Federal Clean Power Plan Implementation Underway — Affected Industries (Not Just Power Gen) Need To Act - December 21, 2015
Weil, Gotshal & Manges
Description
JANUARY 2016
VOL. 16-1
PRATT’S ENERGY LAW REPORT
PRATT’S
ENERGY LAW
REPORT
EDITOR’S NOTE: WELCOME 2016!
Victoria Prussen Spears
DO YOU DARE TO FLARE? A NORTH
DAKOTA FIELD OFFICE PROVIDES A
VIEW INTO THE FEDERAL
REGULATORY FUTURE
Mark S. Barron
JANUARY 2016
FERC MODIFIES FILING REQUIREMENTS
FOR MARKET-BASED RATE SELLERS
AND CLARIFIES GEN-TIE PRIORITY
RIGHTS RULES
James K. Mitchell, Nicholas A.
Giannasca, and Carlos E. Gutierrez VOL.16-1 CALIFORNIA LEGISLATURE BOOSTS RENEWABLES PORTFOLIO STANDARD TO 50 PERCENT AND INCREASES ENERGY EFFICIENCY GOALS; BALKS AT INCREASED REDUCTIONS IN GREENHOUSE GAS EMISSIONS AND PETROLEUM USE Dario J. Frommer FEDERAL CLEAN POWER PLAN IMPLEMENTATION UNDERWAY — AFFECTED INDUSTRIES (NOT JUST POWER GEN) NEED TO ACT Thomas D.
Goslin THE SEC SETTLES CLAIMS AGAINST HITACHI FOR ALLEGED CORRUPT PAYMENTS TO OBTAIN CONTRACTS TO BUILD SOUTH AFRICAN POWER STATIONS Keith M. Rosen and Christian Urrutia IN THE COURTS Steven A. Meyerowitz LEGISLATIVE AND REGULATORY UPDATE Victoria Prussen Spears INDUSTRY NEWS Victoria Prussen Spears .
0001 [ST: 1] [ED: m] [REL: 16-1] (Beg Group) Composed: Wed Dec 16 13:04:54 EST 2015 XPP 8.4C.1 SP #3 FM000150 nllp 1898 [PW=468pt PD=702pt TW=360pt TD=580pt] VER: [FM000150-Local:09 Sep 14 16:11][MX-SECNDARY: 11 Dec 15 08:32][TT-: 23 Sep 11 07:01 loc=usa unit=01898-fmvol016] 0 Pratt’s Energy Law Report VOLUME 16 NUMBER 1 JANUARY 2016 Editor’s Note: Welcome 2016! Victoria Prussen Spears 1 Do You Dare to Flare? A North Dakota Field Ofï¬ce Provides a View into the Federal Regulatory Future Mark S. Barron 3 FERC Modiï¬es Filing Requirements for Market-Based Rate Sellers and Clariï¬es Gen-Tie Priority Rights Rules James K. Mitchell, Nicholas A. Giannasca, and Carlos E.
Gutierrez 10 California Legislature Boosts Renewables Portfolio Standard to 50 Percent and Increases Energy Efï¬ciency Goals; Balks at Increased Reductions in Greenhouse Gas Emissions and Petroleum Use Dario J. Frommer 16 Federal Clean Power Plan Implementation Underway—Affected Industries (Not Just Power Gen) Need to Act Thomas D. Goslin 20 The SEC Settles Claims Against Hitachi For Alleged Corrupt Payments to Obtain Contracts to Build South African Power Stations Keith M.
Rosen and Christian Urrutia 23 In the Courts Steven A. Meyerowitz 26 Legislative and Regulatory Update Victoria Prussen Spears 34 Industry News Victoria Prussen Spears 39 . 0002 Composed: Wed Dec 16 13:04:54 EST 2015 [ST: 1] [ED: m] [REL: 16-1] XPP 8.4C.1 SP #3 FM000150 nllp 1898 [PW=468pt PD=702pt TW=360pt TD=580pt] VER: [FM000150-Local:09 Sep 14 16:11][MX-SECNDARY: 11 Dec 15 08:32][TT-: 23 Sep 11 07:01 loc=usa unit=01898-fmvol016] 42 QUESTIONS ABOUT THIS PUBLICATION? For questions about the Editorial Content appearing in these volumes or reprint permission, please email: Jacqueline M. Morris at ................................................................................................................... Email: .......................................................................................... jacqueline.m.morris@lexisnexis.com For assistance with replacement pages, shipments, billing or other customer service matters, please call: Customer Services Department at . .
