Environmental Law ReSource

Climate Change After Copenhagen

David Wagner — Tue, 09 Mar 2010 10:48:48 -0500

This post was written by Dave Wagner.

Reed Smith attorney Jennifer Smokelin participated in a seminar sponsored by the Climate Decision Making Center (CDMC) on March 8, 2010 and addressed her time spent at the United Nations' Framework Convention on Climate Change (UNFCCCC or COP 15) in December 2009. Jennifer's presentation, which is available here, discussed COP 15 and the likely affect of the Copenhagen Accord from the perspectives of two stakeholder groups: business and industry non-governmental organizations (BINGOs) and the general citizenry. In particular, Jennifer analyzed the commitments offered thus far under the Copenhagen Accord, compared them to commitments under the Kyoto Protocol and what that means for business and the environment, and opined regarding likely US actions to implement the Copenhagen Accord.

The CDMC is anchored at Carnegie Mellon University's Department of Engineering and Public Policy. It was founded in 2004 with a five-year, $6.9 million grant from the National Science Foundation. Collaborating investigators and graduate students are located at the University of British Columbia, the University of California at Berkeley, the University of Calgary, Oxford University, Stanford University, Pacific Risks, and The Wharton School at the University of Pennsylvania. At the CDMC, researchers are studying the limits in our understanding of climate change, its impacts, and the strategies that might be pursued to mitigate and adapt to change.

USEPA Increases Regulatory Oversight of Hazardous Waste Imports and Exports

David Wagner — Mon, 08 Mar 2010 13:19:34 -0500

This post was written by Lou Naugle, Chris Rissetto and Dave Wagner .

Almost 10 years after the United States committed in an international agreement to strengthen its hazardous waste regulations, the U.S. Environmental Protection Agency (EPA) issued a final rule that governs the shipping of hazardous waste between the United States and other countries. Details on the new rule can be found in The Sentinel, Reed Smith's quarterly newsletter that discusses export, customs and trade developments.

According to EPA, the new measures will increase regulatory oversight of the international shipping of hazardous waste and provide stricter controls. The final rule, which will be effective on July 10, 2010, is also designed to make international shipment regulations under the Resource Conservation and Recovery Act more consistent with those of the Organization for Economic Cooperation and Development (OECD), a consortium of 31 Member countries that includes the United States. Key changes to the rules include:

Modifying the requirements concerning international shipment of hazardous waste destined for recovery among OECD countries;
Establishing notice and consent requirements for SLABs intended for reclamation in another country;
Changing the hazardous waste import-related requirements for U.S. hazardous waste management facilities to confirm that individual import shipments comply with the terms of EPA’s consent; and
Revising the EPA address to which exception reports concerning hazardous waste exports are to be sent.

Franchisors: Are You Prepared for the UK's Carbon Reduction Commitment?

David Wagner — Mon, 01 Mar 2010 14:00:02 -0500

This post was written by Siobhan Hayes.

In earlier postings we introduced the UK’s Carbon Reduction Commitment (Energy Efficiency) Scheme (“CRC”). From 1 April 2010 the CRC Regulations will apply and many franchisors will be responsible for the carbon emissions of their franchisees. Franchisors will need information from their franchisees and may incur costs under the CRC that may not be easily recovered from franchisees.

The final draft of the CRC Regulations provides that where a franchisee

carries out it franchise business under the franchisor’s name,
using premises exclusively for that business,
and the franchisor ‘agrees’ the internal or external appearance of the premises which is similar to other premises covered by other franchise agreements

then the fuel supplies to the franchisee for each compliance year for CRC will be the franchisor’s fuel supply. So when it comes to reporting and buying allowances to cover the franchisor group’s carbon emissions under CRC the franchisor must include the franchisee’s CRC fuel consumption.

For a franchisor to assess its CRC compliance requirements for phase 1 (which starts on 1 April 2010) the franchisor must determine:

which companies in its group were operating in the UK on 31 December 2008 ;
which franchise agreements were in existence for franchise businesses in the UK on 31 December 2008;
whether any of those group companies and franchisees had a half hourly electricity meter in the qualification year being the calendar year 2008; and
locate records of its own group companies and its franchisees electricity consumption through half hourly meters in 2008.

If 2008’s electricity consumption was above 6,000 MWh it will have to comply with CRC in full. Between 3,000 and 6,000 MWh of electricity consumed in 2008 will give it reporting obligations under CRC but not the full compliance obligations applying from 1 April 2011 requiring it to buy carbon allowances, etc. It’s worth noting that even the existence of one half hourly meter in 2008 gives companies the obligation to provide contact details online.

Where landlords supplied 2008’s electricity either to companies in the franchisor’s group or to the franchisees themselves then the landlords will be responsible for any CRC compliance obligations and not their tenants.

