Climate Law Update: Climate Change & Sustainable Energy News : Thelen Reid Law Firm : Renewable Energy, Construction, Project Finance Lawyers & Attorneys

Later, officials of the federal agency told news outlets, including the Great Falls Tribune, that the White House's Office of Management and Budget had put loans for baseload generation on hold. Separately, the USDA recently announced it was accepting applications for $220.9 million in loan and grant applications for renewable energy and energy efficiency projects. 

The government's retreat from coal projects could have far-reaching implications, according to Earthjustice, an Oakland, California nonprofit law firm representing envronmental groups that had filed a lawsuit against the government's involvement in the Montana plant. That litigation had also raised concerns about  other projects financed via the USDA agency. Earthjustice, in statement in early March, said the federal agency's move would affect at least five other proposed coal plants in Kentucky, Illinois, Arkansas, Texas and Missouri. Would-be operators of the Missouri plant have already suspended plans for the project.

"This is a big decision," Abigail Dillen, a Earthjustice lawyer said in the statement. "It says new coal plants can't go to the federal government for money at least for the next couple years, and these are make or break times to get these plants built." 

"We're counting it as a victory" in the lawsuit, said Brian Smith, an Earthjustice spokesman.  

The Missouri plant appeared to be an early victim of the federal decision. On March 3, the cooperative that had planned to build the facility announced it was "delaying indefinitely" the project, citing the lack of financing from the utilities service, as well as regulatory uncertainty.

Regarding the Montana project, Andrew's letter cited "the uncertainty of the litigation now filed." But a spokesman for the service said the primary reason for rejecting the plant's funding was its quickly escalating expense. The utility service, which traces its roots to the Depression-era Rural Electrification Act, helps provide funding for projects serving rural areas by issuing loans and loan guarantees.

"The decision was based on one very significant and primary factor and that was cost," said the spokesman, Jay Fletcher. He said when the plant was proposed in 2004 it carried an estimated price tag of $450 million, a figure which had since grown to $750 million. Opponents of the Montana project had also cited the plant's price tag, contending that affordable wind power alternatives were available. An official of the Montana cooperative could not be reached for comment, but the Great Falls newspaper reported the utility would seek private financing.

Meanwhile, officials at the East Kentucky Power Cooperative were grappling with fallout from the service's funding decision. The cooperative has plans for a new 268-megawatt coal plant, new gas-fired peaker plants and transmission lines deliver the power. Elements of the project had already been targeted in a separate court challenge brought by environmentalists.

While the Kentucky lawsuit does not mention global warming implications of the plant, that's clearly one of the concerns of the plaintiffs. In a statement they warned:

"Coal-fired power plants emit large quantities of harmful soot, heavy metals such as mercury, and greenhouse gases into the environment. This pollution can result in an increase in respiratory problems, heart disease, and other health impacts. Coal prices are also rising; economists say that the price has risen 400 percent in the past six years, and the risks of increased regulations on dangerous carbon dioxide emissions are likely to drive those costs much higher."

The lawsuit, however, was brought on more technical grounds, in effect charging that the National Environmental Policy Act was violated because the environmental impacts of a 36-mile transmission line project were not considered together with the two proposed power plant units the lines would serve. The RUS that the transmission project would pose no significant impact to the environment.  A separate environmental impact statement for the generating units is being prepared, according to the lawsuit.

Anne Mayberry, also a spokeswoman for the federal program, declined to comment on the lawsuit targeting the Kentucky facilities. However, Nick Comer, a spokesman East Kentucky Power, said both the cooperative and the federal agency had followed the law. The cooperative has described the generating project as using "clean coal" technology. But according to local news reports, environmentalists who in February proposed a greater reliance renewable energy, have criticized that as doing little to reduce carbon dioxide emissions.

Comer said that the cooperative continues to study renewable and alternative energy sources and already has projects generating power from landfills. But he noted that the region served by his cooperative -- which also lies close "to a lot of coal mines" -- is growing faster than the national average. Comer said it was too early to tell what the loss of federal financing might mean, although he said the possibility of going to the private market was being discussed.

"Coal," Comer said said, "has to be part of the picture."      

 (Department of Energy photo showing construction of clean coal plant in Florida) 

The Pew organization is one of six nonprofit groups involved in the Offset Quality Initiative, which participants said was intended to support policy makers as they develop regulatory standards for climate change policies involving offsets. They distinguished their efforts from others that are intended to address voluntary emissions offsets.

"Our primary focus is on the regulatory side," said Mike Burnett, executive director of Portland, Oregon's The Climate Trust, one of the groups involved in the project. But he said it was not the coalition's goal to develop its own standards or to rate those developed by others.

Peace, however, said it was important to have some standards and to allow them to have some flexibility to make room for innovative projects. At the same time, she advocated the concept of "additionality," a buzz word that covers "high quality" projects that would not have happened but for offset programs being in place.

"If you"ve been doing it for 20 years and somebody comes to you and says, 'I'm gong to pay you for an offset -- well, that's not a very high-quality offset," Peace said.

The projects getting funding under the PG&E deal all have a stamp of approval from the California Climate Action Registry, a state-formed nonprofit that is one of the entities involved in the Offset Quality Initiative. PG&E's announcement included a statement from Gary Gero, interim president of the registry, who commended the utility "for taking on the challenge to fund real, transparent and verifiable carbon emission reduction projects." 

Most of PG&E's purchase, 200,000 metric tons, comes from  The Conservation Fund's Garcia River Forest (pictured, from Conservation Fund Web site). Although owned by a conservation organization, the 24,000-acre redwood and Douglas fir forest is being managed as a working timber producer, according to a statement from the organization. The credits derive from the fact that less timber is harvested than allowed under a "sustainable" easement on the land held by the Nature Conservancy.

As the Conservation Fund put it:

"The Fund harvests trees significantly below the maximum amount allowed by the easement and by California’s stringent environmental regulations. It is this sustainable management practice that provides “additionality” by trapping more CO2 in the trees than would normally be trapped with allowable harvest levels. This additional salvaged CO2 is sold as certified emissions reductions credits, calculated by independent auditors and verified through the Registry."

Money for the purchases, which also include 14,000 credits from the Sempervirens Fund, which protects giant sequoias, comes from ClimateSmart program in which PG&E customers voluntarily enroll and pay extra on their utility bills to make their energy use "climate neutral."

Among the efforts to certify voluntary market programs was a project announced by the Center for Resource Solutions, a San Francisco nonprofit. Its Green-e Climate, according to a statement and presentations made at the Carbon Forum conference, requires that "greenhouse gas emission reductions be verified according to strict project-level certification." The goal is to guarantee consumers clear information about the projects, that offsets have not been double-sold or double-counted and that they come from projects that would not have happened "business as usual." The program relies on certifications including those offered by the Clean Development Mechanism,  the Gold Standard and the Voluntary Carbon Standard.  Green-e announced it had certified offerings by four retailers of carbon offsets, including one, 3Degrees, that has among its portfolio a project in Brazil that captures methane from hog farms. 

"We are verifying the products that are being sold to consumers," said Lars Kvale, Green-e climate manager, at the San Francisco conference. In many cases, he said, consumers "don't necessarily know what they're getting or what they're buying."