Virginia Governor Takes Steps to Reduce Electricity Sector Carbon Dioxide Emissions in the Commonwealth

While the federal government is rolling back power sector-related regulation, some states are moving in the opposite direction.  On May 16, 2017, Virginia Governor Terry McAuliffe signed into effect Executive Directive 11, which is intended to “reduce carbon dioxide emissions from the Commonwealth’s power plants and give rise to the next generation of energy jobs.”  The Directive specifically calls for the Director of the Department of Environmental Quality, in coordination with the Secretary of Natural Resources, to develop proposed regulations “to abate, control, or limit carbon dioxide emissions from electric power facilities,” and to submit the proposal to the State Air Pollution Control Board for consideration and, ultimately, public comment, by no later than December 31, 2017.  According to the Directive, the regulations should establish abatement mechanisms of similar stringency to other states’ carbon dioxide emissions limits, and should establish a “trading-ready” regime that would allow for the use of market-based mechanisms and trading of emissions allowances.

The Directive builds on Governor McAuliffe’s Executive Order 57, issued in June 2016, which required the Secretary of Natural Resources to convene a working group to study and recommend methods for reducing carbon dioxide emissions from electric power facilities and promote a clean energy economy.  The Directive also comes on the heels of a suite of bills enacted in early May “promot[ing] the use of solar and other renewable energy options and aim[ing] to reduce energy consumption across [Virginia].”  Several other states including California, Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont have previously acted to cap greenhouse gas emissions in their states.

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White House Releases Full Budget Proposal for FY 2018 Slashing Departmental Budgets

Building on its earlier “skinny” budget, the White House Office of Management and Budget released today the President’s full budget for Fiscal Year 2018, entitled A New Foundation for American Greatness.  The President’s proposed budget (which will now go to Congress for its consideration) discusses the President’s policy aims, sets spending priorities for FY 2018, and forecasts a ten-year budget planning window with a projected $3.6 trillion in spending reductions over that time period.  The President’s budget is accompanied by:

  • An Appendix with detailed budget estimates by Agency;
  • Analytical Perspectives covering the assumptions underlying the budget, presenting certain of the data used to develop the budget, and offering analyses of certain specific subject areas addressed in the budget including a discussion on federal grants to state and local governments; and
  • Major Savings and Reforms describing the budget’s major discretionary and mandatory savings and reform proposals and “highlight[ing] 2018 savings of $57.3 billion in discretionary programs, including $26.7 billion in program eliminations and $30.6 billion in reductions.”

With respect to particular agencies, the budget includes the following energy-related proposals and requests:

Department of Agriculture:

Department of Energy:

Department of Health and Human Services:

Department of the Interior:

Department of State, U.S. Agency for International Development (USAID), and Treasury:

  • Eliminate funding to the United Nations’ Green Climate Fund, Clean Technology Fund, Strategic Climate Fund, and to the Global Climate Change Initiative.

Environmental Protection Agency:

  • Eliminate the Energy Star Program and other voluntary partnership programs related to energy and climate change,
  • Reduce by $130 million EPA’s environmental enforcement activities, and
  • Reduce clean air and global climate change research and development funding by $115 million and clean air state and tribal assistance grants by $60 million.
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FERC’s Non-Binding Advisory Orders Not Reviewable in Court

Last month, in Portland General Electric Co. v. FERC, the D.C. Circuit clarified that the federal appellate courts lack jurisdiction to review non-binding, advisory orders from FERC that merely interpret provisions of the Public Utility Regulatory Policies Act of 1978 (PURPA).  The case involved a dispute over the extent of Portland General Electric’s (PGE’s) obligation to purchase power from PáTu Wind Farm, a six-turbine, 9 MW generator in rural Oregon and a PURPA-“qualified facility.”

PGE’s obligation to purchase power from PáTu stemmed from the power-purchase agreement (PPA) between the two entities, an agreement that is governed by PURPA.  Enacted as a response to the 1973 oil crisis, PURPA seeks to diversify the nation’s energy supplies and reduce its dependence on imported oil.  To accomplish this, PURPA incentivizes the development of “qualifying facilities” (QFs)—including cogeneration facilities and small power production facilities that produce energy using wind, solar, biomass, waste, or geothermal power—and creates a market for QFs to sell their output.  The law contains a “must-purchase” obligation that requires utilities to purchase “any energy and capacity which is made available” from these particular generators at the utility’s avoided cost, i.e., the amount it would have cost the utility to generate that electricity on its own or purchase it from another source.

