The Long and Winding Rule: USEPA's Cross-State Air Pollution Rule the Latest to Address Interstate Air Pollution

This post was written by Steve Nolan.

In previous posts, we have reported the vacation of the Clean Air Interstate Rule (CAIR) in 2008, CAIR's subsequent, temporary resuscitation later that year, and the 2010 release of the draft Transport Rule which was proposed to replace CAIR. On July 7, 2011, the U.S. Environmental Protection Agency (USEPA) released the final version of this rule, now renamed the Cross-State Air Pollution Rule (Cross-State Rule).

The Cross-State Rule is specifically directed at emissions from electric generating units in classes 2211, 2212 and 2213 of the North American Industry Classification System. Like CAIR, the new rule is intended to help downwind states achieve USEPA's National Ambient Air Quality Standards (NAAQS) for fine particulate matter and ozone. Also like CAIR, the new Cross-State Rule actually regulates sulfur dioxide (a chemical precursor of fine particulate matter) and nitrogen oxides (a chemical precursor of both fine particulate matter and ozone) generated by upwind states.

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USEPA Delays Proposed Greenhouse Gas Emissions Rule for Power Plants

This post was written by Jennifer Smokelin.

On June 13, the U.S. Environmental Protection Agency (USEPA) indicated that it would take additional time to review input on proposed greenhouse gas emissions limits on New Source Performance Standards for new and existing power plants. The Agency stated that it will propose the new rules by September 30, 2011, instead of the original deadline of July 26. USEPA still plans to finalize the rules in late May 2012.

New Source Performance Standards are technology-based emissions limits issued under Section 111 of the Clean Air Act that apply to new and in some cases existing facilities in a specific industrial sector. NSPSs are a set of rules distinct from (and potentially broader than) the Tailoring Rule, the set of regulations now in effect to control greenhouse gases from large industrial sources. The proposed NSPS will apply to all sources within a source category and, in this case, the source category is power plants. Currently, under the Tailoring Rule, USEPA only requires the largest industrial facilities to obtain prevention of significant deterioration permits under new source review provisions of the Clean Air Act when they expand or make modifications that increase emissions. Those permits require the facilities to install best available control technology, which is determined for each individual facility, while the NSPS impose uniform emissions limits for the industry nationwide.

The extension will also not affect USEPA's deadline to propose performance standards for petroleum refineries by December 15. As we discussed on the blog in December 2010, this is a separate settlement agreement that requires USEPA to issue the final petroleum refinery rule by November 15, 2012 (See American Petroleum Institute v. EPA, D.C. Cir., No. 08-1277, settlement reached December 23, 2010).

Proposed Pennsylvania Legislation Imposes Natural Gas Impact Fee

This post was written by Nicolle Bagnell and Ariel Nieland.

Last week, Pennsylvania State Senator Joe Scarnati (R) expanded upon a bill he introduced last month, Senate Bill 1100, which proposes to levy a $10,000 base impact fee on natural gas drillers in the Marcellus Shale. Senator Scarnati's expansions provided additional details for how the money collected from the fee would be distributed and how penalties for non-compliance would be assessed. Under the new version of SB 1100, the majority of the funds obtained from the fee are to be distributed among local counties, municipalities, and conservation districts. A portion of the funds would also be used to address statewide infrastructure and environmental impacts. The bill provides for impact fees to be retroactively assessed, meaning that drillers would be responsible for paying fees for last year's production. Bill opponents have expressed concern that the bill would chill development in the Marcellus. The Pennsylvania Senate Environmental Resources and Energy Committee will consider SB 1100 on June 14.

In Amending RoHS, the European Union Restricts Hazardous Substances in Medical Devices, Electronic Toys and Other Products

This post was written by David Wagner.

On May 27, the European Council, which represents the governments of EU Member States, revised the Directive on the Restriction of Hazardous Substances in Electrical and Electronic Equipment (RoHS Directive), and extended a ban on certain hazardous substances to a wider range of products, including medical devices, electronic toys, electrical appliances, cables, and spare parts. First adopted in 2003, the RoHS Directive bans six hazardous substances in electrical and electronic equipment, including lead, mercury and cadmium. With the amendment, the ban will now in principle apply to all electrical and electronic equipment as well as to cables and spare parts. Certain transitional periods are provided for, e.g., monitoring and control devices and medical devices will be covered in three years, in vitro medical devices in five years and industrial control appliances in six years. There are also a few exceptions such as photovoltaic panels that produce energy from solar light and energy-saving light bulbs. EU countries are required to adopt the revised RoHS legislation into their national legal codes within 18 months.


New Pennsylvania Law Establishes Spacing Requirements Between Natural Gas "Well Clusters" and Workable Coal Seams

This post was written by Nicolle Bagnell and Ariel Nieland.

On May 13, 2011, Pennsylvania Governor Tom Corbett signed Senate Bill 265 into legislation. SB 265 sets a minimum distance between natural gas "well clusters" (defined as the area within a well pad holding horizontal wells and comprising an area of no more than 5,000 square feet) overlying workable coal seams, and provides for coordination of gas well drilling and coal mining. Under the new legislation, the Department of Environmental Protection (DEP) will issue no new permits for any well unless that well's cluster is at least 2,000 feet from the nearest well cluster or the operator of the well and owner of any workable coal seams underlying the proposed well provide written consent to spacing of less than 2,000 feet. In addition, no permits will be issued for wells located less than 1,000 feet from any other wells (excluding injection wells not penetrating workable coal seams, plugged wells, nonproducing wells drilled prior to November 30, 1955, or storage wells). The bill also requires well operators intending to drill in any operating coal mine to attach the written consent of the mine operator to permit applications.

It's Official: the Environmental Law Resource is a Top 50 Environmental Law Blog

This post was written by David Wagner.

We’re in – LexisNexis has selected Reed Smith's Environmental Law Resource blog as one of the Top 50 Environmental Law & Climate Change Blogs for 2011. We were recognized as "preeminent thought leaders in the blogosphere" who "offer some of the best writing out there." LexisNexis found that our blog contains "a wealth of information for all segments of the environmental law and climate change industry, and includes timely news items, expert analysis, practice tips, frequent postings and helpful links to other sites and sources."

The 50 honorees were grouped into 10 categories and our blog was one of just 4 blogs honored under the "Litigation" category.

We’re thrilled and certainly appreciate the recognition. Even more importantly, we appreciate your interest in our blog.

Proposed Marcellus Related Legislation in Pennsylvania Proposes Arbitrary Two Mile Spacing Requirement

This post was written by Steven Regan.

On March 28, 2011, House Bill No. 1211 (Printer’s No. 1321) (“HB 1211”) was referred to the Pennsylvania House Committee on Environmental Resources and Energy. HB 1211 would amend section 205 of the Pennsylvania Oil and Gas Act (58 P.S. § 601.205) to add an arbitrary two mile well location restriction. Under the proposed amendment, “[A] permit for a well intending to produce from an unconventional shale formation shall not be issued by the department unless it is located not less than two miles from the nearest well drilled into an unconventional shale formation. . . The well spacing requirements under this subsection shall not be waived.” HB 1211 defined an unconventional shale formation as a “shale formation that typically produces natural gas through high volume hydraulic fracturing or horizontal well bores,” and includes the Rhinestreet, Burket, Marcellus, Mandata and Utica shale formations and other formations designated by the department (DEP)”.

