As reported earlier, the Department of the Interior (DOI) and Federal Energy Regulatory Commission (FERC) have been negotiating an agreement to outline and clarify the agencies’ respective jurisdiction and responsibilities for renewable energy projects in offshore waters on the Outer Continental Shelf (OCS).  On April 9, Secretary of the Interior Ken Salazar and FERC Chairman Jon Wellinghoff finally signed a Memorandum of Understanding (MOU) to facilitate development of a “cohesive, streamlined process” to accelerate wind, solar, and hydrokinetic (wave, tidal, and ocean current) energy projects on the OCS, ending a long dispute between the agencies.

In short, the MOU preserves the authority of DOI’s Minerals Management Service (MMS) over offshore wind and solar projects and gives MMS authority to issue leases, easements, and rights-of-way for OCS hydrokinetic projects, for which projects FERC will then have exclusive jurisdiction to issue construction and operating licenses or exemptions.  MMS had previously asserted jurisdiction over all energy projects on the OCS, including hydrokinetic projects, and even sought to block preliminary permits issued by FERC.  Specifically, the agencies agree that:

• MMS will retain exclusive jurisdiction over the production, transportation, and transmission of energy from non-hydrokinetic OCS projects;
• MMS will: (1) have exclusive jurisdiction to issue leases, easements, and rights-of-way for hydrokinetic OCS projects; and (2) conduct any necessary environmental reviews for those actions, including reviews under the National Environmental Policy Act (NEPA), while FERC has discretion to act as a cooperating agency in those reviews;
• FERC will not issue preliminary permits for hydrokinetic OCS projects, but will: (1) have exclusive jurisdiction to issue licenses and exemptions for those projects, with active involvement of federal land and resource agencies, including DOI; and (2) conduct any necessary environmental reviews for those actions, including under NEPA, while MMS has discretion to act as a cooperating agency in those reviews;
• The agencies will coordinate to ensure that: (1) hydrokinetic OCS projects meet the public interest, including adequate protection, mitigation, and enhancement of fish, wildlife, and marine resources and other beneficial public uses; and (2) any FERC license or exemption or FERC-regulated operations under an MMS lease, easement, or right-of-way are consistent with the Outer Continental Shelf Lands Act, the Federal Power Act, and other applicable laws;
• MMS may condition leases, easements, and rights-of-way for hydrokinetic OCS projects and FERC will include in any license or exemption for those projects a requirement to comply with the MMS conditions;
• FERC will not issue a license or exemption for any hydrokinetic OCS project until the applicant has obtained an MMS lease, easement, or right-of-way;
• MMS will provide in all leases, easements, and rights-of-way for hydrokinetic OCS projects that construction or operation cannot begin without a FERC license or exemption, unless FERC notifies MMS that no license or exemption is required;
• FERC may inspect hydrokinetic OCS projects to ensure compliance with licenses or exemptions and MMS may inspect those projects to ensure compliance with any applicable lease, easement, or right-of-way; the agencies will work to coordinate inspections through development of joint policies or regulations, as appropriate;
• Each agency will use its own appropriations to fulfill its respective responsibilities;
• The agencies will work together, to the extent practicable, to develop policies and regulations for hydrokinetic OCS projects, including processes to address “hybrid” (wind/hydrokinetic) projects or projects that straddle state waters and the OCS; and
• The MOU is “strictly for internal management purposes,” does not expand or alter the scope of either agency’s authority, and shall not be construed to create any legal obligation on either agency or any private right or cause of action.

The MOU is effective as of April 9, 2009, may be modified only upon further written agreement of the agencies, and can be terminated 120 days after written notice to the other agency.

In a joint press release, Secretary Salazar noted that the MOU “will spur the development of clean, renewable energy,” while Chairman Wellinghoff noted the MOU, “[b]y removing all the regulatory barriers to the development of hydrokinetic energy” on the OCS, “will advance the development of a promising renewable resource” that will benefit consumers.

As noted earlier, however, others have questioned whether the agencies’ agreement will be effective.  For example, Senate Energy and Natural Resources Committee Chairman Jeff Bingaman has expressed doubt that the agreement will actually streamline the development process and both Chairman Bingaman and Ranking Member Senator Lisa Murkowski have suggested that a more definite legislative solution could be included in a forthcoming energy bill.