The must-purchase obligation was at the center of the dispute between PáTu and PGE.  In PáTu’s view, both PURPA and the PPA required PGE to purchase its entire output, and—because that output varies day to day based on wind conditions—to do so via dynamic scheduling, a technology that electronically transfers generation from one balancing authority area to another in real time.  PGE argued that the variable nature of PáTu’s generation meant that it was only required to purchase the output that PáTu committed to deliver in day-ahead schedules.

After a state administrative and court proceeding, PáTu filed a complaint at FERC.  In January 2015, the Commission issued an order finding that PURPA regulations and the PPA required PGE to purchase PáTu’s entire net output delivered to PGE, but that PGE was not required to use dynamic scheduling.  After the Commission denied rehearing, both PáTu and PGE filed petitions for review with the D.C. Circuit.  PáTu argued that the Federal Power Act required PGE to utilize dynamic scheduling.  The D.C. Circuit upheld this aspect of FERC’s order and denied PáTu’s petition.

In a separate appeal of the same FERC order, PGE challenged the PURPA-related aspects of FERC’s orders, including FERC’s conclusion that PURPA required PGE to purchase PáTu’s entire net output.  In response to the PGE appeal, FERC argued that the Court should dismiss PGE’s petition on the grounds that the Court lacked jurisdiction to review the January 2015 order.  The D.C. Circuit agreed with FERC and dismissed PGE’s petition for lack of jurisdiction.  The Court explained that PURPA divides responsibility for implementation between the federal government and the states, and delineates distinct enforcement roles for the states, the Commission, and the federal courts.  And while PURPA permits actions to proceed in federal court in certain circumstances, it does not allow for direct review of FERC orders that merely interpret PURPA provisions.  The court also cited its previous decision in Midland Power Co-op v. FERC, 774 F.3d 1 (D.C. Cir. 2014), explaining that, “[a]lthough at first glance one might think that the Federal Power Act’s broadly worded judicial-review provision would cover FERC orders interpreting PURPA, our court has ruled otherwise.”

While FERC’s January 2015 order contained language that appeared mandatory—i.e., ordering PGE to accept PáTu’s entire net output—FERC conceded at oral argument that its January 2015 order was merely declaratory.  As such, the D.C. Circuit concluded that it did not have jurisdiction to review it, and in doing so, delivered some sharp criticism:

[W]e are mystified by FERC’s continued use of mandatory language to resolve PURPA disputes in orders that it later insists are purely hortatory. … FERC could avoid a great deal of confusion and waste of judicial resources by not using words like “shall” and “must,” and by making it clear in its orders—as opposed to later in this court—that its discussions of PURPA-related issues are advisory only.

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Parties Weigh in on Abeyance Vs. Remand in CPP and NSPS Cases

A few weeks ago, the D.C. Circuit ordered the parties in both the Clean Power Plan (CPP) litigation and the New Source Performance Standards (NSPS) litigation to file briefs addressing whether these cases should be remanded to EPA or held in abeyance.  Currently both cases are temporarily in abeyance for about another month and a half.  Meanwhile, EPA is conducting its review of both rules pursuant to the March 28, 2017 Executive Order on energy and environmental policy.

Yesterday the parties in both cases filed their briefs arguing in favor of either remand or abeyance.  One key difference between the briefings in the two cases is that the NSPS rule is currently in effect while the CPP rule has been put on hold by the Supreme Court’s stay of that rule pending completion of judicial review.  As a result, if the court were to continue to hold the CPP case in abeyance, the stay of that rule would remain in effect.  In contrast, were the court to remand the CPP case to the EPA, the CPP rule would go back into effect (or at least, according to EPA, remand would “raise substantial questions regarding the stay’s validity”).  The stakes are somewhat less high in the NSPS case, since the NSPS rule will still remain in effect whether the court holds the case in abeyance or remands it to the EPA.

