Virginia Enacts Suite of Clean Energy Legislation

On May 8, 2017, Virginia Governor Terry McAuliffe signed eleven energy-related bills at a ceremonial event.  The Governor’s office released a press release describing the legislation as “promot[ing] the use of solar and other renewable energy options and aim[ing] to reduce energy consumption across the Commonwealth.”  Also in attendance were several of the bills’ patrons, including legislators from both parties, as well as clean energy industry stakeholders.

The legislation covers a range of clean energy issues, from battery storage technology to so-called “local green development zones.”  Below we break down each of the eleven bills.

SB 1393 provides that each investor-owned utility shall design a community solar pilot program, which will allow retail customers to voluntarily subscribe to receive electricity generated by a small solar generation facility.  The pilot programs are to last for three years unless renewed or made permanent through new legislation.

SB 990 directs the Virginia Department of Mines, Minerals and Energy, in consultation with the staff of the Virginia State Corporation Commission, to assess the progress Virginia is making toward the 2022 goal of reducing retail electric energy consumption by 10% of the amount of energy consumed in 2006.

SB 1258 reconstitutes the Virginia Solar Energy Development Authority as the Virginia Solar Energy Development and Energy Storage Authority, and it increases the composition of the Authority by four seats.  The Authority’s mandate now will include the promotion and development of storage technology in Virginia.

SB 1394/HB 2303 are identical bills that create a new framework for “small agricultural generating facilities” for certain small, renewable generating facilities operated as part of an agricultural business.  The Virginia State Corporation Commission is to conduct a proceeding to amend or adopt its regulations in order to implement this law, and it must issue an order by June 1, 2018.  Utilities will be required to make a compliance filing with a schedule to accommodate small agricultural generators within three months of that order.

SB 1395 increases the maximum capacity of “small renewable energy projects” from 100 megawatts to 150 megawatts.  This increase only applies to solar or wind facilities; the maximum capacity for facilities that generate electricity from falling water, wave motion, ties, or geothermal power remains 100 megawatts.  These projects are eligible to be permitted through the Permit by Rule process.

HB 1565 establishes “local green development zones.”  Counties, cities, or towns may establish such zones in order to grant tax incentives and provide certain regulatory flexibility within the zone.  Local governments may choose to grant such benefits to green development businesses within the zone or to businesses operating in qualifying “energy-efficient buildings” located within the zone.

HB 1712 furthers the ability of state agencies and localities to enter into energy performance-based contracts, which provide a financing mechanism for building and facility improvements that reduce energy consumption.  The new law allows a government body, in certain circumstances, to enter into the same energy performance-based contract that a different government body previously entered into.

HB 1760/SB 1418 both pertain to pumped hydroelectricity facilities.  The new legislation declares that the construction of “pumped hydroelectricity generation and storage facilities” is in the public interest, and that the Virginia State Corporation Commission is to liberally construe the relevant provisions of the Code of Virginia when determining whether to approve such facilities.

HB 2390 expands previous legislation authorizing pilot programs for renewable energy power purchase agreements.  This new law establishes a pilot program in the service territory of Appalachian Power Company, with private institutions of higher education as eligible participants.

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First Comes the Executive Order, Then Comes the Lawsuit

Last week, the President released an executive order entitled “Implementing an America-First Offshore Energy Strategy” aimed at “encourag[ing] energy exploration and production, including on the Outer Continental Shelf.”  The Executive Order states that “America must put the energy needs of American families and businesses first” and that “[t]he energy and minerals produced from lands and waters under Federal management are important to a vibrant economy and to our national security.”

The Executive Order directs the Secretary of the Interior, among other things:

  • To “give full consideration to revising the schedule of proposed oil and gas lease sales” to include, but not be limited to, annual lease sales in the following Outer Continental Shelf Planning Areas:  Western Gulf of Mexico, Central Gulf of Mexico, Chukchi Sea, Beaufort Sea, Cook Inlet, Mid-Atlantic, and South Atlantic;
  • To develop and implement “a streamlined permitting approach for privately funded seismic data research and collection aimed at expeditiously determining the offshore energy resource potential of the United States within the Planning Areas.”
  • To review the Bureau of Safety and Environmental Enforcement’s (BSEE) Final Rule “Oil and Gas and Sulfur Operations in the Outer Continental Shelf—Blowout Preventer Systems and Well Control,” 81 Fed. Reg. 25,888 (Apr. 29, 2016), and to review  (and consider whether to revise or withdraw) the Bureau of Ocean Energy Management’s Proposed Rule “Air Quality Control, Reporting, and Compliance,” 81 Fed. Reg. 19,718 (Apr. 5, 2016).
  • To review (and, if appropriate, publish for notice and comment a proposed rule suspending, revising or rescinding) the BSEE Final Rule “Oil and Gas and Sulfur Operations on the Outer Continental Shelf—Requirements for Exploratory Drilling on the Arctic Outer Continental Shelf,” 81 Fed. Reg. 46,478 (July 15, 2016).