Even if not fully effective to minimize delays and inefficiencies in developing renewable energy projects in OCS waters, the MOU does end the confusion over the respective jurisdiction of the two agencies.  Still, as suggested by other recent commentary, the MOU does not resolve how MMS will address criticisms lodged against its proposed regulations for alternative energy projects in OCS waters or when either agency will issue further proposed or final rules for their respective processes.  Secretary Salazar has suggested that MMS regulations could be ready in as little as a few months, while the timeline for new FERC rules, if any, remains to be seen.  Both issues will need to be resolved before either agency can begin siting projects.

For further information about this topic, please contact Akin Gump.

This post was contributed by Lyle Denniston, writing at our sister site, SCOTUSblog.com.

Parsing what Congress means when it is silent, the Supreme Court on Wednesday decided that federal environmental regulators may let more than 500 electric power plants use less-costly devices to take water for cooling out of the nation’s waterway, even if that does less than could be done to protect fish and tiny forms of aquatic life.  The decision was a significant loss for conservationists, and for states that wanted more rigorous protection of the fish, shellfish and tiny plankton at the bottom of the aquatic food chain in their rivers and streams.

Although the ruling in Entergy Corp. v. Riverkeeper (07-588) was limited to government controls on water pollution, it seemed to speak more generally in allowing federal agencies in other fields to opt for lower-cost technology even if not the best for the environment, unless Congress explicitly forbids them to do so.

Justice Antonin Scalia examined a provision of the Clean Water Act that controls industry structures for pulling plant-cooling water out of rivers and streams, and found that Congress had said nothing there about whether EPA could weigh costs against benefits and choose a lower-cost option. “It is eminently reasonable,” Scalia wrote, “to conclude that [that section’s] silence is meant to convey nothing more than a refusal to tie the agency’s hands as to whether cost-benefit analysis should be used, and if so to what degree.”

If Congress’ silence meant prohibition, then federal agencies would not be able to take into account any considerations that Congress did not expressly leave to their discretion, Scalia said.

To Justice John Paul Stevens and two other dissenters, congressional silence—at least in this legislation—spoke more definitively.  In the environmental field, the dissenters argued, “Congress granted the EPA authority to use cost-benefit analysis in some contexts but not others” and Congress intended “to control, not delegate, when cost-benefit analysis should be used.” Thus, under the Clean Water Act, silence on Capitol Hill did not mean “an invitation for the Agency to decide for itself which factors should govern its regulatory approach.”

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UPDATE: In their conference of February 23rd, the Supreme Court declined to hear Utility Air Regulatory Group v. New Jersey, clearing the way for the EPA to enact new, stricter regulations regarding mercury emissions from power plants.

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As noted on SCOTUSblog earlier, the Obama administration moved earlier this month to dismiss a case that the Bush administration’s Environmental Protection Agency (EPA) had appealed to the Supreme Court. The case dealt with the Clean Air Mercury Rule—specifically provisions in the rule which allowed the EPA to de-list emissions sources without making specific health and environmental determinations. While this move by the Obama EPA will likely lead to the dismissal of the case in question—EPA v. State of New Jersey—another parallel case, Utility Air Regulatory Group v. New Jersey, remains before the Court.

The EPA’s motion dismiss likely puts that case in jeopardy as well; however, a coalition of electric utilities and trade organizations has asked the Court to continue Utility Air Regulatory Group v. New Jersey, arguing that the case has separate issues which are not made irrelevant by the dismissal of the EPA’s case.

Read their letter to the Court in full at SCOTUSblog.

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The U.S. Overseas Private Investment Corporation (OPIC) and the U.S. Export-Import Bank (Ex-Im) recently settled litigation seeking to require OPIC and Ex-Im to account for carbon dioxide emissions in connection with projects they support. Plaintiffs, the City Council of Boulder, Colorado, Friends of the Earth, Greenpeace, and the cities of Arcata, Oakland and Santa Monica, California, filed the lawsuit in the U.S. District Court for the Northern District of California (Docket No. C 02-4106 JSW) in August 2002.  Plaintiffs alleged that OPIC and Ex-Im provided assistance, in the form of loans and loan guarantees and insurance, to projects around the world that contribute to climate change without complying with National Environmental Policy Act (NEPA) requirements.