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. (518) 487-3000 Fax Number . .
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. . .
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. . .
. . .
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. . .
. . .
. . .
. (518) 487-3584 Customer Service Web site . .
. . .
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http://www.lexisnexis.com/custserv/ For information on other Matthew Bender publications, please call Your account manager or . . .
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(518) 487-3000 ISBN: 978-1-6328-0836-3 (print) ISBN: 978-1-6328-0837-0 (ebook) ISSN: 2374-3395 (print) ISSN: 2374-3409 (online) Cite this publication as: [author name], [article title], [vol. no.] PRATT’S ENERGY LAW REPORT [page number] (LexisNexis A.S. Pratt); Ian Coles, Rare Earth Elements: Deep Sea Mining and the Law of the Sea, 14 PRATT’S ENERGY LAW REPORT 4 (LexisNexis A.S. Pratt) This publication is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services.
If legal advice or other expert assistance is required, the services of a competent professional should be sought. LexisNexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used under license. A.S. Pratt is a registered trademark of Reed Elsevier Properties SA, used under license. Copyright © 2016 Reed Elsevier Properties SA, used under license by Matthew Bender & Company, Inc.
All Rights Reserved. No copyright is claimed by LexisNexis, Matthew Bender & Company, Inc., or Reed Elsevier Properties SA, in the text of statutes, regulations, and excerpts from court opinions quoted within this work. Permission to copy material may be licensed for a fee from the Copyright Clearance Center, 222 Rosewood Drive, Danvers, Mass. 01923, telephone (978) 750-8400. An A.S.
Pratt® Publication Editorial Ofï¬ce 630 Central Ave., New Providence, NJ 07974 (908) 464-6800 www.lexisnexis.com (2016–Pub.1898) . 0003 [ST: 1] [ED: m] [REL: 16-1] Composed: Wed Dec 16 13:04:54 EST 2015 XPP 8.4C.1 SP #3 FM000150 nllp 1898 [PW=468pt PD=702pt TW=360pt TD=580pt] VER: [FM000150-Local:09 Sep 14 16:11][MX-SECNDARY: 11 Dec 15 08:32][TT-: 23 Sep 11 07:01 loc=usa unit=01898-fmvol016] 32 Editor-in-Chief, Editor & Board of Editors EDITOR-IN-CHIEF STEVEN A. MEYEROWITZ President, Meyerowitz Communications Inc. EDITOR VICTORIA PRUSSEN SPEARS Senior Vice President, Meyerowitz Communications Inc. BOARD OF EDITORS SAMUEL B. BOXERMAN Partner, Sidley Austin LLP ANDREW CALDER Partner, Kirkland & Ellis LLP M. SETH GINTHER Partner, Hirschler Fleischer, P.C. R.
TODD JOHNSON Partner, Jones Day BARCLAY NICHOLSON Partner, Norton Rose Fulbright BRADLEY A. WALKER Counsel, Buchanan Ingersoll & Rooney PC ELAINE M. WALSH Partner, Baker Botts L.L.P. SEAN T.
WHEELER Partner, Latham & Watkins LLP WANDA B. WHIGHAM Senior Counsel, Holland & Knight LLP iii . 0004 [ST: 1] [ED: m] [REL: 16-1] Composed: Wed Dec 16 13:04:54 EST 2015 XPP 8.4C.1 SP #3 FM000150 nllp 1898 [PW=468pt PD=702pt TW=360pt TD=580pt] VER: [FM000150-Local:09 Sep 14 16:11][MX-SECNDARY: 11 Dec 15 08:32][TT-: 23 Sep 11 07:01 loc=usa unit=01898-fmvol016] 21 Editor-in-Chief, Editor & Board of Editors Pratt’s Energy Law Report is published 10 times a year by Matthew Bender & Company, Inc. Periodicals Postage Paid at Washington, D.C., and at additional mailing ofï¬ces. Copyright 2016 Reed Elsevier Properties SA, used under license by Matthew Bender & Company, Inc. No part of this journal may be reproduced in any form—by microï¬lm, xerography, or otherwise—or incorporated into any information retrieval system without the written permission of the copyright owner. For customer support, please contact LexisNexis Matthew Bender, 1275 Broadway, Albany, NY 12204 or e-mail Customer.Support@lexisnexis.com.
