Energy & Environmental Law Blog

Energy & Environmental Law Blog

Analyzing the critical energy and environmental issues of the day

OSHA Rules for Injury Reporting Change

Posted in California, Federal, Northwest, Rulemakings

Starting January 1, 2015, OSHA rules will require companies nation-wide to report all work-related in-patient hospitalizations, amputations and eye losses within 24 hours.  Oregon is one of 6 states that already require employers to report single in-patient hospitalizations.  Previously, employers in most other states were only required to report in-patient hospitalizations if three or more employees were affected, so even amputations or eye losses did not have to be reported.  OSHA rules in all states continue to require that employers report work-related fatalities within 8 hours. 

The new rule also contains an option for electronic reporting.  OSHA estimates that each report will take about 30 minutes.  Some industries with relatively low injury and illness rates are exempt from federal OSHA reporting requirements, as are employers with 10 or fewer employees.  Details can be found at 79 FR 56129 (Sept. 18, 2014).

FERC Announces Technical Conferences Focused on Clean Power Plan

Posted in Electric Power, Federal, FERC

The Federal Energy Regulatory Commission has announced plans to hold a series of technical conferences around the country to discuss the impact of the proposed Clean Power Plan on electric utilities.  The first of these conferences will be a National Overview technical conference to be held at the FERC on February 19, 2015.  Subsequent regional conferences will be held in Washington, DC, St. Louis, MO, and Denver, CO.  Among the topics to be discussed in the National Overview conference are (i) whether state utility and environmental regulators, regulated entities and others have the appropriate tools to identify reliability and/or market issues that may arise, (ii) potential strategies for complying with the EPA regulations and coordinating with FERC-jurisdictional wholesale and interstates markets, and (iii) how planning entities, industry and states coordinate reliability and infrastructure planning processes with environmental compliance efforts to ensure the adequate development of new infrastructure and to manage any potential reliability and operational impacts of proposed compliance plans.

The Space Between Draft and Final

Posted in Climate Change, EPA, Rulemakings

EPA has a lot to consider in finalizing its rule directing states to create programs to reduce greenhouse gas (GHG) emissions from fossil fuel fired electric generating units.  The public comment period on a recently proposed rule generated 1.6 million comments from companies, governmental agencies and members of the public.

EPA targets June 2015 for publication of the Final Rule, though such targets are not set in stone.  In the proposed rule, published on June 2, 2014 EPA direct states to create their own programs to reduce GHG emissions from the power sector by 30% by 2030.  While providing state-specific goals and some guidance, EPA left the details to the states.  Such flexibility is one of the hallmarks of this rule, allowing the states’ plans to be tailored to meet the energy, environmental and economic goals of the individual state.

Now, EPA turns inward and considers the comments in finalizing the rule.  In the meantime, practitioners and regulators meet to discuss how this rule and other measures addressing climate change will play out.  In January 2015, the Rocky Mountain Mineral Law Foundation and the Edison Electric Institute offer a summit to debate the laws and regulations aimed at addressing climate change.  See RMMLF/EEI — Special Institute on Climate Change Law and Regulations:  Planning for a Carbon Constrained Regulatory Environment

At issue in the debates surrounding this proposed rule, and the subject of some litigation, is the question of EPA’s authority to regulate GHG emissions and the ability to direct states to address this global issue in state-specific plans.  The proposed rule was drafted under the auspices of EPA exercising its authority under section 111(d) of the Clean Air Act.  Specific panels at the RMMLF Climate Change Summit directly address this jurisdictional issue and invite discussion about whether EPA has the authority and whether it is subject to legal challenge. Invitees will also consider whether the resulting state-specific patchwork of regulation will combine for regional programs (such as the Northeast’s RGGI) and whether the states will have to strive to meet the programs in some early acting states (such as California).  While the electric industry is the focus of the proposed rule, other fields see the writing on the wall and see the benefit of early debate.

Back at EPA, with 1.6 million comments, and several lawsuits pending challenging the timing and authority of the rule, it seems unlikely EPA will make the June 2015 target to finalize the rule.  We will keep you posted.

