Energy & Environmental Law Blog

Energy & Environmental Law Blog

Analyzing the critical energy and environmental issues of the day

California Supreme Court’s CEQA Ruling Reaches Beyond Residential Development

Posted in California, Environmental Quality, NEPA, Rulemakings

On Monday March 2, the California Supreme Court handed down a decision allowing a Berkeley home builder to use an exemption from detailed environmental assessment under the California Environmental Quality Act (“CEQA”) in its proposed construction of a nearly 10,000 square foot residence in the Berkeley hills.  While the limited holding of the case relates to residential development’s use of CEQA exemptions, the analysis in the case is likely to have an impact on commercial development and infrastructure projects.

In Berkeley Hillside Preservation v. City of Berkeley, the issue involved whether the City of Berkeley had to require an Environmental Impact Report (“EIR”) prior to construction of a 6,500 square foot residence and 3,400 square foot garage in the Berkeley hills.  the Court of Appeals accepted the argument of those opposing the project, that, due to its size which was out of proportion to other residences and the instability of the hill to support a home of this size, an exception to the exemption should apply.  Specifically, opponents argued that there is a “reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances.” CEQA Guidelines section 15300.2(c).   The California Supreme Court reversed the Court of Appeal and determined that the residential exemption applies, and there were no applicable exceptions.

CEQA, the state analog to the National Environmental Policy Act or NEPA, requires certain projects to undergo an assessment of potential environmental impacts prior to approval.  The CEQA process can result in an exemption, a Negative Declaration, a Mitigated Negative Declaration (“MND”) or an EIR.  In this case, the City of Berkeley as the Lead Agency determined that this residential construction could commence without analyzing impacts under CEQA and no exceptions to that exemption were present.

The case and oral arguments focused on the term “unusual circumstances.”  The Court of Appeal had found that the existence of significant impacts was itself an usual circumstance.  The Supreme Court disagreed, as this determination would exist in all contested matters.  The Supreme Court held that it cannot be simply that there are impacts, but that the impacts must be “due to” the “unusual circumstances.” As a matter of statutory construction, the phrase “due to unusual circumstances” must be given attention, and not disregarded.  “Unusual Circumstances” have always been difficult to identify, and the nexus of those circumstances to the impacts must be demonstrated.  In practice, this determination will be made by the lead agency and both developers and objectors will use the advice from this case.  Project opponents will attempt to show early on that there are unusual circumstances in a project and that those unusual circumstances create significant environmental impacts. Project developers may consider having the permitting agency explicitly state there are no unusual circumstances, a finding which is not required on the face of CEQA.  And, in the case where there is a possibility of unusual circumstances creating significant impacts, a project developer may wish to skip the exemption and proceed directly to the MND or EIR stage, and not risk a challenge about the applicability of an exemption.  Under the regulations, an MND should take 6 months and an EIR should take a year, though both those timeframes are rarely met.  Nonetheless a developer may consider whether the opposition’s fight about CEQA analysis may eat up valuable time which might be spent analyzing the impacts.

 

State of Alaska Continues Slow Progress in Adjudicating Instream Flow Water Rights

Posted in Northwest, Water Law

The State of Alaska’s Department of Natural Resources (DNR) continued its slow and steady progress to issue the first instream flow water right to a non-governmental organization with a February 18, 2015 notice requesting comments on an instream flow water right application by the Chuitna Citizens Coalition Inc. (Chuitna).

Parties wishing to comment on the application must do so by March 4, 2015.

As we described in a previous blog post, instream flow water rights can be controversial among consumptive water users because they decrease the legally available supply of water for other uses that may arise in the future.  Conversely, instream flow water rights are often championed by non-governmental and other entities seeking to protect environmental values supported by maintaining specific water levels in a given waterbody.

Chuitna originally filed its application in 2009 but it languished for over two years until Chuitna brought suit over DNR’s delay in 2011.  In October 2013, an Anchorage trial court ruled in Chuitna’s favor finding that DNR’s over-long delay violated Chuitna’s due process rights.  A little more than two years later on February 18, 2015, DNR published notice of the application, which is the first step in the public portion of the process for adjudicating the right.

