Jenner & Block

Climate Change Update Resource Center

As a service to Jenner & Block's clients and the greater legal community, the Firm's Climate and Clean Technology Law practice maintains this online resource center that offers the latest case law and other developments in climate change.

Please also visit the Firm's Environmental, Energy and Natural Resources Law practice website for information about our capabilities, and our Corporate Environmental Lawyer Blog for current developments in this area.

Jenner & Block will update this web  page with new developments and items of interest as they become available.  For further information, please contact Partner Gabrielle Sigel.

Federal Legislative Developments

Comprehensive Energy and Climate Bill, Cap-and-Trade, Abandoned For Summer

On July 22, 2010, Senate Democrats abandoned their efforts to pass this summer a comprehensive energy and climate change bill, including a greenhouse gas (“GHG”) cap-and-trade program.  Instead, Senate leadership has decided to delay work on a bill until after the Senate returns from its August recess.  Democrats say the delay will provide the time necessary to attract the 60 votes required for Senate passage.  According to Senator John Kerry (D-Mass.), one of the most vocal proponents of climate change legislation, “We’ve known from Day 1 that in order to pass comprehensive climate change legislation, you’ve got to reach 60 votes.  To reach that, you need some Republicans.  As we stand here today, we do not have one Republican.”

The Senate’s decision leaves many businesses, particularly in the utility and fossil fuels industries, with uncertainty regarding future regulatory controls and investment incentives.  Renewable energy businesses, which were hoping for tax and other benefits to make wind, solar, and other green power businesses more competitive with fossil fuels, are also impacted by the delay.  Moreover, businesses with significant GHG emission now face potential U.S. Environmental Protection Agency (“EPA”) regulation of those emissions under the Clean Air Act (“CAA”), as well as varying state regulations.

Momentum Renewed to Stop EPA’s Authority Under the Clean Air Act

With the Senate Democrats’ announcement tabling a comprehensive energy and climate change bill that would have prohibited EPA from regulating GHG emissions, there is renewed bipartisan interest in checking EPA’s authority over emissions under the CAA.  In the House, Representative Rick Boucher (D-Va.) co-sponsored a bill that would require a 2-year “timeout” before EPA emissions rules go into effect.  In the Senate, Senator Jay Rockefeller (D-W.V.) has proposed a similar 2-year postponement, on which Senate Majority Leader Harry Reid (D-Nev.) plans to allow a vote later this year.  According to Senator Rockefeller, “I am continuing to push hard for my bill to suspend EPA action for two years, so that Congress, not federal regulators, can set national energy policy.”

As reported in the June 2010 Climate Change Update, the more sweeping EPA preemption plan sponsored by Senator Lisa Murkowski (R-Alaska) was defeated in June.  While President Obama had promised to veto Senator Murkowski’s bill if it reached his desk, there has been no White House statement regarding the President’s position on a 2-year delay of EPA regulation.  Senator Murkowski has now filed an amendment to a pending small business tax relief bill that would impose a 2-year delay of EPA regulation of GHG emissions from stationary sources, which is similar to Senator’s Rockefeller proposal.

Senate Attempts to Pass Legislative Response to Oil Spill before Recess

On July 27, 2010, Senator Reid introduced the Clean Energy Jobs and Oil Accountability Act.  The $15 billion bill responds to issues concerning the oil spill in the Gulf of Mexico and provides scaled-down clean energy legislation.  Under Reid’s bill, the $75 million liability cap for responsible parties under the Oil Pollution Act would be removed, making responsible parties liable for the full extent of economic damages caused by a spill.  Responsible parties would face further increased civil liability and criminal and civil penalties for environmental violations.  The bill also includes a measure that would streamline the claims process against the Oil Spill Liability Trust Fund, raise the Fund to $5 billion from the current $1 billion authorization, and authorize $100 million in advances to claimants.  Senator Reid’s bill further requires oil drilling companies to improve their oil spill response plans before drilling begins.  In addition, the bill includes provisions for a study of the economic impacts of the Administration’s offshore drilling ban.