Rather than impose a strict, arbitrary well spacing requirement, the purpose of the Oil and Gas Act to “permit the optimal development of the oil and gas resources of Pennsylvania . . .” (58 P.S. § 601.102(1)) could be easily served if wells producing from unconventional shale formations were governed by the existing well spacing requirements under Section 407 of the Oil and Gas Conservation Law (58 P.S. § 407), e.g., factors such as the surface topography, a well spacing plan and other available geological and scientific data.

Another Severance Tax Bill Related to Marcellus Shale is Proposed in Pennsylvania

This post was written by Nicolle Bagnell and Ariel Nieland.

The Marcellus Shale legislative season remains in full bloom as another severance tax bill was introduced in the Pennsylvania General Assembly this week. Senate Bill 905 proposes a 2% tax on the gross value of natural gas at the wellhead where the amount produced is between 60,000 to 150,000 cubic feet/day (cf/d). For wells that have been in production longer than three years, the tax rate would increase to 5%. As with House Bill 833, SB 905 provides for "stripper wells" (those wells producing less than 60,000 cf/d) to be exempted from the tax unless certain exceptions apply. SB 905 also provides for the establishment of a Natural Gas Severance Tax Fund, which would be distributed at the county and municipality level to preserve and improve local water supplies, maintain and improve wastewater systems, and for other purposes related to "the health, welfare and safety consequences of severing natural gas in municipalities within the county."

Along with Other Emissions, USEPA's Proposed Standards for Coal- and Oil-Fired Electric Utility Boilers Target Mercury, Particulate Matter and Carbon Dioxide

This post was written by Mark Mustian.

On March 16, 2011, the U.S. Environmental Protection Agency (USEPA) proposed a new regulation in its decades-long attempt to regulate air toxics emissions and criteria air pollutants from large coal- and oil-fired boilers used in electricity generation. While this is USEPA’s first national standard to reduce mercury emissions from electric utility boilers, the proposal would also regulate other air toxics, especially particulate matter, and would reduce carbon dioxide emissions. In addition, the proposed regulation would modify New Source Performance Standards for electric utility boilers. This post provides some background information, a summary of the proposed regulation, a brief analysis of its costs and benefits, and the next steps.


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Proposed Federal Legislation Targets Air Emissions from Hydraulic Fracturing

This post was written by Jennifer Smokelin.

Dubbed a sister bill to the “FRAC Act” (which targets water emissions from hydraulic fracturing), last week Reps. Jared Polis (D-CO), Maurice Hinchey (D-NY) and Rush Holt (D-NJ) introduced the “BREATHE Act,” for “Bringing Reductions to Energy’s Airborne Toxic Health Effects.” According to a release from Rep. Polis, the bill specifically:

  • Closes the NESHAP exemption. While some emissions requirements exist for individual wells, oil and gas drilling is exempted from aggregated “major source” requirements under the National Emission Standards for Hazardous Air Pollutants (NESHAP).
  • In practical terms, would prompt the industry to follow NESHAP’s required use of best available and currently used emissions control technology.
  • Closes the hydrogen sulfide (H2S) exemption. Hydrogen sulfide, which emitted from oil and gas operations, is currently exempt from regulation as a hazardous air pollutant under the Clean Air Act.

Slides and Audio for Reed Smith's 1st Quarter Climate Change Report

This post was written by David Wagner .

As always, we covered the latest in greenhouse gas regulation in our quarterly teleseminar and here are the audio and slides from yesterday’s event. We discussed:

  • Possible delays in the implementation of the Tailoring Rule (Larry Demase)
  • GHG permitting and biomass: EPA's permitting deferral and its affect on industries that use biomass (Jennifer Smokelin)
  • Congressional efforts to develop a Clean Energy Standard (David Wagner)
  • Developments in a recent California court decision addressing what additional work the California Air Resources Board must perform prior to implementing AB32 (Todd Maiden)

Proposed Pennsylvania Bill Would Result in Lease Expiration as to Land Not Being Used for Oil or Gas Production

This post was written by Nicolle Bagnell and Ariel Nieland.

In addition to a number of other Marcellus Shale-related bills introduced in the Pennsylvania House and Senate over the past few months, Senate Bill 722 was also laid on the table last week. The bill proposes to amend the Oil and Gas Act in order to spell out exactly what would happen to leased land that neither contains a well nor is included in a production unit. The bill is, in effect, a statutory version of a Pugh Clause commonly found in oil and gas leases. According to the language of the bill, any land covered by a lease, but not included in the unit, would be released.

Marcellus Shale-related Bills Introduced in Pennsylvania in 2011

This post was written by Nicolle Bagnell and Ariel Nieland.

Several new Marcellus Shale-related bills have been introduced in the Pennsylvania Senate and House of Representatives since the start of 2011. House Bill 833, first introduced on March 1, 2011 and known as the Natural Gas Severance Tax Act, proposes to impose a tax on natural gas extraction of 30 cents per 1,000 cubic feet. The bill also provides an exemption for wells with low production rates (less than 60,000 cubic feet/day) known as "stripper wells" to incentivize operators' continued use of those wells in lieu of drilling new wells. House Bill 33, which was introduced on February 9, 2011 and shares many of the same legislative sponsors as H.B. 833, proposes a tax of 5% on all gas extracted plus an additional 4.6 cents per 1,000 cubic feet. This tax rate is the same as that proposed under Senate Bill 352, which was introduced on February 1, 2011. House Bill 234, introduced on January 26, 2011, would provide for further reporting requirements for operators producing gas from "unconventional shale formations" (including the Marcellus, Burket, Utica, Mandata, and Rhinestreet Shale formations, etc.). House Bill 232, also introduced on January 26, 2011, provides for additional restrictions on well locations and permits, as well as wastewater disposal requirements and a cumulative impacts study.

In addition to the introduction of new bills, several new regulations addressing well casing requirements, which the Pennsylvania General Assembly approved in the fall of 2010, went into effect in early February upon publication in the Pennsylvania Bulletin. We previewed these requirements in November 2010.

Reed Smith's (Free) Quarterly Climate Change Teleseminar is March 16

This post was written by David Wagner.

We’re celebrating one year’s worth of climate change teleseminars with, you guessed it, another climate change teleseminar. Please join us on Wednesday, March 16 from Noon to 1 p.m. (EDT) for the First Quarterly Report on Climate Change in 2011. In this one-hour teleseminar, Larry Demase, Jennifer Smokelin, Todd Maiden and Dave Wagner will provide a regulatory update on significant international, national and state issues concerning climate change and the future of GHG regulation. In particular, the topics are:

  • A delay in the implementation of the Tailoring Rule? An exemption for GHG permit applications in process prior to January 2, 2011?
  • GHG permitting and biomass: EPA's permitting deferral and its affect on industries that use biomass.
  • Congressional efforts to develop a Clean Energy Standard that would require electric utilities to generate electricity from "clean" energy sources, including nuclear, coal with carbon capture and storage, and natural gas.
  • Developments in a recent California court decision addressing what additional work the California Air Resources Board must perform prior to implementing AB32.

If you would like to attend, please email Sandy Petrakis.

