Climate Change Update - Jenner & Block
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A Publication
of the
Climate and Clean Technology
Law Practice
Climate Change Update July 2010
Editors: Gabrielle Sigel, Jennifer Cassel and Rachel Loftspring
Federal Legislative Developments regulation of those emissions under amendment to a pending small
the Clean Air Act (“CAA”), as well business tax relief bill that would
Comprehensive Energy and
as varying state regulations. impose a 2-year delay of EPA
Climate Bill, Cap-and-Trade,
regulation of GHG emissions from
Abandoned For Summer Momentum Renewed to Stop
stationary sources, which is similar
On July 22, 2010, Senate EPA’s Authority Under the Clean
to Senator’s Rockefeller proposal.
Democrats abandoned their Air Act
efforts to pass this summer With the Senate Democrats’ Senate Attempts to Pass
a comprehensive energy and announcement tabling a Legislative Response to Oil Spill
climate change bill, including a comprehensive energy and climate before Recess
greenhouse gas (“GHG”) cap- change bill that would have On July 27, 2010, Senator Reid
and-trade program. Instead, prohibited EPA from regulating introduced the Clean Energy Jobs
Senate leadership has decided to GHG emissions, there is renewed and Oil Accountability Act. The
delay work on a bill until after the bipartisan interest in checking EPA’s $15 billion bill responds to issues
Senate returns from its August authority over emissions under the concerning the oil spill in the Gulf of
recess. Democrats say the delay CAA. In the House, Representative Mexico and provides scaled-down
will provide the time necessary to Rick Boucher (D-Va.) co-sponsored clean energy legislation. Under
attract the 60 votes required for a bill that would require a 2-year Reid’s bill, the $75 million liability
Senate passage. According to “timeout” before EPA emissions cap for responsible parties under the
Senator John Kerry (D-Mass.), one rules go into effect. In the Senate, Oil Pollution Act would be removed,
of the most vocal proponents of Senator Jay Rockefeller (D-W.V.) making responsible parties liable for
climate change legislation, “We’ve has proposed a similar 2-year the full extent of economic damages
known from Day 1 that in order postponement, on which Senate caused by a spill. Responsible
to pass comprehensive climate Majority Leader Harry Reid (D-Nev.) parties would face further increased
change legislation, you’ve got to plans to allow a vote later this year. civil liability and criminal and
reach 60 votes. To reach that, you According to Senator Rockefeller, civil penalties for environmental
need some Republicans. As we “I am continuing to push hard for violations. The bill also includes a
stand here today, we do not have my bill to suspend EPA action for measure that would streamline the
one Republican.” two years, so that Congress, not claims process against the Oil Spill
The Senate’s decision leaves many federal regulators, can set national Liability Trust Fund, raise the Fund to
businesses, particularly in the energy policy.” $5 billion from the current $1 billion
utility and fossil fuels industries, As reported in the June 2010 authorization, and authorize
with uncertainty regarding future Climate Change Update, the $100 million in advances to
regulatory controls and investment more sweeping EPA preemption claimants. Senator Reid’s bill further
incentives. Renewable energy plan sponsored by Senator Lisa requires oil drilling companies to
businesses, which were hoping Murkowski (R-Alaska) was defeated improve their oil spill response plans
for tax and other benefits to make in June. While President Obama before drilling begins. In addition,
wind, solar, and other green power had promised to veto Senator the bill includes provisions for a
businesses more competitive with Murkowski’s bill if it reached his study of the economic impacts of the
fossil fuels, are also impacted by desk, there has been no White Administration’s offshore drilling ban.
