D.C. Circuit Vacates FERC Hydropower Licensing Decision

Earlier this month, the D.C. Circuit vacated a FERC order renewing a hydroelectric license issued to Alabama Power Company.  FERC had granted Alabama Power Company a new 30-year license in 2013 to continue operating seven hydropower developments along the Coosa River (collectively, the Coosa Project), over the objections of a number of public and private conservation groups (collectively, the Conservation Groups).

The relicensing of hydropower projects requires action from a number of federal and state agencies.  The dispute in this particular case revolved around the interaction of three federal statutory schemes:

  • The National Environmental Policy Act (NEPA).  Federal agencies are obligated under NEPA to analyze and consider the environmental consequences of proposed major federal actions.  NEPA does not, however, prohibit federal agencies from taking actions that have adverse environmental effects, so long as they have analyzed and considered these effects.  An agency must prepare a detailed Environmental Impact Statement for actions that will have a significant impact on the environment.  But, an agency may first conduct an Environmental Assessment to determine whether the proposed federal action will significantly impact the environment and thus requires an Environmental Impact Statement.
  • The Endangered Species Act.  The Endangered Species Act is administered by the Department of the Interior’s Fish and Wildlife Service (FWS), which lists animal and plant species as threatened or endangered.  Federal agencies must consult with FWS to ensure that any action “authorized, funded, or carried out by such agency . . . is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of habitat of such species.”  As part of this consultation process, FWS issues a biological opinion explaining whether the action is likely to jeopardize the continued existence of listed species.  If it determines that the action is not likely to jeopardize the continued existence of a species, but will result in incidental “taking” (defined broadly to include harassing, harming, pursuing, hunting, shooting, wounding, killing, trapping, capturing, or collecting), the biological opinion must specify reasonable and prudent measures to minimize the impacts of such incidental taking and set terms and conditions for the agency action to go forward.
  • The Federal Power Act.  FERC is required by the Federal Power Act to ensure that any licensed hydropower project is “best adapted to a comprehensive plan for improving or developing a waterway or waterways.”  In doing so, FERC is to give “equal consideration to the purposes of energy conservation, the protection, mitigation of damage to, and enhancement of, fish and wildlife (including related spawning grounds and habitat), the protection of recreational opportunities, and the preservation of other aspects of environmental quality.”

The Conservation Groups filed petitions for review of FERC’s decision to grant a new license for the Coosa River Project, alleging violations of each of these laws.  The D.C. Circuit agreed that the relicensing of the project violated NEPA and the Endangered Species Act, and that these violations also meant that FERC had violated its Federal Power Act obligations.

The NEPA issue centered on FERC’s conclusion that relicensing would not have any significant environmental impacts and its decision not to issue an Environmental Impact Statement.  The D.C. Circuit identified two fatal flaws with FERC’s NEPA analysis.  First, FERC failed to consider and address multiple indications that the project could have significant environmental impacts, such as substantial effects on fish passage and dissolved oxygen levels.  Second, NEPA requires an agency to consider the cumulative impacts of past, present, and reasonably foreseeable future actions as part of its analysis, to ensure that actions are not segmented into separate, smaller actions that individually have only insignificant environmental impacts.  Here, the D.C. Circuit concluded that FERC did not properly consider cumulative impacts because it largely ignored the effects of past actions in this part of the Coosa River and did not offer any substantive analysis of how the impacts of those past actions would interact with those resulting from the issuance of a new 30-year license.

For the Endangered Species Act issue, the Conservation Groups argued that FWS’s biological opinion was legally deficient.  The D.C. Circuit agreed, finding that the biological opinion failed to incorporate degraded baseline conditions into its analysis.  For example, FWS largely omitted discussion of fish passage and seasonal flows from its analysis, arguing that these are part of the historically degraded condition of the relevant river segment and would remain unaffected by the relicensing.  The D.C. Circuit, however, explained that FWS was nevertheless required by law to account for the effects of degraded conditions on threatened species.  The court also concluded that the biological opinion failed to show a rational connection between its factual findings and the conclusion that the Coosa River Project will not jeopardize listed species or adversely modify critical habitat, because the opinion estimated that 90 to 100 percent of several listed species in certain sections could be “taken” yet concluded that the relicensing was not likely to jeopardize listed species or adversely modify critical habitat.

