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

In an e-mail to Climate Law Update, Shell Exploration and Production Company spokesman Curtis Smith said:

"Shell has already conducted safe and environmentally responsible seismic programs in the Beaufort and Chukchi seas during 2006 and 2007. We will continue to do so in 2008 while meeting or exceeding all regulatory requirements."

He added that the prior explorations "were successfully completed without any recordable safety incidents or known negative impact to the environment or local communities." The company spent $2.1 billion earlier this year acquiring oil and gas leases in the Chukchi Sea. 

A BP spokesman, Steve Rinehart, who noted that the company was not active in the Chukchi Sea,  told Climate Law Update:

"BP does have a well-considered seismic survey planned for this summer. It's a survey that will be conducted in a way, and is designed in a way to not harm or conflict with fish, sea birds, marine mammals or other wildlife."

He also said that the timing of the explorations means they would not occur during whale migrations, and would take place at a time of lessened ice, meaning fewer bears should be present. 

Although the latest lawsuit has little explicitly to do with global warming, that issue was clearly not far from the minds of some of the protagonists. Brendan Cummings, a California attorney for the Center for Biological Diversity, and one of the plaintiffs in the litigation, said in a statement issued by the groups (see text here):

"All of the marine mammals of the Arctic are under severe threat from global warming and should not be subjected to further harm. Yet the planned seismic surveys would subject literally tens of thousands of these already imperiled animals to dangerously loud sounds."

Cummings' group, along with the Natural Resources Defense Council, another plaintiff in the latest litigation, recently won a judge's ruling ordering federal wildlife officials to quickly decide whether to grant Endangered Species Act protection to the polar bear because of threats posed by climate change. Such a move also could require heightened environmental scrutiny for oil exploration operations, the groups contend (see Climate Law Update stories here, here, here and here).

The center is also pressing federal officials to extend the protections of the endangered species law to four seal species that inhabit the Chukchi and Beaufort seas, both as a result of global warming and oil development (see Climate Law Update story here).

Shell and BP are also among the defendants in a separate lawsuit filed in federal court in San Francisco alleging global warming damage to Kivalina, an Alaskan village (see lawsuit here).

 (Photo: Minerals Management Service)

The report noted that many in the industry favor free allocations, as a way of reducing the costs of complying with carbon dioxide reductions. But discouraged that approach, warning of potential excessive profits and noting the "overly generous" allocations under the first phases of Europe's trading system. 

With electric power generation responsible for about 40 percent of the nation's carbon dioxide emissions, or about 2.7 billion tons annually, according to the report, the industry has a big stake in the outcome of any legislation.

The issue is not confined to the federal level. In states such as California, which is contemplating a cap-and-trade program to help the state meet the demands of its groundbreaking AB 32, regulators are also wrestling with the subject. California officials are expected to make a recommendation on the allocation question this summer (see Climate Law Update story here).    

Under Lieberman-Warner, credits covering about 45 percent of the emissions would be distributed for free in 2012, according to the report, while another 573 million tons worth would be handed out to distribution companies. Those allowances would then be auctioned off to raise money for energy efficiency programs or to provide customer rebates. The Bingaman-Specter bill, on the other hand, would provide about 80 percent of the allowances for free in 2012.

At a hypothetical value of $10 a ton -- no one really yet knows how much the credits would be worth -- the value of the free credits allocated to the 100 largest utilities under the Lieberman-Warner approach would be about $10.4 billion. That comparable figure under the competing measure would be more than $18 billion.

Restricting the amount of free credits is clearly favored by at least one sponsor of the report, the Natural Resources Defense Council. In a statement accompanying the release of the assessment, Dan Lashof, science director of the environmental group's climate center said (see full text of statement here):

"Billions of dollars in allowances are at stake under the proposals to cap and reduce global warming pollution. The value of pollution allowances should benefit consumers and smart programs that deliver real pollution reductions, not polluters." 

Along with the NRDC, the report was sponsored by Ceres, a coalition of investors and environmental groups, as well as two utilities, Pacific Gas and Electric Company and Public Service Enterprise Group of New Jersey.

The report also shows stark differences between utilities based on whether credits are distributed based on the utility's emissions, or its electricity output. The emissions-based method would "penalize companies that have invested in low- and zero-carbon technologies in advance of the cap-and-trade program," the report noted.

Under an emissions scenario, the Southern Company, described by the Wall Street Journal's online site Environmental Capital as "coal heavy," would get $600 million in credits under the proportions outlined under the Lieberman-Warner bill, as opposed to $734 million if the allowances were doled out based on emissions.

