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Pot, Power & Pollution: The Overlooked Impacts of Marijuana Legalization on Utilities and the Environment

April 17, 2014

Last month, Washington issued its first license for a legal marijuana grow operation under Initiative 502 ("I-502"), the marijuana legalization measure adopted by Washington voters in November 2012. A wave of additional operations will follow, as about 2,800 producers have applied for licenses to grow marijuana. While the implications of I-502 for the criminal justice system, land use, taxation and many other issues have been widely debated, the potentially significant changes in electricity and water use that are likely to follow from I-502's implementation have received almost no scrutiny. Nor have the important implications for environmental protection. Given the stakes, Washington utilities and environmental regulators should pay close attention to I-502 and the ongoing process of implementing the initiative.

At the outset, it is important to understand that the United States already produces huge amounts of cannabis. Official estimates suggest that U.S. production was somewhere in the range of 10,000 to 24,000 metric tons in 2001, making it America's largest cash crop by value. A more recent study suggests that production may actually be far higher - 69,000 metric tons. Given that marijuana production generally remains illegal, these estimates are highly uncertain. But there is little doubt that, as marijuana production comes out of the shadows and into the realm of legitimate business, power and water utilities will need to confront a number of serious and complex issues.

Implications for Electric Utilities
For electric utilities, legalization is a major concern because cannabis production, which generally relies on energy-intensive indoor growing operations, uses huge amounts of electricity. One recent study estimates that marijuana production may account for as much as 1% of the nation's entire electric consumption, accounting for a total bill of approximately $6 billion. In California, the numbers are even higher. Marijuana production in that state is estimated to use 3% of all electricity consumed there, equivalent to 9% of all residential electricity use.

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I-937 Updates: New Legislation and New Administrative Rules May Alter Washington's Renewable Portfolio Standard

April 7, 2014

As a result of both legislative and administrative action, several notable changes to Washington's Initiative 937 ("I-937", also known as the Washington Energy Independence Act) are on the horizon. While rejecting large-scale reform, the legislature made significant course corrections related to treatment of conservation and conduit hydro projects under the initiative. Those changes, and possibly several others, will be addressed in ongoing rulemaking proceedings at the Washington Department of Commerce and Washington Utilities & Transportation Commission ("UTC").

Two changes to I-937 were enacted in the 2014 session of the Washington Legislature. First, HB 1643, popularly known as the "conservation smoothing" legislation, allows utilities that achieve conservation in excess of specified targets to credit the excess toward future compliance periods, within limits. As originally enacted by the voters in 2006, I-937 required all covered utilities to obtain all "achievable cost-effective conservation." This mandate was carried out in a two-year process, which requires utilities first to identify conservation targets, then to adopt a plan to achieve those targets. In carrying out this mandate, many utilities, especially smaller utilities, found that conservation is not achieved in neat blocks, but instead is often achieved in major increments that may exceed specific biennial conservation targets. In these circumstances, I-937 both denied utilities the benefit of conservation achieved above biennial targets and created a perverse incentive to delay these conservation achievements.

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Please Join Us for "Clean Water and Stormwater" Conference

March 25, 2014

We're pleased to announce that Eric Christensen will be speaking at Law Seminars International's 14th Annual Comprehensive Conference on Clean Water and Stormwater. Eric will be participating in a panel discussing renewal of the Columbia River Treaty and how this may affect water flows and water quality in the Columbia. We hope to see you there!

BPA Attempts to Split the Baby on Oversupply Management Costs

February 28, 2014

In its latest effort to put to rest the years-long controversy that has swirled around its efforts to address excessive electricity production during periods when high winds coincide with high water in the Columbia River system, the Bonneville Power Administration ("BPA") recently issued a draft Record of Decision ("ROD") allocating the costs of such events. While wind generators argued for allocating all such costs to BPA's power customers and BPA's power customers urged BPA to assign all such costs to its transmission customers, BPA chose a third path. In the recent draft ROD, issued by newly-minted BPA Administrator Elliot Mainzer, BPA concluded that it should allocate oversupply costs to those generators operating within its balancing authority area that have scheduled power during an oversupply event. BPA's chosen alternative was supported by only one out-of-region entity, so it is unlikely to end either the controversy or the protracted litigation that has resulted.

As we have previously reported, the oversupply problem is an unintended consequence of the rapid expansion of wind generation in the Pacific Northwest. The wind fleet's capacity in the region now exceeds 7,000 MW, with 4,500 operating in BPA's balancing authority area. The oversupply problem arises when strong spring winds coincide with high spring runoff in the Columbia River Basin. In this situation, the combined electric power produced by federal dams on the Columbia River and wind generators in the region can exceed electrical loads. Further, the obligation to maintain dissolved gases within limits set by environmental authorities in order to avoided gas bubble trauma in fish (especially endangered salmon and steelhead runs), limits the amount of water dam operators can release over spillways, which adds to dissolved gas loads, requiring them instead to run the water through generators.

