2010 elu web conference series march 18.final · 2 ©2010 foley & lardner llp program moderator...

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Continuing the Global Debate: The Latest Developments in Climate Change and Greenhouse-Gas Initiatives

Thursday, March 18, 201011:30 a.m. – 12:30 p.m. Central

For audio participation, please dial: 1.866.835.8906; Passcode 1442279

©2010 Foley & Lardner LLP

Housekeeping Issues

Materials are available on our Web site at www.Foley.com or simply click the print icon on the bottom right hand side of your screen to print to a PDF.Call 866.493.2825 for technology assistanceDial *0 (star/zero) for audio assistanceAmple time for live Q & A will be allotted at the end of the formal presentationWe encourage you to Maximize the PowerPoint to Full Screen Usage – Hit F5 on your keyboard


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Program Moderator

Richard G. Stoll

Dick Stoll is a partner in Foley’s Washington, D.C. office. He is a member of the firm's Environmental Regulation Practice, and concentrates on federal administrative and environmental law matters.


Brian H. Potts

Brian Potts is an associate with Foley and a member of the firm's Environmental Regulation Practice and Energy Industry Team.

Program Speaker


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Program Speaker

Mark A. Thimke

Mark Thimke is a partner with Foley & Lardner LLP. He is a member of the firm's Environmental Regulation and Corporate Compliance & Enforcement Practices and the Energy Industry Team.


Federal Greenhouse Gas (GHG) Developments

Richard G. Stoll


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Federal GHG Legislation

Boxer-Feinstein Appropriations Rider (December 2007) mandating GHG monitoring and reporting regulations– Resulted in EPA's GHG Monitoring/Reporting final

rule of October 30, 2009, 74 FR 56260 et seq– Final rule generally covers 25,000 + tpy sources

in many but not all sectors



– EPA soon proposing additional sectors (OMB just cleared March 8 -- for (i) oil and natural gas systems; (ii) carbon dioxide injection and geologic sequestration; (iii) producers of some fluorinated greenhouse gases, such as hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride).

– Parties on both sides seeking judicial review in DC Circuit -- Court now holding cases in abeyance while EPA considers several administrative petitions and holds settlement talks

– Rule still applies to calendar year 2010 emissions


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Waxman-Markey (H.R. 2454) passed House (219-212) June 26, 2009Nothing like Waxman-Markey moving through SenateBoxer-Kerry was quite similar to Waxman-Markey but going nowhereNow lots of talk about a "cap-and-trade lite" or "energy" only bill, but most observers expect nothing to come of this in 2010



Main action in Congress right now is degree to which they might pass something that CURTAILS EPA's regulatory initiatives under the CAA. Two pending Senate bills:– Murkowski would freeze everything (except the

GHG monitoring and reporting) – Introduced January 21, 2010

– Rockefeller would let mobile source regulation move forward, hold up stationary source regulation for two years – introduced March 4, 2010


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EPA's Regulatory Initiatives Under CAA (and Judicial Review Status)

GHG Monitoring/Reporting regulations (discussed above) October 30, 2009, 74 FR 56260 et seq(With DOT) Motor vehicle GHG and fuel economy -- proposed September 28, 2009, 74 FR 49454 et seq -- expected to go final by April 2010 -- (already sent to OMB for final inter-agency review March 9, 2010)



Endangerment Finding -- final December 15, 2009, 74 FR 66496 et seq --– Sixteen groups of parties (over 70 entities total)

have filed D.C. Circuit petitions for judicial review -- industry, 3 states (Texas, Virginia, Alabama) --national environmental groups have intervened

on EPA's side– Some talk of seeking stay pending review, but

Administrator Jackson's recent announcements (see part 4 below) may have defused this possibility


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For stationary sources, NSR and Title V "Tailoring" rule -- proposed October 27, 2009, 74 FR 55292– While CAA specifies 100 and 250 tpy thresholds

for NSR and Title V, EPA proposed 25,000 tpy for GHGs for a five-year study period, with possible tightening to follow

– EPA left open when NSR would be triggered– Prospect of subjecting stationary sources to NSR,

Title V, with "BACT" issues lingering has created firestorm of criticism and concern in many quarters, especially in State governments



– "Train wreck" could be approaching, especially if the 25,000 tpy threshold would be rejected by D.C. Circuit as deviating from the statute, which specifies 100 and 250 tpy


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– "Train wreck" envisioned even at 25,000 tpy, and State governments and many others comment that such threshold would still impose enormous new burdens



– Senator Rockefeller and 7 other "coal state Democrats" send Ms. Jackson letter Feb 19 2010 asking how EPA intends to implement final (upcoming) "tailoring" rule

– Ms. Jackson responds Feb 22 2010 -- probably all-time record for EPA response to a Congressional inquiry:

EPA will "phase-in" NSR starting with only the largest sources, and only then in 2011EPA will start with "substantially higher" than 25,000 tpy cutoff


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– In Senate testimony March 3 2010 Ms. Jackson indicates EPA will go with much higher numbers than 25,000 -- possibly 75,000 or even 100,000

– Whatever EPA does on "tailoring" -- unless trumped by Congressional action (such as Murkowski or Rockefeller) will inevitably face massive D.C. Circuit challenges from all sides

– Prime issue for the "tailoring" litigation: when statute specifies 100 and 250 tpy thresholds, are regulations specifying 75,000 or 100,000 tpy thresholds legal?


Greenhouse Gas Related Changes to the Renewable Fuel Standard Program

Brian H. Potts


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What is the Renewable Fuel Standard Program?