For a company such as Northern California's PG&E, reliant on hydro, nuclear, natural gas and renewable generation, the differences would be even more dramatic. The company would get as little as $2 million to $4 million in allowances under the emissions scenario but receive between $99 million and $174 million if allocations were based on output, according to the report.

On a somewhat different subject, the report made another fairly startling point: Since 1990, overall carbon dioxide emissions from power plants have gone up by 29 percent; but emissions of other pollutants, including sulfur dioxide and nitrogen oxide, have dropped more than 40 percent. The difference, suggested the report's authors, was that the latter two pollutants are regulated under the Clean Air Act, while carbon dioxide has not been.      

 (Photo: Lake Almanor, California, part of PG&E hydroelectric system; Wikipedia)

According to the two earlier lawsuits, the designation of the Southwest corridor affects an area of 70,000 square miles in California and Arizona, while the Mid-Atlantic region covered by the department’s action includes “broad areas” of eight states and the District of Columbia.

The new move to the 9^th Circuit came after federal officials argued in the Pennsylvania case that such challenges could only be brought in the appeal courts. Although the initial filing in the appeals court did not include details of the plaintiffs’ allegations, a public statement from the organizations involved in the case outlined a number of objections, including the department’s alleged failure to fully consider public comments and alternatives.   

The cases stem from the department’s decision last October to designate the two corridors. The latest lawsuit came shortly after the department earlier this month denied requests to reconsider the order (see DOE press statement here).

Areas within the corridors could be subject to jurisdiction by the Federal Energy Regulatory Commission under the energy policy law, according to energy department documents.

“In practice, this will mean that if an applicant does not receive approval from a state to site a proposed new transmission facility within a national corridor, the applicant may then apply to FERC for a permit and authorization to construct the facility,” the energy department said in an information packet distributed at the time of the October decision. Once granted a permit, a builder could also use the power of eminent domain to acquire property rights for the lines, except if the land is owned by the state or federal governments, the department said.

Opponents of the department’s move saw numerous problems with it. The Pennsylvania lawsuit, charged, for instance:

“As a result of the Order, proposed utility and transmission line projects
within the Corridor will be subject to “fast-track” federal approval, bypassing
state-level processes for locating transmission infrastructure, overriding federal
environmental laws, and enabling federal condemnation of private land and
diversion of public land for new high voltage transmission lines.

By facilitating utility right-of-way creation and transmission line construction without a detailed analysis of the associated environmental impacts and without full consultation with the appropriate resource and land management agencies, DOE’s proposed corridor designation will have avoidable impacts on ecosystems, wildlife habitats and populations, historic resources and water quality.”

Anjali Jaiswal, an attorney for the Natural Resources Defense Council, one of the groups bringing the 9^th Circuit lawsuit, said the case was not about stopping transmission projects:

“We recognize the need for increased investment in transmission solutions across the country. But we need to ensure that these transmission corridor designations take place in compliance with federal environmental law.”

The lead plaintiff in the case was the Wildnerness Society. The California Wilderness Coalition also joined the litigation. 

In its public statement released at the time of the rehearing denial, the energy department said it had “dismissed without merit” challenges raised by those seeking a new look at the decision. It also asserted that a number of federal statutes, including those cited in the lawsuits, were “not applicable” to the decision to designate the corridors. Rather, reviews under those laws would be conducted by FERC before issuing any construction permit.

Julie Ruggiero, a spokeswoman for the energy department, said Wednesday that the designation of the corridors "in and of itself has no environmental impact and instead shines a spotlight on areas of the country that are experiencing congestion and constraint." She said the department had also provided "all interested parties with fair and ample opportunities" to give their views.

Last month, the federal attorneys representing the energy department moved to dismiss the Pennsylvania case, arguing such challenges could only be heard in the court of appeals.

(Photograph of transmission lines in Oregon courtesy Department of Energy)

Environmentalists were more split on the EPA study, however, with Environmental Defense saying it showed the economy could grow substantially while controlling emissions, and the Natural Resources Defense Council accusing the agency of hiding the key conclusions that demonstrated emissions reductions are affordable. 

Under the Lieberman-Warner bill, known as the Climate Security Act, greenhouse emissions from major economic sectors, including electric power, transportation, manufacturing and natural gas would be capped and gradually reduced. It also would establish a trading program for emissions credits. Backers of the legislation have estimated it would reduce emissions by as much as 66 percent from 2005 levels by 2050. The full Senate is expected to take up the bill, which some environmental groups want to strengthen, in June.