Beyond measures to respond to oil spills, the bill provides $5 billion in point-of-sale rebates for energy efficient appliances under the Home Star Program, a program aimed at encouraging middle-class Americans to install energy saving products in their home.  It also provides full funding for the Land and Water Conservation Fund, a state and local fund, for the next five years. 

Federal Litigation Developments

Environmental Groups Attempt to Stop Coal-Fired Power Plant Construction

On July 16, 2010, environmental groups renewed their attempt to stop the construction of a coal-fired power plant being built in Arkansas.  Sierra Club, et al. v. United States Army Corps of Engineers, et al., W.D. Ark., No. 4:10-cv-04017, 7/16/10.  The Sierra Club and others alleged in an 11-count amended complaint against the U.S. Army Corps of Engineers (“COE”) that the COE issued a permit that would allow construction of the Southwestern Electric Power Company’s new power plant without conducting the necessary environmental studies required under the National Environmental Policy Act (“NEPA”) and EPA regulations.

The COE permit authorizes the filling of 8.07 acres of wetlands and 8,150 linear feet of stream impacts, which the Sierra Club states will cause irreparable harm to the area.  Once the power plant is built, it will have the capacity to burn 9,000 tons of coal per day and is expected to emit 5,280,000 tons of CO2 per year, along with substantial quantities of sulfur dioxide, lead, mercury, and other contaminants.  According to the Sierra Club, the direct and indirect effects of these emissions were not analyzed in a sufficient manner prior to the issuance of the permit.

An answer to the amended complaint is due by August 16, 2010.

Five Attorneys General Sue U.S. Over Asian Carp

On July 19, 2010, attorneys general from Michigan, Wisconsin, Minnesota, Ohio, and Pennsylvania sued the United States in an effort to force emergency action that would prevent Asian carp from entering Lake Michigan and to accelerate plans for a permanent barrier against the Asian Carp.  See Michigan v. United States, N.D. Ill., No. 1:10-cv-4557, 7/19/10.  According to the complaint, Asian carp are a public nuisance that threaten grave and irreparable harm to public trust resources.  Asian carp can grow up to 100 pounds, “feed almost continuously,” are prone to jumping high out of water when startled, and reproduce rapidly.  There is fear that these fish could destroy the Great Lakes’ $7 billion commercial fishing industry and hurt the $16 billion recreational boating industry.

The complaint requested two forms of relief: (1) a preliminary injunction ordering defendants COE and Metropolitan Water Reclamation District of Greater Chicago (a local government unit tasked with protecting the quality of Lake Michigan and other Chicago area waterways) to immediately take all available measures to prevent the migration of Asian carp into Lake Michigan; and (2) a preliminary injunction requiring COE to expedite a feasibility study to develop and evaluate options for the permanent physical separation of the Chicago Area Waterway System from Lake Michigan.  

In another attempt to control Asian carp, federal legislators from Midwestern states, including Illinois, Ohio, and Michigan, have introduced legislation in both the House and Senate that would require COE to establish a permanent physical barrier between the Mississippi River and the Great Lakes (see, e.g., S. 2946).  These bills would permit shipping and cargo to pass through the barrier while preventing the transfer of water and invasive species.  Eight senators have also sent a letter to the Senate Appropriations Committee, requesting the addition of a provision in the 2011 energy appropriations bill that would authorize COE to take emergency actions to prevent the Asian carp from entering Lake Michigan.

Similarly, a coalition of Great Lakes governors and mayors, led by Chicago Mayor Richard Daley, launched a $2 million regional investigation to evaluate the separation of the Mississippi River and Great Lakes.  The study, which was announced on July 22, 2010, is called “Envisioning a Chicago Area Waterway System for the 21st Century” and is expected to take 18 months to complete.