By the way, some franchisor groups may be able to take advantage of the new provisions in the CRC Regulations enabling them to split large groups of companies into separate groups for compliance purposes. But note: it is not possible to do so in a way that leaves part of the group outside the CRC! If the groups cannot be split for compliance purposes then the group will have extra reporting requirements for any subsidiaries that are high enough consumers of electricity that would have to comply if they were a single entity without a group structure.

The use of “franchise” in the CRC Regulations means that many vertical distribution agreements would be caught as well as true franchise arrangements. Many pre-existing contracts may not provide for the costs of CRC to be recovered by the franchisor. Companies involved may want to review these provisions.

Also, groups with parent companies outside the UK will have to nominate a UK subsidiary company to comply with the CRC.

When does this information first need to be made available? By the deadline for registration for the CRC which is 30 September 2010.

What's next? Full CRC compliance including reporting on fuels consumed, keeping records, buying allowances, surrendering allowances following the end of each CRC compliance year and reviewing their franchise agreements to see whether any CRC costs can be passed on to the franchisees.

This posting is short and has been simplified somewhat compared to the CRC Regulations; it is based on the final draft of the Regulations laid before Parliament. To address and discuss CRC issues, Reed Smith is hosting a series of client workshops and seminars. Please contact your usual Reed Smith attorney or the author if you would like details on upcoming events or further advice related to CRC.

Finnair's Eco Ad Has Its Wings Clipped

David Wagner — Fri, 19 Feb 2010 11:10:28 -0500

This post was written by Alun Jones and John Feldman. The original post can be found on Adlaw by Request.

On January 6, 2010, the UK's advertising watchdog, the Advertising Standards Authority (the ASA), issued a decision upholding complaints it received against a poster that promoted the Finnish airline, Finnair. The poster featured an image of an Airbus flying above Finland's coastline and stated, "Be eco-smart. Choose Finnair's brand new fleet."

Finnair supported its statement on the basis that it had a new fleet of planes and it structured its flight routes with an eye toward increasing fuel efficiency. The ASA did not find that support very compelling. ASA decided that readers were likely to interpret "eco-smart" as analogous to "environmentally friendly," implying that flying Finnair would have little or no detrimental effect on the environment. Furthermore, the ASA required robust substantiation for the fuel efficiency claims beyond Finnair's emissions data. ASA even questioned whether the ad was clear enough in defining the nature of the comparison: Was Finnair comparing its old fleet with its new fleet, or its new fleet with other airlines?

That general environmental claims lead to serious headaches at the ASA is nothing new. Consider the ASA's September 2009 decision upholding complaints against the Malaysian Palm Oil Council's "Palm Oil-The Green Answer" article. But, how specific do you need to go in order to be clear of a "general environmental claim"?

In a decision involving the carrier EasyJet, the ASA reviewed the claim "Because we operate Europe's most modern fleet, our planes emit 30% fewer emissions per passenger mile than traditional airlines. So you can enjoy your holiday safe in the knowledge you'll have done more for the environment than Gordon's taxes ever could." Similar to the Finnair ad, to be sure, but in the case of EasyJet, ASA held that the ad did not mislead consumers into believing that traveling with EasyJet was environmentally friendly. According to ASA, consumers were likely to understand that all airlines would cause environmental damage. There had also been a great deal of press regarding the doubling of Air Passenger Duty by the British government, and the advertisement would likely be read in that context. However, EasyJet based its calculations for the "30% fewer emissions" claim primarily on the number of passengers they could carry in their planes. Because they could carry more passengers than most other airlines, it followed, according to EasyJet, that the CO2 emissions per passenger were 30 percent less. There was no evidence that supported the claim that EasyJet's younger planes had 30 percent fewer emissions per passenger mile. Thus, ASA found the ad to be partially substantiated and partially in breach of the CAP Code.

That ASA hates open-ended, general environmental claims is clear. But, it is too easy to conclude that "green" claims are impossible for industries that are inherently big contributors to greenhouse gases. As the EasyJet decision shows, careful casting of the claim can make a world of difference. In another example, ASA accepted the substantiation of EDF Energy, which promoted itself in conjunction with "Green Britain Day," using the advertising line, "Brought to you by EDF Energy, sustainability partner of London 2012." Even though this advertisement produced far greater public outcry than the Finnair advertisement (149 complaints versus 4), ASA found the promotional line to be permissible.

Why This Matters

Specificity and clarity is the key. All of the relevant guidance in the UK on environmental marketing – the CAP Code, the ICC Code, Clearcast Guidance and DEFRA's Green Claims Code, all of which are informed by the ISO's standard 14021 – make it very difficult to use broad, general "green" claims. Linking vague descriptions, such as "friendly" or "kind" with words such as "eco," "ozone" and "nature," is to be avoided according to the Codes, as is the use of terms such as "sustainable," "green" or "non-polluting." This is in line with the detailed guidance given on the use of some specific terms, such as "biodegradable" and "recyclable" by ISO 14021.

