Federal Legislative Developments
On January 27, 2010, in his first State of the Union address, President Obama reiterated his desire to see a comprehensive energy and climate bill adopted in the coming year. In his speech, Obama tied such legislation to job creation, providing examples of “green jobs” and emphasizing that, “to create more of these clean energy jobs, we need more production, more efficiency, more incentives.” Among the programs Obama espoused are the construction of new, “safe, clean” nuclear power plants; “continued investment in advanced biofuels and clean coal technologies,” and the passage of a “comprehensive energy and climate bill with incentives that will finally make clean energy the profitable kind of energy in America.” While Obama did not mention the words “cap and trade” in his speech, he supported his plea for climate legislation by stating that “providing incentives for energy-efficiency and clean energy are the right thing to do for our future—because the nation that leads the clean energy economy will be the nation that leads the global economy.” Obama also indicated that he would be willing to make “tough decisions about opening new offshore areas for oil and gas development,” but only as one component of his energy plan for the country.
On January 21, 2010, Sen. Lisa Murkowski (R-Alaska) introduced a resolution (S.J. Res. 26) to disapprove both the endangerment finding and the cause-or-contribute finding that EPA issued under Section 202(a) of the Clean Air Act (“CAA”), with respect to greenhouse gas (“GHG”) emissions. EPA’s findings, published in the Federal Register on December 15, 2009, allows EPA to control GHG emissions under the CAA. Senator Murkowski’s resolution would render those findings without “force or effect.” Importantly, under the 1996 Congressional Review Act such resolutions require only 51, rather than 60, votes for passage. However, like all legislation, the resolution would have to be passed by both the Senate and the House — which, unlike the Senate, is not required to follow expedited procedures for such resolutions — as well as signed by the President, before it could take effect. Under the Congressional Review Act, Sen. Murkowski has 60 session days from the time EPA sent the findings to the House and Senate to move for consideration and vote on the resolution by the full Senate. If the Senate committee with jurisdiction over the resolution (the Committee on Environment and Public Works) fails to submit the resolution for consideration by the full Senate within 20 days after receiving it, Senator Murkowski may force consideration of the resolution by the full Senate if she can obtain the signatures of 30 senators. Because the Senate was in recess from December until January 20, the 60-day period will expire in mid-March. The resolution remains under review by the Senate Committee on Environment and Public Works.
On January 27, 2010, the Securities and Exchange Commission (“SEC”) voted to issue an interpretive release (“the release”) to provide guidance on existing climate change disclosure obligations, focusing on four categories of information that companies should consider disclosing: (a) the impact of legislation and regulation; (b) the impact of international accords; (c)indirect consequences of regulation or business trends; and (d) the physical impacts of climate change. Although the release is not yet available, a press release discussing the SEC vote reveals what the release will state. First, with regard to (a), management should evaluate the impact of present, and some pending, legislation and regulation on such factors as liquidity, cash flow, and operations. Second, as to (b), companies should consider any international treaties or protocols that may develop and any resulting risks or effects on its business in determining what information to disclose. Third, concerning (c), companies should consider legal, technological, political and scientific developments regarding climate change that may create new opportunities or risks for companies. Notably, the SEC counts reputational harm as potentially material information, observing that the public’s perception of a company’s practices with respect to GHGs may affect business operations and financial condition. Finally, with regard to (d), companies should disclose material information about the physical consequences of climate change, including, for example, disruptions caused by changing weather patterns and varying sea levels.
In the press release, the SEC indicated that the release is not intended to affect existing rules concerning company reporting requirements nor is it intended to affect existing tests of materiality for determining whether disclosure is required. Rather, the SEC merely aims to clarify disclosure requirements that already apply. Thus, information falling into the four categories identified by the SEC should be evaluated for materiality under the current standard of materiality set forth in TSC Industries v. Northway, 426 U.S. 438 (1976).
Additional SEC interpretive releases available at http://www.sec.gov./rules/interp.shtml.
On January 29, 2010, President Obama announced that his administration has set a target reduction in GHG emissions for federal agencies: 28% by 2020. Some of the measures that federal agencies will take to meet that target include increased use of renewable energy sources, including solar, wind, and geothermal sources, and reduced energy use, achieved through mechanisms such as energy management systems and increased use of fuel-efficient vehicles. The emission reductions will be achieved pursuant to agency sustainability plans, which each agency will create and submit to the White House Office of Management and Budget for review. According to a White House press release, achieving the 28% target will cut federal energy use by 646 billion BTUs, the equivalent of 205 million barrels of oil or taking 17 million cars off the road for one year, and will equal $8 to $11 billion in avoided energy costs through 2020. Announcing the target, President Obama stated, “As the largest energy consumer in the United States, we have a responsibility to American citizens to reduce our energy use and become more efficient. Our goal is to lower costs, reduce pollution, and shift Federal energy expenses away from oil and towards local, clean energy.”
