Climate, Energy, & Air Update - Dec. 4 - 18, 2013

December 18, 2013

Senate set to vote this afternoon on bipartisan compromise budget deal . . . Baucus working on energy tax white paper . . . 15 states ask EPA for “stringent but flexible” 111(d) standards . . . Northeast states petition EPA to force 9 upwind states into Ozone Transport Region . . . Podesta joins White House and will be a driver on climate and energy policy . . . Supreme Court hears CSAPR oral argument . . . D.C. Circuit hears MATS oral argument . . . House holds hearings on FERC, NRC, and Columbia River Treaty . . . Senators ask DOE to develop methodologies for determining energy savings from energy efficiency activities.  

EXECUTIVE BRANCH
  • 15 States Ask EPA to Promulgate “Stringent but Flexible” GHG Rule for Existing Power Plants. On December 16, officials from 15 states sent a letter to the Environmental Protection Agency (EPA) with recommendations for the agency’s impending proposal to set carbon dioxide “standards of performance” for existing power plants under section 111(d) of the Clean Air Act.  Section 111(d) outlines a federal-state process for regulation, under which states submit plans to EPA with standards of performance for the regulated sources.  In section 111(d) rulemakings, EPA typically has published an “emission guideline document” setting a benchmark performance level for the state plans.  The December 16 letter recommends that EPA set a performance level based on emission reductions achievable not only through actions implemented at the typical power plant, but also through third party actions such as additions of renewable energy and end-use energy efficiency measures.  The letter further recommends that the guideline “equitably recognize[ ] the different starting points and circumstances of different states, including the pollution reductions achieved by states through climate and clean energy programs.”  Attached to the letter is a set of detailed recommendations.  In addition to representatives from California and states participating in the Regional Greenhouse Gas Initiative, the letter includes signatories from Colorado, Illinois, Minnesota, Oregon, and Washington.  The letter is available at: http://www.georgetownclimate.org/sites/default/files/EPA_Submission_from_States-FinalCompl.pdf.

  • Northeast States Petition EPA to Force 9 States to Join Ozone Transport Region.  On December 9, eight states sent a petition to the EPA requesting that the agency add nine “upwind” states – Illinois, Indiana, Kentucky, Michigan, North Carolina, Ohio, Tennessee, Virginia and West Virginia – to the Ozone Transport Region (OTR).  The OTR is a mechanism under section 184 of the Clean Air Act designed to help states located in the Northeastern United States address persistent regional ozone nonattainment problems by imposing more stringent controls on emissions of nitrogen oxide and other ozone precursors.  Section 176A of the Act authorizes governors of OTR states to petition EPA to add another state to the OTR, thereby subjecting that state to the more stringent regulatory regime.  Citing EPA’s own modeling, the December 9 petition asserts that transport of pollution from the named upwind states is contributing significantly to violations of the 2008 ozone National Ambient Air Quality Standard in the existing OTR states.  The petition calls on EPA to approve the petition in order to ensure that the existing OTR states meet 2015 and 2016 attainment deadlines, but the petition does not otherwise propose particular emission budgets or other emission control policies for the identified upwind states.  Note that the Cross-State Air Pollution Rule addresses the 1997 ozone NAAQS, but not the 2008 NAAQS.  A copy of the petition is available at: http://www.ct.gov/deep/lib/deep/air/176a/Petition_2013Dec9.pdf.

  • Obama Sets Renewable Power Goals for Federal Agencies.  Building off his June 2013 Climate Action Plan, President Obama issued a December 5 memorandum directing federal agencies to use renewable energy to meet 20 percent of their power needs by 2020.  The goal applies to each agency, but the memorandum provides that the objective should be pursued only “to the extent economically feasible and technical practicable.”  The previous goal was 7.5 percent. 

  • EPA Releases Strategic Plan.  The EPA released its draft strategic plan, establishing its priorities over fiscal years 2014-2018.  The strategic plan is open for public comment through January 3, 2015. The plan is available at http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OA-2013-0555-0001.