This notice comes a little more than six months after DNR’s publication of notice for an instream flow water rights application by the United States Fish and Wildlife Service

Though DNR appears to be picking up the pace, there are several hundred more applications waiting in the wings.  Whether DNR can keep up its progress in the light of impending cuts to the state government’s operating budget remains to be seen.

ANWR News: The Fine Print of President Obama’s Executive Action to Create Over 12 Million Acres of Wilderness

Posted in Land Use

The United States Fish and Wildlife Service (FWS) is administratively implementing President Obama’s recommendation that certain lands in the Arctic National Wildlife Refuge (ANWR) in Alaska be designated as wilderness.  FWS is finalizing a management plan for ANWR that will treat more than 12 million acres of the area as wilderness for the next 15 years – the plan’s duration.

FWS must manage wildlife refuges under its jurisdiction in Alaska by using what is called a Comprehensive Conservation Plan (CCP).  A CCP is a land use planning document that guides the agency in its management decisions regarding lands within the refuge.

FWS began the planning process for ANWR’s next CCP in 2010.  FWS previously released drafts of the CCP for public comment.

The current notice regarding the CCP identifies FWS’ preferred alternative as being to manage substantial amounts of lands within ANWR as wilderness.  FWS is publishing notice of the revised CCP and its preferred alternative for public review, but is not taking further public comment at this time.

Parties interested in resource development opportunities in northern Alaska should review the draft CCP for ANWR because it will provide insight both into how ANWR may be managed for the foreseeable future and FWS’s thinking on resource issues that are likely present in other parts of northern Alaska.  Though FWS is not taking further public comment at this time, Congress will certainly be taking a closer look and interested parties may have further opportunities to present their viewpoints.

FERC Proposes Tighter “Hold-Harmless” Commitment Standards for Utility Mergers

Posted in Electric Power, FERC

The Federal Energy Regulatory Commission (FERC) is proposing to revise its standards for determining whether proposed utility mergers and other asset transfer transactions subject to its jurisdiction under Section 203 of the Federal Power Act have the potential to have an adverse effect on cost-based rates for transmission service or wholesale electric service.

FERC’s policy statement, if adopted, may affect the willingness of utilities to enter into utility mergers and other asset transfer transactions in the future.  The proposed policy statement was published January 27 in the Federal Register, and comments are due by March 30.

 A regulated entity is able to satisfy FERC’s concern that a proposed utility mergers and other asset transfer transaction will not have an adverse effect on FERC-jurisdictional rates by providing a “hold-harmless commitment.”   Currently, such a commitment has entailed agreeing that for five years after the transaction closes, the entity will not seek to recover transaction-related costs or transition costs in such rates except to the extent that there are demonstrable merger-related savings.

However, in the proposed policy statement, the FERC is proposing to make the following changes to its policy for review of hold-harmless commitments:

1. Applicants will be required to identify the costs to which the hold-harmless commitment applies.  Although the FERC will determine on a case-by-case basis the costs that must be encompassed within the hold-harmless commitment of each applicant, it has prescribed a non-exhaustive list of costs incurred to explore, agree to, consummate and implement a transaction which it believes should be covered.  Also under the proposed policy statement, the FERC would bar recovery from ratepayers of similar costs that are associated with transactions that are pursued but never completed.

2. Applicants that propose hold-harmless commitments will be required to describe in detail the controls and procedures that will be used to identify and track those costs from which their customers are to be protected.  This discussion would be required to include a describe how the applicants define, designate, accrue, and allocate transaction-related costs, explain the criteria used to determine which costs are transaction-related, and discuss the accounting and rate-making procedures that would be used track and allocate those costs.