Oregon Carbon Tax Study Released

Posted in Climate Change, NERC, Northwest

Today the Oregon Legislative Revenue Office released a report on the economic and emissions impacts of a carbon tax in the state.  The report was prepared by the Northwest Economic Research Center (NERC) at Portland State University.  The NERC study was funded by a $200,000 appropriation approved during the 2013 session under SB 306.

The NERC study modeled a number of scenarios, varying the size of the tax and the degree of revenue repatriation, to assess differing effects on greenhouse (GHG) gas emissions and the economy.  Not surprisingly, the study shows a direct correlation between the amount of the tax and the level of GHG reductions—the higher the tax, the more resulting GHG emissions.  What may be less intuitive is that the overall economic impact of a carbon tax, under all scenarios, is relatively minor.

As explained in an upcoming article in Power Magazine, which will be posted to this blog site in January, a tax should be considered among other carbon reduction strategies, including a cap and trade system.  California has adopted a combination of cap and trade and clean fuels approaches, whereas British Columbia has implemented a carbon tax.  Washington State is also considering alternative programs to reduce GHG emissions.

A carbon tax bill will likely be introduced in the 2015 legislative session, but we are unable to predict the likelihood of passage at this writing.  In addition, the Oregon legislature will be taking up extension of the existing Clean Fuels Program, which is scheduled to sunset in 2015.  We believe extension or elimination of the sunset date is likely to be enacted.

Washington’s Courts Deliver Possible Double Whammy Limiting Insurers’ Ability to Use a Late Tender Defense to Delay Providing a Defense

Posted in Litigation, Northwest

Liability insurance policies require notice be provided to the insurer to allow the insurers time to adequately investigate and respond to claims.   An insured’s failure to provide notice to its carrier can result in the insured losing the benefits of its policies.

Some courts have deemed an insured’s failure to provide notice within time periods that are as short as a couple of months  to be a breach of a policy’s notification requirements.  Most states, however, also require a showing (by the insured or the insurer) that the carrier was prejudiced by the tardy notice before a loss of coverage results.

The recent ruling in Expedia, however, calls into question whether insurers can delay providing a defense based on allegedly late notice.

In fact, the rulings by the Expedia Court could be viewed as “double whammy” for insurers.   Not only will they be obligated to pay defense costs until they get a judicial ruling, but their ability to seek a judicial ruling on the duty to defend may be limited if their actions could be prejudicial to their insureds.

It is hard to say how the Expedia ruling will affect the handling of insurance claims going forward, but if nothing else, it provides further ammunition for policy holders seeking a defense from their carriers.   Another pro-insured ruling in an already pro-insured State.

 Expedia Ruling 

As explained in Expedia,  that to prevail on a defense of late tender in Washington, a carrier must demonstrate that it was “actually and substantially prejudiced” by the delay.   Generally speaking, it is difficult for carriers to make a showing of actual and substantial prejudice because it requires they demonstrate that things would have been better if they had participated earlier.  If a carrier can make such a showing, it could obtain relief from the duty to indemnify and defend the underlying claim.

Expedia involves a declaratory judgment action the travel company brought against its insurers seeking to confirm their duty to defend lawsuits filed by various taxing authorities (states, counties, municipalities, etc.).   Expedia had known about the potential claims in 2002, but had not notified its carriers until 2005, about six months after the first case was filed.   The carriers denied coverage and refused to provide a defense based on numerous grounds.

Expedia then tendered an additional 62 lawsuits to its carriers in 2010 and 2011, and again they denied coverage and refused a defense.  When Expedia brought its declaratory judgment action, the insurers counterclaimed arguing, among other things, that they had no duty to defend the company because Expedia had failed to provide timely notice.

Expedia moved for summary judgment on the duty to defend, and the carriers sought and were granted a continuance to seek discovery related to the late notice.  This ruling effectively delayed any adjudication of Expedia’s claim.  Expedia petitioned the Supreme Court for discretionary review.