The Environmental Law Resource Nominated for LexisNexis Top 50 Environmental Law Blogs

This post was written by David Wagner.

It's really nice to be recognized. In fact, we're thrilled that LexisNexis has nominated Reed Smith's Environmental Law Resource as one of the Top 50 Environmental Law & Climate Change Blogs for 2011. Even better, they grouped the 50 nominees into 11 categories and our blog was one of just 7 blogs nominated under the "Litigation" category. LexisNexis selected the nominees based on "timely topics, quality writing, frequent posts and that certain something 'extra' that keeps a web audience coming back for more."

We certainly appreciate your interest in our blog and, if you want to support our nomination, LexisNexis is inviting comments.


11 Climate Change Issues in 2011

This post was written by Jennifer Smokelin and  David Wagner .

As we look forward to 2011, the Environmental Team at Reed Smith will be on top of a range of environmental issues, but offers the following analysis of what we view, in no particular order, to be 11 key climate change or greenhouse gas-related issues likely to affect you and your business in 2011 – call it “11 Climate Change Issues for ’11.” This post focuses on regulatory and transactional issues and we will analyze the outcomes of GHG-related court challenges as they unfold. Please return to blog regularly for updates and analysis on these and many other issues.

The 11 climate change issues are listed below.

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Reed Smith's 4th Quarter Climate Change Report: Slides and Audio Available Here

This post was written by David Wagner.

If you missed Reed Smith's Quarterly Climate Change Teleseminar on December 16, 2010, feel free to listen to an audio recording of the event while watching the slide show. We discussed:

  • Significant developments at COP16 (Jennifer Smokelin)
  • The Impact of California's new "Proposition 26" on the implementation of California's Global Warming Solutions Act (aka "AB 32") (Eric McLaughlin)
  • USEPA's issuance of PSD and Title V Permitting and BACT Guidance for GHG sources subject to the "Tailoring Rule" (Larry Demase)
  • Recent Carbon Capture and Storage Developments (David Wagner)
  • Issues and problems to consider regarding 2011 GHG emissions monitoring & reporting (Douglas Everette)

Reed Smith's (Free) Quarterly Climate Change Teleseminar is December 16

This post was written by David Wagner.

Please join us on Thursday, December 16 from Noon to 1 p.m. (EST) for our quarterly report on climate change. In this one-hour teleseminar, Larry Demase, Jennifer Smokelin, Todd Maiden, Douglas Everette and Dave Wagner will span the globe and discuss:

  • Significant developments at the global climate change conference, COP 16
  • The Impact of California's New "Proposition 26" on the Implementation of California's Global Warming Solutions Act (aka "AB 32")
  • USEPA's Issuance of PSD and Title V Permitting and BACT Guidance for GHG Sources Subject to the "Tailoring Rule"
  • Recent Federal Requirements Related to Carbon Capture and Storage
  • Issues and Problems to Consider Regarding 2011 GHG Emissions Monitoring & Reporting

To register for the event, please click here.

California Issues Significantly Revised Green Chemistry Regulations

This post was written by Eric McLaughlin.

California’s Department of Toxic Substances Control (DTSC) released a revised version of the Safer Consumer Product Alternatives Regulations (SCPA Regulations) for public comment on November 16, 2010. Once finalized, the SCPA Regulations will implement California’s Green Chemistry Initiative, a new program aimed at refocusing the regulation of chemicals used in consumer products. DTSC will accept comments on these regulations – which were revised in response to extensive comments the agency received on the previous draft published in September – until December 3, 2010. Comments may be submitted only concerning the revised portion of the SCPA Regulations and new documents that DTSC has added to the rulemaking file.

The revisions made to the current draft of the SCPA Regulations are substantial. Significant changes were made to clarify and streamline the regulations, including moving a number of provisions from the body of the regulations to the definitions section and eliminating other elements of the regulations altogether (e.g., the Guiding Principles and tiered alternatives analysis process). The resulting regulations are much easier to understand and apply, and are 30 pages shorter than the previous iteration.

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Proposed Bill Would Provide Tax Credit for Creating a Marcellus Shale Job in Pennsylvania

This post was written by Dan Dixon.

In an effort to maximize local economic growth related to Marcellus Shale, last week 18 senators from the Pennsylvania State Senate introduced a new bill titled the "Marcellus Shale Job Creation Tax Credit" that, if enacted, would provide a "tax credit" of $2,500 per new job created for a Pennsylvania resident. As introduced, the bill requires that the jobs created must pay 350% of the Federal Minimum wage, include benefits, and be "family sustaining." A company taking the credit must express intent to maintain operations in Pennsylvania for a period of five years (after its certified to receive the credits). Preference will be given to companies employing residents who meet certain classifications (terminated due to plant closure, geographically difficult to employ, etc.).

Under the current version of the proposed legislation, the Department of Revenue would be permitted to award over $24M in total tax credits per year. These credits could be applied to a company's Pennsylvania income or franchise tax (up to 100% of the liability). Importantly, the credits could be transferred to an affiliated entity and applied to the affiliates Pennsylvania income or franchise tax liability. We will provide additional posts as this legislation progresses through the Senate and House.

In France, a "Green New Deal" for Wind Turbines

This post was written by Stéphane Illouz.

In France, the “Grenelle II” law (known in English as “The French Green New Deal”) has significantly changed the regulatory approach related to onshore wind turbines. Before this law was passed in July 2010, requirements for onshore wind turbines were fairly straightforward. For the installation of an onshore wind turbine, owners had to obtain a building permit. For wind turbines higher than 50 meters, owners had to complete an impact report (“étude d’impact”) and a public enquiry (“enquête publique”).

Under Grenelle II, the requirements for wind turbines higher than 50 meters have increased. Onshore wind turbines of this size are now also subject to a specific classified installation process (“Installations Classées pour la Protection de l’Environnement” or “ICPE”). This issue was the subject of significant debate in the French Parliament because the ICPE process is usually only applicable to polluting or dangerous activities -- activities typically not associated with wind turbine installation.

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One Step Closer to a Marcellus Shale Gas Severance Tax in Pennsylvania

This post was written by Nicolle Bagnell and Ariel Nieland.

Last night, the Pennsylvania House of Representatives voted 104-94 in favor of passing Senate Bill 1155, the state's first natural gas severance tax. Currently, Pennsylvania is the only Marcellus Shale state that does not impose a tax on natural gas production. The proposed tax, which is likely to be scaled back once it goes before the Senate for a vote, would also be one of the highest of its kind in the nation, at 39 cents per 1,000 cubic feet (Mcf) of natural gas. A similar severance tax currently in place in West Virginia, 5% of the value of the gas plus 4.7 cents per Mcf, is more akin to the rate favored by Pennsylvania Governor Ed Rendell. Although many opponents are concerned that the tax would kill job growth and stifle what has been seen as "one of the few bright spots in Pennsylvania's economy," supporters of the tax contend that it would enable the state to put environmental safeguards in place, while compensating Pennsylvania citizens for the use of their state's natural resources.

Reed Smith's Third Quarter Climate Change Report - You Can Find It Here

This post was written by David Wagner.