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Washington Supreme Court Limits Recreational Immunity Statute

January 30, 2014

In a decision of great importance to major Washington landowners, including local governments, major private landowners such as forest products companies, and operators of water projects, the Washington Supreme Court today issued an opinion that may limit the state's recreational immunity statute. As a result of the decision, the immunity conferred by the statute is clouded in mixed-use situations, where access to land is granted for both recreational and other uses, such as transportation. Camicia v. Howard S. Wright Constr. Co., No. 85583-8 (issued Jan. 30, 2014).

First passed in 1967, the recreational immunity statute is intended to encourage landowners to open lands, as well as waterways associated with hydroelectric projects and similar facilities, to recreational users. The statute encourages recreational access by immunizing those landowners from liability for unintentional accidents where no fee is charged for recreational access.

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Department of Energy Names Elliot Mainzer Permanent BPA Administrator

January 27, 2014

Perhaps signaling the beginning of the end of the turmoil that has gripped the Bonneville Power Administration ("BPA") since then-Administrator Bill Drummond was abruptly suspended last July, the U.S. Department of Energy today named Elliot Mainzer as the new BPA Administrator. By making Mr. Mainzer's appointment permanent -- he was named Acting Administrator amidst the chaos of Mr. Drummond's sudden suspension -- DOE put in place a critical piece of the puzzle that is BPA's future. The DOE appointment implicitly endorses the course Mr. Mainzer has set for BPA to navigate the problems that led to Mr. Drummond's removal, and may therefore signal a return to normalcy for the agency. With the explicit endorsement of key political figures and interest groups, Mr. Mainzer is now appears well-positioned to refocus the agency's attention on its core missions and responsibilities.

This is welcome news for the region. As marketer for the enormous federal hydropower system in the Columbia River Basin and operator of the majority of high-voltage electric transmission in the Pacific Northwest, BPA plays an outsized role in the region's economic and environmental health. And the BPA Administrator plays an outsized role in the agency's operations because the Administrator is clothed with broad powers nearly unparalleled in other federal agencies.

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Eric Christensen to Speak at 19th Annual Buying & Selling Electric Power Conference

January 7, 2014

Please join us on January 13 and 14, 2014, for the 19th Annual Conference on Buying and Selling Electric Power in the West. The conference brings together leading energy attorneys, expert consultants, industry executives, government officials, and many others to discuss cutting-edge issues affecting the electric industry in the West.

On January 14, Eric Christensen, Chairman of GTH's Energy, Telecommunications and Utilities practice group will present a lecture on Columbia River Treaty, the current status of the treaty, and how future changes are likely to affect electric power production and transmission in the Pacific Northwest.

We look forward to seeing you there.

Minimum Streamflows: Washington Supreme Court Rejects Claim of Broad Authority to Override Minimum Streamflow Requirements

October 3, 2013

The Supreme Court of Washington today issued an opinion sharply limiting the Department of Ecology's authority to limit minimum streamflow requirements to serve "overriding considerations of the public interest." Today's decision, arising from a long-running conflict concerning minimum streamflows on the Skagit River, finds that this statutory language is "very narrow" and Ecology can override minimum streamflows only in "extraordinary circumstances." The Court therefore rejects Ecology's conclusion that it is authorized to make exceptions to minimum flow requirements on a demonstration that net economic benefits will result. As a result, it will be much more difficult for Ecology to accommodate new water withdrawals to support economic development in those basins where withdrawal limits imposed by minimum streamflows have been reached. (Swinomish Indian Tribal Community v. Department of Ecology, No. 87672-0 (issued Oct. 3, 2013)).

In 1969, the legislature adopted a minimum streamflow statute authorizing Ecology to implement minimum streamflows to protect fish, wildlife, water quality, and aesthetic values of the state's streams and rivers. A minimum streamflow is functionally equivalent to any other water right in that it is subject to the venerable "first in time, first in right" principle of Western water law. That is, water users with rights arising after the minimum streamflow is established cannot withdraw water if the withdrawal would impair the minimum streamflow. Today's Supreme Court decision defines the scope of Ecology's authority to authorize water withdrawals that conflict with minimum streamflows "only in those situations where it is clear that overriding considerations of the public interest will be served." RCW 90.54.020(3)(a).