So, why did Finnair fail when EasyJet flew (in part)? Finnair's use of "eco-smart" was probably just too general and too vulnerable to multiple interpretations. Somewhat ironically, if Finnair had been more comparative in its advertising, comparing the age of its fleet with that of other airlines, and drawing a direct environmental benefit claim from that fact, ASA might have been less critical. The more hard-hitting but specific claim could have given Finnair the cover, whereas the general "eco-smart" claim did not. We often see comparative claims given more leeway than absolute environmental benefit claims, which can be misinterpreted as communicating a greater "green" message than may be intended. And, finally, as the EasyJet and EDF Energy cases suggest, placing an environmental message into a context that touches on current affairs can help to demonstrate that the public is cognizant of the limited environmental message.

Reed Smith Discusses Copenhagen in The National Law Journal

David Wagner — Fri, 12 Feb 2010 16:56:46 -0500

This post was written by Larry Demase and Jennifer Smokelin.

In this article published in The National Law Journal, Reed Smith attorneys and Copenhagen attendees Larry Demase and Jennifer Smokelin discuss outcomes from the United Nations' climate change conference while focusing on what may happen to the domestic energy sector. They emphasize that, despite the questions surrounding international climate negotiations, the Obama administration will continue to push to reinvent the domestic energy sector, if for no reason other than economic stimulus. This push is reinforced by the recent proliferation of "energy security" and "green jobs" bills proposed in Congress. As for changes, they also explain that, during the next 10 to 20 years, we can expect a threefold increase in supply from renewables such as wind and solar. They also look for coal-supplied electricity to trickle off during the next 40 years but, assuming a viable carbon capture and storage program, in the near term significant production of electricity from coal will remain.

Who's in Accord with the Copenhagen Accord - and What Does It Mean?

David Wagner — Tue, 09 Feb 2010 15:31:37 -0500

This post was written by Larry Demase, Jennifer Smokelin and David Wagner.

January 31, 2010 marked the official deadline for parties to the Copenhagen Accord to submit their respective plans for reducing greenhouse gas emissions. However, this was not considered a “hard deadline” by the UNFCCC Secretariat and thus responses still trickle in. To date, 95 countries have officially agreed to “associate” with the Accord, with certain emitters (arguably key emitters) also including emission reduction actions in their statement to the UNFCCC. Some big global emitters have signed on to the Accord – the US Climate Action Network (USCAN) indicated that as of the date of this posting, countries representing 80.8% of global emissions are in accord with the Copenhagen Accord.

But this fails to take into account the hodge-podge assortment of reductions so far pledged under the Accord – and the effect thereof. And it’s not clear whether activities related to the Accord represent some progress or a setback, or serve as a distracter to the two UNFCCC working groups that are negotiating an agreement that would take over when the first commitment period of the Kyoto Protocol expires at the end of 2012. First, consider some of the reduction pledges:

Annex I entity and Kyoto Protocol-signatory European Union (with collectively 12% of global GHG emissions) pledged a 20-30% reduction in overall GHG emission from a 1990 baseline by 2020.
At the same time, Annex I and late-Kyoto-signatory Australia (with nearly 5% of global GHG emissions) pledged a 5-25% reduction in overall GHG emission by the same time from a 2000 baseline (which translates roughly into a 3-24% reduction from 1990 levels, according to Australia GHG Inventory data).
In contrast, Annex I but non-Kyoto-signatories like the United States (with almost 15% of the global GHG share) pledged a 17% reduction from 2005 levels by 2020, which translates into a mere 3.87 percent reduction from 1990 levels.
Kyoto-signatory Canada, the United States largest trade partner, not surprisingly similarly pledged a 15% reduction from 2005 levels by 2020, which leads to an increase in GHG emissions of 0.25% from 1990 levels for that nation.

These vastly different reduction commitments among Annex I nations bode ill for even-handed (and more likely sustainable) GHG reductions. Also, keep in mind that developing (non-Annex-I) nations have different reduction commitments from Annex I nations for reasons of historic responsibility. But having Accord commitments differ (in type and amount) among non-Annex-I nations – what we see emerging under the Accord – is likely not workable in the long-run and perhaps not even in the short term. For example, developing countries such as China (with 16% of global GHG) pledge a 40-45% reduction by 2020 and India (with nearly 5%) pledged a 20-25% reduction in GHG intensity, a measure of GHG emissions per dollar of GDP. GHG intensity reductions cannot accurately be represented in terms of reductions on a 1990 base year due to wide variation in GDP projections so it is impossible to gauge such a commitment against Annex I nations. Not only is this non-gaugeable commitment likely to meet with resentment in the US Congress when is comes to passing domestic GHG legislation (although “GHG intensity” reductions were the only reduction measures offered as recently as one year ago by the Bush administration), but it differs from other non-Annex I countries. Non-Annex I Brazil (with a little more than 6% of global GHG emission) and a few other nations have pledged reductions not in absolute terms or in terms of GHG intensity, but on a “Business as Usual” (BAU) model, which is a commitment to reduce emissions from the most plausible projection of the future GHG emissions if climate-friendly emission reductions were not taken. In the case of Brazil, which has pledged a 36-39% reduction on a BAU model, this actually translates to an increase of between 2-7% in GHG emissions from a 1990 baseline.

