproni devotes the remainder of her ruling explaining why the M-Opinion violates the Administrative Procedures Act as contrary to law. Judge Caproni rejected Interior’s narrow reading of the statute as lacking support in the plain language of the MBTA. As Judge Caproni explained,

“There is nothing in the text of the MBTA that suggests that in order to fall within its prohibition, activity must be directed specifically at birds. Nor does the statute prohibit only intentionally killing migratory birds. And it certainly does not say that only ‘some’ kills are prohibited.”

While Judge Caproni acknowledged that in drafting the MBTA Congress may have been “principally concerned” about over-hunting, Congress chose not to narrowly draw the prohibition in the statute to intentional take or kill of birds.

The August 11 order vacates the M-Opinion.

FERC Updates PURPA Rules and Dismisses Petition to Declare Jurisdiction over Net-Metering Sales

Jul 18 2020

By Kimberly Frank, Buck Endemann, Abraham Johns

On July 16, 2020, the Federal Energy Regulatory Commission (“FERC” or “the Commission”) issued two noteworthy electric power orders: the first is a final rule (“Order No. 872”) that updates regulations implementing the Public Utility Regulatory Policies Act of 1978 (“PURPA”);[1] the second dismisses the New England Ratepayer Association’s (“NERA”) petition for a declaratory order on FERC’s jurisdiction over net energy metering sales.[2]

Final Rule on PURPA Update

In September 2019, FERC issued of a Notice of Proposed Rulemaking (“NOPR”) to significantly change how it implements PURPA, a law that applies to small power producers.[3] In Order No. 872, FERC largely adopted the NOPR’s proposed revisions to the Commission’s regulations implementing PURPA sections 201 and 210. Notable changes to the PURPA regulations include: (1) providing additional flexibility to set “avoided cost” rates for qualifying facilities (“QFs”) sales; (2) modifying the “one-mile rule” to allow for consideration that affiliated QFs more than one mile but less than ten miles apart may be at the same site ; (3) revising procedures to challenge initial QF certification and re-certification; (4) revising the threshold from 20 megawatts (“MW”) to 5 MW at which a utility may petition to terminate its obligation to purchase from certain QFs; and (5) requiring states to develop criteria that must be met for a QF to be entitled to a contract or legally enforceable obligation (“LEO”).

Changes included in Order No. 872 will be effective 120 days from publication in the Federal Register. When effective, Order No. 872 will not affect existing contracts, LEOs, or existing certifications for facilities, but will be prospective, applying to new contracts or LEOs, and certifications or recertifications for facilities filed after the order’s effective date.

Dismissal of NERA Petition for Declaratory Order

On April 14, 2020, NERA filed a petition for declaratory order, seeking FERC’s declaration that FERC holds exclusive jurisdiction over wholesale energy sales from behind-the-meter generation[4] and requiring that the rates for such sales be priced pursuant to the Federal Power Act (“FPA”) or PURPA, when applicable. Specifically, NERA asked FERC to declare jurisdiction over energy sales of rooftop solar and other distributed energy resources on the customer side whenever the output exceeds the customer’s demand, or the energy is meant to bypass customer load. NERA characterized “full net metering,” as “a practice through which an electricity consumer produces electric energy from a generation source (most often solar panels) that is located on the same side of the retail meter as the customer’s load.”[5] Historically, the Commission sees such transactions as retail in nature and regulated by the states. NERA argued, however, that the energy exceeding customer demand or bypassing customer load is sold to a utility for resale to customers, making them wholesale sales, and therefore, subject to FERC’s jurisdiction.[6]

The Commission began its analysis with a reminder: “Declaratory orders to terminate a controversy or remove uncertainty are discretionary.”[7] The Commission then used its discretion not to address the issues presented, as they did not “warrant a generic statement” from FERC.[8] The Commission found that NERA never identified “a specific controversy or harm” to be addressed.[9] Further, the Commission found that to the extent NERA is concerned that certain New England state regulatory authorities are not pricing QF sales in accordance with PURPA, the petition did not meet PURPA’s requirements for enforcement.

[1] Qualifying Facility Rates and Requirements Implementation Issues Under the Public Utility Regulatory Policies Act of 1978, 172 FERC ¶ 61,041 (2020).

[2] New England Ratepayers Ass’n, 172 FERC ¶ 61,042 (2020) (“NERA Order”).