    • One notable change is a shift in the emphasis of enforcement efforts from “conventional performance measures,” such as number of inspections or pounds of pollution reduced, to “Next Generation Compliance.”  The latter entails a focus on prevention, easier to implement regulations, and continuous monitoring technologies.  The agency expects this shift to reduce the number of conventional enforcement actions, with goals set at 30 percent fewer inspections and 40 percent fewer civil cases over 2014-2018. 

    • EPA included plans to developed proposed rules limiting greenhouse gas emissions from heavy-duty vehicles, potentially including truck trailers, and off-road engines such as those used in construction and agriculture.  EPA has also indicated it is considering issuing conventional pollutant regulations for these vehicles, including regulations addressing nitrogen oxides (NOx), volatile organic compounds (VOCs) and fine particulate matter (PM2.5).

  • Agencies Seek Applications for Energy Loans and Loan Guarantees.  Various federal agencies announced funding opportunities for energy development and deployment.  Van Ness Feldman maintains the Federal Funding Resource Center, a compilation of federal funding opportunities updated daily.  The Center is available at http://www.vnf.com/funding.

    • The United States Department of Agriculture’s Rural Utilities Service announced the availability of $250 million in loans to help fund energy efficiency and renewable energy investments.  These loans will be provided to rural electric cooperatives and utilities, which will then re-lend the money to consumers and businesses.  The funding announcement is available here.

    • The Department of Energy (DOE) Loan Program Office published a solicitation for $8 billion in loan guarantees for Advanced Fossil Energy Projects.  Under this program, DOE would guarantee loans for the development of fossil energy projects that reduce greenhouse gases.  The final solicitation and fact sheet are available at . http://lpo.energy.gov/resource-library/solicitations/advanced-fossil-energy-projects-solicitation/.  A VNF summary of solicitation requirements is available here.

    • In additional loan guarantee news, at a presentation hosted by the United States Energy Association, the head of DOE’s Loan Program Office said DOE is planning to restart its renewable energy loan guarantee program in 2014, using the remaining $3 billion in loan guarantee authority not yet tapped.  DOE included a statement in its draft 2014-2018 strategic plan that it intends to use existing credit authorities to support clean energy technologies.  DOE’s draft strategic plan is available at http://energy.gov/sites/prod/files/2013/12/f5/Draft%20DOE%20Strategic%20Plan%2012-4-13%20for%20Public%20Comment%20FINAL.pdf.

  • Agencies Announce Energy Funding.  In addition to funding opportunity announcements, various federal agencies announced federal funding awards.

  • DOE Issues Report on Energy Storage.  At the behest of Sen. Ron Wyden (D-OR), Chairman of the Senate Energy and Natural Resources Committee, the Department of Energy (DOE) issued a report on energy storage on December 12.  The report asserts that energy storage is growing increasingly important as intermittent renewable resources make up a larger share of the grid.  Currently, pumped storage hydropower is the main form of energy storage.  The DOE report calls for further development of cost-competitive technologies, such as air energy storage, thermal storage, batteries and flywheels.  The report also emphasizes the importance of a favorable regulatory environment in order to reduce industry uncertainty about investment in and use of such technologies.  The report is available at http://energy.gov/articles/energy-department-releases-grid-energy-storage-report.

  • Interior Authorizes Virginia to Test Off-Shore Wind Project.  On December 6, the Department of the Interior authorized the Commonwealth of Virginia to submit a formal proposal to construct a 12 MW wind power test facility 25 miles off the coast.  The test is intended to generate data that Dominion Virginia Power can use to construct a larger, commercial off-shore project.

  • Navy and USDA “Farm to Fleet” Program Leaves the Dock.  On December 11, the Secretaries of the Navy and the U.S. Department of Agriculture (USDA) announced a “Farm to Fleet” initiative under which the Navy will seek to purchase jet engine and marine diesel fuels containing 10-50 percent advanced biofuels.  Under the joint initiative, the USDA will attempt to boost supply through its Commodity Credit Corp, which provides loans and other financial assistance to farmers.  The Navy will begin solicitations in 2014, expects deliveries in 2015, and aims to set sail with its “green fleet” in 2016.  The two departments project that the initiative could lower the price for drop-in biofuels to less than $4/gallon by 2016.