Direct any editorial inquires and send any material for publication to Steven A. Meyerowitz, Editor-in-Chief, Meyerowitz Communications Inc., 26910 Grand Central Parkway Suite 18R, Floral Park, New York 11005, smeyerowitz@meyerowitzcommunications.com, 347.235.0882. Material for publication is welcomed—articles, decisions, or other items of interest to lawyers and law ï¬rms, in-house energy counsel, government lawyers, senior business executives, and anyone interested in energy-related environmental preservation, the laws governing cutting-edge alternative energy technologies, and legal developments affecting traditional and new energy providers. This publication is designed to be accurate and authoritative, but neither the publisher nor the authors are rendering legal, accounting, or other professional services in this publication.
If legal or other expert advice is desired, retain the services of an appropriate professional. The articles and columns reflect only the present considerations and views of the authors and do not necessarily reflect those of the ï¬rms or organizations with which they are afï¬liated, any of the former or present clients of the authors or their ï¬rms or organizations, or the editors or publisher. POSTMASTER: Send address changes to Pratt’s Energy Law Report, LexisNexis Matthew Bender, 121 Chanlon Road, North Building, New Providence, NJ 07974. iv . 0020 [ST: 1] [ED: 100000] [REL: 16-1] Composed: Wed Dec 16 13:05:08 EST 2015 XPP 8.4C.1 SP #3 SC_00052 nllp 1898 [PW=468pt PD=702pt TW=360pt TD=580pt] VER: [SC_00052-Local:07 Dec 15 19:12][MX-SECNDARY: 11 Dec 15 08:32][TT-: 23 Sep 11 07:01 loc=usa unit=01898-ch1601] 0 PRATT ’S ENERGY LAW REPORT Federal Clean Power Plan Implementation Underway—Affected Industries (Not Just Power Gen) Need to Act By Thomas D. Goslin* The author of this article discusses the Obama Administration’s Clean Power Plan (“CPP”) and why affected company managers and investors—and not just those in the power industry—should take steps soon to understand whether and how the CPP may impact their businesses. The Obama Administration recently published in the Federal Register its Clean Power Plan, a rule that aims to reduce carbon dioxide (“CO2”) emissions from existing fossil-fuel ï¬red power plants.1 While nominally focused on power plants, the unprecedented scope of the new regulation has the potential to impact industries far removed from the generation of electricity. Moreover, given the tight compliance deadlines provided for in the rule, regulators already are working to develop plans to implement the CPP in their states. As such, company managers and investors—and not just those in the power industry—should take steps soon to understand whether and how the CPP may impact their businesses. THE CLEAN POWER PLAN The CPP, spelled out over 1,609 pages in the Federal Register, is an exceedingly complicated regulation promulgated by the U.S.
Environmental Protection Agency (“EPA”) under the federal Clean Air Act. At its most basic, the rule generally requires states to reduce CO2 emissions from fossil fuel-ï¬red power plants consistent with state-speciï¬c levels established by EPA. In the rule, EPA suggests approaches— referred to as “building blocks”—that states can employ to meet these standards.
That said, states generally are free to adopt whatever measures they choose, so long as those measures result in reductions in CO2 emissions that meet or exceed the standards set forth by EPA. States have until September 6, 2016, to submit plans for achieving these required emissions reductions, though states may request extensions of up to two years if they need additional time, so long as states submit an initial ï¬ling by the 2016 date summarizing in some speciï¬city how that state will meet their goals. The CPP is unique in that it largely lets the states determine how they will meet EPA air emissions targets. While this freedom provides states with latitude to determine the best means for achieving compliance, the approaching September 2016 deadline for making such determinations means that states are scrambling to assess their options.
These options are varied, and include retiring old, inefï¬cient power plants; developing new renewable energy sources; generating more electricity * Thomas D. Goslin is counsel at Weil, Gotshal & Manges LLP focusing his practice on a range of environmental, energy, and other regulatory concerns in the context of mergers and acquisitions, private equity investments, ï¬nancing transactions, infrastructure projects, and corporate restructurings. He may be contacted at thomas.goslin@weil.com. 1 80 FR 64662 (Oct.