The court vacated the licensing decision and remanded the case back to FERC for further proceedings.

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EIA Adds Puerto Rico to Its Monthly Electric Generator Inventory; DOE Releases Report on Energy Resilience Solutions

Recovery from the damage caused by Hurricanes Irma and Maria—causing the longest power outage in U.S. history—continues in Puerto Rico.  This week, the Energy Information Administration (EIA) reported that it has added Puerto Rico to its Preliminary Monthly Electric Generator Inventory, which monitors the current status of existing and proposed generating units at electric power plants across the United States with 1 megawatt or greater of combined nameplate capacity. (The monthly inventory is “preliminary” because it includes data that EIA has not yet fully verified.)  EIA reports that more than 99% of the hydro and fossil-fueled power capacity in Puerto Rico have been operational since April 2018.  However, more than 100 plants are not yet in operation, amounting to 76% of Puerto Rico’s wind capacity, 32% of its solar capacity, and 12% of its storage capacity.  According to EIA’s report, most generating facilities—excluding one wind and one solar facility—expect to return to service within calendar year 2018.

DOE also published a report last month, Energy Resilience Solutions for the Puerto Rico Grid, aimed at providing recommendations to inform investments in the island’s energy infrastructure funded by federal appropriations.  The recommendations focus on three specific areas:

  1. Ensuring that investments will result in modern, intelligent infrastructure systems that are affordable, reliable, and resilient while fully complying will all local and federal law;
  2. Undertaking the analysis and planning necessary to de-risk those investments and identify an effective mix of centralized and distributed energy resources of different fuel types; and
  3. Providing for adequate training and capacity building to offset human capital out-migration and transitioning system operations.
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FERC Acts on State Subsidies in PJM, Fuel Security in ISO-NE

FERC recently issued two orders addressing the broader issue of “out-of-market” payments.  These orders signal a vigorous debate at FERC of several hot button issues that may be subject to significant political pressure as Commissioner Powelson’s replacement is appointed and confirmed.

PJM: On June 29, FERC rejected two alternatives proposed by PJM that aimed to address the impacts of state public policies—including those around generation type—on PJM’s capacity market.  By a 3-2 vote (with Commissioners LaFleur and Glick dissenting, and Commissioner Powelson concurring), the Commission addressed PJM’s alternative proposal, as well as an earlier Federal Power Act (FPA) section 206 complaint filed by generators regarding subsidies to existing resources.  The Commission stated that “it has become necessary to address the price suppressive impact of resources receiving out-of-market support.”  But the Commission did not find any of the proposals before it to be acceptable.  The Commission has set the issue for a paper hearing to consider an approach that would:

(i) modify PJM’s [Minimum Offer Price Rule (MOPR)] such that it would apply to new and existing resources that receive out-of-market payments, regardless of resource type, but would include few to no exemptions; and (ii) in order to accommodate state policy decisions and allow resources that receive out-of-market support to remain online, establish an option in the Tariff that would allow, on a resource-specific basis, resources receiving out-of-market support to choose to be removed from the PJM capacity market, along with a commensurate amount of load, for some period of time.

Commissioner LaFleur dissents, stating that she disagrees with the decision to find PJM’s capacity market unjust and unreasonable and that the Commission’s course forward risks inadequate stakeholder involvement, particularly from states.  Rather, Commissioner LaFleur would have accepted and suspended one of PJM’s proposals (the “MOPR-Ex”) as the forum for pursuing changes, citing ISO New England’s (ISO-NE) recently approved Competitive Auctions with Sponsored Policy Resources proposal as “a prime example of how a region can craft a targeted market reform to address this tension and preserve the benefits of the wholesale markets for customers while also facilitating state policies.”

