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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The EPA’s most recent permit approval for construction of a coal-fired power plant is being challenged on climate change grounds. In the third challenge of its kind, opponents of a proposed 1,500-megawatt power plant on Navajo land in northwest New Mexico appealed the EPA’s decision to the Environmental Appeals Board (“EAB”) on grounds the permit violates Clean Air Act (”CAA”) standards for a number of pollutants, including CO2. The EAB heard oral arguments in two similar challenges and a decision in the precedent-setting In re Deseret Power case is expected from the EAB any day.

The CAA Prevention of Significant Deterioration (“PSD”) permit for the plant was issued after supporters of the facility filed suit arguing that EPA failed to act within the statutory 12-month window. The $3 billion project, which is financed by Sithe Global Power subsidiary Desert Rock Energy Company and the Navajo-owned Diné Power authority, has been held up since 2003. The proposal is opposed by environmental groups and New Mexico Governor Bill Richardson, who indicated that the state will join in the EAB appeal.

The appeal alleges that the EPA failed to analyze the impact of the plant on greenhouse gases or to require appropriate pollution control technologies. The EPA has consistently argued that CO2 is not subject to permitting restrictions until the agency makes an endangerment finding, which the agency is now considering as part of an Advanced Notice of Proposed Rulemaking. The EAB will rule on the legality of EPA’s argument in the In re Deseret Power decision, which is expected to have a widespread effect on pending challenges to coal-fired power plants.

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Last week, the Riverside County Superior Court invalidated an environmental impact report (EIR) for a 1,766-acre residential and commercial project that had been proposed for development in the northwest open space areas of Coachella Valley near Joshua Tree National Park in Southern California. The Court cited the EIR’s failure to analyze the project’s greenhouse gas (GHG) emissions and other climate change impacts. [Center for Biological Diversity, et al. v. City of Desert Hot Springs, et al. (Riverside County Superior Court - Case No. RIC 464585) (August 6, 2008)].

The Palmwood Project proposed nearly 2,700 homes, 1 million square feet of commercial space, a 400-unit hotel, a commercial amphitheater, and golf courses comprising 45 holes. Environmental groups Center for Biological Diversity and Sierra Club challenged the Project, arguing, inter alia, that respondent City of Desert Hot Springs’ failure to make a meaningful attempt to analyze the Project’s climate change impacts violated the California Environmental Quality Act (CEQA), the state version of the National Environmental Policy Act.

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Approximately 90 cities, 29 counties, and 20 towns across the United States have adopted some type of green building program.  So far, even what are considered the most aggressive green building codes, such Los Angeles’ and San Francisco’s, have not drawn any notable legal attacks.  On July 3, 2008, however, a group of national HVAC industry groups and local companies sued the City of Albuquerque, New Mexico, in federal district court to challenge two recently adopted green building city ordinances.

In 2007, the Albuquerque City Council unanimously adopted a High Performance Building Ordinance and a two-volume local Energy Conservation Code, which established air conditioner, furnace, heat pump, and water heater energy efficiency requirements that were more stringent the federal requirements.  For example, the new regulations would raise the standards for HVAC equipment in all new and retrofit commercial and residential projects to a Seasonal Energy Efficiency Ratio (SEER) of 15 for air conditioning and an Annual Fuel Utilization Efficiency (AFUE) of 90% for heating.  By comparison, the current U.S. Department of Energy (U.S. DOE) minimum standards for the same equipment are lower - at 13 SEER and 78% AFUE.

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The air pollution permit for a new 1200 megawatt coal-fired power plant in Early County, Georgia, was revoked yesterday by a state court judge.  Environmental groups challenged Longleaf Energy Associates’ (Longleaf) permit approval, arguing (among other things) that Longleaf did not properly account for CO2 emissions or incorporate the required pollution control technologies in the plant design.

Superior Court Judge Thelma Wyatt Cummings Moore ruled that 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).

Any air pollutant that is subject to regulation must be mitigated with “Best Available Control Technology” (BACT).  Judge Moore rejected Longleaf’s argument that CO2 is not subject to regulation because there are no controls or limits on CO2 emissions under the CAA - or any other federal law.  “Since CO2 is ‘otherwise subject to regulation under the Act,’ a . . . permit cannot issue for Longleaf without CO2 emission limitations based on a BACT analysis.”

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The Environmental Protection Agency’s Environmental Appeals Board (EAB) heard oral arguments this morning in a precedent-setting case that will determine whether EPA is required to consider emissions limitations on CO2 as part of the permitting process for coal-fired power plants and other emitters of greenhouse gases. The case of In re Deseret Power Electric Cooperative, which challenges EPA’s refusal to use its permitting authority under the Clean Air Act (CAA) to impose on controls on CO2 emissions from a proposed Utah waste-coal fired power plant, will impact dozens of challenges to coal-fired power plant permits pending in state agencies and appeals boards throughout the country.

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In a show of the increasing influence of climate change concerns at the state level, the Kansas legislature failed yesterday to override Governor Kathleen Seblius’ veto of a bill that would have opened the door for expansion of Sunflower Electric Power Corp’s (“Sunflower”) coal-fired power plant in Holcomb, Kansas. Although the Kansas Senate easily approved the veto override by a vote of 32 to 7, the House fell four votes short.

Legislative leaders who supported the project told Sebelius last week to accept a compromise that would reduce the size of the project from 1,400 megawatts to 1,200 megawatts, or face a veto override. Sebelius, who had already vetoed the 1,400 megawatt power plant and proposed a single 660 megawatt facility, rejected the proposal, citing concerns over projected emissions of 11 million tons of carbon dioxide annually.

The showdown between Sebelius and the legislature resulted from a decision by Kansas Secretary of Health and Environment Rod Bremby last October to deny an air-quality permit for Sunflower on climate change grounds. Legislators argued that the decision to hold up the project would damage Kansas’ business climate and result in higher costs for electricity.

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Residents of a small Alaska village recently sued a group of large oil companies, electric utilities, and a coal company, alleging that the defendants’ greenhouse gas emissions are destroying the village.

The Inupiat village of Kivalina, home to roughly 400 people, is located “on the tip of a six-mile barrier reef located between the Chukchi Sea and the Kivalina and Wulik Rivers on the Northwest coast of Alaska, some seventy miles north of the Arctic Circle.” The suit contends that “[g]lobal warming is destroying Kivalina and the village thus must be relocated soon or be abandoned and cease to exist” as a result of the loss of arctic sea ice that protects the village from storms. The complaint estimates the cost of relocating the village to be from $95 million to $400 million.

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