23, 2015). 20 . 0021 [ST: 1] [ED: 100000] [REL: 16-1] Composed: Wed Dec 16 13:05:08 EST 2015 XPP 8.4C.1 SP #3 SC_00052 nllp 1898 [PW=468pt PD=702pt TW=360pt TD=580pt] VER: [SC_00052-Local:07 Dec 15 19:12][MX-SECNDARY: 11 Dec 15 08:32][TT-: 23 Sep 11 07:01 loc=usa unit=01898-ch1601] 0 FEDERAL CLEAN POWER PLAN IMPLEMENTATION from cleaner natural gas-ï¬red plants; and reducing demand for electricity in their states. States are also able to enter into multi-state cap-and-trade programs, similar to the Regional Greenhouse Gas Initiative in place in the Northeast, which provide states with additional flexibility for meeting CO2 emission reduction goals. States are free to choose any of the above options, or any others they can think of, so long as they reduce CO2 emissions to the levels set forth in the CPP. While the potential for the CPP to impact the electricity generation and other closely related industries (e.g., coal and natural gas) is obvious, less obvious are the potential impacts to other industries. For example, businesses that use signiï¬cant amounts of electricity face the likelihood of increased energy prices resulting from shifts to more expensive (but cleaner) generating technologies.
One study of an earlier draft of the CPP found that its implementation could increase the price of delivered electricity nationwide by 22 percent, and that in some states the increases could be signiï¬cantly greater: e.g., the study found that electricity prices could increase by up to 54 percent in Texas.2 The severity of the projected price increases is dependent upon several factors, including in large part the methods employed by the states to achieve their CPP goals. One of those methods includes reducing demand for electricity by employing energy efï¬ciency measures. In fact, an earlier draft of the CPP speciï¬cally called for states to use such measures to reduce CO2 emissions. While the energy efï¬ciency “building block” was dropped from the ï¬nal rule, states are free (and in some ways, encouraged) to use energy efï¬ciency measures to meet emission reduction targets. EPA has suggested that states examine programs to improve efï¬ciency in several common electric loads, including: chiller and refrigeration systems, compressed air systems, motors and drives, ventilation and fan systems, packing systems, and lighting.
To the extent that businesses manufacture, or make signiï¬cant use of, such products or systems, there is a strong possibility that CPP implementation will impact operations. CONCLUSION Businesses concerned about potential impacts from the CPP (or interested in potential opportunities arising from the rule) need to engage with state policymakers soon. As noted above, states have until September 6, 2016, to submit compliance plans, and while it is expected that most states will seek a deadline extension, many state regulators already are meeting with stakeholders to discuss their CPP plans. And though it may be tempting to refrain from engaging with regulators until litigation challenging the CPP winds its way through the courts, doing so could be foolhardy. Not only is it unclear whether such challenges will succeed, but as we have seen in recent decisions concerning EPA rules, even when courts strike down parts of a rule or criticize certain aspects of its promulgation, they have been willing to let the 2 http://www.nera.com/content/dam/nera/publications/2014/ NERA_ACCCE_CPP_Final_10.17. 2014.pdf. 21 .
0022 [ST: 1] [ED: 100000] [REL: 16-1] Composed: Wed Dec 16 13:05:08 EST 2015 XPP 8.4C.1 SP #3 SC_00052 nllp 1898 [PW=468pt PD=702pt TW=360pt TD=580pt] VER: [SC_00052-Local:07 Dec 15 19:12][MX-SECNDARY: 11 Dec 15 08:32][TT-: 23 Sep 11 07:01 loc=usa unit=01898-ch1601] 0 PRATT ’S ENERGY LAW REPORT unaffected aspects of the regulation stand.3 In fact, even states that are challenging the rule in court, such as Arkansas, are holding meetings to discuss compliance options, while environmentally-progressive states, such as Washington, are working quickly to have ï¬nal compliance plans ready by the 2016 deadline. As such, companies and investors in industries that may be affected by the CPP would be wise to study the complexities of the regulation and engage with policy makers soon to ensure that their voices are heard as CPP implementation plans are designed over the course of the next several months. 3 See, e.g., Michigan v. EPA, 135 S. Ct.