Commissioner Glick focuses on the federal/state jurisdictional divide in his dissent, arguing that the Commission’s decision “interfer[ed] with state policies that address externalities associated with electric generation, such as greenhouse gas emissions that contribute to the existential threat of climate change.”  Citing federal taxpayer support of drilling, indemnity limits for nuclear power generators, and other financial assistance in the energy sector, he states that the Commission is “picking and choosing which policies to frustrate and which to willfully ignore.”

The next step in these dockets will be for parties to submit initial briefing within 60 days of the order (followed by an opportunity for replies).  Parties may also seek rehearing of this order.

ISO-NE: On July 2, FERC rejected ISO-NE’s request for a waiver of certain provisions of its tariff that would allow it to enter into a cost-of-service agreement for two Exelon natural gas combined cycle units.  ISO-NE’s tariff allows it to enter into such agreements to retain retiring generation resources based on local transmission security issues, but in this case, ISO-NE said the Exelon units were needed for fuel security reasons.  These units—Mystic Units 8 and 9—are served by the Distrigas LNG Terminal (also owned by Exelon).  ISO-NE stated that the retirement of Mystic Units 8 and 9, as the largest customer of the Distrigas Terminal, would put that facility at risk for closure as well, a particular concern given the natural gas pipeline constraints in the region.

FERC unanimously voted to deny the waiver, but the question of what to do about the situation was another 3-2 vote.  Finding that the ISO-NE tariff may be unjust and unreasonable based on the fuel security issues demonstrated in the docket, the Commission instituted a proceeding under FPA section 206.  FERC directed ISO-NE to, within 60 days, either (1) submit interim revisions to allow short-term, cost-of-service agreements based on fuel security concerns (and submit permanent revisions within a year), or (2) show cause as to why the tariff is just and reasonable as it stands.

Commissioners Powelson and Glick both dissented from this approach to the next step, expressing concern that it was “a rush to judgment” (in Commissioner Glick’s words).  Given the actual longer-term nature of the identified problem, each were worried that the section 206 proceeding, framed by the Commission’s order, would not allow full consideration of all alternatives to arrive at the best approach to considering fuel security.

The Commission has laid out the next steps here for ISO-NE, although parties may also seek rehearing of this order.

It remains to be seen what Commissioner Powelson’s departure from FERC in mid-August will mean for these orders.

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D.C. Circuit Extends Abeyance of Clean Power Plan Litigation, Possibly for the Last Time?

The litigation over the CPP has been on hold for over a year, and yesterday the the D.C. Circuit ordered that it remain in abeyance for another 60 days.  At least some of the judges, however, appear to be growing impatient with the continued delays.  Circuit Judge Robert Wilkins wrote that this will be the last abeyance order he is inclined to grant, and Circuit Judge David Tatel separately expressed his reluctance to continue holding the case in abeyance.  Circuit Judge Patricia Millett joined both of these statements.

How did we get here?  Back in February 2016, the Supreme Court granted the request of those challenging the CPP to stop the rule from going into effect while it was under judicial review.  Litigation then proceeded before the D.C. Circuit; oral arguments were held in September 2016, and briefing wrapped up in April 2016.  But when President Trump took office, he directed EPA to review the CPP and take action to revise or rescind the rule if it was inconsistent with the Trump Administration’s policies.  Shortly thereafter, the Department of Justice asked the D.C. Circuit to hold the CPP litigation in abeyance while EPA considers repealing and replacing the CPP.  The court granted this request in April 2017, over the objection of intervenors supporting the CPP, and has issued a series of orders each extending the abeyance for an additional 60 days.