So what does the Accord mean? It appears to mean different things to different countries. What we are seeing looks a lot like “from each according to ability” from a reduction standpoint and if you add in the Copenhagen Green Climate Fund (the financial pledges to support mitigation and adaptation in certain at-risk nations in paragraph 8 and 10 of the Accord), there is a component of “to each according to need.” It doesn’t take a Marxist scholar to recognize what is developing – and add the fact that there are no enforcement mechanisms under the Copenhagen Accord to encourage compliance and little verification of target compliance, one begins to worry whether the Copenhagen Accord can lead to a fair, ambitious and binding agreement to solve the climate crisis. On the positive side, it did bring the major players into the mix. But the Accord’s role is unclear given the soft and differing commitments and the continued work of the two working groups trying to hammer out the post-Kyoto agreement.

It's Official: SEC Adopts Interpretive Guidance About Climate Change for Public Companies

David Wagner — Mon, 08 Feb 2010 15:48:20 -0500

This post was written by David Mittelman, Eulalia Mack, Todd Maiden, Lou Naugle, Jennifer Smokelin and J. Todd Arkebauer.

A week after the Securities and Exchange Commission (the "SEC") voted to adopt interpretive guidance addressing public company disclosure standards in connection with climate change, they made it official. On February 2, 2010, the SEC issued the interpretive guidance. The guidance reflects an effort by the SEC to provide companies with greater clarity about existing obligations under the federal securities laws that relate to climate change and its consequences. Reed Smith updated its client bulletin to provide some more information on the key disclosure areas.

China Imposes Additional Requirements on the Import and Export of 154 Chemicals and 16 Ozone Depleting Substances

David Wagner — Fri, 05 Feb 2010 10:11:41 -0500

This post was written by Amanda Tao and David Wagner.

In the past month, China's Ministry of Environmental Protection has released two directories of substances requiring additional certifications and permitting for import and export. The directories address 154 chemicals and 16 ozone depleting substances. The Chemicals Directory for which Import and Export are Strictly Controlled updates a previous list to include nine more chemicals than the previous directory of 2008. The additional chemicals are Tributyltin-oxide, Tributyltin fluoride, Chlorotributylstannane Tributyltin chloride, Tri-n-butyltinmethacrylate, Tributyltin benzoate, Tributyltin linoleate and Tributyltin naphthenate. Companies importing or exporting any chemicals on the list must apply to the ministry for an environmental management certificate.

The Directory on Ozone Depleting Substances for which Import and Export are Strictly Controlled, released on January 6, 2010, requires companies seeking to import or export a listed substance to apply for the approval from the National Administration on Import/Export of Ozone Depleting Substances, and then apply for an import/export permit from licensing organizations authorized by the Ministry of Commerce and then present the permit to clear customs.

In the EU, 14 Substances are Added to Candidate List for Restriction under REACH

David Wagner — Thu, 04 Feb 2010 09:00:01 -0500

This post was written by Todd Maiden and Dave Wagner.

On January 13, 2010, the European Chemicals Agency added 14 substances to its Candidate List of “Substances of Very High Concern” under REACH, nearly doubling the original list of 15. The determination to include new substances on the Candidate List was based on their hazardous properties, the volumes used and the likelihood of exposure to humans or the environment.

A chemical’s placement on the candidate list may lead to the phase out or restriction of that substance. Fifteen chemicals were placed on the Candidate List in October 2008 and, of those, seven were proposed for phase out or restriction in June 2009. The European Commission has not yet adopted a decision banning or restricting any of the substances.

The listing, however, does triggers immediate obligations. For example, suppliers of articles in the EU that contain substances on the Candidate List in a concentration above 0.1% have to provide sufficient information to allow safe use of the article to their customers or upon request, to a consumer within 45 days of the receipt of the request. Suppliers of substances on the Candidate List also have to provide their customers with a safety data sheet. Additional obligations, including future requirements, can be found here.

The 14 substances added to the Candidate List are five variations of anthracene oil and paste, a form of coal tar used in manufacturing electrodes, aluminosilicate refractory ceramic fibers, zirconia aluminosilicate, 2,4-dinitrotoluene, diisobutyl phthalate, lead chromate, tris(2-chloroethyl)phosphate, and two lead-based pigments.