2699 (U.S. 2015) (holding that EPA failed to adequately consider costs in promulgating regulations restricting emissions of certain pollutants from power plants, remanding the case to the lower court for additional consideration, but not vacating the rule). 22 .
Giannasca, and Carlos E. Gutierrez VOL.16-1 CALIFORNIA LEGISLATURE BOOSTS RENEWABLES PORTFOLIO STANDARD TO 50 PERCENT AND INCREASES ENERGY EFFICIENCY GOALS; BALKS AT INCREASED REDUCTIONS IN GREENHOUSE GAS EMISSIONS AND PETROLEUM USE Dario J. Frommer FEDERAL CLEAN POWER PLAN IMPLEMENTATION UNDERWAY — AFFECTED INDUSTRIES (NOT JUST POWER GEN) NEED TO ACT Thomas D.
Goslin THE SEC SETTLES CLAIMS AGAINST HITACHI FOR ALLEGED CORRUPT PAYMENTS TO OBTAIN CONTRACTS TO BUILD SOUTH AFRICAN POWER STATIONS Keith M. Rosen and Christian Urrutia IN THE COURTS Steven A. Meyerowitz LEGISLATIVE AND REGULATORY UPDATE Victoria Prussen Spears INDUSTRY NEWS Victoria Prussen Spears .
0001 [ST: 1] [ED: m] [REL: 16-1] (Beg Group) Composed: Wed Dec 16 13:04:54 EST 2015 XPP 8.4C.1 SP #3 FM000150 nllp 1898 [PW=468pt PD=702pt TW=360pt TD=580pt] VER: [FM000150-Local:09 Sep 14 16:11][MX-SECNDARY: 11 Dec 15 08:32][TT-: 23 Sep 11 07:01 loc=usa unit=01898-fmvol016] 0 Pratt’s Energy Law Report VOLUME 16 NUMBER 1 JANUARY 2016 Editor’s Note: Welcome 2016! Victoria Prussen Spears 1 Do You Dare to Flare? A North Dakota Field Ofï¬ce Provides a View into the Federal Regulatory Future Mark S. Barron 3 FERC Modiï¬es Filing Requirements for Market-Based Rate Sellers and Clariï¬es Gen-Tie Priority Rights Rules James K. Mitchell, Nicholas A. Giannasca, and Carlos E.
Gutierrez 10 California Legislature Boosts Renewables Portfolio Standard to 50 Percent and Increases Energy Efï¬ciency Goals; Balks at Increased Reductions in Greenhouse Gas Emissions and Petroleum Use Dario J. Frommer 16 Federal Clean Power Plan Implementation Underway—Affected Industries (Not Just Power Gen) Need to Act Thomas D. Goslin 20 The SEC Settles Claims Against Hitachi For Alleged Corrupt Payments to Obtain Contracts to Build South African Power Stations Keith M.
Rosen and Christian Urrutia 23 In the Courts Steven A. Meyerowitz 26 Legislative and Regulatory Update Victoria Prussen Spears 34 Industry News Victoria Prussen Spears 39 . 0002 Composed: Wed Dec 16 13:04:54 EST 2015 [ST: 1] [ED: m] [REL: 16-1] XPP 8.4C.1 SP #3 FM000150 nllp 1898 [PW=468pt PD=702pt TW=360pt TD=580pt] VER: [FM000150-Local:09 Sep 14 16:11][MX-SECNDARY: 11 Dec 15 08:32][TT-: 23 Sep 11 07:01 loc=usa unit=01898-fmvol016] 42 QUESTIONS ABOUT THIS PUBLICATION? For questions about the Editorial Content appearing in these volumes or reprint permission, please email: Jacqueline M. Morris at ................................................................................................................... Email: .......................................................................................... jacqueline.m.morris@lexisnexis.com For assistance with replacement pages, shipments, billing or other customer service matters, please call: Customer Services Department at . .
. . .
. . .
. . .
. . .
. . .
. . .
. . .
. . .
. . .
. . (800) 833-9844 Outside the United States and Canada, please call .
. . .
. . .
. . .
. . .
. . .
. . .
. (518) 487-3000 Fax Number . .
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. . .
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. . .
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. . .