3. The hold harmless commitment will be required to be of unlimited duration.

4. The FERC will no longer require adoption of hold harmless commitments for transactions that will not have an adverse effect on rates.  Among the transactions that fall into this category are the purchase of an existing generating plant or transmission facility that is needed to serve the acquiring company’s customers or forecasted load within a public utility’s existing footprint in compliance with a resource planning process or to meet specified NERC reliability standards.  Applicants may also demonstrate that other types of transactions meet this standard as well.

 

Washington State Producers and Retailers of Mercury-Containing Lights Face New Regulations

Posted in Health and Safety, Natural Resources, Northwest

The New Year brought with it new obligations for any company that produces or sells mercury-containing lights in (or into) Washington State.  As of January 1, 2015, the State’s recycling program and corresponding funding mechanism is fully operational, and participation is mandatory for producers of mercury-containing lights.

While the statute and regulations impose unclear requirements on retailers of mercury-containing lights – such as contributing to consumer education – the bottom line for retailers is that penalties are imposed on retailers for only one thing: selling bulbs from an unapproved producer. So retailers should talk to their producer, and check the list of approved producers.

Background

Mercury is an ingredient in high-intensity discharge bulbs (HID), neon bulbs, ultraviolet bulbs (often used to disinfect drinking water), and florescent lights, including the ubiquitous, spiral-shaped compact fluorescents used in homes.  Businesses that accumulate a significant amount of used mercury-containing bulbs should handle the bulbs as universal waste.  And individuals are now prohibited from disposing of the lights in the trash.

The legislature realized that it needed a way to pay for the handling and recycling of all the bulbs that came from historically unregulated sources like residences.  In 2010, Ecology passed the Washington Mercury-Containing Lighting Recycling Act, which established a product stewardship program funded by producers of the lights.  The producers didn’t like that idea, however, and the National Electrical Manufacturers Association (NEMA) sued to block the law’s implementation.  The State settled with NEMA by agreed to alter the program’s financing structure.

Implementation

As implemented, the law mandates that the product stewardship program is financed by the consumer.  Consumers pay a $0.25 charge on each bulb when purchased, but the producer is still responsible for remitting the fee to the State’s contractor that operates the program.  So as practical matter, the producer is still paying for the program by building the $0.25 fee into its costs and passing that cost along to the consumer.  Producers must register with an approved stewardship program, and there is currently only one approved program – LightRecycle  Washington, which is operated by PCA Product Stewardship, Inc. on the State’s behalf.

Things get trickier for retailers, however.  The primary requirement imposed on retailers is that they must sell bulbs only from approved producers.  Retailers need not register as part of the program unless they choose to remit the $0.25 fee on the producer’s behalf.  Some retailers opt to do so for simplicity.  In either case, retailers collect the $0.25 handling charge on the State’s behalf by building the cost into the sale price, or they eat the cost.

Constitutionality

When it comes to out-of-state or purely online retailers selling bulbs into Washington, the State may be walking a thin constitutional line.  The $0.25 fee looks a lot like a sales tax.  And U.S. Supreme Court precedent in Quill Corp. v. N. Dakota By & Through Heitkamp prohibits the imposition of sales taxes on retailers without a “substantial nexus” to the taxing state, which requires at least a physical presence.

The Washington statute appears to attempt to avoid this problem by requiring only “Washington retailers” to include the fee in the purchase price.  But the statute does not define “Washington retailer,” and even those who are not obligated to include the fee in the price must do so or take a loss.  The principle of Quill may be outdated in the Internet age, and other states have begun to push its boundaries, but it lives on for now.

 

Model Remedies Under Washington’s Model Toxic Control Act – A Modest First Step for Impacted Soil Sites

Posted in Land Use

In December 2014, the Washington Department of Ecology (“Ecology”) issued a white paper discussing the status of its work toward developing “model remedies.”  In 2013, the Washington Legislature directed Ecology to establish these model remedies and the 2014 white paper discusses seven draft model remedies developed for sites with petroleum contaminated soil.

