Transcript NATIONAL ENVIRONMENTAL POLICY ACT (NEPA)

Impending GHG Emission Reduction
Requirements
EUCI
June 17, 2010
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PRESENTED BY
Peter Glaser
Troutman Sanders LLP
401 9th Street, NW
Suite 1000
Washington, DC 20004
202.274.2950
www.troutmansanders.com
Potential GHG Regulation
Congress
or
EPA
or
Both?
Kerry-Lieberman
• Targets and timetables same as WaxmanMarkey
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4.75% below 2005 levels by 2013
17% below 2005 levels by 2020
42% below 2005 levels by 2030
83% below 2005 levels by 2050
• Electric power and refinery sectors covered
at start (2013, versus 2012 for W-M);
transportation sector through fee set at
allowance price; manufacturing in 2016.
K-L Electric Sector Allowances
• 2013: 2.408 billion allowances (compared
to sector’s allocation of 2.004 billion in
2012 in W-M)
• 2013 through 2015: 51% percent of the
allowances created for these years
(compared to W-M’s allocation of 43.75%
for 2012-13 and 38.89% for 2014-15)
• EPA projects allowance prices of $16$17/mton in 2013 and $23-24 in 2020
(2005 dollars)
K-L Electric Sector Allowance
Distribution
• LDC allocations based on a 75%
emissions/25% sales formula (as
compared to 50/50 in W-M)
• Merchant coal generation: 10% of electric
sector allowances (same as W-M)
• Long-term contract generation: 4.3% of
electric sector allowances (same as W-M)
K-L Price Collar
• Allowances sold at ceiling price of $25/ton
of CO2 in 2013, escalating at 5%/year plus
inflation (W-M: $28 start)
• Floor price established by sale of
allowances from regular auction starting at
$12/ton of CO2 in 2013 escalating at 3% a
year plus inflation
• Cost containment reserve of 4 billion
allowances (compared to W-M’s 2.5 billion)
K-L Preemption
• Bill preempts (or at least seems intended to
preempt) CAA regulation except for performance
standards for coal-fired EGUs permitted after 2008
• Plus EPA retains the authority to establish GHG
performance standards for the existing fleet (!)
• Preempts state cap-and-trade programs, but not
other state regulation (such as California’s AB 32Global Warming Solutions Act)
• No preemption of ESA, tort lawsuits, NEPA, or CWA
regulation
K-L Technology Incentives
• Incentives for nuclear power
• Incentives for CCS development
(similar to Rockefeller-Voinovich
CCS bill)
• Provisions for expanded off-shore
drilling and permitting
K-L Offsets
•
Use of up to 2 billion tons/year of offsets allowed
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Both domestic and international offsets can be used for
compliance on a 1:1 basis through 2017
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Of the 2 billion tons/year, 1.5 billion tons of offsets must
come from domestic sources and 0.5 billion tons from
international sources
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Starting in 2018, 1.25 international offset credits will be
needed to constitute an emission allowance.
EPA can allow up to 1 billion tons from international sources
if it projects that less than 1.5 billion tons will be available
from domestic sources at allowance price levels.
According to EPA, domestic offsets account for 19% of
total GHG abatement, and international offsets account
for 18-29% of total GHG abatement
K-L Phase-Down of Coal
Generation
• Incentive allowances to encourage
retirement of up to 35 GW of merchant coal
generation
• Coal-Fueled Fleet Transition Program:
coal units that agree to retire eligible for tax
benefits, exemption from regulation
→ Neither provision fully developed
Prospects
• Stand-alone bill seems a long-shot
• Attach to energy bill? To BP bill?
• Energy only bill? Utility only bill?
• One from column A and one from column B?
• House has already enacted W-M, so if something
passes Senate, it can be conferenced with W-M in
lame duck session
EPA GHG Regulation
• Endangerment
Finding
Litigation
• Auto Rule
• Johnson
Memorandum
Reconsideration
• Tailoring Rule
• GHG BACT Guidance
• NSPS
Endangerment Finding Litigation
• Finding issued December 7, 2009
• Court challenges from Texas,
Alabama, Virginia and numerous
industry groups
• 17 states on each side
• Don’t expect decision in litigation
until 2012
Auto GHG Rule
• Published in Fed. Reg. May 7, 2010
• DOT MPG - EPA gCO2/mi. standard
• According to EPA, makes six GHGs “regulated air
pollutants” under the PSD and Title V programs
• Will subject most of industrial capacity in U.S. to
GHG regulation under these programs, yet EPA
refuses to do an economic study
• Lawsuits 60 days after publication in Fed. Reg.
Some already filed
Johnson Memo Reconsideration
• Reconsideration issued 3/2/10
• GHGs will be deemed to be regulated beginning
1/2/11 when auto rule “takes effect”
• Will apply to any PSD permit then in process
• Phase in per tailoring rule
• Numerous lawsuits filed, including by enviro
organization that will continue argument that GHGs
already regulated
Tailoring Rule
• Published in Fed. Reg. 6/3/10
• Phase in of PSD and Title V:
- 1/2/11: Sources subject to PSD “anyway” will be
required to do GHG BACT if increase emissions by
75,000 tons per year
- 7/1/11: New sources above 100,000 tpy and
existing sources that increase emissions by 75,000
subject to PSD
- EPA will do future rulemaking and future study to
determine whether lower emitting sources will be
regulated and how, but commits that no source
below 50,000 tpy will be regulated for six years
• Statutory thresholds are 100/250 tpy, so
questionable legal validity…but will anyone
challenge?
EPA GHG BACT Guidance
• Technical guidance will begin rolling
out later this summer
• Policy guidance by end of year
• Stakeholder input, but no
commitment to formal notice and
comment
NSPS
• EPA has agreed to promulgate
NSPS for coal EGUs that will include
GHG standards
• Commence rulemaking probably
next year
• Will apply to new and modified
sources and could also apply
eventually to existing-unmodified
sources
Will Congress Preempt EPA GHG
Regulation?
• Murkowski Resolution to disapprove
Endangerment Finding and cut off
EPA GHG regulation defeated last
Thursday 53-47
• Rockefeller bill to delay regulation for
2 years
• Casey-Carper to …?