Triggered by Marcellus Shale Demand, Pennsylvania Plans to Open a New Oil and Gas Management Office

David Wagner — Wed, 03 Feb 2010 16:25:25 -0500

This post was written by Nicolle Snyder Bagnell.

Pennsylvania Department of Environmental Protection's Secretary John Hanger announced today that the Department plans to open a new office of its Oil and Gas Management division in Scranton, Lackawanna County, Pennsylvania. Although the exact location has not yet been decided, the purpose of the office will be to decrease travel time and locate regulators closer to the oil and gas wells they regulate, particularly the new Marcellus Shale wells planned in that part of the state. You can find the Department's press release here.

More from the Marcellus Shale: West Virginia's Department of Environmental Protection Finalizes Guidelines for Fracking

David Wagner — Tue, 02 Feb 2010 09:51:28 -0500

This post was written by Nicolle Snyder Bagnell.

On January 8, 2010, West Virginia's Department of Environmental Protection (WVDEP) finalized its industry guidance for oil and gas drilling in the Marcellus Shale. The guidance focuses on large water volume fracture treatments and addresses the use and disposal of frac fluids. As discussed in the guidance, horizontal drilling, coupled with large volume hydraulic fracture treatments, is becoming a common exploration technique. Large amounts of water mixed with sand and other additives are pumped into the shale formation under high pressure to fracture the rock around the well to create a permeability conduit to the well bore. Water used in the hydraulic fracturing process, often referred to as “frac fluid,” must be processed in one of three ways. It can be injected in permitted disposal wells, treated to remove generated pollutants then disposed of properly, or reused.

The WVDEP also added a "Well Work Permit Application Addendum" as part of its natural gas drilling permit application requirements.

USEPA Establishes an "Eyes on Drilling" Tipline

David Wagner — Tue, 02 Feb 2010 09:47:18 -0500

This post was written by Nicolle Snyder Bagnell.

Last week the U.S. Environmental Protection Agency (USEPA) launched its new "Eyes on Drilling" tipline. The toll free number and email address were created by USEPA to help address growing public concern about oil and natural gas drilling in the Marcellus Shale. In particular, they are asking citizens to report illegal disposal of wastes or other suspicious activity related to oil and gas drilling. Information about the tipline, as well as what the agency is asking citizens to include in their report, can be found here.

SEC Adopts Interpretive Guidance About Climate Change for Public Companies

David Wagner — Mon, 01 Feb 2010 15:31:27 -0500

This post was written by David Mittelman, Eulalia Mack, Todd Maiden, Lou Naugle, Jennifer Smokelin and J. Todd Arkebauer.

On January 27, 2010, the Securities and Exchange Commission ("SEC") voted to adopt interpretive guidance addressing public company disclosure standards in connection with climate change. While this interpretive guidance is not intended to impose new standards, it does serve as an important reminder for public companies, potentially as part of their disclosure controls and procedures, to assess whether climate change may have a material impact upon their business and financial condition. For details, go to Reed Smith's client bulletin that discusses this development.

Among the disclosure areas the forthcoming interpretive guidance will address, according to the SEC press release, are the following:

Impact of legislation and regulation. When assessing potential disclosure obligations, a company should consider whether the impact of certain existing laws and regulations regarding climate change is material.
Impact of international accords. A company should consider, and disclose when material, the risks or effects on its business of international accords and treaties relating to climate change.
Indirect consequences of regulation or business trends. A company should consider, for disclosure purposes, the actual or potential indirect consequences it may face because of climate change-related regulatory or business trends.
Physical impacts of climate change. Companies should also evaluate for disclosure purposes the actual and potential material impacts of environmental matters on their business.

Given the SEC's high-profile stamp of authority on this topic, public companies should expect a greater focus by the SEC staff and third-party observers in reviewing and evaluating disclosure practices about the material impact of climate change.

Pennsylvania's Proposed Drilling Regulations for Oil and Gas Wells Now Available for Public Comment

David Wagner — Fri, 29 Jan 2010 14:39:55 -0500

This post was written by Nicolle Snyder Bagnell.

Pennsylvania's Department of Environmental Protection (DEP) has just made available its proposed draft regulations for public comment. Comments must be received by the DEP by March 2, 2010. A copy of the regulations can be found here.

Pennsylvania Department of Environmental Protection to Hire 68 New Oil and Gas Regulators

David Wagner — Thu, 28 Jan 2010 17:04:05 -0500

This post was written by Nicolle Snyder Bagnell.