On January 21, 2010, the Navy and the Department of Agriculture signed a Memorandum of Understanding (“MOU”) to advance the development of biofuels and other types of renewable energy. According to Secretary of the Navy Ray Mabus, quoted in a Navy press release, the goal of the MOU is to assist the Navy to meet “aggressive” targets Secretary Mabus set in order to “secure the strategic energy future of the United States, create a more nimble and effective fighting force and protect our planet from destabilizing climate changes.” Those targets include: (a) consideration of energy efficiency and energy footprint in acquisition decisions; (b) by 2012, establish a “Green Strike Group,” composed of biofuel-powered nuclear ships and vessels, and expand that group to include aircraft and surface combatants by 2016; (c) by 2015, reduce by half the petroleum used in the 50,000 non-tactical commercial fleet, replacing that petroleum with flex fuel, electric and hybrid vehicles; (d) by 2020, obtain at least half of shore-based Navy installations energy from alternative sources, and make 50% of all shore installations net-zero energy consumers; and (e) by 2020, obtain half of all energy consumed by ships, tanks, vehicles, aircraft and shore installations from alternative sources. In a statement, Agriculture Secretary Tom Vilsack stated that the MOU “is part of President Obama’s vision of a coordinated federal effort to build a clean energy economy, create new jobs, and reduce our dependence on foreign oil.”
On January 13, 2010, EPA published a proposed consent decree in the Federal Register under which EPA would agree to respond, by either March 25 or 20 days after the entry of the consent decree (whichever is later), to a 2009 petition from environmental group WildEarth Guardians requesting that the agency object to a Colorado Title V CAA Permit for failure to evaluate whether GHG limits were required under the state’s State Implementation Plan (“SIP”). Proposed Consent Decree, Clean Air Act Citizen Suit, 75 Fed. Reg. 1770 (Jan. 13, 2010). In the March 10, 2009, petition, WildEarth Guardians argued that the Colorado Department of Public Health and Environment, Air Pollution Control Division (“Colorado”) improperly issued a December 9, 2008, Title V permit for the Hayden coal-fired power plant because, in issuing the permit, Colorado “failed to assess whether [CO2] is subject to regulation in accordance with Prevention of Significant Deterioration (“PSD”) requirements and therefore failed to ensure compliance with PSD under the [CAA], PSD regulations, and the Colorado SIP.” WildEarth Guardians contended that the Colorado SIP includes several provisions that regulate CO2,including provisions requiring monitoring of CO2emissions and a definition of air pollutants under which, WildEarth Guardians argues, CO2 meets. Thus, the petition continues, Colorado was not entitled to rely on EPA’s interpretations of which air pollutants are “subject to regulation” under the CAA for purposes of determining whether pollutant controls were required to be evaluated for CO2; rather, Colorado was obliged to evaluate whether CO2 is regulated under the state’s own regulatory scheme, which it failed to do. The proposed consent decree would settle a suit filed by WildEarth Guardians in Augus 2009 after EPA failed to respond to the March 2009 petition.
On January 7, 2010, Wisconsin Governor Jim Doyle (D) signed energy legislation which state agency personnel claim will create 1,800 jobs in the state within one year of enactment and a minimum of 15,000 jobs in the state by 2025. The legislation, titled the Clean Energy Jobs Act (formerly S.B. 450), requires numerous energy efficiency and conservation measures, some of which include: (a) requiring a 2% decrease in energy consumption in the state by 2015, (b) setting renewable energy standards of 20% by 2020 and 25% by 2025, (c) directing state agencies to perform GHG emission assessments and take measures to reduce GHG emissions and energy use; (d) establishing metropolitan planning organizations to develop goals for reducing GHG emissions from local transportation; and (e) incentives for growth of crops for biofuel. In a statement released by the Governor upon signing the bill into law, Gov. Doyle stated that the legislation “offers new standards to help accelerate Wisconsin’s green economy.”
The environmental assessment performed by state agencypersonnel is available at http://www.wisgov.state.wi.us/docview.asp?docid=18757.
