GTH Energy & Natural Resources Law Blog

Reflecting new Gov. Jay Inslee's strong interest in renewable energy and climate change, these issues were hot topics during this year's legislative session. With the conclusion of the regular session at the end of April, the fate of most energy-related bills has now been decided. Because Gov. Inslee has called an executive session to address unresolved tax and budget issues, the final story has not yet been written. But a number of bills important to electric utilities, renewable energy developers, and others in the energy industry have now become law.

As has become routine in recent years, Washington's Renewable Portfolio Standard, Initiative 937 ("I-937") continues to be a flashpoint for controversy. Although comprehensive reforms reflecting a "grand bargain" between environmental and industry interests once again eluded the legislature, three important changes to I-937 were enacted. These are:

SB 5400 (signed April 23): This legislation allows a utility subject to I-937 to count wind energy imported from states where the utility has retail customers toward the utility's I-937 compliance obligations. The bill provides a limited waiver from I-937's requirement that renewable power must come from the Pacific Northwest. For reasons we have previously discussed, this provision is, at best, constitutionally suspect. It is also probably counterproductive because California has used similar territorial restrictions to limit access to its renewables marketplace, causing havoc in the Pacific Northwest renewables industry. As a practical matter, the result of the bill is somewhat limited, allowing PacifiCorp to count otherwise-excluded Wyoming wind resources toward its I-937 compliance obligations.

HB 1154 (signed May 1): This bill amends I-937's prohibition against double-counting of the environmental benefits of renewable generators so that biomass and biogas producers can sell carbon offsets attributable to the destruction of methane (a powerful greenhouse gas), while still receiving credit for renewable energy production under I-937. This change will allow dairy digesters, landfill gas generators, and similar renewable generators to participate in emerging carbon-offset markets like those in California. These markets promise a potentially substantial revenue stream for operators of biomass and biogas facilities. This legislation may therefore kick-start construction of such facilities in Washington.

SB5297 (Governor's signature pending): This bill is follow-up legislation to the complex legislative package passed in 2011 to facilitate the transition of the Centralia Steam Plant from coal to natural gas. Part of the 2011 legislation allowed utilities to purchase long-term "coal transition power" contracts from Centralia to provide the financial assurances necessary for the refueling of the plant. This bill helps facilitate contracts for "coal transition power" by permitting utilities to purchase coal transition power without threatening their eligibility for I-937's "safe harbor" for no-growth utilities. The "safe harbor" provision allows utilities with no load growth to comply with I-937 by spending 1% of their retail revenues on eligible renewable resources, even if that spending does not achieve otherwise-applicable portfolio requirements for renewable resources.

Continue reading "New Washington Energy Legislation: Legislature Continues to Wrestle With Questions Raised by Renewables" »

Current conventional wisdom in the energy industry holds that the natural gas "fracking" revolution will lead to an era of sustained supply gluts and low prices. Low natural gas prices, in turn, will allow for rapid expansion of gas-fired electric generation, leading to a period of sustained low prices in the electricity markets. According to the conventional wisdom, then, the fracking boom will create a sustained economic headwind for renewable generators forced to compete with low-priced gas generation. But several recent scientific and economic studies suggest that the conventional wisdom might be wrong.

By now, the tectonic changes in energy markets arising from the massive increase in natural gas production brought about by application of horizontal drilling and hydraulic fracturing techniques -- commonly known as "fracking" -- are well known. As usefully summarized in this recent primer by Harvard environmental policy professors Michael McElroy and Xi Lu, fracking reversed a long-term decline in domestic natural gas production, driving prices down as much as 86% from their 2008 highs. Among the many unanticipated results, coal-fired generation has declined precipitously, reaching a record-low of 34% of generation last year. Because gas-fired generation produces only about one-half the carbon dioxide of coal generation, the nation's carbon dioxide emissions have fallen to 1992 levels despite persistent political paralysis on climate issues.

Continue reading "Will The Fracking Revolution Bouy Renewables?" »

On Monday, the Washington House of Representatives passed ESSB 5802, which creates a "Climate Legislative and Executive Work Group" to study the state's options for achieving significant reductions in greenhouse gases. The bill, which is the first of Gov. Inslee's legislative requests to pass both houses of the legislature, will set the stage for more substantive legislative action on climate change in next year's legislative session.

ESSB 5802 is intended to jump-start the debate on greenhouse gas reduction in the 2014 legislative session by delivering a set of recommended policies to the legislature by the end of 2013. The first step in this process calls for the Climate Legislative and Executive Work Group to retain a politically neutral consultant to carry out a comprehensive study of the policy options for reducing Washington's greenhouse gas emissions, including a baseline assessment of current GHG emissions by sector, a review of programs adopted by the federal government and by other states and neighboring provinces of Canada, and an analysis of the costs and benefits of the various policy options. The study must also examine a range of specifically-designated policies, including, for example, a Renewable Fuels Standard, emissions performance standards, and policies to encourage greater energy efficiency. This initial evaluation will be delivered to Gov. Inslee by October 15, 2013.

Continue reading "Gov. Inslee's Climate Change Study Bill Is The First Energy Legislation to Clear the Washington Legislature" »

In a decision with strong overtones for climate policy and federal permitting of projects that release greenhouse gases, the U.S. Court of Appeals for the D.C. Circuit today affirmed the U.S. Fish & Wildlife Service's ("FWS") decision to list the polar bear under the Endangered Species Act ("ESA"). The FWS decision, which is based on the danger to polar bear populations caused by declining sea ice in the Arctic, is one of the first major federal policies to address the consequences of climate change. Further, the decision means that projects releasing major quantities of greenhouse gas emissions may run afoul of the ESA, and that consultation with FWS under the ESA may become a routine regulatory requirement for such projects.