the delay. Moreover, businesses House statement regarding the Beyond measures to respond to oil
with significant GHG emission now President’s position on a 2-year spills, the bill provides $5 billion
face potential U.S. Environmental delay of EPA regulation. Senator in point-of-sale rebates for energy
Protection Agency (“EPA”) Murkowski has now filed an efficient appliances under the Home
©2010 Jenner & Block LLP. 353 N. Clark St. Chicago, IL 60654-3456. Jenner & Block is an Illinois Limited Liability Partnership including
professional corporations. This publication is not intended to provide legal advice but to provide information on legal matters. Transmission is
not intended to create and receipt does not establish an attorney-client relationship. Readers should seek specific legal advice before taking
any action with respect to matters mentioned in this publication. The attorney responsible for this publication is Gabrielle Sigel. Masthead image
from the Collection of the Supreme Court of the United States. Attorney Advertising. Prior results do not guarantee a similar outcome.Climate Change Update
Star Program, a program aimed at According to EPA, the Keystone XL electricity purchases, could reduce
encouraging middle-class Americans project would emit 27 million metric GHG emissions by 101 million metric
to install energy saving products tons of carbon dioxide-equivalent tons of CO2 , the equivalent to the
in their home. It also provides full gases, resulting in a “well-to-wake” emissions from 235 million barrels
funding for the Land and Water footprint for tar sands that is 82% of oil, according to a White House
Conservation Fund, a state and local more than the average crude refined press release. Implementation
fund, for the next five years. in the United States, or approximately efforts, including doubling the size
Federal Regulatory Developments the equivalent to the annual carbon of the federal government’s hybrid
dioxide (“CO2”) emissions from seven fleet and removing Styrofoam cups
EPA Issues 2011 Proposed coal-fired power plants. Advocates from agency cafeterias, have already
Renewable Fuel Standards for the project say it will reduce begun.
On July 12, 2010, EPA issued its reliance on Middle East oil. EPA is Federal Litigation Developments
proposed renewable fuel standards calling on the State Department to
for 2011. Under the new standards, include an estimate of the extraction- Environmental Groups Attempt
the total volume of renewable fuel related GHG emissions associated to Stop Coal-Fired Power Plant
required to be included in gasoline with the project. A decision as to Construction
increased to 13.95 billion gallons, whether the Keystone XL project On July 16, 2010, environmental
constituting 7.95% of fuel. While serves U.S. national interest is groups renewed their attempt to stop
that number is 1 billion gallons expected this fall. the construction of a coal-fired power
higher than the 2010 requirement Obama Expands Federal plant being built in Arkansas. Sierra
of 12.95 billion gallons, the total Government’s Commitment to Club, et al. v. United States Army
percentage of renewable fuel in 2010 GHG Emissions Cuts Corps of Engineers, et al., W.D. Ark.,
was higher, at 8.25%. In 2009, 11.1 No. 4:10-cv-04017, 7/16/10. The
billion gallons of renewable fuel were On July 20, 2010, President Sierra Club and others alleged in an
required to be included in gasoline, Obama announced that the federal 11-count amended complaint against
while in 2008, 9 billion gallons were government would aim to reduce its the U.S. Army Corps of Engineers
required. Renewable fuel volume “indirect” GHG emissions, including (“COE”) that the COE issued a
targets were established under the emissions from employee commuting permit that would allow construction
Energy Independence and Security and travel, by 13% by 2020. The of the Southwestern Electric
Act of 2007, which has a 2022 goal federal government is the largest Power Company’s new power plant
of 36 billion gallons of renewable fuel user of energy in the country—it without conducting the necessary
included in gasoline. owns 600,000 vehicles, owns and environmental studies required under
manages nearly 500,000 buildings, the National Environmental Policy Act
State Department Should Revise and paid $24.5 billion for utility and (“NEPA”) and EPA regulations.