If you missed Reed Smith's Third Quarter Teleseminar on Climate Change, feel free to listen to an audio recording of the event while watching the slideshow. The report discussed:

  • U.S. Congressional activity in light of the Senate's failure to pass climate change legislation last summer;
  • The likelihood that California's Proposition 23 will pass in November, how that would affect AB 32 (California's Global Warming Solutions Act), and practical implications for California businesses;
  • How the U.S. Environmental Protection Agency, in attempting to regulate greenhouse gases, is trying to fill some gaps in State Implementation Plans while potentially creating new regulatory gaps in the process; and
  • How the uncertainty of credits under the Clean Development Mechanism is affecting carbon allowance prices.

Our Fourth Quarter Climate Change Report is scheduled for December 16, 2010. Please contact us to sign up or look for more information on the blog.

Reed Smith's (Free) Third Quarterly Teleseminar on Climate Change is September 28

This post was written by David Wagner.

Please join us for our next quarterly report on climate change from 12 to 1 pm on Tuesday, September 28. In this one-hour teleseminar, Larry Demase, Jennifer Smokelin, Todd Maiden and David Wagner will provide an update on significant international, national and state issues concerning climate change and the future of greenhouse gas (GHG) regulation. Following up on Congress' failure to pass energy and climate legislation over the summer, our topics include:

  • A review of two USEPA proposed rules that would help ensure USEPA’s implementation of permitting requirements for GHGs, set to take effect in January 2011. The first proposed rule identifies State Implementation Plans that do not currently apply certain requirements to GHG emitting sources, and requires them to be modified. In the second rule, EPA is proposing a Federal Implementation Plan that will apply in any state that cannot (or does not) revise its state plan by January 2011.
  • A discussion on the likelihood that California's Proposition 23 will pass in November (which would postpone implementation of California's Global Warming Solutions Act, aka "AB 32"), an assessment of the true scope of Proposition 23, and practical implications for California businesses.
  • A discussion on the United Nations halting issuance of carbon credits for Chinese Clean Development Mechanisms.
  • An update on stalled Congressional action with regard to climate regulation.

To register for the teleseminar, please click here.

Progress Made In the Development of California's Green Chemistry Regulations

This post was written by Eric McLaughlin.

Since the enactment of California’s two landmark green chemistry laws in September 2008 (AB 1879 and SB 509), significant effort has been made to develop their implementing regulations. This process has proven to be difficult and controversial, because a compromise must be reached between numerous competing concerns, most notably the legislative mandate to protect human health and the environment, and the significant costs to be imposed on companies manufacturing and selling consumer products in California. The process has also come under intense nationwide scrutiny, because California's Green Chemistry Initiative is considered a possible model for national chemical policy reform.

State regulators at the Department of Toxic Substances Control (DTSC) have until January 1, 2011 to enact the final version of the green chemistry regulations, known as the Safer Consumer Products Alternatives (SCPA) regulations. An informal rulemaking process has been used to shape the regulatory framework and extensive public comment has been received from stakeholders, including the scientific community, industry and environmentalists. The most recent draft of the SCPA regulations was released on June 23, 2010 and public comments were accepted through July 15, 2010.

California’s green chemistry laws are intended to completely refocus the regulation of chemicals in consumer products on the beginning of the product life cycle – the design phase. This approach will enable determinations to be made about which chemicals should be used in which products, and weighing the potential effects of those products on human health and the environment before they occur. Drafting the regulations to accomplish this goal, however, has prompted much debate throughout the informal rulemaking process, which has intensified as the SCPA regulations have taken shape, and has focused on six main issues: (1) scope of the regulations; (2) prioritizing chemicals of concern; (3) alternatives analysis; (4) confidential business information; (5) conflicting and duplicative regulations; and (6) the cost of implementation. This post summarizes the status of these issues.

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USEPA Postpones Public Hearing on Proposal to Take Over Certain States GHG Air Permitting Programs

This post was written by Jennifer Smokelin and David Wagner.

On August 23, 2010, the U.S. Environmental Protection Agency (USEPA) postponed the public hearing on its plan to take over greenhouse gas (GHG) permitting programs related to construction or modification projects. The hearing was scheduled to be held in Arlington, VA on August 25, 2010, and was delayed because the draft rule has not yet been published in the Federal Register. USEPA has not set a new date for the hearing. As we discussed in a blog post last week, USEPA has proposed two rules to fill gaps in 13 state permitting programs that do not allow for the regulation of GHG emissions from industrial sources. The first proposed rule seeks to allow states that are not prepared to regulate GHGs to revise their State Implementation Plans. The second rule outlines USEPA's plan to establish a Federal Implementation Plan that would take over permitting programs in states that do not meet the requirements by next January, when USEPA’s Tailoring Rule would be in effect.

Regulated Entities in Allegheny County (PA) and Certain California Counties, Be Aware: USEPA May Take Over GHG Air Permitting Programs Related to Construction or Modification Projects

This post was written by Jennifer Smokelin and David Wagner.

Here's the issue:  Certain larger emission sources of greenhouse gases (GHGs) will be subject to permitting requirements for planned construction projects starting January 2, 2011.  In 13 states, the permitting programs (known as the Prevention of Significant Deterioration (PSD) permitting program) do not apply to sources of GHGs.  Thus, emission sources in those states would be unable to obtain a PSD permit that covers GHG emissions, and would potentially be unable to undertake construction or modification projects on or after January 2, 2011.  The states are Alaska, Arkansas, Connecticut, Florida, Idaho, Kansas, Oregon, Texas, and portions of California, Arizona, Kentucky, Nebraska, and Nevada.

Here's USEPA's proposed solution:  The Agency recently proposed two rules that would fill the gap in the permitting programs for these 13 states: (1) the SIP call and (2) the FIP.  Under the first proposed rule, the U.S. Environmental Protection Agency (USEPA) would issue a "SIP call," requiring the 13 states to revise their State Implementation Plans (SIPs).  According to USEPA, the PSD program in these jurisdictions is "presumptively inadequate" because they do not allow for the regulation of GHG emissions. All other states would be required to review their rules and inform USEPA if they would not be able to issue PSD permits for greenhouse gas emissions. 

Under the second rule, USEPA proposes to establish a FIP - a Federal Implementation Plan for the 13 "presumptive inadequate" states, and for any other state in which USEPA determines that the state PSD program does not meet requirements for regulation of GHGs. Only the states deemed by USEPA to be inadequate would need the federal plan.  In other words, in any states that do not update their regulations within 12 months after USEPA signs the final action, the second proposed rule would give the Agency the authority to take over until the state can assume the responsibility.

What this might mean to regulated entities:  A state that has to amend its rules, especially the 13 "presumptive inadequate" states, would likely have difficulty making the changes by USEPA's deadline, which is within 12 months after USEPA signs the final action.  If USEPA steps in as planned, new sources and modification projects might be unusually delayed while USEPA works through the GHG portions of permitting applications.

What this might mean in Allegheny County and most California counties:  It's hard to say.  Allegheny County and most of the Air Quality Management Districts in California are in a "grey area" - that is, they are not listed on either the Presumptive SIP Call or the Presumptive Adequate Lists.  USEPA has determined that these jurisdictions (among others) do not have an approved PSD SIP.  See additional discussion below.

What's next:  The two rules have not yet been formally proposed with publication in the Federal Register, and comments on the rules would be due 30 days after publication.  USEPA has scheduled a public hearing on the matter for August 25, 2010 in Arlington, Virginia.

