International Restructuring Newswire
This issue features articles from the United Kingdom, Australia and Canada.
California became one of two US states in September to require all electricity supplied in the state to come from renewable or other carbon-free sources. California set a goal of reaching 100% clean energy by 2045.
The only other state with a similar goal currently is Hawaii.
California Governor Jerry Brown said the action was part of the state’s commitment to honoring the goals in the global Paris agreement on climate change. The United States gave formal notice in 2017 that it is withdrawing from the pact over concern about the potential cost to the US economy, becoming the only nation to reject the climate change accord. Brown said, “We are going to meet the Paris agreement and we’re going to continue down that path to transition our economy to zero carbon emissions.”
For more details about the California actions, see the “California Update” in this issue.
The ability of both California and Hawaii to reach 100% clean energy will require battery costs to plunge over time.
Earlier this year, California became the first state to require solar rooftop panels on nearly all new homes.
For the first time ever, the US Environmental Protection Agency added a contaminated site to the Superfund national priorities list because of vapor intrusion.
Vapor intrusion is the release of volatile chemical vapors from contaminated soil into buildings above ground. It can occur when vapors filter through cracks in the building foundation, dirt floors, utility line openings or other pathways.
An Obama-era EPA rule that went into effect in 2017 added subsurface intrusion to the hazard ranking system that is used to score whether a contaminated property gets listed as a Superfund site.
While the determination to add a site to the Superfund list based solely on vapor intrusion is likely to remain rare, properties with less extensive subsurface intrusion risk are regularly addressed through the Resource Conservation and Recovery Act or under state environmental regulations.
Developers and real estate buyers should be ready to assess potential risks from vapor intrusion before completing a transaction as part of the standard diligence. There are tens of thousands of sites in the United States where past releases of chlorinated solvents or petroleum hydrocarbons could pose a risk of vapor intrusion, even if the property underwent investigation or an incomplete remediation earlier. Even sites that reached regulatory site closure could be reopened under certain circumstances where some contamination remains. In addition, the threat of toxic tort lawsuits alleging vapor intrusion from groundwater that contaminates neighboring properties has become a cottage industry in the plaintiffs’ bar.
For vapor intrusion to be of concern, the vapors have both to migrate into buildings and contaminate indoor air to such a degree that human health is affected.
EPA announced the vapor intrusion Superfund listing on September 11. It rejected industry concerns that it would set an adverse precedent by sidestepping standard practice for evaluating vapor intrusion sites. Critics argue that EPA was required to consider the use of permanent vapor mitigation systems in scoring sites for inclusion on the Superfund list and that EPA failed to do so.
EPA proposed in June to amend a list of practices buyers are supposed to use before buying property to assess the environmental risk from prior ownership and use. By going through this checklist, a buyer can limit its potential liability under the Superfund law for the cost to clean up past contamination under certain circumstances. The June amendments added the possibility that vapor intrusion could contaminate indoor air as another item to check.
A federal judge in California ruled that the EPA must either issue Clean Water Act permits for individual properties authorizing the discharge of pollutants in its stormwater, called “NPDES” permits, or prevent the property owners from discharging any polluted stormwater offsite into receiving watersheds.
The judge ruled in early August that, once EPA finds that a property’s stormwater discharges “cause or contribute to violations of water quality standards,” the Clean Water Act gives regulators no choice but to limit those releases. In so doing, the court rejected EPA’s claim that it has discretion to address the pollution through methods other than stormwater permits.
EPA has authority under section 402(p)(2)(e) of the Clean Water Act to issue permits for currently unpermitted sites where it determines that runoff “contributes to a violation of a water quality standard or is a significant contributor of pollutants” to protected waters. This is called residual designation authority.
Environmental groups brought a number of cases against EPA after the agency — including during the Obama administration — rejected petitions to issue new stormwater permits under its residual designation authority.
If other courts follow the logic of this case, EPA and states with Clean Water Act authority could be required to consider stormwater permits even where regulators would otherwise prefer alternative strategies for remedying water quality issues.
The court rejected the argument that other strategies could replace stormwater permits, even if the same qualitative results were achieved. The court said the EPA has only two choices: issue a permit or ban all unpermitted stormwater releases.
The decision was in Los Angeles Waterkeeper v. Pruitt.
Environmental groups have asked a federal appeals court to clarify or revisit a decision upholding the current EPA rules for cooling water intake structures.
The rules in question set technological standards for water cooling systems used by power plants and factories.
The appeals court sided with EPA in late July.
The Clean Water Act requires EPA to set “best available technology” standards to minimize adverse environmental impacts from cooling water intake structures that draw water for cooling purposes and later discharge heated water back into lakes and rivers. EPA rules in this area are supposed to reduce the potential harm to fish and other aquatic organisms from hot water and prevent them from being sucked through the intake structures or pulled up against mesh filters.
Existing rules require use of closed-cycle cooling technology for new facilities that allows reuse of the water after it has time to cool. However, this is not required for existing facilities.