Tar Sands Pipeline Analysis, fuel in 2008. According to President
EPA Says Obama, “Every year the Federal The COE permit authorizes the filling
Government consumes more energy of 8.07 acres of wetlands and 8,150
On July 16, 2010, EPA submitted
than any other single organization linear feet of stream impacts, which
comments to the State Department
or company in the United States. the Sierra Club states will cause
calling on it to revise its draft
That energy goes towards lighting irreparable harm to the area. Once
environmental impact statement
and heating government buildings, the power plant is built, it will have
(“EIS”) regarding the proposed
fueling vehicles and powering federal the capacity to burn 9,000 tons of
Keystone XL pipeline that could
projects across the country and coal per day and is expected to emit
eventually transport up to 900,000
around the world. The government 5,280,000 tons of CO2 per year,
barrels of high-carbon Canadian
has a responsibility to use that energy along with substantial quantities of
tar sands crude, per day, to Texas
wisely, to reduce consumption, sulfur dioxide, lead, mercury, and
refineries. In its draft EIS, the State
improve efficiency, use renewable other contaminants. According to the
Department quantified the GHG
energy, like wind and solar, and cut Sierra Club, the direct and indirect
emissions associated with the
pipeline itself, but did not analyze costs.” These reductions in indirect effects of these emissions were not
the climate impacts of extracting emissions, in conjunction with those analyzed in a sufficient manner prior
the energy-intensive tar sands, an previously announced by President to the issuance of the permit.
omission EPA believes makes the Obama for direct emissions and An answer to the amended complaint
analysis “inadequate.” indirect emissions associated with is due by August 16, 2010.
2Climate Change Update
Five Attorneys General Sue U.S. These bills would permit shipping five of the citizen suits would be
Over Asian Carp and cargo to pass through the barrier dismissed entirely and one would be
On July 19, 2010, attorneys while preventing the transfer of dismissed in part. Two additional
general from Michigan, Wisconsin, water and invasive species. Eight suits, one filed by the Environmental
Minnesota, Ohio, and Pennsylvania senators have also sent a letter to the Defense Fund and the other by Kinder
Senate Appropriations Committee, Morgan CO2, are not covered by the
sued the United States in an effort to
requesting the addition of a provision proposed settlement and would not
force emergency action that would
in the 2011 energy appropriations be affected.
prevent Asian carp from entering Lake
Michigan and to accelerate plans bill that would authorize COE to State and Regional Developments
for a permanent barrier against the take emergency actions to prevent
the Asian carp from entering Lake RGGI Allowances Futures Trading
Asian Carp. See Michigan v. United
Michigan. Down
States, N.D. Ill., No. 1:10-cv-4557,
7/19/10. According to the complaint, Similarly, a coalition of Great On July 9, 2010, the Regional
Asian carp are a public nuisance Lakes governors and mayors, led Greenhouse Gas Initiative (“RGGI”),
that threaten grave and irreparable by Chicago Mayor Richard Daley, a market-based program in 10
harm to public trust resources. launched a $2 million regional Northeast and Mid-Atlantic states
Asian carp can grow up to 100 investigation to evaluate the committed to capping and reducing
pounds, “feed almost continuously,” separation of the Mississippi River CO2 emissions from the power
are prone to jumping high out of and Great Lakes. The study, which sector 10% by 2018, released a
water when startled, and reproduce was announced on July 22, 2010, report analyzing the secondary
rapidly. There is fear that these fish is called “Envisioning a Chicago market for RGGI allowances and
could destroy the Great Lakes’ $7 Area Waterway System for the 21st futures trading. According to the
billion commercial fishing industry Century” and is expected to take 18 report, the volume of futures trading
and hurt the $16 billion recreational months to complete. declined significantly in the fourth
boating industry. quarter of 2009, decreasing from 319
EPA Releases Proposed GHG million allowances in the third quarter
The complaint requested two forms Reporting Settlements in Six of 2009 to 127 million in the fourth
of relief: (1) a preliminary injunction Industry Lawsuits quarter. Prices for futures similarly
ordering defendants COE and
On July 20, 2010, EPA gave notice declined. Between third quarter of
Metropolitan Water Reclamation
of proposed settlement agreements 2009 and fourth quarter of 2009,
District of Greater Chicago (a
in six citizen suits filed by industry futures prices dropped 8% to $2.25.