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Deadline Time for the UK's Carbon Reduction Commitment

This post was written by Siobhan Hayes and Indeg Kerr.

The latest Government Press Release shows that 1,299 businesses have registered under the UK’s Carbon Reduction Commitment (Energy Efficiency) Scheme (‘CRC’). The Government’s own estimate is that 5,000 businesses will have to register and comply in full with the CRC. The deadline for registration is 30 September 2010 but the process of registration may take weeks. This posting addresses registration issues and the consequences of failing to register.

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Climate Change Legislation is Dead. Long Live Climate Change Regulation!

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

Although an energy bill is now on the Senate floor, it is limited to energy conservation and issues related to the oil spill. It does not include a price on carbon in the form of cap and trade for any sector, and we are unlikely to see comprehensive climate legislation in September or later this year. So now what? Congressional failure to act now or later in 2010 means that, on the federal level, the U.S. Environmental Protection Agency ("USEPA") will step in and use its authority under the Clean Air Act to regulate greenhouse gases ("GHGs") from the utility, transportation and industrial sectors, and there is a small possibility that such regulation by USEPA will include a cap-and-trade program. To be sure, USEPA has already taken several steps to regulate GHGs. 

The following post discusses what will likely come out of Congress and USEPA's ongoing efforts to enact measures that regulate GHGs.

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Stakeholders Speak Out to USEPA on Hydraulic Fracturing

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

Reed Smith joined an audience of 1,200 attendees at last night's "Opportunity for Stakeholder Input on Criteria for Selecting Case Studies for Consideration in USEPA's Hydraulic Fracturing Research Study" meeting in Southpointe, PA, just outside of Pittsburgh. The standing-room only event marked the largest turnout yet in this series of public hearings sponsored by the U.S. Environmental Protection Agency (USEPA). Approximately 600 people attended the first hearing in Fort Worth, Texas on July 8, while nearly 350 attended in Denver, CO on July 13. The last hearing in the series of four will take place in Binghamton, NY on August 12.

USEPA has explained that the purpose of the hearings is to solicit input from community and industry stakeholders on the design of USEPA's upcoming study of the potential impact of hydraulic fracturing ("hydro-fracking")­—which involves pumping large volumes of water mixed with frac fluid and sand into geologic formations to extract natural gas—on groundwater and drinking water. To facilitate this goal, USEPA welcomed members of the community to register for two-minute slots of speaking time during which they could address their thoughts on the scope and design of the study, as well as on the potential costs and benefits posed by Marcellus Shale natural gas production in Pennsylvania.

It became clear from the comments of the 130 or so speakers that public concern over the potential adverse environmental and health impacts of hydro-fracking has reached fever pitch. Some concerned community members advocated for a moratorium to be placed on all Pennsylvania natural gas drilling, similar to the one currently in effect in New York state, until USEPA completes its hydro-fracking study (expected sometime in late 2012). Industry supporters expressed fears that over-regulation could chill the significant increases in job opportunities and government revenue expected in Pennsylvania as a result of Marcellus Shale natural gas development and production.

According to USEPA, the study is scheduled to begin in early 2011, with preliminary study results expected in 2012. In addition to conducting the series of four public hearings, USEPA is also soliciting comments from the public via email at on the following inquiries: (1) where should USEPA prioritize its efforts?; (2) where are gaps in current knowledge?; (3) is there data and information already in existence that USEPA should be aware of?; and (4) are there potential candidate sites or case studies that would be useful for the study?

Pennsylvania Proposes Oil & Gas Well Casing and Cementing Rules

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

On July 10, 2010, the Pennsylvania Environmental Quality Board (EQB) published its proposed rulemaking measures to update existing state requirements for drilling, casing, cementing, testing, monitoring and plugging of oil and gas wells. The proposed rulemaking, originally adopted by the EQB in May, is now open for public comment until August 9, 2010. Once the period for public comment is over, the proposal will go before the Pennsylvania Independent Regulatory Review Commission for review and final publication.

According to the EQB, a large portion of the updates contained in the proposal are already employed as part of best management practices among operators. However, the new regulations are said to further decrease any risk of gas migration from well sites to neighboring water supplies. The proposed rulemaking was prompted, in part, by public concern over the potential impact that the increasing number of Marcellus Shale wells could have on groundwater and drinking water supplies. Although the Pennsylvania Department of Environmental Protection's review of current well site construction and operation practices revealed that "many, if not all, Marcellus well operators met or exceeded the current well casing and cementing regulations[,] . . . the current regulations were not specific enough" in detailing guidelines for proper well construction or requirements for operators to respond to complaints over gas migration. The current updates would provide for more specificity in these areas, as well as establish a requirement that well operators conduct quarterly inspections of the structural integrity of all wells in operation. 

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Follow-up on Reed Smith's Quarterly Climate Change Report

This post was written by David Wagner.

If you missed Reed Smith's Quarterly Report on Climate Change, feel free to listen to an audio recording of the event. In addition, the slideshow presentation is available here. The report covered a lot of information and featured:

  • A status report on Congressional action on comprehensive climate regulation;
  • A summary of issues regarding the GHG cap-and-trade scheme under AB 32 in California;
  • An overview of the legal issues related to carbon capture and storage; and
  • A discussion of offset projects in the United States.


Wyoming Passes Landmark Mandatory Disclosure Rules for Fracking Chemicals

This post was written by Ariel Nieland.

The Wyoming Oil and Gas Conservation Commission voted unanimously yesterday to pass two new regulations that require energy companies to disclose all chemicals used in the fracking process as well as to identify all groundwater sources and state-licensed wells in proximity to well heads. One of the major industry concerns over such disclosure requirements is the protection of trade secrets, i.e. what chemicals comprise each company's frac fluid and in what proportion. To address this concern, the regulations impose confidentiality requirements on state regulators in possession of proprietary information. The disclosure requirement is the first of its kind in the nation; however, other states, including Pennsylvania have proposed similar regulations.


The UK's Carbon Reduction Commitment: Now Is the Time

This post was written by Siobhan Hayes and Indeg Kerr.

We wrote a variety of blog postings on the UK’s Carbon Reduction Commitment (Energy Efficiency) Scheme (‘CRC’) whilst the Government was consulting on the draft Regulations. A lot of the information must have seemed unimportant prior to April 2010 but now the CRC Energy Efficiency Scheme Order 2010 (‘CRC Order’) is in force and many businesses will need to evaluate whether, how and to what extent they must comply with the CRC. 

The CRC is aimed at organisations which are not energy intensive and will cover many sectors including offices, retailers and hotels. The CRC affects overseas companies that do business in the UK and applies whether or not they do so using UK subsidiaries. Private equity investors have to determine how to manage their CRC liabilities.

This posting covers how to determine whether the first phase of the CRC Order is going to apply to your business and provides pointers on what to do next.

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New Climate Bill Likely to be Unveiled in the U.S. Senate Next Week

This post was written by Ariel Nieland.