[3] Qualifying Facility Rates and Requirements Implementation Issues Under the Public Utility Regulatory Policies Act of 1978, 168 FERC ¶ 61,184 (2019) (“NOPR”).

[4] Behind-the-meter generation refers to energy generated from the customer side of the retail meter.

[5] NERA Order at P 3.

[6] NERA Order at P 4.

[7] NERA Order at P 35.

[8] NERA Order at P 35.

[9] NERA Order at P 36-37.

Keeping “PACE” in Commercial Real Estate Improvements: A Primer on the New Washington Commercial Property Assessed Clean Energy and Resiliency (C-PACER) Program

Jun 17 2020

Authors: Rhys W. Hefta, Craig S. Trueblood, David L. Benson, Kari L. Larson

Commercial property owners in the state of Washington may soon have access to a new source of funding for energy efficiency, renewable energy, and resiliency improvements to their buildings. Washington’s C-PACER legislation (House Bill 2405), passed by the legislature during the 2020 regular session, went into effect 11 June 2020. The C-PACER program aims to address the significant needs for property owners to finance energy efficiency upgrades, renewable energy improvements, stormwater management, water conservation, and resiliency retrofits to address vulnerabilities to earthquakes and other natural disasters.

The state and many local governments across the country are imposing new requirements on the owners of existing buildings to reduce water and energy consumption, control stormwater runoff, minimize damage from earthquakes, and convert to renewable sources of energy. These types of building improvements often have high up-front capital costs and long cost-recovery periods. This combination has inhibited investment by property owners who may not plan on holding an asset long enough to see the benefit of these improvements.

With the enactment of the C-PACER program, Washington joins 36 other states that have enacted some form of property assessed clean energy legislation (20 of which have current active programs). Washington’s C-PACER program, like some other states, relies on private rather than public financing. Unlike traditional private financing models, C-PACER loans are not personal debt obligations. Rather, the C-PACER loan is repaid through a voluntary assessment on the improved property that runs with the land and is secured by a super-priority lien. Accordingly, the obligation to repay the C-PACER loan remains with the property regardless of any transfer of ownership. Because of this unique structure, C-PACER loans can allow for a much longer repayment period than traditional financing options. In addition, the super-priority of the lien allows for lower interest rates. In theory, the longer term and beneficial rate will improve the ability of the owner to repay the C-PACER loan, as the owner actually accrues the benefit of savings on utility bills, lower insurance premiums, and other operating cost reductions from the improvements.

The following is a brief summary of the key information to know about the C-PACER program.

Is the C-PACER Program Available Statewide?

The C-PACER program is a voluntary program that is to be managed on a statewide basis by the Washington Department of Commerce (though a C-PACER program guidebook is not expected this year as a result of COVID-19). Once established, each county must opt into the program on a voluntary basis. However, counties are not required to wait for the statewide program. Each county is empowered to establish its own program in compliance with the requirements of the state legislation. Accordingly, availability will vary by jurisdiction. No counties have yet adopted a program.

What Properties Qualify?

Under the C-PACER program, owners of agricultural, commercial, and industrial properties are eligible to obtain financing for qualifying projects. The C-PACER program also applies to owners of multifamily residential properties with five or more dwelling units. Eligible property may be owned by any type of business, corporation, individual, or nonprofit organization permitted by state law. However, as noted above, individual counties have broad discretion to establish their own program within the parameters of the state legislation and could limit the types of properties that qualify.

What Projects Qualify?

C-PACER financing is available both for qualifying improvements to existing commercial buildings and new construction. Qualified improvements include, among others, solar panels, high-efficiency heating and cooling systems, insulation and other improvements that address safe drinking water, or those that decrease energy or water consumption or demand through efficiency technologies, products, or activities. Improvements that support the production of clean, renewable energy, including a product, device, or interacting group of products or devices on the customer’s side of the meter that generates electricity, provides thermal energy, or regulates temperature, would also be deemed qualifying improvements. Likewise, improvements that increase resilience are also qualified improvements. Examples of resilience improvements include seismic retrofits, flood mitigation, stormwater management, wildfire and wind resistance, energy storage, and microgrids. The inclusion of resiliency improvements is a feature of the Washington legislation that is not found in other jurisdictions and may be of particular interest for owners of unreinforced masonry buildings and other properties in need of seismic improvements.

How Is the C-PACER Loan Repaid?