The Executive Order further directs the Secretary of Commerce, among other things:

  • To “refrain from designating or expanding any National Marine Sanctuary under the National Marine Sanctuaries Act, 16 U.S.C. 1431 et seq., unless the sanctuary designation or expansion proposal includes a timely, full accounting from the Department of the Interior of any energy or mineral resource potential within the designated area—including offshore energy from wind, oil, natural gas, methane hydrates, and any other sources that the Secretary of Commerce deems appropriate—and the potential impact the proposed designation or expansion will have on the development of those resources.”
  • To conduct within 180 days “a review of all designations and expansions of National Marine Sanctuaries, and of all designations and expansions of Marine National Monuments … designated or expanded within the 10-year period prior to the date of this order,” which review is to include “the opportunity costs associated with potential energy and mineral exploration and production from the Outer Continental Shelf, in addition to any impacts on production in the adjacent region.”
  • To review (and, if appropriate, publish for notice and comment a proposed rule suspending, revising or rescinding) NOAA’s Technical Memorandum NMFS-OPR-55 of July 2016 (Technical Guidance for Assessing the Effects of Anthropogenic Sound on Marine Mammal Hearing) for consistency with the Executive Order’s policy.

The Executive Order also:

  • Revokes Executive Order 13754 on Northern Bering Sea Climate Resilience (issued December 9, 2016), and
  • Modifies previously issued Memorandum that withdrew certain areas of the U.S. Outer Continental Shelf (including sections of the Arctic Ocean) from disposition by leasing to limit such withdrawal to only “those areas of the Outer Continental Shelf designated as of July 14, 2008, as Marine Sanctuaries under the Marine Protection, Research, and Sanctuaries Act of 1972.”

Yesterday, a coalition of environmental organizations brought a complaint in the United States District Court for the District of Alaska challenging the Executive Order as unlawful (under the Outer Continental Shelf Lands Act) and unconstitutional (under Article II and the Property Clause, Article IV, Section 3, clause 2).  The lawsuit seeks declaratory and injunctive relief.  The coalition is led by the League of Conservation Voters, who filed its first-ever lawsuit, and includes the Natural Resources Defense Council, Sierra Club, Alaska Wilderness League, Defenders of Wildlife, Northern Alaska Environmental Center, Resisting Environmental Destruction on Indigenous Lands, Center for Biological Diversity, Greenpeace, and the Wilderness Society.

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D.C. Circuit Holds in Abeyance MATS and NSPS Litigation

In addition to the D.C. Circuit’s order granting EPA’s motion to hold in abeyance litigation surrounding the Clean Power Plan, the court last week also put holds on ongoing litigation over EPA’s Mercury and Air Toxics Standards (MATS) 2016 Supplemental Finding and its CO2 New Source Performance Standards (NSPS) for New Power Plants.

MATS 2016 Supplemental Finding.  Last week, the D.C. Circuit granted EPA’s motion to indefinitely postpone oral argument in Murray Energy Corp. v. EPA, No. 16-1127.  The court is holding the consolidated cases in abeyance to allow the agency time to determine what action the agency will be taking with respect to the MATS Supplemental Finding.  The case has been removed from the oral argument calendar, and EPA was directed to file status reports on its review of the Supplemental Finding at 90-day intervals.

New Source Performance Standards.  The D.C. Circuit also issued an order granting EPA’s March 28 motion to hold in abeyance North Dakota v. EPA, No. 15-1381.  In contrast to the MATS indefinite abeyance, the court ordered a limited 60-day abeyance of these consolidated cases, during which time EPA must file status reports at 30-day intervals.  (In its previous order the Court had removed the April 17 oral argument date from its calendar pending its decision on the motion).  Similar to the directive it issued in the CPP litigation, the court also directed the parties to file supplemental briefs by May 15 addressing whether the cases should be remanded to EPA rather than held in abeyance, and requested that submissions be joint “to the extent possible.”

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Court Holds Clean Power Plan Litigation in Abeyance

Today, the D.C. Circuit granted EPA’s motion to hold the consolidated cases challenging the Clean Power Plan in abeyance.  The court ordered a 60-day abeyance and directed EPA to file status reports at 30-day intervals.  The court further directed supplemental briefing from the parties addressing whether the cases should be remanded to EPA rather than held in abeyance.  These supplemental briefs are due May 15, 2017.

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Columbia University Report Shows that Environmental Regulations are Not the Primary Threats to Coal

A recent report by Columbia University’s Center on Global Energy Policy has found that declines in coal generation, while due to a variety of factors, are unlikely to be significantly reversed by implementing all the actions in last month’s energy Executive Order.  In Can Coal Make a Comeback?, researchers looked at the reasons for the decline in U.S. coal consumption of 20% from 2011 to 2015—and the bankruptcy filings of a number of coal mining companies.  The report also looks at the impacts on those who work in the coal industry and their communities.  At the end of 2011, there were over 130,000 people working in the coal mining industry; now that number is just over 70,000.  And drops in coal production have reduced tax revenue in coal communities.

This report finds that 49% of the decline in U.S. coal consumption was due to decreased natural gas prices, 26% was due to decreased electricity demand, and 18% was due to growth in renewables.  Environmental regulations accelerated coal generator retirements, but were less significant contributors to the overall decline.  The report also finds that issues in international coal markets—including lower Chinese coal demand that depressed global prices—were a relatively large factor.

The report identifies increases in natural gas prices as a crucial factor for coal to rebound.  Rolling back environmental regulations promulgated under the Obama Administration would not, standing alone, markedly increase coal consumption.  (The report assumed the removal of the Clean Power Plan, CO2 New Source Performance Standards for new power plants, methane rules for new oil and gas production, methane rules for new and existing oil and gas production on federal lands, and the coal leasing moratorium on federal lands.)

On employment, the report is skeptical that a full reversal to pre-2015 levels is likely to occur.  While acknowledging the difficulties of revitalizing impacted communities, the report discusses several community-driven economic diversification efforts that may provide some relief rather than “false hope that the glory days can be revived.”  The report identifies federal government actions that can assist these programs, including infrastructure investment, tax credits, and repurposing of abandoned mine land.

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