Based on news reports, Senator John Kerry (D-Mass.), along with Senator Lindsey Graham (R-S.C.), and Senator Joseph Lieberman (I-Conn.) plan to release a revised climate bill aimed at cutting U.S. industry emissions of carbon dioxide and other greenhouse gases associated with global climate change. It may be unveiled as early as next week in time for Earth Day on April 22. A key issue raised in prior climate bills, which the new bill is not expected to address, is the creation of a national "cap and trade program" for managing greenhouse gases, such as the ones currently in place in the European Union to reduce greenhouse gases and in the U.S. to control acid rain-causing sulfur dioxide. The new climate bill will, however, likely provide for an overall cap on greenhouse gas emissions for certain utilities, with other industries to be phased in over time, as well as "a modest tax" on transportation fuels. The bill is also expected to incentivize construction of nuclear power plants, carbon capture and storage facilities, renewable energy sources such as wind and solar power, as well as oil and gas drilling.

Pennsylvania Department of Environmental Protection Warns of Water Pollution Threat from Dissolved Chemicals

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

In a statement released yesterday, John Hanger, Secretary of the Pennsylvania Department of Environmental Protection, championed the proposal of new rules aimed at keeping Pennsylvania streams, drinking water, and rivers free from a pollutant known as "total dissolved solid" (TDS), which is a measure of chemical substances dissolved in water. In addition to natural gas drilling, sources of TDS include abandoned mine drainage, agricultural runoff, and discharges from industrial or sewage treatment plants. Mr. Hanger's hope is to establish the necessary regulations now that will prevent TDS from becoming a source of contamination later. In the press release, Mr. Hanger focused on the high TDS concentrations related to natural gas drilling, stating that “Marcellus drilling is growing rapidly and our rules must be strengthened now to prevent our waterways from being seriously harmed in the future.”

In Pennsylvania, Proposed Regulation to Require Public Disclosure of Chemicals Used in Hydraulic Fracturing

This post was written by Nicolle Snyder Bagnell and Ariel Nieland.

During a Marcellus Shale public forum meeting held last week near Scranton, Pennsylvania, the Pennsylvania Department of Environmental Protection (DEP) proposed a new regulation to be added to the most recent draft of proposed legislation regulating well construction. Under the proposed regulation, gas drilling companies would have to provide information about chemical usage on a well-by-well basis. This new proposal would require each company, upon completion of well construction, to disclose in a report a list containing all the names and total volume of chemicals used in the hydraulic fracturing process. The new proposal will be presented at a Pennsylvania Environmental Quality Board meeting for discussion on May 19, 2010. Scott Perry, director of DEP's Bureau of Oil and Gas Management, explained that this proposed regulation was drafted in response to a growing desire by the public for increased transparency with respect to well site development.

USEPA Increases Regulatory Oversight of Hazardous Waste Imports and Exports

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

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

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.

The Legal Classification of UK's CRC Emissions Allowances

This post was written by Luca Salerno and Siobhan Hayes.

In earlier postings we have introduced the UK’s Carbon Reduction Commitment (Energy Efficiency) Scheme (“CRC”) and have considered the impact for companies and groups and penalties for non-compliance. This note considers briefly what the problems are in the legal classification of carbon emission allowances and the issues that will need to be resolved by the time businesses start trading them.

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UK's Carbon Reducation Commitment (CRC) News

This post was written by Tim Foster and Siobhan Hayes.

In earlier postings we have introduced the UK’s Carbon Reduction Commitment (“CRC”) which has been the subject of public consultation. The Government issued their policy decisions recently and a number of things will change when the Regulations come into force next April. To restate, headlines reporting the CRC was deferred were wide of the mark and the CRC will still start to apply in April 2010. To emphasise the impact of the CRC the first thing to note is that it will now be called the CRC Energy Efficiency Scheme. Energy efficient businesses are to be rewarded for their good behaviour. 

This is a note on the main changes we expect to see when the next draft of the Regulations is published towards the end of this year.

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CRC Performance League Tables for UK Businesses

This post was written by Siobhan Hayes and Tim Foster.

In earlier postings we have introduced the UK’s Carbon Reduction Commitment (Energy Efficiency) Scheme (“CRC” )and have considered the impact for companies and groups and penalties for non-compliance .This is a note on the performance league tables that will rank all CRC participating organisations in terms of energy efficiency. The more efficient will receive bonus payments while the less efficient will be penalised, under a system of “revenue recycling”, which is explained below.

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CRC in the UK Hotels Sector

This post was written by Siobhan Hayes, Indeg Kerr and Tim Foster.

In earlier postings we have introduced the UK’s Carbon Reduction Commitment Energy Efficiency Scheme(CRC). This posting is a brief look at how the hotels sector will be affected by the CRC.

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CRC Penalties for UK Businesses

This post was written by Siobhan Hayes.

In earlier postings we introduced the UK’s carbon reduction commitment (CRC) and we have considered which companies need to comply. In this posting we are covering the penalties that UK businesses will face if they fail to comply with various reporting requirements and fail to buy and surrender carbon emission allowances by the relevant deadline.

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In the U.S., the House Passes The American Clean Energy and Security Act, First-Ever Congressional Bill To Address Climate Change

This post was written by Todd O. Maiden, Eric M. McLaughlin, and Amy E. Coren.

Despite heavy criticism from House Republicans and generally tepid support from House Democrats, the latest bill on climate change initiatives, H.R. 2454: The American Clean Energy and Security Act (ACESA), garnered just enough votes to move forward in the legislative process, passing 219 to 212. Having passed the House, the next stop for ACESA is the U.S. Senate for consideration.

Introduced by U.S. House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and House Energy and Environment Subcommittee Chairman Edward Markey (D-MA), H.R. 2454 calls for an economy-wide greenhouse gas (GHG) cap-and-trade system and various complementary GHG reduction measures, while also providing for federal investment in the areas of clean energy and energy efficiency programs, carbon capture and sequestration technologies, and the research and development of renewable technologies.

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Carbon Reduction Credit: What UK Businesses Need to Know Now

This post was written by Siobhan Hayes, Indeg Kerr, and Tim Foster.

In earlier postings we’ve introduced the UK’s Carbon Reduction Commitment (Energy Efficiency) Scheme (CRC). All UK businesses with half hourly meters were sent letters from the Environment Agency (EA) introducing them to the CRC and the obligations the business will face. However, please note that letters went to the billing addresses for each relevant meter. The EA states that it does not know which parent company will be responsible for compliance with the CRC and that applies across the whole of the business of the UK group (covered in a previous posting). It is possible that your organisation has received a letter but there may be complications: it could have gone to a person who no longer works at the company; may be overlooked; or may not reach the right level of management. Even without the initial EA letter getting to the right people, businesses in the UK need to be prepared.

This posting covers the information to be gathered for the qualification year of 2008 and some practical steps to prepare for CRC compliance.

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The Impact of the UK's Carbon Reduction Commitment on Groups and Subsidiaries

This post was written by Tim Foster and Siobhan Hayes.

In 2010 the Carbon Reduction Commitment Order will require many UK businesses to measure and report on their energy consumption, to buy allowances to cover their carbon emissions and to pay significant penalties if they do not comply. The CRC was summarised in a recent Reed Smith posting.

Unlike previous legislation affecting EU carbon emissions (the Emissions Trading Scheme) the CRC does not apply to specific installations or individual companies in relation to their own emissions. It applies to the whole of the organisation in the UK. For companies doing business in the UK that means that the CRC applies to the relevant UK group as a whole. If the UK group is owned by a parent incorporated overseas the parent will have compliance duties in respect of its UK subsidiaries.

