D.C. Circuit Vacates EPA’s Stay of Methane Rule

On July 3, 2017, the U.S. Court of Appeals for the D.C. Circuit granted a group of environmental organizations’ challenge of the EPA’s decision to stay the implementation of a rule covering methane and other greenhouse gas emissions from the oil and gas industry (methane rule).  The methane rule, which was issued under the Obama Administration in June 2016, establishes new source performance standards for methane, volatile organic compounds (VOC), and toxic air pollutant emissions from “certain new, modified, and reconstructed equipment, processes, and activities across the oil and natural gas source category.”  As the preamble to the rule explains, this covers sources that were previously unregulated under the prior standards (such as “hydraulically fractured oil well completions, pneumatic pumps, and fugitive emissions from well sites and compression stations”) as well as sources that were previously regulated only for VOC but not methane (such as “hydraulically fractured gas well completions and equipment leaks at natural gas processing plants”).

In April 2017, the EPA announced that it was convening a proceeding for reconsideration of certain aspects of the methane rule and stated that it was issuing a 90-day stay of the compliance date.  A few months later, EPA granted reconsideration and extended the stay to two years.  Six environmental groups challenged this decision.

The D.C. Circuit’s opinion first concludes that the court does have jurisdiction over this matter because the decision to suspend compliance with the methane rules is tantamount to the amendment or revocation of a rule, which is the sort of final action subject to judicial review.  Next, the court held that nothing in the Clean Air Act or the Administrative Procedure Act provides the EPA with the authority to stay the methane rule here.  According to the Court, the Clean Air Act provides that the stay would be lawful only if reconsideration of the rule were mandatory, and the Clean Air Act requires reconsideration if objections to the rule were “impracticable to raise” during the time for public comment and the objections are “of central relevance to the outcome of the rule.”  However, here the court concluded that it was not impracticable to raise objections during the public comment period, and thus stay was not required, because “the administrative record . . . makes clear that industry groups had ample opportunity to comment on all four issues on which EPA granted reconsideration.”  Nevertheless, the court emphasized that its opinion in no way limits EPA’s authority to issue a new methane rule in the future.

Judge Brown issued a dissenting opinion that focused on the issue of jurisdiction.  Judge Brown would have held that EPA’s stay was not a “final agency action” and is not subject to review by the court.  She would not have dismissed the challenge on this basis and not reached the remaining issues in this case.

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EPA Proposes to Reinstate Pre-2015 Waters of the United States Rule, But More Changes Coming

The EPA, Department of Army, and Army Corps of Engineers (the agencies) have proposed to rescind their 2015 regulatory definition of “waters of the United States” and re-codify the prior definition of this term.  This definition is known as the Waters of the U.S., or “WOTUS,” rule, and it determines what bodies of waters are subject to federal protection under the Clean Water Act.

Three months ago, the President issued an Executive Order directing the agencies to review the WOTUS rule for consistency with the new administration’s policies.  Under the Obama Administration, the agencies had revised the WOTUS definition to cover small waterways; however, the U.S. Court of Appeals for the Sixth Circuit issued a stay of that rule shortly after it was published.  As a result, the agencies’ most recent action will not have an immediate effect, since it re-codifies the definition that is still currently in effect as a result of the stay.

Moreover, the re-codification of the pre-2015 definition is likely to be temporary.  The proposed rule explains that this current action is only the first part of a two-step process of reviewing and revising the definition of waters of the United States.  The second step will be a more comprehensive rulemaking to consider a new definition.  As directed by the Executive Order, this future rulemaking will take into consideration the principles outlined by Justice Scalia writing for a plurality of the Supreme Court in Rapanos v. United States.  The Rapanos opinion offers a more restrictive definition of waters of the United States, which would cover “relatively permanent, standing or continuously flowing bodies of water” connected to traditional navigable waters, as well as wetlands with “continuous surface connection” to such waters.

Comments on the re-codification of the pre-2015 definition will be due 30 days after publication in the Federal Register.  However, the agencies state that these comments should be limited to only the question of whether the agencies should adopt the pre-2015 definition as an interim measure before conducting a more substantive rulemaking on a new definition.  Comments about the proper definition of waters of the United States should wait until the second rulemaking proceeding.

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Scientists Debate: Could the U.S. Rely on 100% Wind, Water, and Solar Power?

While scientists agree that widespread deployment of solar and wind generation could substantially reduce U.S. greenhouse gas emissions, a study led by Christopher Clack and published in the Proceedings of the National Academy of Sciences last week demonstrates that exactly how that increased deployment will be achieved is still a hotly debated subject.  Clack et al.’s study challenges a 2015 study led by Mark Jacobson, of Stanford University’s Atmosphere / Energy Program, that was also published in same journal.  While Jacobson’s study concluded that the United States could transition to 100% renewable power by 2050, Clack’s study concludes that “[r]elying on 100% wind, solar, and hydroelectric power could make climate mitigation more difficult and more expensive than it needs to be,” and points out that previous analyses have found that the most feasible route to a low-carbon energy future is one that adopts a diverse portfolio of technologies.