On March 30, 2007, in a ruling on cross-motions for summary judgment, the Court held that OPIC had not established that it was exempt from NEPA and rejected defendants’ claims that the lawsuit sought extraterritorial application of NEPA.  The Court found, however, that it could not determine as a matter of law whether the “illustrative projects” plaintiffs used for summary judgment constituted major federal actions under NEPA.  The Court also declined to rule on whether those projects were “cumulative actions” requiring a single Environmental Impact Statement.  The Court reasoned that because the projects involve substantial non-federal activity, the record was insufficient to allow the Court to determine the degree of control over the projects exercised by OPIC and Ex-Im.

The court rejected OPIC and Ex-Im’s argument that “the impacts of global warming on the domestic environment … are too remote and speculative to be considered for purposes of NEPA.”  In support of this ruling, the Court noted that the defendants did not dispute the allegation that the projects emitted GHGs, and the defendants had made statements in their own reports suggesting that GHGs contribute to global warming.  The Court noted, however, that it could not rule on the issue of causation until it determined whether the projects would have gone forward without OPIC or Ex-Im assistance.

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While the Obama administration’s legislative agenda in regards to climate change is still in its infancy, the administration has already moved to reconcile the differences between its views and the current position of government in important environmental litigation. The first of those moves came today, when Solicitor General Elena Kagan moved to dismiss the Environmental Protection Agency (EPA) ’s position in EPA v. State of New Jersey. The Solicitor General’s move in this case, which will affect the implementation of the Clean Air Mercury Rule, represents a fairly dramatic change in policy for the EPA, and likely means that the case will not be granted certiorari and recieve Supreme Court review.

Read a more complete discussion of this issue at SCOTUSblog.com.

For further information about this topic, please contact Akin Gump.

 Two days before Christmas, the DC Circuit Court of Appeals reversed course and issued a new ruling in the Clean Air Interstate Rule (CAIR) case–North Carolina v. EPA, No. 05-1244. 

In July 2008, a three-judge panel struck down the CAIR program after determining that it violated EPA’s statutory mandate.  The panel held that EPA was required to evaluate and address air pollution contributions on a state-by-state basis, whereas CAIR uses a regional approach.  In addition, they held that the EPA lacked authority to terminate or limit emissions allowances originally issued under the Acid Rain Program (ARP); many of CAIR’s environmental benefits are based on mandating accelerated retirement of ARP allowances, so that pollution is quickly reduced across the region. 

The panel then held that the rule would be vacated in its entirety and remanded to EPA to promulgate a new rule consistent with the court’s opinion.  The federal government filed a petition for rehearing and rehearing en banc on September 24, 2008.  A month later, the court issued an order directing the other parties to the case to file a response to the government’s petition. 

On December 23, 2008 the same three-judge panel granted the petition for rehearing in part and significantly modified its prior remedial order.  The Court withdrew its vacatur order and reinstated the rule — held that the rule should stay in place — pending the EPA’s reconsideration of the rule on remand.  The Court noted that, “notwithstanding the relative flaws of CAIR, allowing CAIR to remain in effect until it is replaced by a rule consistent with our opinion would at least temporarily preserve the environmental values covered by CAIR.”  The Court underscored, however, that EPA must still fix “CAIR’s fundamental flaws” in a timely manner, or face being hauled before the Court yet again.  “[W]e do not intend to grant an indefinite stay of the effectiveness of this court’s decision,” the Court cautioned.

This decision is the result of a rather uncommon process within the D.C. Circuit. At the outset, it is unusual for the DC Circuit to grant a petition for rehearing, particularly one that so substantially modifies the court’s initial ruling.  Patricia Millett, co-head of Akin Gump’s Supreme Court and Appellate practice, noted that the judges had already considered and addressed the ramifications of their vacatur decision in July, so it is “particularly unusual for the Court to reevaluate and reverse course on an issue of such consequence that had already been debated and decided.  After all, these type of administrative law issues are the DC Circuit Court’s bailiwick.”  None of the issues presented in the rehearing were strikingly new or novel - the effects of eliminating CAIR were outlined for the Court at the time.  Because the government also sought rehearing en banc by the full D.C. Circuit — something that it is relatively rare for the Solicitor General to authorize the federal government to do in that court — there is speculation that the panel’s change of heart may have been motivated by pressure or concerns from other members of the Court.

In the end, the Court determined that having an illegal program in effect is better than not having any program at all, given the environmental benefits that CAIR is expected to deliver.  EPA estimates that CAIR “will result in $85 to $100 billion in health benefits and nearly $2 billion in visibility benefits per year by 2015 and will substantially reduce premature mortality in the eastern United States.”