Model remedies are cleanup actions that are determined in advance to meet regulatory requirements if a site meets the eligibility criteria for the remedy.  If a model remedy is used, it is not necessary to conduct either a feasibility study or a disproportionate cost analysis.  Furthermore, if a liable party seeks a “no further action” determination from Ecology, fees for the review are waived.

As might be expected, the model remedies are aggressive and do not provide for risk-based closure. They do address situations where residual soil contamination remains in place subject to recorded restrictive covenants.

However, the draft model remedies outlined in the white paper, while a good first step, are still very limited. First, the model remedies only apply if soil is the impacted media – they do not apply if groundwater, surface water, sediment or indoor air are impacted.   Second, the model remedies also do not apply to sites with contaminated soil below the water table, even if the groundwater is not impacted.

Third, the model remedies also do not apply to sites with contaminated soil when petroleum contamination has been detected in groundwater above the practical quantitation limits.  In other words, even if the groundwater concentrations are below cleanup levels, the model remedies cannot be applied if contaminants are detected in groundwater.

At this time, it is unclear when Ecology will finalize these model remedies or when model remedies for other impacted media will be proposed.

CERCLA Settlements Get a Different Look: the Ninth Circuit May Have Set a New Level of Scrutiny in State of Arizona v. Tucson

Posted in CERCLA, EPA, Rulemakings

The Ninth Circuit has further defined the level of scrutiny required by a court when evaluating settlements under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).  In State of Arizona v. City of Tucson, the Ninth Circuit refused to defer to the settling state agency and required the lower court to independently scrutinize the settlement terms.

This decision will clearly impact the level of scrutiny required by a court when a state proposes to settle both state and federal cleanup liability at a site.  What isn’t clear is whether this decision will impact the level of scrutiny required for all settlements and/or settlements by a state agency under the laws of its state.

Background

The State of Arizona sought judicial approval of proposed settlements with a number of responsible parties.  The settlements resolved the settling parties’ liability under CERCLA and Arizona environmental law.  The District Court approved the settlements and recognized its obligation to independently scrutinize the settlement terms.  However, the District Court opinion did not include any substantive analysis of the settlements’ terms.

The Ninth Circuit stated that it is not enough if evidence sufficient to evaluate the settlement terms is before the court.  The lower court must “actually engage with that information” and explain why the evidence indicates the settlement is substantively “fair, reasonable, and consistent with CERCLA’s objectives.”  The district court must evaluate the specific settlement amounts relative to each party’s liability and consider other factors, such as litigation risk, when determining if the settlement payments are appropriate under the circumstances.

Greater Deference to the EPA than State Agencies

 The Ninth Circuit acknowledged that EPA would be given a greater level of deference in any settlement under CERCLA, but it would not provide the same level of deference to the state agency.  The court expressly declined to apply the “abuse of discretion” standard, apparently because the state was settling with defendants pursuant to a statute the state was not “charged with enforcing.”  The Ninth Circuit seemed to be willing to allow state agencies “some deference” with regard to settlements under their state laws, but it did not say it would allow the agencies the same level of deference provided to EPA under CERCLA.

 

Governor Jerry Brown Calls for 50% Renewables by 2030

Posted in California, Renewables

Yesterday during Governor Brown’s inaugural address for his 4th term, the Governor announced 3 ambitious carbon-reduction goals.

  1. Increase from 33% to 50% electricity derived from renewable sources;
  2. Reduce today’s petroleum use in cars and trucks by up to 50%; and
  3. Double the efficiency of existing buildings and making heating fuels cleaner.

Stay tuned. This means lots of new regulations and initiatives in California in the near future as the various agencies figure out how to achieve these goals!