  • Ex-Im Bank Tightens Restrictions on Funding for Coal-Fired Power Plants.  On December 12, the Export-Import Bank of the United States (Ex-Im Bank) revised its guidelines on lending for “high-carbon-intensity” projects, defined to include overseas projects involving the construction of a plant that uses coal as a source of fuel for power generation or production of heat.  Under the revised guidelines, Ex-Im financing will be available for such projects in most countries only if the project will have a carbon capture and storage system.  However, the guidelines do not apply to coal projects located in countries included on an Ex-Im Bank list of the “World’s Poorest Countries” where no other lower carbon power options are viable.  In addition, the guidelines explicitly do not apply to projects at a new or an existing coal mine that is not part of an integrated power plant project.  President Obama requested the revisions to the guidelines in his June 2012 Climate Action Plan.  The revised guidelines are available at http://www.exim.gov/newsandevents/releases/2013/upload/Supplemental-Env-Guidelines-12-12-13.pdf

  • Key Personnel Moves in December:
    • John Podesta has returned to the White House for a one-year stint as a special counsel.  Podesta, a former Chief of Staff to Bill Clinton and founder and President of the Center for American Progress, has been a robust advocate for climate change and clean energy policies.  The White House said that Podesta will not work on the Keystone XL pipeline (of which he has been a strong critic), but will work on other energy and climate issues.

    • Nancy Sutley, the Chairwoman of the White House Council on Environmental Quality, announced that she will step down from her post in February.  Her Deputy and General Counsel, Gary Guzy, announced that he will join the Covington & Burling law firm.  The Obama Administration has not announced any replacements.

    • EPA Administrator Gina McCarthy named Joel Beauvais to be Associate Administrator for Policy, a position left vacant after Michael Goo left for DOE.  Previously, Beauvais was Associate Administrator in the Air & Radiation office.  Prior to his arrival at EPA, Beauvais worked for then-Rep. Ed Markey (D-MA). 
LEGISLATIVE BRANCH
  • House Passes Bill to Promote Hydroelectric Projects.  On December 3, the House passed by voice vote H.R. 1963, the “Bureau of Reclamation Conduit Hydropower Development Equity and Jobs Act.”  If enacted, the bill would remove federal statutes that currently prevent irrigation districts from developing hydropower on Bureau of Reclamation (BOR) canals, ditches, and conduits.  Additional information on the bill is available at http://daines.house.gov/index.cfm?sectionid=25&itemid=624

  • House Committee Holds Hearing.  On December 5, the House Energy and Commerce Subcommittee on Energy and Power held a hearing entitled “Evaluating the Role of Federal Energy Regulatory Commission (FERC) in a Changing Energy Landscape.”  According to Committee-issued documents, the purpose of the hearing was to examine the FERC’s past, current and future work on permitting pipelines, hydropower and transmission projects, as well as to review FERC’s coordination with the EPA.  All four FERC Commissioners testified at the hearing. Committee members focused many of their questions on how EPA rules set to be implemented by 2016 (including the Mercury and Air Toxics Standard rules) will affect certain regions of the country.  The webcast, written testimony and committee-issued documents are available at http://energycommerce.house.gov/hearing/evaluating-role-ferc-changing-energy-landscape.   

  • House Committee Holds Field Hearing.  On December 9, the House Natural Resources Committee held a field hearing in Pasco, Washington, entitled The Future of the US-Canada Columbia River Treaty -- Building on 60 years of Coordinated Power Generation and Flood Control.”  Chairman Doc Hastings (R-WA) and Ranking Members Peter DeFazio (D-OR) were the only two Members of the Committee present; however, Rep. Cathy McMorris Rodgers (R-WA) and Rep. Rick Larsen (D-WA) submitted statements to be included in the Committee’s record of the hearing.  Witnesses included Elliot Mainzer, Acting Administrator of the Bonneville Power Administration; and, Scott Corwin Executive Director of the Public Power Council.  Witnesses and Members of the Committee focused their remarks on exploring ways to balance domestic interests while working to resolve economic disparities created by the original 1964 treaty between the United States and Canada.  The webcast, written testimony and committee-issued documents are available at http://naturalresources.house.gov/calendar/eventsingle.aspx?EventID=363025