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. . .
. . .
. (518) 487-3584 Customer Service Web site . .
. . .
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http://www.lexisnexis.com/custserv/ For information on other Matthew Bender publications, please call Your account manager or . . .
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(800) 223-1940 Outside the United States and Canada, please call . . .
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(518) 487-3000 ISBN: 978-1-6328-0836-3 (print) ISBN: 978-1-6328-0837-0 (ebook) ISSN: 2374-3395 (print) ISSN: 2374-3409 (online) Cite this publication as: [author name], [article title], [vol. no.] PRATT’S ENERGY LAW REPORT [page number] (LexisNexis A.S. Pratt); Ian Coles, Rare Earth Elements: Deep Sea Mining and the Law of the Sea, 14 PRATT’S ENERGY LAW REPORT 4 (LexisNexis A.S. Pratt) This publication is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services.
If legal advice or other expert assistance is required, the services of a competent professional should be sought. LexisNexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used under license. A.S. Pratt is a registered trademark of Reed Elsevier Properties SA, used under license. Copyright © 2016 Reed Elsevier Properties SA, used under license by Matthew Bender & Company, Inc.
All Rights Reserved. No copyright is claimed by LexisNexis, Matthew Bender & Company, Inc., or Reed Elsevier Properties SA, in the text of statutes, regulations, and excerpts from court opinions quoted within this work. Permission to copy material may be licensed for a fee from the Copyright Clearance Center, 222 Rosewood Drive, Danvers, Mass. 01923, telephone (978) 750-8400. An A.S.
Pratt® Publication Editorial Ofï¬ce 630 Central Ave., New Providence, NJ 07974 (908) 464-6800 www.lexisnexis.com (2016–Pub.1898) . 0003 [ST: 1] [ED: m] [REL: 16-1] Composed: Wed Dec 16 13:04:54 EST 2015 XPP 8.4C.1 SP #3 FM000150 nllp 1898 [PW=468pt PD=702pt TW=360pt TD=580pt] VER: [FM000150-Local:09 Sep 14 16:11][MX-SECNDARY: 11 Dec 15 08:32][TT-: 23 Sep 11 07:01 loc=usa unit=01898-fmvol016] 32 Editor-in-Chief, Editor & Board of Editors EDITOR-IN-CHIEF STEVEN A. MEYEROWITZ President, Meyerowitz Communications Inc. EDITOR VICTORIA PRUSSEN SPEARS Senior Vice President, Meyerowitz Communications Inc. BOARD OF EDITORS SAMUEL B. BOXERMAN Partner, Sidley Austin LLP ANDREW CALDER Partner, Kirkland & Ellis LLP M. SETH GINTHER Partner, Hirschler Fleischer, P.C. R.
TODD JOHNSON Partner, Jones Day BARCLAY NICHOLSON Partner, Norton Rose Fulbright BRADLEY A. WALKER Counsel, Buchanan Ingersoll & Rooney PC ELAINE M. WALSH Partner, Baker Botts L.L.P. SEAN T.
WHEELER Partner, Latham & Watkins LLP WANDA B. WHIGHAM Senior Counsel, Holland & Knight LLP iii . 0004 [ST: 1] [ED: m] [REL: 16-1] Composed: Wed Dec 16 13:04:54 EST 2015 XPP 8.4C.1 SP #3 FM000150 nllp 1898 [PW=468pt PD=702pt TW=360pt TD=580pt] VER: [FM000150-Local:09 Sep 14 16:11][MX-SECNDARY: 11 Dec 15 08:32][TT-: 23 Sep 11 07:01 loc=usa unit=01898-fmvol016] 21 Editor-in-Chief, Editor & Board of Editors Pratt’s Energy Law Report is published 10 times a year by Matthew Bender & Company, Inc. Periodicals Postage Paid at Washington, D.C., and at additional mailing ofï¬ces. Copyright 2016 Reed Elsevier Properties SA, used under license by Matthew Bender & Company, Inc. No part of this journal may be reproduced in any form—by microï¬lm, xerography, or otherwise—or incorporated into any information retrieval system without the written permission of the copyright owner. For customer support, please contact LexisNexis Matthew Bender, 1275 Broadway, Albany, NY 12204 or e-mail Customer.Support@lexisnexis.com.