FERC ORDERS NEW YORK ISO TO REFUND OVER-CHARGES RESULTING FROM HURRICANE SANDY

Posted in FERC, Rulemakings

The Federal Energy Regulatory Commission has ordered the New York Independent System Operator, Inc. to reopen and resettle billings for electricity it supplied during the November/December 2012 billing periods, and to refund to DWT client GDF Suez Energy Resources, NA over-charges erroneously billed to Suez as a result of Hurricane Sandy.  GDF Suez Energy Resources, NA v. New York Independent System Operator, Inc. and Consolidated Edison Company of New York, Inc., 149 FERC ¶ 61,257 (2014).  Suez was represented in this proceeding by Jim Mitchell, a partner in the Washington, DC office of DWT.

During the Fall of 2012, Suez supplied electricity to various retail customers in lower Manhattan, including a large office building at 55 Water Street.  Electricity to serve those customers was purchased by Suez from the NYISO and delivered through the distribution system of Consolidated Edison Company of New York, Inc.

Flooding caused by Hurricane Sandy disrupted the supply of electricity to lower Manhattan and damaged the electric service meters in that area.  Therefore, bills for electricity supplied by the NYISO during November and December 2012 were estimated bills that were based on historical consumption patterns.  Con Ed, which was responsible for metering deliveries, subsequently determined that the electricity consumption attributed to 55 Water Street during that period was over-stated by more than 260%.  However, the revised estimates for electricity consumed during that period were not made available by Con Ed until the time allowed in the NYISO Tariff for revision of settlements had expired.  As a result, the NYISO was unable to issue corrected bills after the extent of the billing error had been determined without a FERC order.

In its order, the FERC found that Hurricane Sandy was an extraordinary event.  The FERC further concluded that its failure to order payment of refunds would cause significant injustice, because the delay in preparation of the revised estimates precluded Suez from challenging its bills for electricity supplied during November and December 2012 within the time allowed under the NYISO Tariff.  In a concurring statement, FERC Commissioner Philip D. Moeller encouraged the NYISO and all other regional transmission organizations “to work with their stakeholders to ensure that they have transparent processes for correcting invoices and provide market participants with sufficient time to remedy lost or invalid meter data.”

Charging Forward: California PUC Expands Utility Role in EV Charging Infrastructure Deployment

Posted in California, Electric Power, Rulemakings

In a final decision determined on December 18th, the California Public Utilities Commission (CPUC) overturned its blanket prohibition on utility ownership of electric vehicle (EV) service equipment (such as EV charging stations) and endorsed an expanded role for utilities in developing and supporting plug-in electric vehicle (PEV) charging infrastructure.

The CPUC’s earlier July 2011 decision prohibited electric utilities from owning PEV charging infrastructure beyond what they needed for their own fleets or workplaces.  However, the CPUC pledged to “revisit” that ban on utility ownership of public charging infrastructure if utilities presented evidence “of underserved markets or market failure in areas where utility involvement is prohibited”.

Making good on its promise, the CPUC is now revisiting the role of utilities in PEV charging infrastructure deployment in a current rulemaking, which it recently joined with San Diego Gas & Electric Company’s (SDG&E) Application to create an EV-grid integration pilot program.  Rather than set a specific standard for utility participation in the PEV charging infrastructure deployment, the CPUC will evaluate utility proposals on a case-specific basis, with the consolidated SDG&E Application providing its first opportunity to do so.

In evaluating a utility proposal, the CPUC will apply a balancing test weighing the benefits of utility ownership of PEV charging infrastructure against the competitive limitations that may result from such ownership.  “[A]t a minimum” the CPUC will examine the following factors:

 “(1) The nature of the proposed utility program and its elements; for example, whether the utility proposes to own or provide charging infrastructure, billing services, metering, or customer information and education.

(2) Examination of the degree to which the market into which the utility program would enter is competitive, and in what level of concentration.

(3) Identification of potential unfair utility advantages, if any.

(4) If the potential for the utility to unfairly compete is identified, the commission will determine if rules, conditions or regulatory protections are needed to effectively mitigate the anticompetitive impacts or unfair advantages held by the utility.”

 As a result of this decision, PEV charging infrastructure deployment becomes a significant potential investment and growth opportunity for California utilities and provides an important and perhaps game-changing ally for EV proponents.