What did the judges say this time?  Circuit Judge Wilkins explained that the fundamental purpose of the court’s ability to hold a case in abeyance is to preserve the status quo until after the court rules on a dispute.  Because EPA has not indicated when it expects to conclude its rulemaking process for its proposed repeal of the CPP, he explained that an abeyance in this situation “does not serve to maintain the status quo while the Court decides . . . instead, the result is the maintenance of the status quo while EPA decides the disposition of the rule.”  Because this is inconsistent with the D.C. Circuit’s authority, Circuit Judge Wilkins intends to oppose granting further abeyance and would instead dismiss the case without prejudice and remand it to EPA.

Circuit Judge Tatel’s concurrence focused on the Supreme Court’s stay of the CPP, which was issued to protect against irreparable injury while the courts resolve the legal challenges to the CPP.  The Supreme Court directed the parties to inform the Court of any developments that may conceivably affect the outcome of the litigation.  Since the Supreme Court’s decision, EPA has proposed to repeal the CPP.  Circuit Judge Tatel wrote that if advised of the current status of the CPP, the Supreme Court may decide to extend the stay.  Or, “given EPA’s own judicially upheld determination that greenhouse gases pose an ongoing threat to public health and welfare” and the Supreme Court’s ruling that “EPA must take regulatory action in the face of such a determination,” it may determine “that the need for expeditious agency action does not permit the luxury of continued delay.”  Either way, Circuit Judge Tatel reasoned, “the Supreme Court is entitled to decide for itself whether the temporary stay it granted pending judicial assessment of the Clean Power Plan ought to continue now that it is being used to maintain the status quo pending agency action.”

What comes next?  The case will remain in abeyance until the end of August, and three of the nine judges who participated in this most recent abeyance order have expressed at least some reluctance to keeping the case on hold for longer than that.  EPA has not indicated when it might take final action on its proposed repeal of the CPP, but the D.C. Circuit ordered it to continue to file status reports every 30 days.  The next status report is due July 26, 2018.

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GAO Study: Reported Federal Climate Change Spending Increased by $4.4 Billion Since 2010

On May 30, the Government Accountability Office (GAO) issued an analysis on reported federal climate change funding, prepared as a report to Congressman Lamar Smith (R-TX), Chairman of the House of Representatives Committee on Science, Space, and Technology.  The analysis examined annual federal climate change funding reported by the Office of Management and Budget (OMB) from 2010 to 2017; the extent to which such funding is clearly linked to federal fiscal exposure to climate change; the extent to which climate change funding is spent on programs where addressing climate change is the primary purpose; and the extent to which these primary-purpose climate change programs are fragmented, overlapping, or duplicative.

This report finds that OMB reported that annual climate change funding has increased by $4.4 billion from fiscal years 2010 to 2017.  According to GAO however, OMB reporting on climate change funding did not include information on climate related fiscal exposures (e.g., programs like disaster assistance where costs were likely to increase due to climate change) to assist policymakers in understanding budget trade-offs for climate change activities.  In addition, GAO reported that few government programs—18 of 533—that report climate change spending exist for the primary purpose of addressing climate change.  Those 18 programs are fragmented across four federal agencies including the National Oceanic and Atmospheric Administration (in the Department of Commerce), the National Aeronautics and Space Administration, the Department of Energy, and the Department of Agriculture.  Each agency’s programs serve different purposes, target different audiences, or operate at different time periods and scales, which minimizes potential overlap or duplication.  For example, 13 of these 18 programs focused on enhancing scientific understanding of climate change, while the remainder focused on other aspects of climate change, such as modeling and providing information to stakeholders to facilitate adaptation.

GAO’s report makes two recommendations to OMB:

  1. The Director of OMB should provide, concurrent with any future climate change funding reports to Congress, funding information for federal programs with fiscal exposure to climate change. This information should include costs to repair, replace, and improve the weather-related resilience of federally-funded property and resources; costs for federal flood and crop insurance programs; and costs for disaster assistance programs.
  2. The Director of OMB should provide, concurrent with any future climate change funding reports to Congress, a detailed analysis of federal climate change programs it considers to be fragmented, overlapping, or duplicative.
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