EPA Releases Proposed GHG Reporting Settlements in Six Industry Lawsuits 
On July 20, 2010, EPA gave notice of proposed settlement agreements in six citizen suits filed by industry associations, including the American Public Gas Association and Energy Recovery Council, challenging EPA’s mandatory GHG reporting rule.  The October 2009 rule, which has created debate in both Congress and U.S. courtrooms, generally requires annual reporting of GHG emissions to EPA from sources emitting at least 25,000 metric tons of GHGs and suppliers of fossil fuels and industrial GHGs.  Under the proposed settlement agreements, EPA would propose various amendments to subparts of the rule, including revising the applicability threshold for local natural gas distribution companies and permitting certain complex oil refineries to request authorization to use “best available monitoring methods” through 2015.  If the D.C. Circuit approves the settlements, five of the citizen suits would be dismissed entirely and one would be dismissed in part.  Two additional suits, one filed by the Environmental Defense Fund and the other by Kinder Morgan CO2, are not covered by the proposed settlement and would not be affected. 
 

EPA Releases Proposed GHG Reporting Settlements in Six Industry Lawsuits

On July 20, 2010, EPA gave notice of proposed settlement agreements in six citizen suits filed by industry associations, including the American Public Gas Association and Energy Recovery Council, challenging EPA’s mandatory GHG reporting rule.  The October 2009 rule, which has created debate in both Congress and U.S. courtrooms, generally requires annual reporting of GHG emissions to EPA from sources emitting at least 25,000 metric tons of GHGs and suppliers of fossil fuels and industrial GHGs.  Under the proposed settlement agreements, EPA would propose various amendments to subparts of the rule, including revising the applicability threshold for local natural gas distribution companies and permitting certain complex oil refineries to request authorization to use “best available monitoring methods” through 2015.  If the D.C. Circuit approves the settlements, five of the citizen suits would be dismissed entirely and one would be dismissed in part.  Two additional suits, one filed by the Environmental Defense Fund and the other by Kinder Morgan CO2, are not covered by the proposed settlement and would not be affected.

International, Advocacy Groups, & Business Developments

European Commission Sets 2013 Emissions Cap, Considers New Emissions Law

On July 9, 2010, the European Commission (“EC”) announced that those power plants and industrial installations responsible for 40% of the European Union’s (“EU”) GHG emissions and which are covered by the EU’s Emission Trading System (“ETS”), will be allowed to emit 1.927 billion metric tons of CO2  in 2013.  That cap is 6.3% lower than the amount ETS participants were allowed to emit in 2007.  However, the cap is 8.7% higher than actual emissions in 2009, a consequence of the economic crisis that caused ETS-covered installations to drop from 1.998 billion tons emitted in 2008 to 1.772 billion tons in 2009.  According to the EC, the 2013 cap is consistent with EU legislation requiring it to reduce GHG emissions 20% by 2020 compared with 1990 levels.  The cap does not include allowances that will be allocated to airlines, which are required to begin participating in ETS in 2012.  ETS will cover all airlines flying into and out of the EU, regardless of country of origin.

On July 15, 2010, EC approved a draft carbon emissions law that would create an auctioning platform for ETS allowances after 2012, a change that would raise large amounts of money for national treasuries.  Under the current system, most allowances are distributed to participants for free.  The draft law also permits EU member states to opt-out of the ETS auctioning system and run their own markets beginning in 2013.  Germany and the United Kingdom, which already have their own established platforms, are particularly interested in the opt-out provisions.  The European Parliament and Council have a three-month review period to consider the draft law.

China Now the Largest Consumer of Energy in the World

On July 20, 2010, the International Energy Agency (“IEA”) announced that China surpassed the U.S. as the world’s largest consumer of energy.  The U.S. had been the world’s largest consumer for more than a century.  China’s energy demand has doubled since 2000 and, if not for large investments in energy efficiency and renewable energy, would have had even higher demand, according to the IEA.  Because China’s per capita demand is still 1/3 of the average for members of the International Organization for Economic Cooperation and Development, the opportunity for future growth in China is particularly strong.