  • Committee Approves Bills.  On December 10, the House Energy and Commerce Committee approved two bills by voice vote.  H.R. 724, a bill to amend the Clean Air Act to remove the requirement for dealer certification of new light-duty motor vehicles, would remove a redundant requirement for certification.  The bill is sponsored by Congressman Bob Latta (R-OH).  H.R. 3683, which is sponsored by Chairman Fred Upton (R-MI), is a bill to amend the Energy Independence and Security Act of 2007 to strengthen the collaboration between the United States and Israel on energy development and to bolster the existing United States-Israel energy relationship by encouraging increased cooperation between the two countries.  Additional information on both of these bills is available at http://energycommerce.house.gov/markup/full-committee-vote-hr-3527-hr-1098-hr-1281-hr-724-hr-bill-amend-energy-independence-act-2007#sthash.ANtjHiun.dpuf. 

  • House Subcommittees Hold Joint Hearing.  On December 12, the House Energy and Commerce Subcommittee on Energy and Power joined the House Energy and Commerce Subcommittee on Environment and the Economy to hold a joint hearing entitled “Oversight of NRC Management and the Need for Legislative Reform.” At the hearing, the Subcommittees also reviewed H.R. 3132, the “Nuclear Regulatory Commission Reorganization Plan Codification and Compliments Act.” According to committee-issued documents, the purpose of the hearing was to examine issues related to spent nuclear fuel and the management challenges at the Nuclear Regulatory Commission.  Members of the Subcommittees asked questions on a variety of topics, including the NRC’s responsiveness to Congressional inquiries and budget processes, and its compliance with a recent court decision to address issues related to Yucca Mountain.  All five NRC Commissioners testified at the hearing.  The webcast, written testimony and committee-issued documents are available at http://energycommerce.house.gov/hearing/oversight-nrc-management-and-need-legislative-reform.

  • House Passes Budget Deal; Senate Expected to Pass.  On December 12, the House passed H.J. Res 59, the “Bipartisan Budget Act of 2013” by a vote of 332 to 94.  169 Republicans voted to support the measure and 32 Democrats voted against it.  The Senate was expected to pass the bill in a vote scheduled for December 12.  Among other things, the bill would rescind the remaining funds, $40 million in total, from the Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum Resources Research Program; make permanent the revenue requirements under the Mineral Leasing Act; and place a cap on federal oil and gas royalty repayment.  A summary of the House-passed bill is available at http://budget.house.gov/uploadedfiles/bba2013summary.pdf

  • Senators Push for Renewables Tax Extenders.  On December 16, Senator Ed Markey (D-MA) joined 23 Senators on a letter to Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT).  The letter requests a short term extension of ten tax programs aimed at promoting the development of renewable energy and energy efficient projects.  Specifically, the letter states “if a broader tax code overhaul cannot be achieved by year’s end, it is imperative that these key clean energy tax incentives are renewed as soon as possible.”  The text of the letter is available at  http://www.markey.senate.gov/record.cfm?id=349212.

  • Senators Urge DOE to Conduct Study on Methodologies for Measuring Energy Savings from Energy Efficiency Actions.  On December 16, Chairman of the Senate Energy and Natural Resources Committee Ron Wyden (D-OR), Sen. Elizabeth Warren (D-MA), and Sen. Mike Crapo (R-ID) sent a letter Secretary of Energy Ernie Moniz urging him to direct DOE to “conduct a study on operational energy efficiency tools, and to recommend uniform methodologies for measuring the energy and cost savings from these technologies and services.”  The letter notes that growing numbers of manufacturers and building owners are interested in energy efficiency tools, but the absence of a consensus on measuring cost and energy savings has slowed investment in such tools.  The letter is available here: http://www.warren.senate.gov/files/documents/LETTER_DOE%20energy%20efficiency%20study.pdf