Clack et al. argue that shortcomings and errors in Jacobson’s study render it unreliable as a guide about the likely cost, technical reliability, and feasibility of a 100% wind, solar, and hydroelectric power system.  Among these errors, according to the Clack study, was the Jacobson study’s conclusion that hydropower facilities would increase generation by over 30%.  The Clack study argues that “this explanation shows a fundamental misunderstanding of the operation of electricity markets and the factors determining hydroelectric supply,” and failed to take into account that the primary factors limiting hydroelectric capacity are water supply and environmental constraints.  The Clack study also criticizes the Jacobson study for modeling errors, a lack of modeling for electric power transmission, reserve margins, and frequency response, and inadequate scrutiny of the climate models used to generate weather data.

While Clack et al. conclude that moving to 100% renewable generation is unrealistic, they point out that a number of other studies have concluded that that 80% decarbonization of the US economy could be achieved at reasonable cost.  For reference, the EIA reports that in 2016, wind accounted for 5.6% of the total U.S. electricity generation, solar for 0.9%, and hydro for 6.5%.

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California ISO, Utilities Outline Path to Increased Integration of Distributed Energy Resources

Last week, the California Independent System Operator (CAISO), in conjunction with More Than Smart and three of the state’s distribution utilities (Pacific Gas & Electric Co., Southern California Edison, and San Diego Gas & Electric), unveiled a proposed set of coordination and process improvements that the group believes are necessary to manage the integration of significant distributed energy resources (DERs) onto the grid.  The report, Coordination of Transmission and Distribution Operations In a High Distributed Energy Resource Electric Grid, notes that there have been relatively low volumes of DER penetration to date, but expects much higher volumes of DERs, of potentially more diverse character, in the future.  In anticipation of this “high-DER” future, the report offers a set of suggestions that the group believes the CAISO and the distribution utilities should undertake to enable smooth integration of these resources.

The report recognizes that efforts are underway in California to reduce barriers to DER participation at both the distribution and wholesale levels, but notes that there is a lack of transparency between the transmission and distribution segments of the grid, which are connected but operated by different entities.  While historically energy has flowed only from the transmission system on to the distribution system, DERs now inject energy onto the system at the distribution level, resulting in multi-directional flows over transmission-distribution interfaces.  To ensure continued system reliability, the report recommends the CAISO, distribution utilities, and DER owners and aggregators work together to increase coordination and communication of operational conditions, constraints, and forecasts between:  the distribution utilities and the CAISO, the distribution utilities and the DERs and their aggregators, and the CAISO and the DERs and their aggregators.  Additionally, the report recommends development of a pro forma “integration agreement” for DER aggregators wishing to aggregate multiple DERs into a virtual resource.  Over the longer term, the report recommends more robust development of real-time coordination processes, system protection and controls enhancements, and feasibility assessments.

Keeping an eye toward the future, the report notes that the working group behind the report will continue to meet to track progress and further advance coordination.

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Nevada Governor Vetoes Higher Renewable Portfolio Standard and Community Solar Incentive; Florida Governor Signs Tax Break for Renewable Equipment

While several states have recently enacted legislation focusing on renewable energy, last week Nevada Governor Brian Sandoval vetoed bills pertaining to Nevada’s renewable portfolio standard (RPS) and incentives for community solar projects.

Assembly Bill 206 would have revised Nevada’s RPS from 25% by 2025 to 40% by 2030.  In his veto statement, Governor Sandoval expressed concerns with how the increased RPS might interact with other energy policies, particularly Nevada’s new net metering legislation, which was signed one day earlier. (A previous effort to amend the Nevada Constitution on the issue of net metering was invalidated by the Nevada Supreme Court.)  He also mentioned larger potential changes that could occur if Nevada citizens pass the Energy Choice Initiative to amend the Nevada Constitution.  Nevada’s Constitution requires citizens to pass a ballot initiative twice before it amends the state’s constitution, and the Energy Choice Initiative passed its first vote in 2016.

Citing similar concerns, Governor Sandoval vetoed legislation that would have established incentives for community solar development.  Nevada law already provides for incentives under the Solar Energy Systems Incentive Program, the Wind Energy Systems Demonstration Program, and the Waterpower Energy Systems Demonstration Program.  Senate Bill 392 would have combined these incentives into a single pool of money and authorized the Public Utility Commission of Nevada to provide incentives of up to $1,000,000 per year for systems that benefit low-income and moderate-income customers.  It also would have extended incentives to “community solar gardens,” which are defined as solar systems of less than 12 MW that are owned and operated by a subscriber organization.

Meanwhile, Florida Governor Rick Scott recently signed into law Senate Bill 90, which exempts solar and renewable energy devices and equipment from property taxes.  In August 2016, Florida voters approved a ballot initiative to amend the State Constitution to authorize the legislature to take this action.

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