In a move described as an "Aggressive Action to Protect Public, Environment as Marcellus Drilling Operations Expands," Pennsylvania's Governor Ed Rendell directed the Pennsylvania Department of Environmental Protection ("DEP") to hire 68 new staff members today to work on natural gas well inspections and related oil and gas regulation. The additions will be made despite a moratorium on hiring at the DEP and will be funded entirely from the higher permit fees instituted last year for oil and gas drilling permits. In addition, Rendell commented on the DEP's proposed amendments to the current oil and gas regulations, which will be available for public comment beginning tomorrow, January 29, 2010, saying that the new regulations will:

Require the casings of Marcellus Shale and other high-pressure wells to be tested and constructed with specific, oilfield-grade cement;
Clarify the drilling industry’s responsibility to restore or replace water supplies affected by drilling;
Establish procedures for operators to identify and correct gas migration problems without waiting for direction from DEP;
Require drilling operators to notify DEP and local emergency responders immediately of gas migration problems;
Require well operators to inspect every existing well quarterly to ensure each well is structurally sound, and report the results of those inspections to DEP annually; and
Require well operators to notify DEP immediately if problems such as over-pressurized wells and defective casings are found during inspections.

Climate Change Regulation After Copenhagen: Now What? For Starters, Consider Turning Your GHG Emission Reductions into an Asset

David Wagner — Fri, 15 Jan 2010 14:56:25 -0500

This post was written by Larrry Demase, Jennifer Smokelin, Todd Maiden and David Wagner.

In this client update, Reed Smith attorneys (including COP15 delegates Larry Demase and Jennifer Smokelin) reflect on what transpired in Copenhagen and offer some advice regarding what regulated entities should do next.

Among other issues, the update discusses how to position your GHG-intensive business to minimize compliance costs in a carbon-constrained economy. It also addresses how to position your GHG emission reduction credits to serve as an asset. For example, regulated entities should make sure they have documented and verified all of the GHG credits to which they are entitled. One group of potential GHG credits that comes to mind after the economic downturn last year are credits available as a result of reduced GHG emissions. Consider: Have your facilities reduced GHG emissions in the past year, because of plant idling or reduced production capacity? Have you reduced your carbon footprint measurably and permanently? Or are you beginning to reduce your GHG emissions to improve efficiency? If so, some of these reductions in GHG emissions may be eligible for credits. These credits, which must be properly documented and verified, could potentially be sold or traded on various mandatory and voluntary markets (EU-ETS and/or the Chicago Climate Exchange, for example), or banked for compliance with the inevitable domestic cap-and-trade program.

In short, there may be opportunity here. Reed Smith can work with you to determine which GHG reductions at your facilities are eligible for credits, and help plan how to maximize the potential opportunities, or even how to profit from these credits.

This Time We're Serious: USEPA Outlines Punitive Measures Related to Cleanup of the Chesapeake Bay Watershed

David Wagner — Thu, 07 Jan 2010 14:20:11 -0500

This post was written by Chris Rissetto, Lou Naugle, Bob Helland, and David Wagner.

Last week, the U.S. Environmental Protection Agency ("EPA") outlined what it terms a "rigorous accountability framework" for addressing pollution levels in the Chesapeake Bay and its tributaries. Federal efforts to cleanup the Chesapeake Bay watershed have been ongoing for over 25 years and this is the first time that EPA has outlined a number of punitive measures intended to force compliance with pollution controls by the six Chesapeake Bay states – Delaware, Maryland, New York, Pennyslvania, Virginia and West Virginia – and the District of Columbia.

The update by Reed Smith describes the regulatory regime in place to address the harmful levels of pollutants in the watershed and discusses the punitive measures along with the legal issues they raise. The update also discusses what measures are expected in 2010, especially as they relate to the Chesapeake Bay total maximum daily load (TMDL) for nitrogen, phosphorus and sediment.

USEPA Slated to Propose New Nanomaterial Rules in 2010

David Wagner — Sat, 02 Jan 2010 11:35:50 -0500

This post was written by David Wagner.

Last month, the U.S. Environmental Protection Agency (USEPA) reported in its Unified Agenda that two rules related to nanomaterials may be proposed this year. The first possible regulation is a reporting rule for as yet unspecified nanoscale materials under Section 8 of the Toxic Substances Control Act (TSCA). A notice of this proposed rulemaking is slated for June 2010. The second possible regulation, under Section 4 of TSCA, is a test rule for certain multi-wall carbon nanotubes as well as nanoscale clay and alumina. USEPA reported that notice of the test rule is scheduled to be published in November 2010.

The Unified Agenda, which is published twice a year, provides information about Federal regulatory and deregulatory activities, and includes descriptions about USEPA regulations currently under development or recently completed.

With respect to the proposed reporting rule for certain nanoscale materials, USEPA reported that the “rule would propose that persons who manufacture these nanoscale materials notify USEPA of certain information including production volume, methods of manufacture and processing, exposure and release information, and available health and safety data. The proposed reporting of these activities will provide USEPA with an opportunity to evaluate the information and consider appropriate action under TSCA to reduce any risk to human health or the environment.”