JUDICIAL BRANCH

  • U.S. Supreme Court Hears Oral Argument in Cross-State Air Pollution Rule Case.  On December 10, the U.S. Supreme Court heard oral argument on the EPA’s Cross-State Air Pollution Rule (CSAPR); a rule that the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) vacated in August 2012.  EPA v. EME Homer City Generation LP, No. 12-1182.  CSAPR would require power plants in 28 upwind states to reduce emissions of nitrogen oxides (NOx) and sulfur dioxide (SO2) in order to assist downwind states in achieving certain National Ambient Air Quality Standards (NAAQS) for ozone and fine particulate matter.  Section 110(a) of the CAA imposes a “good neighbor” obligation on states, requiring them to ensure that their State Implementation Plans (SIPs) prohibit in-state sources from “significantly contributing” to nonattainment of NAAQS in downwind states.  Much of the oral argument focused on merits arguments, including whether EPA was permitted to use a cost-based methodology for defining each upwind state’s NOx and SO2emission budgets and whether EPA properly imposed Federal Implementation Plans on the affected states.  Justice Samuel Alito recused himself from the case; thus if the Court’s decision ends in a 4-4 split on any issues, the D.C. Circuit’s decision with regard to that issue will stand. 
      
  • D.C. Circuit Hears Lengthy Oral Argument on EPA’s Mercury Air Toxics Standard Rule.  Also on December 10, the D.C. Circuit heard nearly four hours of oral argument on two challenges to the EPA’s Mercury and Air Toxics Standards (MATS) rules for coal-fired power plants.  White Stallion Energy Center LLC v. EPA, 12-1100, and Utility Air Regulatory Group v. EPA, 12-1166.  The EPA promulgated the MATS rules in 2011 after the agency issued a finding on the health benefits of reducing mercury emissions; finding it “appropriate and necessary” to regulate these emissions.  EPA’s first rule set maximum achievable control technology (MACT) standards for mercury and other toxic heavy metals, acid gases, and certain toxic organic compounds; the second rule established new source performance standards (NSPS) for electric generating units (EGUs).  The White Stallioncomplaint is a broad challenge to the MATS rules, while the Utility Air Regulatory Group petition focusses on the NSPS rule.  Both challenges relied heavily on the argument that EPA was required to consider the costs of installing expensive control technologies, which industry groups say will force multiple coal-fired power plants to close.  However, questions from Judges Kavanaugh, Rogers, and Garland focused on the technical aspects of the rule and suggested that all three judges believe that EPA was not required to consider costs when promulgating the rules. 

  • D.C.  Circuit Agrees to Rehear and Revise Portions of Its Ozone Decision.  On December 11, the D.C. Circuit agreed to rehear aspects of a recent decision upholding the EPA’s 2008 health-based “primary” NAAQS for ozone and agreed to revise language from that decision.  Mississippi v. EPA, No. 08-1200.  The court will rehear aspects of a challenge by environmental groups to EPA’s NAAQS for ozone as insufficient to protect public health with an “adequate margin of safety” as required by the CAA.  Additionally, the court updated one sentence from its decision, without the need for additional argument or remand.  The updated language clarifies that EPA is entitled to deference when it ensures that its air quality standards are protective with an “adequate margin of safety.”  The environmental and health groups petitioned the court to revise the language to ensure that EPA is not held to a lower standard when it considers “margins of safety” when promulgating health-based standards. 

  • Federal Circuit Holds U.S. Army Corps Violated Fifth Amendment.  On December 3, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) ruled that periodic flooding of timber forests caused by the U.S. Army Corps of Engineers (Army Corps)’s planned release of dammed waters was an unconstitutional “taking” of property in violation of the U.S. Constitution’s Fifth Amendment. Ark. Game & Fish Comm’n v. United States, Nos. 2009-5121 and 2010-5029.  During 1993-2000, the Army Corps excessively flooded portions of the Dave Donaldson Black River Wildlife Management Area after some of its planned water releases deviated from the normal patterns.  Initially, the Federal Circuit reversed a lower court decision that an unconstitutional taking had occurred.  However, the Supreme Court reversed and remanded the Federal Circuit, holding that damage from government-caused temporary flooding can require compensation under the Fifth Amendment.  Ark. Game & Fish Comm'n v. United States, 133 S. Ct. 511 (2012).  On remand from the Supreme Court, the Federal Circuit upheld the lower court decision, resulting in an award to the Arkansas Game and Fish Commission of over $5.7 million. 

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