Legally, the decision is rather unremarkable. The petitioners, a group of industries, states, and aligned interests, challenged the FWS's listing decision on a number of technical grounds. But, as the D.C. Circuit observed, the challenges amount to "nothing more than competing views about policy and science." Under the familiar "arbitrary and capricious" standard of review for decisions of administrative agencies, such disagreements are insufficient to overturn an agency decision. Rather, as long as the agency has considered all the evidence, adequately explained its decision, and acted within the law, its decision, even if controversial, is not arbitrary and capricious. The D.C. Circuit concluded that the FWS did not act arbitrarily in the face of numerous challenges to its listing decision.

Continue reading "D.C. Circuit Upholds Endangered Species Act Listing of Polar Bear" »

On December 17, Oregon Governor John Kitzhaber released Oregon's "10-Year Energy Action Plan," which sets out a long-term framework for Oregon's energy policy. While not binding, the Plan is likely to catalyze action by both the Oregon legislature and Oregon state agencies to carry out the plan's recommendations. Renewable energy producers, utilities, and others in the energy industry will be particularly interested in recommendations that would change Oregon's Energy Facility Siting process, restructuring financing for renewable energy projects, and increase funding for energy-related research and innovation.

The plan is built around three core objectives: (1) to meet 100% of Oregon's electric load growth through energy conservation and efficiency measures; (2) to remove financial and regulatory barriers to development of the infrastructure needed to encourage renewables; and, (3) to transition Oregon's vehicle fleet to electricity or alternative fuels. Many of the specific recommendations to carry out these objectives should be of great interest to those working in the energy industry.

Continue reading "Oregon Releases 10-Year Energy Plan, Emphasizing Conservation, Renewables, Infrastructure Investment, and Alternative Fuels" »

Yesterday, the U.S. Court of Appeals for the District of Columbia Circuit tossed out challenges to the Environmental Protection Agency's proposed new source performance standards for greenhouse gases. The Court concluded in a unpublished order that, because EPA's rules are not yet final, the lawsuits are premature.

The litigation was brought by Las Brisas Energy Center, LLC, which is constructing a 1320-MW generator in Corpus Christi, Texas, that will be fired by petroleum coke. The case was then consolidated with similar challenges brought by a number of other generators. Substantively, the petitions claimed that EPA exceeded its authority under the Clean Air Act by imposing an emissions limit of 1,000 pounds of carbon dioxide per megawatt-hour, regardless of fuel type, without first making the required finding that each generator type makes a "significant contribution" to pollution and without conducting adequate economic analysis.

EPA sought to dismiss the case as premature because the greenhouse gas rules are not yet final. The petitioners argued that the proposed rule had an immediate impact on them because it effectively imposed specific limits on their ability to construct generators going forward, even if not finalized. Yesterday's order rejects this argument. But it is hardly the last word. Similar challenges, and many others, are almost certain to be lodged once EPA issues its final greenhouse gas rules.

If you have any questions about the D.C. Circuit's decision, the regulation of electric generators, or other matters related to the utility industry or environmental law, please contact a member of GTH's Energy, Telecommunications and Utilities practice group or Environment & Natural Resources practice group. Both groups are consistently rated as among the best in the Pacific Northwest.

The U.S. Court of Appeals for the Ninth Circuit last week heard oral argument in a challenge brought by a number of out-of-state biofuel producers who assert that California's Low-Carbon Fuel Standard ("LCFS") violates the Commerce Clause of the U.S. Constitution because it discriminates against out-of-state producers and artificially favors in-state producers. The three-judge panel appeared, at times, perplexed, and at other times, to be highly skeptical of the LCFS.

For example, Senior Judge Dorothy Nelson, citing comments from California officials stating the LCFS will increase employment and tax revenue in California, asked, "Isn't this unambiguous evidence that the board was motivated by protectionism?" Similarly, observing that electricity is a major factor in the carbon intensity calculations used by California and that biofuels producers have no control over how the electricity they use is produced, "isn't this the equivalent of discriminating against producers with the 'dirtiest' electricity," who are generally located in the Midwest. Similarly, Judge Mary Murguia, seemed particularly troubled with LCFS regulations that, on their face, apply a higher carbon intensity score to Midwestern biofuels producers than to California producers. The third judge, Senior Judge Betty Fletcher, did not participate heavily in the argument, but observed that she followed the argument closely and, found some of the answers provided by the attorneys "very satisfactory, others not so much." An audio tape of the argument is available here.

(Sadly, Judge Fletcher passed away just five days after the argument. A native of Tacoma, Judge Fletcher had a highly successful legal career here in Seattle, where, among other achievements, she became the first female partner at a major Pacific Northwest law firm. She was appointed to the Ninth Circuit by President Carter in 1979. She will be missed.)

Continue reading "California, Climate Change, and the Commerce Clause: Ninth Circuit Expresses Skepticism in Argument Involving Low-Carbon Fuel Standard" »

Please join us at the Washington Smart Grid Forum and the Washington Future Energy Conference on November 13 and 14 in Seattle. We are pleased to announce that GTH partner Eric Christensen will be moderating a panel of experts at the Smart Grid Forum on November 13, which is one of three "In-Depth Focus Programs" that will be presented that day . GTH partner Durham McCormick will be speaking on Ownership and Finance Models for Distributed and Community Generation at the main Future Energy Conference on November 14.

The Future Energy Conference attracts a broad range of utility executives, power producers, developers, researchers, investors, and professionals interested in the latest developments from the region's burgeoning renewable energy and research economy. It is one of the best forums to learn about these emerging issues. GTH is therefore proud to be a Silver Sponsor of the Conference.