Created by EPAct 2005EPA adopted RFS1 in April 2007 – covered 2007-2012Sets a renewable fuel requirement for obligated partiesRenewable fuel is fuel produced from plant or animal products or wastes (e.g.,

ethanol/biodiesel)Nationwide volumes of renewable fuel already exceeded RFS1 requirements


How does it work?

Obligated parties – (e.g., refiners/blenders)

RINs (batch/gallon)

Tradable

Registration requirements


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RFS2

EISA 2007EPA adopted in February 2010New annual volume requirements starting July 2010Specific volume requirements based on fuel type (e.g., cellulosic biofuel, biomass-based)2010: 12.95 billion gallons (8.25%)Added new greenhouse gas requirements


GHG Requirements for Renewable Fuel

20% GHG requirementCompare lifecycle for renewable fuel to baselineBaseline - average lifecycle GHGs for gas or diesel in 2005D-codesPetition processMore onerous registration requirements


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GHG Grandfathering

Two groupsConstruction commenced prior to December of 2007Construction commenced between Dec. 2007 and Dec. 2009 – fired with natural gas, biomass, or combinationCommence construction defined as in PSD rules


Regional Cap and Trade –Roadmap for Future Greenhouse Gas (GHG) Controls

Mark A. Thimke


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Background

Current regional GHG programs– Regional Greenhouse Gas Initiative (RGGI)

10 northeast statesIn place and functioning

– Midwestern Greenhouse Gas Accord (MGGA)6 states and 1 province (Manitoba)Developed model rules and completing final work on design principles

– Western Climate Initiative (WCI)6 states and 4 provinces (Arizona recently withdrew)California – state program (AB 32); integrate into WCIDesign principles and program development underway


Elements of Regional Programs

Scope – what facilities are “under the cap”– RGGI

Only power sector > 25 MW

– MGGA Power > 25 MWIndustrial facilities; fuels

– WCI90% of CO2 emissions Power > 25 MWIndustrial facilities; fuels


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Reduction– RGGI

1990 GHG baseline (essentially CO2)Maintain 1990 baseline until 2014Reductions to 2018

– MGGA2005 GHG baselineAchieve 20% reduction in 202080% reduction by 2050

– WCI2005 GHG baseline15% reduction by 2020



Offsets– RGGI

Specific preauthorized categories of offsetsLimited to 3.3% of source’s obligation

– MGGAProtocols to be established20/30% (?) of source’s obligation

– WCICapped at 49% of total program emission reduction


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Legal methods– Common approach – use of common “model”

rules adopted in each state– Non-profit organization for administrative detail


Regional Experience

RGGI– Prices– Revenues

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

Current Clearing Price Future Clearing Price

Auction 2Auction 3Auction 4Auction 5Auction 6Auction 7


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$87,956,944.56

$2.07$1.86

40,612,4082,091,000

40,612,4082,137,992

CurrentFuture

Auction 73/10/2010

$61,587,120.90

$2.05$1.86

28,591,6981,599,000

28,591,6982,172,540

CurrentFuture

Auction 612/2/2009

$66,278,239.35

$2.19$1.87

28,408,9452,172,540

28,408,9452,172,540

CurrentFuture

Auction 59/9/2009

$104,242,445.00

$3.23$2.06

30,887,6202,172,540

30,887,6202,172,540

CurrentFuture

Auction 46/17/2009

$117,248,629.80

$3.51$3.05

31,513,7652,175,513

31,513,7652,175,513

CurrentFuture

Auction 33/18/2009

$106,489,935.24

$3.3831,505,89831,505,898CurrentAuction 212/17/2008

$38,575,738.09$3.0712,565,38712,565,387CurrentAuction 1*9/25/2008

TotalProceeds

ClearingPrice

QuantitySold

QuantityOffered

ControlPeriodAuction

Number

*Six states participated in Auction 1


$582,379,052.9410,210,593204,085,721Total

$4,307,689.7971,5071,516,965Vermont

$9,344,844.16155,1293,290,808Rhode Island

$213,386,993.613,640,74575,565,892New York

$64,507,341.451,332,24021,131,282New Jersey

$21,397,456.65409,4137,607,473New Hampshire

$93,303,916.831,553,44932,856,505Massachusetts

$113,265,638.711,862,13839,869,564Maryland

$17,978,362.91298,1576,301,688Maine

$13,867,292.94320,6294,891,227Delaware

$31,019,515.89567,18611,054,317Connecticut

Cumulative ProceedsCumulative Future Control Period

Allowances SoldCumulative Current Control Period

Allowances SoldState


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Regional Program Focus in National Debate

Influence national legislation – regional lobby groupAreas of lobbying– Scope of program– Extent of reductions– Offset


Regional Program Focus in National Debate

Offsets – most contentious– ENGOs

Restrict approvable categories and amount of offsets allowedStrict approval criteria – “RAVEP” with focus on “additionality”

– Business groupsOpen offset market; flexible compliance options

– Income potential

Pre-screened protocols to ease approval process


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Regional Programs – Next Steps

Governmental “discussions” on regional “linkage” moving forward– Meetings in April/May 2010

For states – revenue recycling– Revenue source in a revenue constrained world


Contact Us

Richard G. StollWashington, [email protected]

Mark A. ThimkeMilwaukee, [email protected]

Brian H. PottsMadison, [email protected]


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A copy of the PowerPoint presentation and a multimedia recording will be available on our website early next week.CLE questions? Contact Cheryl Winkowski at [email protected].

Thank You!

2010 elu web conference series march 18.final · 2 ©2010 foley & lardner llp program moderator...

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