The EPA report also did not discuss the economic benefits of reducing emissions. But the other newly released government analysis suggested those could be substantial. The study prepared by the U.S. Climate Change Science Program and the U.S. Department of Transportation and made public earlier in the week (see press release here) predicted global warming could pose huge threats to the Gulf Coast region. Those included increased intensity of hurricanes, sea level increases of up to seven feet, endangering roads and other infrastructure and the inundation of a “vast portion” of the coast from Houston, Texas, to Mobile, Alabama. One group said the government appeared to be trying to release the report in a way to minimize public notice. The report noted that about two-thirds of the nation's oil imports pass through the region, and that it is home to the largest concentration of freight-handling ports in the country. It painted the threat to the region's transportation network in stark terms:

"Warming temperatures are likely to increase the costs of transportation construction, maintenance, and operations. More frequent extreme precipitation events may disrupt transportation networks with flooding and visibility problems. Relative sea level rise will make much of the existing infrastructure more prone to frequent or permanent inundation – 27 percent of the major roads, 9 percent of the rail lines, and 72 percent of the ports are built on land at or below 122 cm (4 feet) in elevation. Increased storm intensity may lead to increased service disruption and infrastructure damage: More than half of the area’s major highways (64 percent of Interstates; 57 percent of arterials), almost half of the rail miles, 29 airports, and virtually all of the ports are below 7 m (23 feet) in elevation and subject to flooding and possible damage due to hurricane storm surge."

The EPA's analysis of the climate change bill, which also did not factor in last year’s energy conservation legislation that, among other things, required better gas mileage in cars, some  impacts were potentially more significant than the business groups’ figures showed. The EPA compared a variety of scenarios to a baseline that assumed compliance with existing domestic and international policies but no new ones after 2007.

 According to the EPA, by 2030, the Liberman-Warner bill could reduce the nation’s GDP by as little as less than 1 percent to as much as nearly 4 percent, or $983 billion, compared to what it would be otherwise. The business groups’ report showed a maximum impact of about 2.7 percent by 2030.

On the other hand, the EPA report also predicted there might be no flight of emissions to other countries, known as “leakage,” as energy prices rise. It also predicts that the use of fossil fuels might peak as soon as 2010, followed by a slow decline to 2050. It also shows renewable sources, such as wind and solar, playing a “significant role” if the bill were enacted. Among other highlights of the report, which were also outlined in a letter to Lieberman from Robert J. Meyers, the EPA’s principal deputy assistant administrator, the bill could reduce emissions by up to 56 percent by 2050, a slightly lower estimate than that put forward by the legislation’s sponsors, and it cites the electricity sector as providing the greatest source of emissions reductions. The report also suggested that technology to capture and store carbon could deploy by as early as 2020.

Meyers' letter also promised that the EPA would issue a revised analysis in May or June, showing the effect of the new energy law. 

In a joint statement responding to the EPA’s analysis, the senators focused on findings under certain scenarios studied by the EPA that they said showed the economy would grow almost as fast with the legislation in place as without it, that greenhouse emissions would not be shifted abroad, and that that other benefits would occur, such as driving natural gas out of the electricity sector, to the benefit of manufacturers who use gas.  

“EPA’s detailed analysis indicates that the U.S. can curb global warming without sacrificing economic prosperity,” Lieberman said in the statement. “We will examine the results closely for improvements that they might suggest for the bill.”

Warner said the results also indicated that greenhouse gases could be controlled “in a manner that leaves the economy whole and is not burdensome on consumers.”

(Wikipedia Photo: Hurricane Katrina damage to New Orleans)

Here's the Times' description of the opposition:

The 21-point "Environmental Justice Movement Declaration" challenges the stance of Gov. Arnold Schwarzenegger (pictured above with New York Gov. George Pataki discussing an emissions market program in 2006), a national advocate of a cap-and-trade program that would allow heavy polluters, often located in poor neighborhoods, to partly buy their way out of lowering their emissions.

"Under a trading scheme, 11 power plants to be built around Los Angeles could offset emissions by extracting methane from coal seams in Utah or planting trees in Manitoba," said Jane Williams of the California Communities Against Toxics, which fights pollution in low-income areas.

The defiant tone of news conferences in Los Angeles, Fresno, Oakland, Sacramento and San Diego indicated that political turbulence might be ahead as the state Air Resources Board hammers out a strategy to drastically reduce greenhouse gas emissions, as required under a 2006 law.

Joining Williams in leading the movement was Angela Johnson Meszaros, director of the California Environmental Rights Alliance. They are co-chairs of the California Air Resources Board's Environmental Justice Advisory Committee. That panel was established under California's AB 32, the 2006 law mandating sharp reductions on emissions blamed for changing the planet's climate. 

In addition to Schwarzenegger, cap and trade schemes, at least for the electricity sector, have drawn support from the California Public Utilities Commission President Michael R. Peevey, large sectors of the utility industry such as Pacific Gas and Electric Company and even garnered cautious backing from environmental groups, such as the Natural Resources Defense Council.