Direct any editorial inquires and send any material for publication to Steven A. Meyerowitz, Editor-in-Chief, Meyerowitz Communications Inc., 26910 Grand Central Parkway Suite 18R, Floral Park, New York 11005, smeyerowitz@meyerowitzcommunications.com, 347.235.0882. Material for publication is welcomed—articles, decisions, or other items of interest to lawyers and law ï¬rms, in-house energy counsel, government lawyers, senior business executives, and anyone interested in energy-related environmental preservation, the laws governing cutting-edge alternative energy technologies, and legal developments affecting traditional and new energy providers. This publication is designed to be accurate and authoritative, but neither the publisher nor the authors are rendering legal, accounting, or other professional services in this publication.
If legal or other expert advice is desired, retain the services of an appropriate professional. The articles and columns reflect only the present considerations and views of the authors and do not necessarily reflect those of the ï¬rms or organizations with which they are afï¬liated, any of the former or present clients of the authors or their ï¬rms or organizations, or the editors or publisher. POSTMASTER: Send address changes to Pratt’s Energy Law Report, LexisNexis Matthew Bender, 121 Chanlon Road, North Building, New Providence, NJ 07974. iv . 0020 [ST: 1] [ED: 100000] [REL: 16-1] Composed: Wed Dec 16 13:05:08 EST 2015 XPP 8.4C.1 SP #3 SC_00052 nllp 1898 [PW=468pt PD=702pt TW=360pt TD=580pt] VER: [SC_00052-Local:07 Dec 15 19:12][MX-SECNDARY: 11 Dec 15 08:32][TT-: 23 Sep 11 07:01 loc=usa unit=01898-ch1601] 0 PRATT ’S ENERGY LAW REPORT Federal Clean Power Plan Implementation Underway—Affected Industries (Not Just Power Gen) Need to Act By Thomas D. Goslin* The author of this article discusses the Obama Administration’s Clean Power Plan (“CPP”) and why affected company managers and investors—and not just those in the power industry—should take steps soon to understand whether and how the CPP may impact their businesses. The Obama Administration recently published in the Federal Register its Clean Power Plan, a rule that aims to reduce carbon dioxide (“CO2”) emissions from existing fossil-fuel ï¬red power plants.1 While nominally focused on power plants, the unprecedented scope of the new regulation has the potential to impact industries far removed from the generation of electricity. Moreover, given the tight compliance deadlines provided for in the rule, regulators already are working to develop plans to implement the CPP in their states. As such, company managers and investors—and not just those in the power industry—should take steps soon to understand whether and how the CPP may impact their businesses. THE CLEAN POWER PLAN The CPP, spelled out over 1,609 pages in the Federal Register, is an exceedingly complicated regulation promulgated by the U.S.
Environmental Protection Agency (“EPA”) under the federal Clean Air Act. At its most basic, the rule generally requires states to reduce CO2 emissions from fossil fuel-ï¬red power plants consistent with state-speciï¬c levels established by EPA. In the rule, EPA suggests approaches— referred to as “building blocks”—that states can employ to meet these standards.
That said, states generally are free to adopt whatever measures they choose, so long as those measures result in reductions in CO2 emissions that meet or exceed the standards set forth by EPA. States have until September 6, 2016, to submit plans for achieving these required emissions reductions, though states may request extensions of up to two years if they need additional time, so long as states submit an initial ï¬ling by the 2016 date summarizing in some speciï¬city how that state will meet their goals. The CPP is unique in that it largely lets the states determine how they will meet EPA air emissions targets. While this freedom provides states with latitude to determine the best means for achieving compliance, the approaching September 2016 deadline for making such determinations means that states are scrambling to assess their options.
These options are varied, and include retiring old, inefï¬cient power plants; developing new renewable energy sources; generating more electricity * Thomas D. Goslin is counsel at Weil, Gotshal & Manges LLP focusing his practice on a range of environmental, energy, and other regulatory concerns in the context of mergers and acquisitions, private equity investments, ï¬nancing transactions, infrastructure projects, and corporate restructurings. He may be contacted at thomas.goslin@weil.com. 1 80 FR 64662 (Oct.