The rules are not straightforward and involve a raft of potentially confusing definitions and terms to describe participating and responsible entities.   This posting covers the key points on who has to comply:

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Why UK Businesses Cannot Ignore the Carbon Reduction Commitment (CRC)

This post was written by Indeg Kerr, Siobhan Hayes and Tim Foster.

UK businesses need to know their carbon footprint because in 2010 the Carbon Reduction Commitment Order will apply. Since our CRC posting in December 2008, draft regulations have been published and are now subject to public consultation. This remains a scheme where businesses using a substantial amount of energy will have to report on their energy consumption, buy carbon allowances based on projected carbon emissions for each scheme year then surrender them at the end of each year when energy use is known. A league table will be published by the Environment Agency (EA) who will administer the scheme showing the relative energy efficiency of all those in the program. The best performing businesses will receive a refund of some of the costs of the allowances plus a bonus but the worst performing businesses will pay a penalty.

Some industries are high intensity energy users and already have to comply with the EU’s Emissions Trading System. The CRC scheme will capture lower intensity energy users who used a significant amount of electricity in 2008 and may include large offices, chains of retail outlets, hotels, banks, chains of restaurants as well as industry.
This posting outlines the types of business that may need to comply with the CRC scheme, the basic requirements of the program, some cost issues, and next steps to consider.

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UK Solicits Comments to Proposed WEEE and RoHS Revisions

This post was written by David Wagner.

The UK's Department for Business Enterprise and Regulatory Reform (BERR) published a consultation on April 7 soliciting public comment on European Commission proposals to revise the WEEE and RoHS Directives. The consultation paper highlights the significant changes and poses questions for industry and others to address. Among other revisions, the proposal would establish under WEEE new collection targets for Member States and new targets for recovery and reuse/recycling. The proposal would also likely increase WEEE financing costs for producers. The proposed revisions to RoHS would include the possible review and restriction of four substances, specifically: hexabromocyclododecane (HBCDD); bis (2-ethylhexyl) phthalate (DEHP); butyl benzyl phthalate (BBP); and dibutylphthalate (DBP). Consultation responses (i.e., public comments) are due May 13, 2009.

The WEEE Directive (or Directive on Waste Electrical and Electronic Equipment) aims to minimize the environmental impact of electrical and electronic equipment by encouraging its reuse, recycling and recovery when it is discarded at end of life. The RoHS Directive (or the Restriction on the use of certain Hazardous Substances Directive) ensures that all Member States observe similar restrictions on the levels of six hazardous substances in the same categories of electrical and electronic equipment.

Pennsylvania's New Right to Know Law

This post was written by Jayme Butcher.

Substantive revisions to Pennsylvania’s Right to Know Law took effect on Jan. 1, 2009. The thoroughly revised law establishes for the first time an Office of Open Records with the Department of Community and Economic Development to administer the new law and fundamentally changes how citizens access public records. Key changes are discussed below and include:

  • The request and appeals process has been substantially streamlined to enable requesters to reach judicial review, in most cases, within a roughly two-month period.
  • All records are presumed “public.”
  • Agencies bear the burden of proving the applicability of one of 30 new statutory exemptions to the requested information.
  • The new law removes substantial ambiguity as to the specific records exempt from disclosure, which should expedite the request and appeals process.
  • Appeals procedures are, in part, determined by the type of agency from which records are sought.
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New York Governor Approves Two Green Building Laws For Residential And State Structures

This post was written by Eric M. McLaughlin and Keisha M. Williams.

In late September, New York became the latest state to give the green light to “green building,” after Gov. David Paterson signed two bills introducing green building performance standards for construction and renovation of New York state government buildings, and a Grants Program for green residential builds. The new laws aim to encourage and incentivize the construction of energy-efficient, sustainable buildings, using recyclable and environmentally friendly materials, and are in line with the governor’s “15 x 15” plan to reduce energy use by 15 percent of expected levels by 2015. New York’s new laws highlight the fact that buildings account for nearly 40 percent of the nation’s greenhouse gas emissions and more than 70 percent of its electricity consumption, and that these impacts can be reduced by regulations governing design and construction.

The State Green Building Construction Act (A. 2005) (State Building Act) will require all new state-owned buildings, and substantial renovations of existing state-owned buildings, to comply with green construction principles set forth in standards to be developed by the Department of Environmental Conservation (DEC) and the New York State Energy Research and Development Authority (NYSERDA). State agencies will also be required to prepare annual building performance reports containing information on their green credentials, including energy consumption, waste reduction, and how indoor air quality compares with set benchmarks. The State Building Act takes effect 180 days after signature, on or about March 25, 2009.

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Congress Enacts Five-Year Extension of Tax Incentives for Green Buildings

This post was written by Ruth N. Holzman, James R. Eskilson, Todd O. Maiden, Eric M. McLaughlin, and Jennifer Smokelin.

There’s good news for commercial building owners who have wanted to “go green,” but have been waiting to see whether the tax incentives for green buildings, set to expire at the end of 2008, would be extended. The historic financial rescue bill (H.R. 1424), signed by President Bush on Friday, Oct. 3, 2008, also included the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 (“TEAMTRA”). Among the tax-extenders in TEAMTRA was a five-year extension of the tax incentives for “green” commercial buildings.

Internal Revenue Code Section 179D gives owners of commercial real property a tax break by allowing them to deduct the cost of certain energy-efficient property. It applies to both new construction and to retrofits of existing construction. Prior to TEAMTRA, this tax break only applied to property placed in service on or prior to Dec. 31, 2008. With the extension of this provision to Dec. 31, 2013, property owners now have sufficient time to design, construct and complete projects that will qualify for this tax break. Although numerous bills had been introduced in Congress that would have raised the amount deductible under Section 179D, TEAMTRA did not contain any increase in this amount. The deduction is still limited to the product of $1.80 multiplied by the square footage of the building.

For a brief overview of the Section 179D deduction for “green” buildings, see “New Tax Incentives for ‘Green’ Buildings Have Owners Seeing Green,” in The Critical Path, Fall 2006; for a more detailed discussion, see "New Tax Incentives for 'Green' Buildings Have Owners Seeing Green," in the ABA's The Construction Lawyer, Summer 2007.

California Enacts Groundbreaking Green Chemistry Law

This post was written by Todd O. Maiden and Eric M. McLaughlin.

On Sept. 29, 2008, California Gov. Arnold Schwarzenegger signed two green chemistry bills—AB 1879 and SB 509—into law. This new green chemistry law totally refocuses chemical regulation in California, from reacting to chemicals after they have already been used in manufacturing or industrial processes, to assessing and regulating the use of chemicals in the design stage. The regulatory system created by the law will evaluate chemical risks and impose tailored restrictions based on science and the real-life impacts of chemical usage, rather than instituting an abstract chemical ban. California’s green chemistry law will take effect Jan. 1, 2009, which means the rulemaking process for the numerous regulations needed to implement the system will begin in earnest.