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Ninth Circuit Orders Amendments to Northwest Power & Conservation Council's Sixth Power Plan

September 19, 2013

While rejecting the potentially most far-reaching claim of the environmental petitioners, the U.S. Court of Appeals for the Ninth Circuit yesterday remanded the Northwest Power and Conservation Council's ("Council") Sixth Power Plan to correct two perceived errors. The opinion is the latest chapter in the Pacific Northwest's "salmon wars," a decades-long political and legal struggle to balance the health of the region's iconic salmon runs with its economically vital hydroelectric power system. Northwest Resource Information Center, Inc. v. Northwest Power & Conservation Council, No. 10-72104 (issued September 18, 2013).

The Council is the body designated under the Northwest Power Act to develop a plan that provides a robust regional fish and wildlife conservation program, while preserving the value of the regional hydroelectric system. The power planning process is the core mechanism employed by the Council to achieve this balance. Hence, changes to power planning process can have far-reaching consequences.

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Fish Hatcheries, the Federal Reclamation Act, and State Water Law: Ninth Circuit Rejects Lawsuit, Reaffirming Primacy of State Water Law

September 11, 2013

The U.S. Court of Appeals for the Ninth Circuit today rejected a claim brought by environmental advocates who asserted that the Leavenworth National Fish Hatchery has been operating illegally because it has not obtained permits to divert water as required under Washington law. While the decision leaves the door ajar for the environmental advocates to pursue their claims in state forums, the decision strongly reinforces the long-held principle that federal reclamation facilities must abide by state law governing water rights. Wild Fish Conservancy v. Jewell, No. 10-3503 (issued Sept. 11, 2003).

The central question raised by the environmental plaintiffs is weather the Leavenworth hatchery, which was constructed to mitigate for damage to fisheries caused by construction of the Grand Coulee Dam, is required by Section 8 of the Reclamation Act of 1902 to obtain water rights under Washington law before it can divert water from Icicle Creek. Icicle Creek is a major tributary of the Wenatchee River, which, in turn, is a major tributary of the Columbia River. Reflecting a long-held tenet of federal policy that federal projects should generally comply with state water law, Section 8 requires the federal government to "proceed in conformity" with state water law and also includes strong language protecting the water rights of landowners, appropriators, government entities, and others established under state law. The court rejected the environmental plaintiffs' claim, concluding that the plaintiffs lacked standing. While standing decisions often leave the substantive question unaddressed, the court's reasoning in today's case reinforces the primacy of state law under Section 8. The decision therefore is likely to prove significant for federal facilities constructed under the Reclamation Act, as well as for facilities subject to other federal statutes containing language similar to Section 8. These include, among many others, Section 27 of Federal Power Act (16 U.S.C. Sec. 812) and Section 10(h) of the Northwest Power Act (16 U.S.C. Sec. 839g(h).

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A Pair of D.C. Circuit Decisions Portend Increased Regulation of Sewage Treatment Plants, Biomass Energy, and Other Stationary Sources of "Biogenic" Carbon

August 23, 2013

A recent decision of the U.S. Court of Appeals for the District of Columbia Circuit (more popularly known as the D.C. Circuit) portends increased regulation of biomass power plants, as well as landfills, sewage treatment plants, and similar facilities that produce greenhouse gases ("GHG") through "biogenic" processes. The decision is critical both to the forest products industry, which frequently burns wood waste and other byproducts to produce energy, and the owners of landfills, sewage treatment plants, wastewater treatment plants, and similar facilities, both public and private. A second recent D.C. Circuit decision, although narrower in scope, similarly upholds stricter regulation of sewage treatment plants under the Clean Air Act.

Considered together, the decisions underscore the importance of "thinking outside the box," to escape treating wastes as a traditional regulatory problem, and exploring ways to, for example, convert waste into valuable commodities. One innovative solution was recently undertaken by Pierce Transit, the public transit agency for Pierce County, Washington, which is now using methane produced from the Cedar Hills landfill to fuel its bus fleet. Another approach is the advanced waste-to-energy technologies now widely adopted in Europe, which simultaneously maximize recover of useful materials, convert the remaining materials to useful energy, and minimize emissions of GHG and other pollutants. Innovative approaches like these can turn expensive and burdensome regulatory and waste treatment problems into economic and environmental assets.

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Washington Supreme Court: Water Pollution Control Act Covers Non-Point Pollution, Takings Claim Rejected

August 15, 2013

The Washington Supreme Court today issued an opinion reading the state's Water Pollution Control Act ("WPCA") broadly to cover non-point sources and concluding that the Washington Department of Ecology ("Ecology") is authorized to issue orders to control non-point sources even without definitive proof that the non-point source is a direct cause of water pollution. The Court also rejected a claim of an unconstitutional "taking" for lack of a sufficient evidence. The opinion substantially strengthens Ecology's hand in dealing with non-point sources, and may result in stronger enforcement action aimed at, for example, requiring landowners to implement "Best Management Practices" to help control non-point pollution. (Lemire v. State of Washington, Dept. of Ecology, No. 87703-3 (issued Aug. 15 2013)).

