Holland & Hart's Climate Change News

AEP Puts Carbon Capture and Storage Plans on Hold

By Emily Schilling

American Electric Power is suspending plans for a commercial-scale carbon capture and storage system because of uncertainties surrounding U.S. economic conditions and climate change policy. AEP had planned to begin commercial operation of the system, which would have captured at least 1.5 million metric tons of carbon dioxide per year in appropriate geologic formations approximately 1.5 miles underground, by 2015. The company will complete engineering studies and the environmental impact statement for the project, but will not move the project any farther. AEP had funding commitments of $334 million from the U.S. Department of Energy. AEP Chairman and Chief Executive Officer Michael G. Morris, said in a statement that the company is “placing the project on hold until economic and policy conditions create a viable path forward.”

Biomass GHG Emissions Regulation Deferred

By James Holtkamp

The Environmental Protection Agency announced July 1 that new and modified facilities combusting wood waste and landfills generating emissions from decomposing biomass will not be required to secure major source permits for greenhouse gas emissions for three years. Without the extension, such facilities would have been subject to EPA’s Tailoring Rule as of July 1, 2011 and would have been required to obtain PSD and Title C operating permits. EPA said that the extension was necessary to determine more accurately how to measure the greenhouse gases emitted by biomass facilities.

Authority of New Mexico Environmental Board to Issue GHG Emissions Rule Upheld by State Supreme Court

By James Holtkamp

On July 27, the New Mexico Supreme Court issued a decision affirming an appellate court ruling that the New Mexico Environmental Improvement Board has the authority under state law to consider and act on petitions to repeal the GHG emissions rules issued by the Board last year. New Energy Economy v. Vanzi, No. 33,074, S.Ct. N.M., 7/27/11. Incoming Governor Susana Martinez unsuccessfully tried to block the implementation of the rules in January. When that effort was blocked by the courts, she made an unsuccessful attempt to repeal the rules via legislation.

The Supreme Court also granted intervention in the proceedings before the Board to the environmental group New Energy Economy. 

Utah Air Quality Board Rejects Petition to Regulate GHGs

By James Holtkamp

On July 6, the Utah Air Quality Board rejected a petition by various individuals and environmental groups to adopt a regulatory framework that would reduce GHG emissions in Utah by six percent per year. The petition is among dozens of similar petitions and lawsuits filed in every state, the District of Columbia and federal court, asserting that state and federal governments have a public trust responsibility to assure reductions in GHG emissions. The Board agreed with the recommendations of the staff of the Division of Utah Air Quality, which cited concerns about lack of resources and pointed out that Utah already has in place regulations requiring permitting of major sources of GHGs.

California Announces Delay of AB32 Compliance Period

By James Holtkamp

The California Air Resources Board announced on July 7 that it was recommending that certain elements of the cap-and-trade program for GHGs under California Assembly Bill 32 (“AB32”) be delayed an extra year, until January 2013. The program itself will be effective in January, 2012, but an extra year will be necessary for “testing” the program before emitters are subject to compliance. In addition, CARB announced revisions to the proposed cap-and-trade program to assure that its mandatory GHG emissions reporting requirements are consistent with similar federal requirements. AB32 was enacted in 2006 and requires the state to reduce GHG emissions to 1990 levels by 2020.

Western Climate Initiative Issues Proposal for Offsets

By Emily Schilling

On July 14, the Western Climate Initiative (WCI) issued the Draft Offset Protocol Review and Recommendation Process, which outlines a process that participating states could adopt to identify and evaluate protocols for issuing offsets as part of the regional greenhouse gas emissions trading program.  The four-step process is designed to demonstrate that the state-level trading programs will result in offset credits that can be exchanged across the regional trading region. The process includes (1) identification of a protocol for review through creation of a “task team” to evaluate the protocol using criteria developed by the Western Climate Initiative; (2) a recommendation from the task team regarding the protocol; (3) posting of the protocol to the WCI website for review and comment; and (4) final revisions and public review before adoption by the state.

California Court Removes Stay of Cap-and-Trade Program; CARB Releases New Analysis

by James Holtkamp

On June 24, 2011, the California Court of Appeals lifted a lower court order halting California’s cap-and-trade program. Ass'n of Irritated Residents v. CARB, Cal. Ct. App., No. A132165, 6/3/11. The lower court had ruled that the California Air Resources Board (“CARB”) had failed to comply fully with the California Environmental Quality Act in developing the proposed cap-and-trade program, which is the centerpiece of California’s comprehensive climate change program required under California Assembly Bill 32 (“AB 32”). In lifting the lower court stay pending a final decision on the appeal of the lower court order, the Court of Appeals granted the state’s request that CARB continue work on the program, which is scheduled to become effective in January 2012.

Western Climate Initiative Releases Offset Validation Proposal

by James Holtkamp

On June 7, 2011, the Western Climate Initiative released draft recommendations for offset project review and approval and for creation of credits in the WCI regional emissions trading program. Under the proposal, offsets meeting certain criteria can be used for compliance with the WCI GHG reduction requirements. In order to be eligible for use in the cap-and-trade program, the offsets will have to validated under rigorous protocols and be subject to a transparent stakeholder involvement process. Comments on the proposal will be accepted until July 8, 2011.

Significant Influx of Major Source Permit Applications Under Tailoring Rule Expected Beginning July 1

by James Holtkamp

July 1, 2011, is the beginning of Phase 2 of EPA’s Greenhouse gas PSD Tailoring Rule, under which new facilities with the potential to emit 100,000 tons or more of CO2e and modified facilities that increase emissions by 75,000 tons per year or more of CO2e will be required to obtain a major source PSD permit, regardless of the projected emissions of other pollutants. State air pollution control agencies expect a significant number of new applications and are concerned that they may not be able to respond quickly to the applications in light of declining budgets and reduced financial support from the federal government. In addition, many of the details of the process for the applications have yet to be worked out, including Best Available Control Technology (“BACT”) review of GHGs. The Tailoring Rule is also being challenged in the District of Columbia Circuit Court of Appeals, and thus many in industry and the states are waiting to see how that court rules before committing significant resources to the GHG permitting process.

EPA Details Options for GHG NSPS for Power Plants

By Marie Bradshaw Durrant

On June 17, 2011, EPA presented the options it is considering for regulating Greenhouse Gas (“GHG”) emissions through New Source Performance Standards (“NSPS”) to a panel representing small businesses. The presentation outlined proposed NSPS for GHG emissions from Electric Generating Units (“EGUs”) and is part of a process initiated in December 2010, when EPA entered into a settlement agreement with environmental groups to issue NSPS for GHG emissions from new and modified natural gas-, oil-, and coal-fired EGUs and emission guidelines for existing natural gas-, oil-, and coal-fired EGUs. Under the agreement, EPA committed to issue the proposed regulations by July 26, 2011 and final regulations by May 26, 2012. The deadline for the proposed rule has now been extended to September 30, 2012, but the final rule deadline remains May 26, 2012.