On January 13, 2010, several state senators, industry associations, and energy companies filed a complaint in New Mexico state court seeking a declaratory judgment that the state’s Environmental Improvement Board (“EIB”) lacks statutory authority to consider a petition requesting that the agency adopt a GHG emissions cap. Leavell v. New Mexico Envtl. Improvement Bd., No. D-506-CV-201000050 (N.M. Dist. Ct. filed Jan. 13, 2010). The plaintiffs further seek injunctive relief to halt EIB consideration of the petition. The suit stems from a petition filed with the EIB in December 2008 by a New Mexico-based nonprofit organization, New Energy Economy, seeking the adoption of GHG caps in the state, as well as the April 2009 determination by the EIB that GHGs are air pollutants under state law. The Leavell plaintiffs argue that the EIB may only act pursuant to its delegation of authority under the state’s Air Quality Control Act, which authorized the EIB to “attain and maintain national ambient air quality standards” and “to prevent or abate air pollution…within the geographic area of the [agency’s] jurisdiction.” Because no ambient air quality standard has been adopted for GHGs, plaintiffs assert, and because “[a]doption of an ambient air quality standard setting the level at which GHG is considered ‘air pollution’ is…a necessary prerequisite to the exercise of EIB’s authority to promulgate regulations limiting GHG,” plaintiffs claim that the EIB lacks authority to consider the petition.
On January 27, 2010, the Center for Biological Diversity (“CBD”) sued the California Department of Forestry and Fire Protection (“CAL FIRE”) in seven California state courts, alleging that CAL FIRE violated the California Environmental Quality Act and the Forest Practice Act by approving logging plans without properly analyzing the GHG emissions impacts from those plans. Center for Biological Diversity v. California Dep’t of Forestry and Fire Prot., No. CI63123 (Cal. Super. Ct. filed Jan. 27, 2010). In a press release about the suits, CBD claims that, rather than correctly calculating the carbon emissions that would be produced by the 15 logging plans, under which 5,000 acres of California forest would be clear-cut, CAL FIRE improperly asserted that regrowth of trees over a 100-year period would “render the logging carbon neutral.” The suits were filed in the California counties of Amador, Calaveras, El Dorado, Modoc, Shasta, Tehama, and Trinity.
International and Business Developments
On January 28, 2010, the Obama administration notified United Nations Framework Convention on Climate Change (“UNFCCC”) Director Yvo de Boer that the U.S. will commit to cutting GHG emissions approximately 17% below 2005 levels by 2020, “recognizing that the final target will be reported to the Secretariat in light of enacted legislation.” The January 28 letter, sent to Director de Boer from U.S. Special Envoy for Climate Change Todd Stern, was created pursuant to the non-binding December 2009 Copenhagen Accord, under which developed nations were to determine “quantified economy-wide emissions targets for 2020” and submit those targets to the UNFCCC by January 31, 2010. In the letter, Stern informs Director de Boer of the U.S. “desire to be associated with the Copenhagen Accord,” but notes that the U.S. target “is provided on the assumption” that developed countries and “the more advanced” developing countries have also associated with the Copenhagen Accord and have “submitted mitigation actions for compilation in accordance with paragraph 4 or paragraph 5 of the Accord…” by January 31, 2010.
Also on January 28, 2010, the European Commission (“the Commission”) notified the UNFCC of the European Union’s (“EU”) desire to be associated with the Copenhagen Accord and of its associated GHG reduction target: 20% below 1990 levels by 2020, with an offer to increase that target to 30% below 1990 levels if other “major emitters” agree to “take on their fair share of a global reduction effort,” according to a press release from the EU. The press release reports a statement by Commission President Jose Manuel Barroso that “[t]he EU is determined to move ahead rapidly with implementing the Copenhagen Accord in order to make progress towards the agreement that we need to hold global warming below 2oC….” The press release also notes that the Commission’s letter to the UNFCCC emphasizes the EU’s position that “developed countries as a group should reduce their emissions by 25-40% below 1990 levels by 2020 and developing countries should achieve a substantial deviation below the currently predicted emissions growth rate, in the order of 15-30% by 2020,” in order to keep global average temperature less than 2oC above pre-industrial averages.
On January 14, 2010, several groups of investors from the U.S., Europe, Australia and New Zealand, as well as the United Nations Environment Programme (“UNEP”) Finance Initiative, released a statement calling on national governments to enact GHG regulations in the wake of the failed attempt at Copenhagen to develop a new climate treaty. In the statement, the Investor Network on Climate Risk (U.S.), the Investor Group on Climate Change (Australia and New Zealand), and the Institutional Investors Group on Climate Change (Europe), which represent over 130 companies and manage over $12 trillion in assets, urge policy makers worldwide to take “rapid action at national, regional, and international levels,” including the following “critical” measures: (a) “short- and long-term emission reduction targets;” (b) “policies that put an effective price on carbon such that businesses and investors reassess investment value and redirect their investments;” (c) “energy and transportation policies to vastly accelerate deployment of energy efficiency, renewable energy, green buildings, clean vehicles and fuels, and low-carbon transportation infrastructure;” (d) “financing mechanisms that can mobilize private-sector investment on a large scale, particularly in developing countries;” (e) “measures and financing to support adaptation in developing and developed countries;” and (f) “policies requiring corporate disclosure to investors of material climate-related risks and programs to manage those risks.”