China’s appetite for energy has caused hesitation among some U.S. lawmakers, who are reluctant to agree to U.S. reductions in GHG emissions without comparable restrictions in China.  China is the largest emitter of GHGs and relies extensively on coal, the dirtiest-burning fossil fuel.  Moreover, a recent pipeline explosion in China leaked a reported 1,500 tons of oil into the Yellow Sea, near the busy northeastern port of Dalian.

U.N. Developing Contingency Plan Options in Advance of Kyoto Protocol Expiration

On July 20, 2010, the U.N. released options for a contingency plan to avoid a gap in regulation or treaty agreements in the likely event that a new international agreement is not in place when the Kyoto Protocol’s commitment period for reducing GHG emissions expires in 2012.  The U.N.-sponsored climate change summit in Copenhagen last December failed to produce an agreement applicable after 2012, and many delegates and leaders believe the climate change summit scheduled for the end of 2010 in Cancun, Mexico will similarly fail to produce an agreement.  Ratification of any new agreement could also prove challenging.  Under U.N. rules, a new agreement cannot go into effect until 90 days after ratification, meaning that a new agreement would have to be ratified by October 4, 2012, to go into effect by January 1, 2013, the day after the Protocol will expire.  Ratification of the Kyoto Protocol took 8 years.

The Ad-hoc Working Group on the Kyoto Protocol (“AWG-KP”), one of the two main negotiating tracks in the United Nations Framework Convention on Climate Change, produced the outline of contingency options in a paper titled, “Legal Considerations Relating to a Possible Gap Between the First and Subsequent Commitment Periods.”  In the 14-page paper, the AWG-KP proposed short-term modifications to the Kyoto Protocol, including reducing the number of countries required to approve new targets, extending the emission caps that currently govern for additional years, and reducing GHG emissions for wealthier industrialized states only.

Federal Regulatory Developments

EPA Issues 2011 Proposed Renewable Fuel Standards

On July 12, 2010, EPA issued its proposed renewable fuel standards for 2011.  Under the new standards, the total volume of renewable fuel required to be included in gasoline increased to 13.95 billion gallons, constituting 7.95% of fuel.  While that number is 1 billion gallons higher than the 2010 requirement of 12.95 billion gallons, the total percentage of renewable fuel in 2010 was higher, at 8.25%.  In 2009, 11.1 billion gallons of renewable fuel were required to be included in gasoline, while in 2008, 9 billion gallons were required.  Renewable fuel volume targets were established under the Energy Independence and Security Act of 2007, which has a 2022 goal of 36 billion gallons of renewable fuel included in gasoline.

State Department Should Revise Tar Sands Pipeline Analysis, EPA Says

On July 16, 2010, EPA submitted comments to the State Department calling on it to revise its draft environmental impact statement (“EIS”) regarding the proposed Keystone XL pipeline that could eventually transport up to 900,000 barrels of high-carbon Canadian tar sands crude, per day, to Texas refineries.  In its draft EIS, the State Department quantified the GHG emissions associated with the pipeline itself, but did not analyze the climate impacts of extracting the energy-intensive tar sands, an omission EPA believes makes the analysis “inadequate.” 
According to EPA, the Keystone XL project would emit 27 million metric tons of carbon dioxide-equivalent gases, resulting in a “well-to-wake” footprint for tar sands that is 82% more than the average crude refined in the United States, or approximately the equivalent to the annual carbon dioxide (“CO2”) emissions from seven coal-fired power plants.  Advocates for the project say it will reduce reliance on Middle East oil.  EPA is calling on the State Department to include an estimate of the extraction-related GHG emissions associated with the project.  A decision as to whether the Keystone XL project serves U.S. national interest is expected this fall.