23, 2015). 20 . 0021 [ST: 1] [ED: 100000] [REL: 16-1] Composed: Wed Dec 16 13:05:08 EST 2015 XPP 8.4C.1 SP #3 SC_00052 nllp 1898 [PW=468pt PD=702pt TW=360pt TD=580pt] VER: [SC_00052-Local:07 Dec 15 19:12][MX-SECNDARY: 11 Dec 15 08:32][TT-: 23 Sep 11 07:01 loc=usa unit=01898-ch1601] 0 FEDERAL CLEAN POWER PLAN IMPLEMENTATION from cleaner natural gas-ï¬red plants; and reducing demand for electricity in their states. States are also able to enter into multi-state cap-and-trade programs, similar to the Regional Greenhouse Gas Initiative in place in the Northeast, which provide states with additional flexibility for meeting CO2 emission reduction goals. States are free to choose any of the above options, or any others they can think of, so long as they reduce CO2 emissions to the levels set forth in the CPP. While the potential for the CPP to impact the electricity generation and other closely related industries (e.g., coal and natural gas) is obvious, less obvious are the potential impacts to other industries. For example, businesses that use signiï¬cant amounts of electricity face the likelihood of increased energy prices resulting from shifts to more expensive (but cleaner) generating technologies.
One study of an earlier draft of the CPP found that its implementation could increase the price of delivered electricity nationwide by 22 percent, and that in some states the increases could be signiï¬cantly greater: e.g., the study found that electricity prices could increase by up to 54 percent in Texas.2 The severity of the projected price increases is dependent upon several factors, including in large part the methods employed by the states to achieve their CPP goals. One of those methods includes reducing demand for electricity by employing energy efï¬ciency measures. In fact, an earlier draft of the CPP speciï¬cally called for states to use such measures to reduce CO2 emissions. While the energy efï¬ciency “building block” was dropped from the ï¬nal rule, states are free (and in some ways, encouraged) to use energy efï¬ciency measures to meet emission reduction targets. EPA has suggested that states examine programs to improve efï¬ciency in several common electric loads, including: chiller and refrigeration systems, compressed air systems, motors and drives, ventilation and fan systems, packing systems, and lighting.
To the extent that businesses manufacture, or make signiï¬cant use of, such products or systems, there is a strong possibility that CPP implementation will impact operations. CONCLUSION Businesses concerned about potential impacts from the CPP (or interested in potential opportunities arising from the rule) need to engage with state policymakers soon. As noted above, states have until September 6, 2016, to submit compliance plans, and while it is expected that most states will seek a deadline extension, many state regulators already are meeting with stakeholders to discuss their CPP plans. And though it may be tempting to refrain from engaging with regulators until litigation challenging the CPP winds its way through the courts, doing so could be foolhardy. Not only is it unclear whether such challenges will succeed, but as we have seen in recent decisions concerning EPA rules, even when courts strike down parts of a rule or criticize certain aspects of its promulgation, they have been willing to let the 2 http://www.nera.com/content/dam/nera/publications/2014/ NERA_ACCCE_CPP_Final_10.17. 2014.pdf. 21 .
0022 [ST: 1] [ED: 100000] [REL: 16-1] Composed: Wed Dec 16 13:05:08 EST 2015 XPP 8.4C.1 SP #3 SC_00052 nllp 1898 [PW=468pt PD=702pt TW=360pt TD=580pt] VER: [SC_00052-Local:07 Dec 15 19:12][MX-SECNDARY: 11 Dec 15 08:32][TT-: 23 Sep 11 07:01 loc=usa unit=01898-ch1601] 0 PRATT ’S ENERGY LAW REPORT unaffected aspects of the regulation stand.3 In fact, even states that are challenging the rule in court, such as Arkansas, are holding meetings to discuss compliance options, while environmentally-progressive states, such as Washington, are working quickly to have ï¬nal compliance plans ready by the 2016 deadline. As such, companies and investors in industries that may be affected by the CPP would be wise to study the complexities of the regulation and engage with policy makers soon to ensure that their voices are heard as CPP implementation plans are designed over the course of the next several months. 3 See, e.g., Michigan v. EPA, 135 S. Ct.
2699 (U.S. 2015) (holding that EPA failed to adequately consider costs in promulgating regulations restricting emissions of certain pollutants from power plants, remanding the case to the lower court for additional consideration, but not vacating the rule). 22 .