As for the proposed test rule for certain multi-wall carbon nanotubes and nanosized clays and alumina, USEPA explained that a test rule may be needed to determine the health effects of these materials. It said that “[t]he results of the tests that could be required under this rule would assist USEPA in understanding the health effects of the substance to manage/minimize any potential risk and exposure. Results could also help with establishing a correlation between the chemical/physical properties and health effects needed to protect the health of workers handling the substance.”

Pennsylvania Supreme Court Upholds Commonwealth Court Decision, Overturning Pennsylvania Mercury Rule

David Wagner — Mon, 28 Dec 2009 15:45:23 -0500

This post was written by Mark Mustian and Larry Demase.

On December 23, 2009, the Pennsylvania Supreme Court issued a decision in PPL Generation v. Commonwealth of Pennsylvania. The state Supreme Court upheld the lower court’s determination that the Pennsylvania Mercury Rule (“PA Mercury Rule”) was unlawful, invalid and unenforceable. The lower court case was decided January 30, 2009 (No. 446 M.D. 2008, Commonwealth Court of Pennsylvania), and a discussion of that decision can be found here.

The Pennsylvania Supreme Court’s decision in favor of PPL Generation puts an end to state efforts to specially regulate mercury emissions from electric generating units (“EGUs”) in Pennsylvania, at least until such a time as the USEPA promulgates new federal mercury regulations, or until enabling legislation is passed in Pennsylvania authorizing the adoption of mercury regulations. Thus, EGUs in Pennsylvania will not be required to comply with the state mercury rule’s limits on mercury, which were to become effective January 1, 2010.

The PA Mercury Rule was published after the passage of two federal rules, one of which removed EGUs from the Clean Air Act (“CAA”) section 112 list of mercury pollution sources (the “Delisting Rule”) and the other that regulated EGUs under section 111 of the CAA (Clean Air Mercury Rule “CAMR”). In order to regulate sources or categories of sources, EPA must add them to the section 112 list. EPA had previously listed EGUs under the section 112 list for mercury, and the Delisting Rule removed EGUs from the list. The Delisting Rule was declared unlawful and vacated in New Jersey v. EPA, 517 F.3d 574 (D.C. Cir. 2008). Once the Delisting Rule was declared invalid, the court found that the CAMR no longer had a legal basis and it was also vacated.

In the Commonwealth Court decision, Judge Pellegrini found that that since the Delisting Rule and CAMR were void ab initio, the EGUs must have been deemed to have always been listed pursuant to the CAA section 112 list. Since the Pennsylvania Air Pollution Control Act (“APCA”) specifically prohibits the state’s Environmental Quality Board from regulating sources or categories listed under section 112, the Board had no authority to promulgate the PA Mercury Rule. The Supreme Court upheld this determination, rejecting the commonwealth’s arguments in favor of retaining the rule.

The commonwealth made several procedural and preliminary arguments. They argued that PPL Generation had waived its right to challenge the PA Mercury Rule because it did not appeal it when originally published. The Supreme Court rejected this argument, finding that this case was predicated on the New Jersey decision, not on the rule passage. The court also rejected arguments regarding procedural irregularities and reasonableness, since those were not the issues evaluated in the lower court rule. Finally the court rejected an assertion that the Board had the authority to promulgate the PA Mercury Rule pursuant to its general authority, since that argument ignored the specific limitation prohibiting the Board from passing the rule.

The Supreme Court also rejected the commonwealth's substantive arguments. The commonwealth argued that at the time it passed the mercury rule, it had the authority to do so. It asserted that subsequent changes in federal law should not affect the validity of the Board’s actions, because to do so would invite extreme regulatory uncertainty. The court found that in this case, “recognition of the inevitable effect of a federal court’s invalidation of a federal regulation does not presage so much uncertainty that the Board will be prevented from properly exercising its regulatory function.” The commonwealth also argued that the New Jersey decision did not specifically invalidate state regulations predicated on the Delisting Rule, and argued that the Commonwealth Court should not give the New Jersey decision retroactive effect. The Supreme Court determined that it could not ignore the effects of a federal decision upon the power of the states to act consistent with the federal Supremacy Clause, observing: “[t]he notion that a state regulation adopted in the interregnum, but which would have future effect, can stand outside the scheme by virtue of some grandfathering principle is unworkable in a federal system.”

On the issue of pre-enforcement review, the state Supreme Court’s decision also made it quite clear that it still considers the 1984 decision in Arsenal Coal Company v. DER, 477 A.2d 1333 to be good law. The Commonwealth had argued that PPL Generation was not entitled to pre-enforcement review of the PA Mercury Rule, as it had an adequate administrative remedy available. The court found that the regulation would have a “direct and immediate” effect on the industry, and that in accordance with Arsenal Coal, a pre-enforcement review of the validity of the regulation was appropriate.