local government unit tasked with
associations, including the American Despite these declines, RGGI reports
protecting the quality of Lake
Public Gas Association and Energy that the number of participants in
Michigan and other Chicago area
Recovery Council, challenging EPA’s the market for RGGI allowance
waterways) to immediately take all
mandatory GHG reporting rule. derivatives was mostly constant
available measures to prevent the
The October 2009 rule, which has in the fourth quarter of 2009, at
migration of Asian carp into Lake
created debate in both Congress and approximately 34 companies. The
Michigan; and (2) a preliminary
U.S. courtrooms, generally requires next RGGI auction is scheduled for
injunction requiring COE to expedite
annual reporting of GHG emissions September 8, 2010.
a feasibility study to develop and
to EPA from sources emitting at least
evaluate options for the permanent Group Finds Climate Change will
25,000 metric tons of GHGs and
physical separation of the Chicago Lead to Extreme Water Shortages
suppliers of fossil fuels and industrial
Area Waterway System from in U.S.
GHGs. Under the proposed
Lake Michigan.
settlement agreements, EPA would On July 20, 2010, the National
In another attempt to control Asian propose various amendments to Resources Defense Council
carp, federal legislators from subparts of the rule, including revising (“NRDC”) released a report finding
Midwestern states, including Illinois, the applicability threshold for local that climate change will likely lead
Ohio, and Michigan, have introduced natural gas distribution companies to decreased precipitation and
legislation in both the House and and permitting certain complex oil increased water demands, thereby
Senate that would require COE to refineries to request authorization escalating the number of water
establish a permanent physical barrier to use “best available monitoring shortages in the United States. The
between the Mississippi River and methods” through 2015. If the D.C. report, called Evaluating Sustainability
the Great Lakes (see, e.g., S. 2946). Circuit approves the settlements, of Projected Water Demands Under
3Climate Change Update
Future Climate Change Scenarios, It is hoped that this virtual generator markets beginning in 2013. Germany
and its accompanying Water will eliminate the future need for and the United Kingdom, which
Facts summary, projects that the building other generating facilities. already have their own established
Great Plains and Southwest areas The project is expected to be fully platforms, are particularly interested
of the United States would face operational by next summer and will in the opt-out provisions. The
“extreme risk” for water shortages be the U.S.’s first large-scale test of European Parliament and Council
due to “changes in precipitation energy savings in commercial real have a three-month review period to
and increases in temperature estate using smart grid technologies. consider the draft law.
[that] will mean that projected International and Business China Now the Largest Consumer
evapotranspiration will exceed rain Developments of Energy in the World
and snowfall (precipitation). In these
regions there will not be any available European Commission Sets 2013 On July 20, 2010, the International
precipitation at all.” In contrast, states Emissions Cap, Considers New Energy Agency (“IEA”) announced
in the Northeast part of the country Emissions Law that China surpassed the U.S. as the
face the least risk. The NRDC On July 9, 2010, the European world’s largest consumer of energy.
projections were based on trends Commission (“EC”) announced that The U.S. had been the world’s largest
in water consumption that assume those power plants and industrial consumer for more than a century.
a total increase in water demand of installations responsible for 40% of China’s energy demand has doubled
about 12.5% by 2050 from 2000 the European Union’s (“EU”) GHG since 2000 and, if not for large
demand levels. emissions and which are covered by investments in energy efficiency and
the EU’s Emission Trading System renewable energy, would have had
Chicago to Host First Commercial even higher demand, according to
Smart Grid (“ETS”), will be allowed to emit
1.927 billion metric tons of CO2 in the IEA. Because China’s per capita
On July 21, 2010, the Building 2013. That cap is 6.3% lower than demand is still ⅓ of the average
Owners and Managers Association the amount ETS participants were for members of the International
of Chicago (“BOMA”), a group of allowed to emit in 2007. However, Organization for Economic
Chicago business owners, signed the cap is 8.7% higher than actual Cooperation and Development, the
an agreement with the Korean Smart emissions in 2009, a consequence of opportunity for future growth in China
Grid Association, a consortium of the economic crisis that caused ETS- is particularly strong.