Obama Expands Federal Government’s Commitment to GHG Emissions Cuts

On July 20, 2010, President Obama announced that the federal government would aim to reduce its “indirect” GHG emissions, including emissions from employee commuting and travel, by 13% by 2020.  The federal government is the largest user of energy in the country--it owns 600,000 vehicles, owns and manages nearly 500,000 buildings, and paid $24.5 billion for utility and fuel in 2008.  According to President Obama, “Every year the Federal Government consumes more energy than any other single organization or company in the United States.  That energy goes towards lighting and heating government buildings, fueling vehicles and powering federal projects across the country and around the world.  The government has a responsibility to use that energy wisely, to reduce consumption, improve efficiency, use renewable energy, like wind and solar, and cut costs.”  These reductions in indirect emissions, in conjunction with those previously announced by President Obama for direct emissions and indirect emissions associated with electricity purchases, could reduce GHG emissions by 101 million metric tons of CO2, the equivalent to the emissions from 235 million barrels of oil, according to a White House press release.  Implementation efforts, including doubling the size of the federal government’s hybrid fleet and removing Styrofoam cups from agency cafeterias, have already begun.

State and Regional Developments

RGGI Allowances Futures Trading Down

On July 9, 2010, the Regional Greenhouse Gas Initiative (“RGGI”), a market-based program in 10 Northeast and Mid-Atlantic states committed to capping and reducing CO2  emissions from the power sector 10% by 2018, released a report analyzing the secondary market for RGGI allowances and futures trading.  According to the report, the volume of futures trading declined significantly in the fourth quarter of 2009, decreasing from 319 million allowances in the third quarter of 2009 to 127 million in the fourth quarter.  Prices for futures similarly declined.  Between third quarter of 2009 and fourth quarter of 2009, futures prices dropped 8% to $2.25.  Despite these declines, RGGI reports that the number of participants in the market for RGGI allowance derivatives was mostly constant in the fourth quarter of 2009, at approximately 34 companies.  The next RGGI auction is scheduled for September 8, 2010.

Group Finds Climate Change will Lead to Extreme Water Shortages in U.S.

On July 20, 2010, the National Resources Defense Council (“NRDC”) released a report finding that climate change will likely lead to decreased precipitation and increased water demands, thereby escalating the number of water shortages in the United States.  The report, called Evaluating Sustainability of Projected Water Demands Under Future Climate Change Scenarios, and its accompanying Water Facts summary, projects that the Great Plains and Southwest areas of the United States would face “extreme risk” for water shortages due to “changes in precipitation and increases in temperature [that] will mean that projected evapotranspiration will exceed rain and snowfall (precipitation).  In these regions there will not be any available precipitation at all.”  In contrast, states in the Northeast part of the country face the least risk.  The NRDC projections were based on trends in water consumption that assume a total increase in water demand of about 12.5% by 2050 from 2000 demand levels.

Chicago to Host First Commercial Smart Grid

On July 21, 2010, the Building Owners and Managers Association of Chicago (“BOMA”), a group of Chicago business owners, signed an agreement with the Korean Smart Grid Association, a consortium of Korean technology companies, to launch a smart grid pilot program involving approximately a dozen downtown Chicago office buildings.  Smart grids deliver electricity using two-way digital technology that overlays the electricity distribution grid with an information and net metering system, permitting the control of power to consumers’ appliances according to the electricity flowing in the grid system.  When power is least expensive, the smart grid user can turn on selected appliances, while at peak times, the smart grid user could turn off selected appliances.

The buildings participating in the pilot program hope to manage their energy usage patterns and monetize their cost savings.  Under the program, the buildings also will be used as electric grid resources, creating what BOMA is referring to as a “virtual generator.”  It is hoped that this virtual generator will eliminate the future need for building other generating facilities.  The project is expected to be fully operational by next summer and will be the U.S.’s first large-scale test of energy savings in commercial real estate using smart grid technologies.