The Pennsylvania Supreme Court’s ruling in this case is significant in several different ways. First, it clearly supports the argument that the validity of an environmental regulation may be challenged outside of an administrative case before the Environmental Hearing Board. For significant regulations that have a “direct and immediate” effect, this presents the opportunity to avoid the delay and piecemeal approach of litigating through the administrative tribunal. Second, the court recognized that environmental regulation in Pennsylvania is inextricably linked to the larger federal regulatory structure. Significant decisions on federal regulations, which potentially affect state regulations, cannot be ignored.

Reed Smith participated in the Pennsylvania case, both in the commonwealth case and in the appeal, through the filing of an amicus brief on behalf of two utility clients.

The Copenhagen Accord and COP-15: Brokenhagen or Some Version of Hopenhagen?

David Wagner — Mon, 28 Dec 2009 14:57:40 -0500

This post was written by Larry Demase and Jennifer Smokelin.

As they return from two weeks at the COP in Copenhagen, Reed Smith lawyers Lawrence Demase and Jennifer Smokelin reflect on what transpired and offer some advice regarding what to look for in the future:

The Copenhagen Accord, negotiated by only five countries and outside of the UN process, lays out the high-level agreements in principle of the largest emitters that are not party to the Kyoto Protocol: China, the United States, and India. The most significant outcome is the agreement with regard to greenhouse gas (GHG) reduction by non-Kyoto parties, particularly China and the United States. With China's use of oil increasing at an incredible rate, even modest commitments (like a decrease in GHG intensity), could be a significant undertaking. The impact of the Copenhagen Accord may be felt more in the price of oil than in the reduction of emissions of GHG.

Specifically, the Copenhagen Accord offers a statement of purpose, which is to meet the “objective of the UN Framework Convention on Climate Change to stabilize GHG concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system”; that is, to keep global warming to 2˚C. It offers $30 billion a year in financial support to poor countries with “balanced allocation between mitigation and adaptation,” growing to $100 billion by 2020, as the Copenhagen Green Climate Fund. The Accord includes key U.S. requirements such as international oversight of emissions reductions (transparency) for both Annex I and (more importantly) non-Annex I countries. The Accord also doesn’t address certain issues. Missing was hard-core MRV (monitoring, reporting and verification) for non-Annex I countries - the Accord only commits signatories to domestic MRV with “provisions for international consultation and analysis ... that will ensure that national sovereignty is respected” for non-Annex I countries. In other words, China will not open its books to verification by the West but will allow “clearly defined guidelines” for international consultation with regard to its domestic MRV. Missing also was any firm commitment to fund the promised $100 billion a year by 2020. A commitment (as requested by Africa and other vulnerable countries) for deeper emission cuts to hold the global temperature rise to 1.5˚C this century was not accepted. More of a surprise, missing was any 2050 goal of reducing global CO2 emissions by 80 percent - something that had been steadily included in discussion drafts up to that point. No overall targets for emission reduction for 2020 were specified, although individual parties are welcome to volunteer what they will reduce. Perhaps most tellingly, missing was any pledge to formalize the Accord as a binding treaty in Mexico City next year. In the end, it seems to be a short-term cash deal with a “to each his own” voluntary reduction pledge - but with non-Kyoto parties at the table.

Some countries criticized the side discussions that led to the Accord as a “back room” deal. In the language of the formal proceedings, the COP only “took note” of the presence of the Copenhagen Accord, and made it an attachment to the proceedings. Despite the informality of how it was developed, other countries were invited to join the Accord, and so far 27, including Australia and the European Union, have signed on with their own pledges. It is indeed a daunting task to try to get 193 countries to agree on anything, let alone something as complicated as addressing climate change, but Maldives President Mohamed Nasheed predicted Saturday that about 120 nations are already engaged in the overall international negotiation process and would sign up with reduction pledges before a 31 January 2010 deadline under the Accord to turn in pledges. If this “back room” approach proves successful, it raises questions as to whether the UN is the most effective forum to address international agreement on climate-change issues.

As we stated in the Day 1 post, the original goal of COP-15 had been an update to the Kyoto Protocol, and development of a Long-Term Cooperative Agreement, and in that it is a half-empty outcome. Negotiating the details of the two prime agreements still needs time, and many issues couldn’t be decided by party negotiators, but needed political decisions at the minister (or higher) level. But when the ministers arrived in Copenhagen, the gaps were too large and the time remaining too short to come to resolution. However, on the half-full side, there were originally four overriding issues that needed to be resolved: (1) How much will Annex I countries reduce their emissions of greenhouse gases? (2) How much will major developing countries such as China and India limit the growth of their emissions? (3) What is financial aid offered by Annex I countries to developing countries to engage in reducing their emissions and adapting to the impacts of climate change? (4) How is that money going to be managed? Looking at these four overriding issues, the Accord addresses but fails to completely resolve all of them. In that, COP-15 was a limited success. Clearly, there is still work to do this year and at the COP next year in Mexico City.