Korean technology companies, to covered installations to drop from China’s appetite for energy has
launch a smart grid pilot program 1.998 billion tons emitted in 2008 to caused hesitation among some U.S.
involving approximately a dozen 1.772 billion tons in 2009. According lawmakers, who are reluctant to agree
downtown Chicago office buildings. to the EC, the 2013 cap is consistent to U.S. reductions in GHG emissions
Smart grids deliver electricity using with EU legislation requiring it to without comparable restrictions in
two-way digital technology that reduce GHG emissions 20% by China. China is the largest emitter
overlays the electricity distribution 2020 compared with 1990 levels. of GHGs and relies extensively on
grid with an information and net The cap does not include allowances coal, the dirtiest-burning fossil fuel.
metering system, permitting the that will be allocated to airlines, which Moreover, a recent pipeline explosion
control of power to consumers’ are required to begin participating in China leaked a reported 1,500 tons
appliances according to the in ETS in 2012. ETS will cover all of oil into the Yellow Sea, near the
electricity flowing in the grid system. airlines flying into and out of the EU, busy northeastern port of Dalian.
When power is least expensive, the regardless of country of origin.
smart grid user can turn on selected U.N. Developing Contingency
On July 15, 2010, EC approved a
appliances, while at peak times, Plan Options in Advance of Kyoto
draft carbon emissions law that would
the smart grid user could turn off Protocol Expiration
create an auctioning platform for ETS
selected appliances. On July 20, 2010, the U.N. released
allowances after 2012, a change that
The buildings participating in the pilot would raise large amounts of money options for a contingency plan to
program hope to manage their energy for national treasuries. Under the avoid a gap in regulation or treaty
usage patterns and monetize their current system, most allowances agreements in the likely event that
cost savings. Under the program, the are distributed to participants for a new international agreement
buildings also will be used as electric free. The draft law also permits EU is not in place when the Kyoto
grid resources, creating what BOMA member states to opt-out of the ETS Protocol’s commitment period for
is referring to as a “virtual generator.” auctioning system and run their own reducing GHG emissions expires in
4Climate Change Update 2012. The U.N.-sponsored climate that a new agreement would have Considerations Relating to a change summit in Copenhagen to be ratified by October 4, 2012, Possible Gap Between the First and last December failed to produce an to go into effect by January 1, 2013, Subsequent Commitment Periods.” agreement applicable after 2012, and the day after the Protocol will expire. In the 14-page paper, the AWG-KP many delegates and leaders believe Ratification of the Kyoto Protocol took proposed short-term modifications the climate change summit scheduled 8 years. to the Kyoto Protocol, including for the end of 2010 in Cancun, The Ad-hoc Working Group on the reducing the number of countries Mexico will similarly fail to produce Kyoto Protocol (“AWG-KP”), one required to approve new targets, an agreement. Ratification of any of the two main negotiating tracks extending the emission caps that new agreement could also prove in the United Nations Framework currently govern for additional years, challenging. Under U.N. rules, a new Convention on Climate Change, and reducing GHG emissions for agreement cannot go into effect until produced the outline of contingency wealthier industrialized states only. 90 days after ratification, meaning options in a paper titled, “Legal For more information, please contact: Gabrielle Sigel Jennifer Cassel Rachel C. Loftspring Partner Associate Associate Tel: 312 923-2758 Tel: 312 840-7206 Tel: 312 840-8617 Email: gsigel@jenner.com Email: jcassel@jenner.com Email: rloftspring@jenner.com Or visit www.jenner.com/climatechangeupdate 5
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