The case arises from a lengthy dispute between Ecology and Columbia County rancher Joseph Lemire concerning pollution in Pataha Creek, which runs through Lemire's property. Ecology identified Pataha Creek as polluted under the state's water quality assessment, which is required under the federal Clean Water Act. In a 2003 evaluation of Columbia County's watersheds, Ecology and the Columbia Conservation District identified conditions on Lemire's ranch that were detrimental to water quality. These included, for example, overgrazing, damage to riparian vegetation, and excrement in the riparian zone, which Ecology believes likely contributed to high water temperatures, reduced dissolved oxygen, damage to aquatic life, and the presence of pathogens in the water. To remedy these problems, Ecology recommended measures such as construction of fences to exclude cattle from the riparian zone and off-stream watering troughs. Eventually, after unsuccessfully negotiations with Lemire, Ecology ordered him to implement these measures, relying on the WPCA to justify its action.

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A Big Boost for Small Hydro: Senate Sends Two Bills Promoting Small and Conduit Hydro to President Obama's Desk

August 5, 2013

In an increasingly-rare display of bipartisanship, the U.S. Senate on August 1 passed two bills that should promote the development of small hydroelectric power on existing dams and in water conduits. The new legislation will also take the first steps to simplifying the FERC licensing project for larger projects and for pumped storage projects. Both bills are expected to be signed by President Obama in the near future.

The first bill, H.R. 267 ("The Hydropower Regulatory Efficiency Act of 2013") makes several significant changes to federal law that are intended to simplify and streamline the regulatory process for small hydroelectric projects:

First, HR 267 raises the eligibility threshold to 10,000 kW for the Federal Energy Regulatory Commission's ("FERC") simplified licensing process. Eligibility is currently capped at 5,000 kW.

Second, the new law provides a complete exemption from FERC licensing for non-federal conduit hydro projects -- those operating on a canal, flume, aqueduct, or similar structure -- for projects with up to 5 MW of capacity. This provision requires FERC to issue a declaration that a project qualifies for the exemption within fifteen days after receiving a notice of intent from the project sponsor and requires any challenges to that determination to be lodged within 45 days. In the absence of such a protest, the determination that the project qualifies for the licensing exemption becomes binding.

Third, the law authorizes FERC to grant complete or partial licensing exemptions for conduit projects with up to 40 MW of capacity.

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As Decision Day for the Columbia River Treaty Looms, BPA and Corps Seek Comments On Draft Recommendations

July 3, 2013

As previously discussed here, the impending decision about whether to seek termination or renegotiation of the Columbia River Treaty next year carries with it enormous long-term implications for the Pacific Northwest and the region's power industry. In preparation for this decision, the "U.S. Entity" -- Treaty-speak for the Bonneville Power Administration and the U.S. Army Corps of Engineers, which jointly administer the Treaty on behalf of the U.S. -- is seeking comments by August 16 on the its "Working Draft of a Regional Recommendation: Improving the Columbia River Treaty Post-2024", which was released late last month.

The Working Draft Recommendation is primarily the product of input from the "Sovereign Review Team," composed of representatives from the four Columbia Basin states, eleven federal agencies, and fifteen Native American tribes. Those entities have not yet reached full agreement, so the Draft remains a work in progress. The comments the U.S. Entity solicited will be part of an ongoing process of refining the recommendations that will be made by the U.S. Entity to the Department of State in December 2013. Ultimately, the Department of State will be responsible for terminating or renegotiating the Treaty.

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Jefferson County PUD Prevails In Tax Dispute; GTH Successfully Defends Summary Judgment Dismissal of Class Action Lawsuit

June 11, 2013

The Washington Supreme Court recently handed a significant victory to Washington's Public Utility Districts when it denied a petition for review of Shoulberg v. Public Utility District No. 1 of Jefferson County. Pursuing a long-standing grievance, taxpayers in Port Townsend filed a class-action lawsuit challenging the PUD's taxation of Port Townsend property owners. The Superior Court and the Washington Court of Appeals (169 Wn. App. 173, 280 P.3d 491 (2012)) rejected the challenge. With the Supreme Court's denial of the petition for review, the Court of Appeals decision is now the final word.

The case involves interpretation of RCW 54.04.030, the section of the PUD statute aimed at preventing duplication of services when PUDs are established in counties with municipal utility systems. The taxpayer plaintiffs argued that property taxes imposed on Port Townsend property owners by the PUD violated the statute's prohibition on duplicative taxation, which prohibits taxation of "property situated within" any city to "pay for any utility, or part thereof, of like character to any utility, owned or operated by such [city]."

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