In West Virginia v. EPA (the CPP case), EPA argued in favor of abeyance rather than remand.  EPA stated that remand would cause it to spend its limited staff and resources on interim administrative actions (such as extending the CPP’s current enforcement deadlines) instead of focusing on its review and potential revision of the entire rule.  The states and entities challenging the CPP agreed with EPA that the case should continue to be held in abeyance.  They argued that doing so would protect their right to judicial review of the rule should EPA ultimately decide not to revise or rescind the CPP, and that abeyance would be consistent with the court’s ordinary practice as well as with the reasoning behind the Supreme Court’s stay of the CPP.  Arguing in favor of remanding the case to the EPA were state and municipal supporters of the CPP, a group of public health and environmental organizations, a group of power companies who support the rule, and a group of renewable energy companies.  They all argued that holding the case in abeyance, thus extending the stay of the rule, would result in inappropriate and indefinite delay of EPA’s Clean Air Act responsibilities.  However, each of these briefs also urged the court to issue an actual decision in this case, instead of either holding it in abeyance or remanding it to the EPA.

The parties filed five similar briefs in North Dakota v. EPA (the NSPS case).  As in its brief in the CPP case, EPA requested that the court continue to hold the case in abeyance while it reviews the rule.  Not surprisingly, the NSPS’s challengers agreed, again arguing that holding the case in abeyance would preserve their right to judicial review should EPA not revise or rescind the rule.  On the other side, state and municipal supporters of the rule, a group of public health and environmental organizations, and a group of power companies in support of the rule urged the court to hold oral arguments and decide the case on its merits.  However, if the court chooses not to decide the case on its merits, these groups argue that there is little difference between the impacts of remand as compared to abeyance given that the rule will remain in effect either way.

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House Subcommittee on Energy Mulls Legislation to Modernize Hydropower Infrastructure and Streamline Permitting

On May 3, 2017, the House Energy and Commerce Subcommittee held a hearing to examine a suite of proposed legislation aimed at incentivizing development of hydropower in the United States.  A Committee Majority Staff memorandum dated May 1, 2017, describes hydropower as “an essential component” of the United States’ “‘all of the above’ energy strategy,” but notes that testimony before the Subcommittee has indicated that the Federal Energy Regulatory Commission’s licensing process is costly, complex, and slow.  The hearing explored opportunities, including draft legislation, aimed at removing regulatory impediments and encouraging new investment in hydropower:

  • H.R. ___, Hydropower Policy Modernization Act of 2017, which in part would give FERC authority to extend preliminary license terms and project construction deadlines, require FERC to consider a broader range of project-related investments in establishing the license term for a hydro project, and designate FERC as the lead agency for coordinating all applicable federal authorizations for hydropower projects;
  • H.R. ___, Promoting Hydropower Development at Existing Non-Powered Dams Act, which would authorize FERC to grant exemptions from licensing requirements to qualifying projects that energize existing, non-powered dams and limit the conditions imposed on projects granted such exemptions;
  • H.R. ___, Promoting Closed-Loop Pumped Storage Hydropower Act, which would limit FERC’s ability to impose license conditions on closed-loop pumped storage projects unless necessary to protect public safety, or reasonable, economically feasible, and essential to prevent loss of or damage to, or to mitigate adverse impacts to, fish and wildlife resources; and
  • H.R. ___, Promoting Small Conduit Hydropower Facilities Act of 2017, which defines a new subcategory of qualifying conduit hydropower facilities that are 2 MW or fewer—i.e., “qualifying small conduit hydropower facilities”—and creates a faster FERC permitting process for such facilities.

Witnesses included hydropower industry representatives as well as Terry Turpin, Director of the FERC Office of Energy Projects, and John Katz, FERC Deputy Associate General Counsel.  If enacted, the legislation will build on efforts already underway at the agency level to streamline hydro permitting.

Additionally, several of the bills would authorize FERC to grant extensions of mandatory construction deadlines for the following hydroelectric projects:

  • H.R. 446, related to the planned Flannagan Hydro Project on the Pound River near Clintwood, Virginia;
  • H.R. 447, related to the planned Gathright Hydro Project on the Jackson River in Alleghany County, Virginia; and
  • H.R. 2122, related to Jennings Randolph Hydro Project on the North Branch of the Potomac River near Barnum, West Virginia and Swanton, Maryland.

Additional topics discussed at the hearing included contemplated legislation to revamp permitting for cross-border oil, natural gas, and electric transmission facilities, and to revise the siting process for interstate natural gas pipelines.

A preliminary transcript of the hearing is available on the House website.

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