The Supreme Court reversed and held that the trial court had erred in delaying adjudication on the issue of the carriers’ duty to defend. “Determining whether the duty to defend has been triggered,” the Court reasoned, “is a separate inquiry from whether an insurer may be relieved of its duty to defend or indemnify due to a defense such as a claim of late tender by the insured.”  The duty to defend is determined on the “eight corners of the insurance contract and the underlying complaint,” and arises when a “complaint construed liberally, alleges facts which could, if proven, impose liability upon the insured within the policy’s coverage.”

The Court said it was “incorrect” for the trial court to have delayed the decision on the duty to defend while the insurers conducted their discovery.  If the carriers had a duty to defend Expedia, they were required to have done so while they attempted to establish their late tender defense.

The Court went on to say that the carriers were obligated to pay defense costs until they obtained a “judicial declaration” saying they had no duty to defend.  Finally, the Court directed the trial court to stay the carriers’ discovery until it made a factual determination as to whether the discovery was potentially prejudicial to Expedia in its defense of the tax claims.

 

Science Advisory Board Finally Weighs In on Waters of the U.S.

Posted in EPA, Rulemakings, Water Law

The Science Advisory Board has at last released its peer review  of EPA’s draft report on Connectivity of Streams and Wetlands to Downstream Waters: A Review and Synthesis, the technical support for the proposed rule on definition of “waters of the United States” under the Clean Water Act.  The SAB paper is generally supportive of EPA’s analysis.

As has been reported in this blog, the proposed rule has generated a great deal of controversy, causing EPA and the Corps to extend the comment period twice (November 14 is the current deadline).  Part of the controversy relates to EPA’s analysis of the technical literature supporting the proposed rule, particularly the effect of tributaries, intermittent and ephemeral streams on navigable waters.  A detailed explanation of the proposed rule, case law leading up to it, and prior agency guidance can be found here.

The SAB paper confirms EPA’s science, but recommends more nuance in some instances.  For example, the paper agrees that tributaries, intermittent and ephemeral streams can have a significant effect on the physical, biological and chemical integrity of receiving waters, but notes that the question is not simply whether there is a connection between upstream sources and navigable waters.  Rather, the paper urges EPA to acknowledge there is a “gradient of connectivity.”

The SAB also makes recommendations to improve the clarity of the EPA report and make more definitive statements.  For example, the SAB states that the literature supports a firmer statement on downstream functions of “unidirectional,” non-floodplain wetlands.  The SAB also recommended that EPA expand the discussion of approaches to quantifying connectivity, which would increase the utility of the document for regulators.

The SAB paper certainly is a necessary element of the scientific support for EPA’s and the Corps’ proposed rule for determining jurisdiction.  But it is unfortunate that the agencies reached their policy choices in the proposed rule without the benefit of the SAB’s input.

Whether that reversed sequence matters in the long term remains to be seen.  Even if EPA and the Corps had waited until the SAB completed its peer review, the rule would probably have come out roughly the same and attracted as much comment.

California Groundwater Regulation Enters the 20th Century!

Posted in California, Water Law

On September 16, 2014, California Governor Jerry Brown signed into law a trio of bills to establish a statewide regulatory scheme for the use of groundwater: Assembly Bill 1739, and Senate Bills 1168 and 1319.  California had previously been the only Western state to leave “reasonable” use of groundwater to the tender mercies of individual pumpers until such time as the aquifer is adjudicated, a process that takes decades to complete.

California historically had asserted regulatory authority only over surface streams and defined underground channels.  But the most prevalent, and unregulated, use was of percolating groundwater.  Overlying landowners were deemed to have “correlative” rights to the use of groundwater under their lands; that is, rights proportionate to the amount of owned land.

This laissez faire approach has led to widespread overdrafting of groundwater resources, subsidence, and ruined groundwater quality.  Further, as stream flows decline—whether because of drought or climate change—more users turn to groundwater pumping, lowering the water table and driving up the cost of energy to lift the water.

All the other Western states exerted authority over groundwater in the previous century.  For example, Oregon’s groundwater appropriation law was enacted in 1955.  California finally joined the 20th Century with enactment of these bills as a response to unprecedented drought conditions and the fear that climate change will make matters worse.