There is little question that the federal government believed that the environmental and public health benefits of CAIR were critically important issues, given that the Solicitor General authorized the EPA to seek rehearing en banc and the EPA included with its petition signed declarations from high-ranking air pollution officials offering support for CAIR.  Brian J. McLean, the Director of EPA’s Office of Air and Radiation, argued that vacating CAIR “would remove the primary incentive for power companies to install and operate emission controls” in many areas.  He also noted the effect that vacating CAIR would have on the markets for emission allowances under the Clean Air Act: in a four month period the price for sulfur dioxide allowances dropped by roughly 80 percent, reducing by over $3 billion the value of banked allowances being held by firms. 

Thus, in addition to achieving significant environmental benefits, the DC Circuit’s reversal is likely to send a positive message about the future of emissions markets in the US, an important issue as President-elect Obama readies his climate change agenda, and Congress returns to work with hopes of passing comprehensive carbon legislation. 

For further information about this topic, please contact Akin Gump.

 In April of 2008, Tesla Motors, Inc. sued Fisker Automotive, Inc., Fisker’s founder and CEO Henrik Fisker and other related entities in the Superior Court of San Mateo County (California), alleging that Fisker stole trade secrets to design Fisker’s own electric car, the Fisker Karma.  Tesla further alleged that Fisker committed fraud and breach of contract, among other claims. 

Tesla claimed that it hired Henrik Fisker to design the interior of its high-performance electric sedan, the Model S, previously known as the “White Star” project.  According to Tesla, Fisker took confidential technical information from Tesla while working on the White Star project and used that information to design and build its own four-door, plug-in, luxury sedan.  Tesla stated that it paid Fisker more than $800,000 for the design work performed on the White Star project and sued Fisker for the return of this money, along with other unspecified damages.

In May, Fisker requested that the judge assigned to the San Mateo case direct the parties’ dispute to private arbitration.  Fisker’s request was based on a clause in the contract between Fisker and Tesla, which required that any disputes between them be decided by an arbitrator in Orange County, California within 90 days.  The judge granted Fisker’s request for arbitration in June, and the San Mateo case stayed pending the result of the arbitration.

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On Wednesday, August 27, the State of New York announced it had settled a dispute with Xcel Energy regarding the company’s alleged failure to make adequate climate-change-related risk disclosures in its 2006 10-K filings to the Securities and Exchange Commission (SEC).  Described by State officials as the “First-Ever Binding and Enforceable Agreement Requiring a Company to Detail Financial Liabilities Related to Climate Change,” the Agreement requires Xcel Energy to disclose, as part of its annual Form 10-K SEC filings, the following information:

• Present and probable future climate change regulation and legislation;
• Climate-change related litigation;
• Physical impacts of climate change.
• Current carbon emissions;
• Projected increases in carbon emissions from planned coal-fired power plants;
• Company strategies for reducing, offsetting, limiting, or otherwise managing its global warming pollution emissions and expected global warming emissions reductions from these actions; and
• Corporate governance actions related to climate change, including whether environmental performance is incorporated into officer compensation.

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Led by New York, a group of twelve states and two cities filed suit yesterday against the EPA in the federal Circuit Court in Washington, DC.

The suit revolves around the New Source Performance Standards (NSPS), a set of federal regulations that create technology-based emissions limits for a variety of large industries.  EPA issued an updated NSPS for petroleum refineries in June 2008, but the rules do not require refineries to install equipment aimed at reducing greenhouse gas (GHG) emissions.  Instead, the new NSPS focuses on “traditional” air pollutants:  nitrogen oxides, sulfur dioxide, and particulate matter.  The suit argues that omitting GHG emissions from the NSPS violated the Clean Air Act.

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The Georgia Court of Appeals will hear an appeal of a lower court’s decision revoking an air quality permit for construction of a coal-fired power plant on grounds the state permit failed to control CO2 emissions.  The Court granted review on August 20 based on a request made by the State and supporters of the Longleaf Energy Station in Early County, Georgia.

Superior Court Judge Thelma Wyatt Cummings Moore revoked Longleaf Energy Station’s state air quality permit just last month on grounds the permit must “identify, evaluate, or apply available technologies that would control CO2 emissions” at the plant.  Citing the 2007 Supreme Court decision in Massachusetts v. EPA, Judge Moore wrote that “there is no question that CO2 is ‘subject to regulation under the [Clean Air] Act’” (CAA).

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