To achieve the goal of a regulatory system based on science and the real-life impacts of chemical usage and exposure, the green chemistry law was drafted using a comprehensive and collaborative approach. Implementation of the regulations will involve an interagency consultative process, incorporating chemical-related research done by other government agencies, and comments from stakeholders and the public. This approach, combined with the notice and comment requirements of the California Administrative Procedure Act, is intended to eliminate the ad hoc rulemaking seen with other environmental laws, such as California’s Proposition 65. Additionally, the scope of the law includes all chemicals used in consumer products, unlike the current patchwork of California laws that address only select product categories, such as lead in jewelry and on lunchboxes, chemicals in food containers, and household products such as light bulbs and batteries.

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Pennsylvania Climate Change Act

This post was written by Jennifer Smokelin, Lawrence Demase and Louis Naugle.

Global warming legislation was enacted for the first time in Pennsylvania July 10, when Gov. Ed Rendell signed the Pennsylvania Climate Change Act. The measure was overwhelmingly approved earlier this month by both houses of the Pennsylvania General Assembly.

A coal-rich state, Pennsylvania emits 1 percent of the world’s greenhouse gases responsible for global warming, more than the emissions of 105 developing countries combined. 

The Climate Change Act is immediately effective and will:

(1) Require the Pennsylvania Department of Environmental Protection to conduct an annual inventory of greenhouse gas emissions in all sectors, specifically but not limited to transportation, electricity generation, industrial, commercial, mineral and natural resources, production of alternative fuel, agricultural, and domestic sectors, and through such inventory, to establish a baseline of GHG emissions

(2) Require DEP, within 90 days of the Act’s effective date, to set up a voluntary registry for business and industry where they can track their GHG emissions and potentially get credit for voluntary GHG emission reductions

(3) Provide for an 18-member politically appointed stakeholder advisory group to DEP (the “Climate Change Advisory Committee” or “Committee”), that will work with DEP to develop a state plan (“Climate Change Action Plan”) to reduce GHG emissions, which is to be available within 15 months of the Act’s effective date

(4) Require DEP to report on potential climate change impacts and economic opportunities for the state within nine months of the Act’s effective date (revisions to be provided every three years thereafter)

(5) Require the Secretary of DEP to monitor the enactment of laws by the U.S. Congress to determine whether any federal law is more stringent than Pennsylvania law with regard to GHG inventory, registry or reporting requirements and, if so, to identify the affected entities, which must comply with the more stringent federal regulations through a notice in the Pennsylvania Bulletin.

Federal Climate Change Legislation Blocked after Week-Long Senate Debate

This post was written by Todd O. MaidenLawrence A. DemaseJennifer SmokelinLouis A. Naugle, and John Lynn Smith

On June 6, 2008, U.S. Senate Majority Leader Harry Reid withdrew from consideration a bill that would have established a national “cap-and-trade” system, requiring industry to pay to emit carbon dioxide and the five other most abundant greenhouse gases (“GHGs”).  The Senate voted 48-36 in favor of the legislation, but Democratic proponents fell 12 votes short of the 60 votes needed to overcome a Republican filibuster.  Six senators absent from the debate, including presidential candidates John McCain and Barack Obama, sent letters indicating they would have voted for the bill, had they been present.

The bill, dubbed the Lieberman-Warner Climate Security Act of 2008, and championed by California Sen. Barbara Boxer, Chair of the Senate Environment and Public Works Committee, aimed to reduce total U.S. GHG emissions by about 66 percent of current levels by 2050.  In the coming decades, the Act – proposing the first cap-and-trade system to cover the electricity, industry, and transportation sectors – would have generated more than $5 trillion in government revenue, to be distributed to affected industries, consumers, and local governments.

Sen. Boxer remained optimistic about the chances of passing federal climate change legislation in the near future.  “It’s clear a majority of Congress wants to act,” she said, referring to the 54 senators who had demonstrated support.  She predicted that a new Congress and a new president would be more amenable to legislation mandating reductions in GHGs.

Other senators had harsher words for the bill’s opponents.  Sen. Robert Menendez (D-N.J.), a member of the Energy and Natural Resources Committee and Chairman of the Senate Foreign Relations subcommittee in charge of international environmental agreements, released a statement in which he charged that “The Republican ‘No’ Machine has reared its head again . . . prevent[ing] our nation from reducing the emissions that have caused the climate crisis and from investing in green technologies that can create jobs and spur the economy.”  Noting the bill was “not perfect,” he added that “every major movement starts with a first step, and that’s what this bill represented.”

Utilizing the same general approach as is being developed under California’s Global Warming Solutions Act of 2006, the bill would have created a national market in emission allowances and provided companies with financial incentives to reduce emissions.  The legislation would have allowed total U.S. GHG emissions to peak in 2012, and required subsequent reductions of about 2 percent per year until 2050.  Approximately 2,100 companies – mostly coal-fired power plants, oil refineries, natural gas processors, and factories – would have been required to purchase permits, or “allowances,” to emit GHGs.  Companies exceeding the target reductions would have been able sell or trade their allowances.  While many of the initial allowances would have been distributed at no charge, most would have been auctioned off.  The revenue from these auctions would have paid for cleaner technologies and rebates to poorer consumers to offset expected increases in energy prices.  The bill would have also established a Carbon Market Efficiency Board, which would have monitored progress and assisted companies in dealing with fluctuations in carbon prices.  In short, the bill was intended to incentivize GHG emission reductions while enabling the emitting parties to determine how they wish to accomplish those reductions.

Opponents, including the current Administration, viewed the bill as a tax on industry that would have increased energy prices, eliminated jobs, and made American businesses less competitive.  President Bush said the bill was “the wrong way to proceed,” and had threatened a veto if it were to pass in its current form.  He added that the bill “would impose roughly $6 trillion of new costs on the American economy.”  An Energy Information Administration study estimated that reducing greenhouse gases 45 to 55 percent by 2030 would slow economic growth by 0.2 percent to 0.6 percent of U.S. gross domestic product.  Because the electric power industry would account for more than 80 percent of the reductions, the study predicts that electricity prices could rise by 11 percent to 64 percent by 2030, and gasoline prices could rise by 22 to 49 cents over the same period.

Greenhouse-Gas Cap and Trade in the US

This post was written by Jennifer Smokelin.

Will national GHG cap and trade hit this country? If so, when? Will the cap and trade system affect your client? And can your clients take advantage of trading in GHG cap and trade before then (IETA estimates predict an overall growth to 70 billion Euro next year in the global market for carbon, of which EU-ETS is 75 percent)?  The Lieberman-Warner Climate Security Act of 2007 (S.2191), which would establish a national cap-and-trade system to reduce U.S. greenhouse-gas emissions, is much less stringent than some other climate bills in Congress, but Lieberman-Warner is so far the only one to pass out of committee; it's scheduled for a Senate vote in June. It would become effective in 2012 and affect 80 percent of the GHG emitting sectors in the United States. Further, U.S.-based entities can benefit today from the carbon markets created by the Kyoto Protocol and the European Trading System (ETS), even though the United States has not ratified Kyoto. They can do so by investing in Clean Development Mechanism (CDM) projects in "non-Annex I" countries like Mexico, and then trading the resulting Certified Emissions Reductions (CERs) into the ETS at a current estimated value of $27 per ton CO2 equivalent. In addition, under Lieberman-Warner as passed out of committee, foreign-generated credits might be used to meet required allowances in the early years of the U.S. cap-and-trade program.