In a nod to intense water politics, the bills take a local planning and management approach.  Other states direct their water agencies to establish basin plans to manage their groundwater resources.  In that sense, California has shown leadership in adopting a more decentralized approach to a water-scarce 21st Century.  Under the new legislation, local entities are to develop management plans for their groundwater basin for state review.  The state would intervene only if it deems the management plans inadequate or not enforced.  This local approach has not prevented certain water users from denouncing the bills as a state power grab.

My first job as a lawyer was as staff counsel to the California State Water Resources Control Board.  In response to what was then the worst drought on record, Jerry Brown, in his first iteration as Governor, convened a blue ribbon commission to review California water rights law.  The group was staffed by U. C. Davis law professor Hap Dunning and a team of young water lawyers, including myself.  We reviewed every aspect of California water law in a series of white papers, and made several sweeping and not so sweeping recommendations for reform.

None of the recommendations passed out of legislative committees.  I suspect the current legislation would not have passed either but for the historic and severe drought conditions now facing the state.  California will need to do whatever it can to stretch its limited and declining water resources to support its powerful agricultural economy and growing cities.  Let’s hope that the new groundwater legislation will be a solution for this century.

California Desert Renewable Energy Conservation Plan Aims to Provide Certainty for Renewable Developers: Draft Released

Posted in California, Land Use, Natural Resources

On September 23, 2014, the U.S Department of Interior and the State of California released a draft Desert Renewable Energy Conservation Plan (“DRECP”), which covers over 22 million acres in Imperial, Inyo, Kern, Los Angeles, Riverside, San Bernardino, and San Diego counties.  The DRECP proposes to protect environmentally-sensitive areas of the California desert while also streamlining permitting in areas the DRECP deems appropriate for siting solar, wind, geothermal, and associated transmission development.

The DRECP is the result of an extensive, multi-year public participation process, which included historic levels of collaboration between the U.S. Bureau of Land Management, U.S. Fish and Wildlife Service, California Energy Commission, and California Department of Fish and Wildlife.  It is intended to provide renewable energy developers with permit timing and cost certainty under the federal and California Endangered Species Acts while at the same time preserving, restoring, and enhancing natural communities and related ecosystems.

The DRECP should be of interest to any companies developing, or considering future development of, renewable energy projects in the California desert areas.  The public will have until January 9, 2015 to provide comments, and public information sessions will be held throughout the fall of 2014.  The draft DRECP and further information on the public comment process is available at www.drecp.org.

ECOS Releases “Waters of the U.S.” Paper

Posted in EPA, Federal, Water Law

On September 15, the Environmental Council of the States (ECOS) released a paper produced by the American College of Environmental Lawyers (ACOEL) on the new “waters of the U.S.” rules proposed by EPA and the Army Corps of Engineers.  The new rules are intended to bring clarity as to the jurisdictional reach of the federal government in light of a somewhat muddled guidance from the Supreme Court.  The proposed rules have generated controversy; the House of Representatives recently passed a bill to block them.

The ACOEL paper includes a complete review of previous case law, a compilation of prior guidance and an analysis of the rule.  It was produced by a team of 10 ACOEL (http://www.acoel.org/) members from private practice (including DWT), academia and NGOs.

ECOS, the association of state environmental regulatory agencies, entered into a Memorandum of Understanding with ACOEL under which ACOEL members would lend their expertise to ECOS on complex federal policy initiatives.  ACOEL provides objective analysis without taking an advocacy position, informing the states in aid of their formulating their own policies.

Additional IRS Guidance on Physical Work Test and Facility Transfers for Energy Tax Credits

Posted in Federal, Renewables

The IRS has released additional guidance (Notice 2014-46) on the “beginning of construction” requirement for the renewable energy production tax credit under Code Section 45 (PTC) and energy investment tax credit under Code Section 48 (ITC).  The notice clarifies the application of the Physical Work Test and the effect that certain transfers of a facility after construction has begun will have on a taxpayer’s ability to qualify for the energy tax credits.  The energy tax credits are available to a qualifying facility if construction of the facility began before January 1, 2014. Read More