As discussed above, C-PACER loans are repaid by a voluntary assessment on the improved property, secured by a lien in favor of the county, which is then immediately assigned to the C-PACER lender. The lien is second only in priority to the lien for unpaid taxes. Once a C-PACER loan is advanced, the administration of the C-PACER loan (including enforcement) is done by the private lender. After the adoption of a C-PACER program, a county’s role is limited to the approval of an assessment and recordation of a C-PACER lien, as well as to the administration of the C-PACER program (which may be contracted out to a private third party).

Who Makes the C-PACER Loans?

Subject to compliance with generally applicable licensing requirements, any private entity can make a C-PACER loan.

What Is the Impact for Holders of Mortgages on the Property?

Because the lien of a C-PACER loan is superior to all other debt obligations other than unpaid taxes, written consent of any existing mortgagee or other holder of a security interest in the real property is required before an owner can obtain a C-PACER loan. Note that the super-priority nature of C-PACER loans may be objectionable to mortgage lenders (and, in fact, some lenders expressly prohibit borrowers from obtaining any such loans).

How Is the C-PACER Lien Enforced?

The private lender is responsible for collection and enforcement of delinquent C-PACER liens or C-PACER loan installment payments. The C-PACER lien is enforced by the lender in the same manner that the collection of delinquent real property taxes is enforced by the county under chapter 84.64 RCW, including the provisions of RCW 84.64.040, with minor exceptions.

CLE Presentation: COVID-19: Perspectives for the “Next New Normal” for Renewable and Utility Companies

May 27 2020

Join us on Wednesday, June 10, 2020, for a CLE presentation on “COVID-19: Perspectives for the “Next New Normal” for Renewable and Utility Companies.”

Companies are seeing unprecedented legal and business impacts due to the COVID-19 pandemic. These impacts are bringing about changes in strategy and how many companies approach their day-to-day business operations to adapt to this new business environment. This one-hour session will involve a presentation by the following K&L Gates attorneys sharing their perspectives on what to consider during the “next new normal.”

Moderator:

Michael D. Cuda, Partner, Banking & Asset Finance

Panelists:

April Boyer, Partner, Labor, Employment and Workplace Safety
Jamie Lavergne Bryan, Partner, Oil, Gas & Resources
Elias B. Hinckley, Partner, Power
John M. Sylvester, Partner, Insurance Recovery and Counseling

This presentation will include the evolving legal and business impacts of COVID-19 in connection with:

Contract Issues
Insurance Issues
Potential Work Issues
Litigation Trends

This webinar will contain a chat feature in which you can submit questions so that we may tailor this presentation to address your concerns.

To register, please click here.

FERC Sets Technical Conference to Assess COVID-19 Impacts on Energy Industry

May 21 2020

By: William Keyser, Sandra Safro, Patrick Metz and Abraham Johns

On May 20, 2020, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) announced that it will hold a technical conference to discuss the impact on the energy industry of emergency conditions arising from the COVID-19 pandemic. The conference will take place July 8-9, 2020 from 9 a.m. to 5 p.m.

Preregistration for the conference is available at: http://www.ferc.gov/whats-new/registration/07-07-20-form.asp. FERC will issue a supplemental notice that includes the conference agenda in a proceeding opened in Docket No. AD20-17-000.

The Commission plans to use the conference to assess the ongoing impacts that the COVID-19 pandemic is having on parts of the U.S. energy industry. While the Commission already enacted short-term regulatory relief actions for regulated entities, the conference will explore long-term options for safeguarding the nation’s energy markets, electric transmission system, natural gas and oil transportation, and future operation of energy infrastructure.

In addition, FERC intends for the event to serve as a public forum for the Commission and stakeholders to address the recovery of the industry from the COVID-19 pandemic. The event will afford the public an opportunity to receive high-level information about how COVID-19 may change the energy industry moving forward.

Among the topics the Commission plans to cover in panels and discussions are: (1) ongoing and future operational and planning challenges due to COVID-19; (2) operations, planning, and infrastructure development impacts anticipated due to the effect of COVID-19 on electric demand; (3) operations, planning, and infrastructure development impacts anticipated due to the effect of COVID-19 on natural gas and oil demand; and (4) anticipated issues related to access to capital, such as credit, liquidity, and return on equity.

Further information about the event will be posted on the Calendar of Events webpage for the event. K&L Gates will continue to monitor for updates from the Commission about the conference.

Catagory:Emissions