EPA and states use five mandatory and six discretionary factors to make site-specific determinations of what is the best available technology to avoid sucking aquatic organisms into cooling-water intake structures, a harm known as entrainment. Becoming trapped against a mesh filter is called impingement. The current rules allow alternative technologies other than the “best available” if site specific conditions favor them.
Environmental groups want EPA to set a single national standard rather than make decisions on a site-by-site basis. They argued that the current approach gives more discretion to regulators than the Clean Water Act allows. The court disagreed.
The environmental groups asked in early September for a clarification or reheating.
They are also unhappy with the manner in which EPA consults with the US Fish and Wildlife Service and the National Marine Fisheries Service about potential harm to endangered species before issuing cooling-water intake permits. They want the court to address whether the government must follow the recommendations that come out of that process.
They also want the federal government to object to state-issued permits that fail to satisfy what the Fish and Wildlife and National Marine Fisheries recommend.
The case is Cooling Water Intake Structure v. EPA. It is pending in the 2d circuit, which covers New York, Connecticut and Vermont.
EPA proposed comprehensive changes to federal regulation of greenhouse gas emissions from power plants in mid-August.
The changes replace the Clean Power Plan that the Obama administration proposed in 2016. The Trump administration says the new plan should be finalized in early 2019.
The Clean Power Plan would have set limits on greenhouse gas emissions from existing power plants, but implementation was blocked by the US Supreme Court, and the plan never took effect. EPA moved formally to withdraw it in October 2017, and the Trump Administration later proposed its repeal.
The new plan does not set specific emissions targets for states to meet. Instead, states would set their own emissions reduction targets, subject to EPA review and approval.
States would still have to submit plans to address certain greenhouse gas emissions, but the plans would be limited to emissions reduction measures that can be applied to individual power plants and not on a sector-wide basis.
Unlike under the Clean Power Plan, states will no longer have to consider whether to impose emissions reductions beyond a plant’s fence line, such as taking steps to increase renewable energy capacity, making downstream energy efficiency improvements, or participating in regional emissions trading programs.
The Clean Power Plan allowed states to consider trading emissions allowances both within and across state lines as a way to identify the cheapest compliance options. EPA now says that the federal government lacks the authority to require states to consider such trading and other off-site options.
States would have autonomy to determine how to regulate greenhouse gas emissions from coal plants on a plant-by-plant basis through heat-rate efficiency improvements. Instead of working to achieve overall emissions cuts, states would now choose from a list of candidate technologies to improve heat-rate efficiency at power plants and require implementation of improved operating and maintenance practices at the plant level.
EPA acknowledged that the proposed plan is expected to “increase emissions of carbon dioxide” and “increase the level of emissions of certain pollutants in the atmosphere that adversely affect human health,” as compared to the Clean Power Plan. Tables in the 289-page report issued by EPA to support the new plan appear to show that the plan would cause between 470 to 1,400 additional premature deaths annually by 2030 due to comparatively higher emissions of greenhouse gases and other air pollutants.
EPA points to significant decreases in compliance costs and relief for coal-fired power plants.
Where the Clean Power Plan was intended to drive renewable and clean energy development, the new plan has as one of its goals to try to rescue coal plants from closing. The new legal interpretation that the federal government can only order actions within the fence line of a plant could backfire under a subsequent administration that is more concerned about climate change. It could lead to plants being required to take more drastic technological steps at the plant level if emissions reduction goals increase instead of being able to avail themselves of cheaper measures that could be taken beyond the fence line.
The proposed replacement for the Clean Power Plan would also mean that new source permits would be required in fewer cases when constructing new or expanded conventional power plants.
The new source rules determine whether particular modifications to existing power plants trigger new permitting requirements that force compliance with the latest pollution control standards, a process intended to prevent areas that meet air quality standards from backsliding.
Existing regulations require permitting for plant modifications that significantly increase the facility’s annual emissions, while the proposed rule change would allow overall emissions to increase without triggering a permit review if a facility’s maximum hourly emissions rate remains the same.
EPA is proposing two alternative ways to measure emissions increases on an hourly basis. States would have the option to choose. One of the approaches is more favorable to coal plants.
Leaked documents show that EPA was weighing whether it should regulate greenhouse gas emissions from power plants at all. In the end, the agency decided not to solicit comments on that question.
While EPA took the unusual step of combining changes to two different power plant regulations under one new rule — namely the standards for regulating greenhouse gas emissions and the new source permitting requirements — EPA included language that would legally separate the air pollution permitting revisions from the underlying carbon dioxide standards. In other words, one provision may be spared if a court strikes down the other.
EPA will reportedly eliminate its office of the science advisor, a high-ranking position created to advise the EPA administrator on the scientific research underpinning environmental and health regulations.
The change would demote the position several levels down so that it is no longer a direct report to the administrator.
EPA spokespersons said the agency decided to combine offices with similar functions and eliminate redundancies.
Last year, EPA scaled back two scientific panels advising the agency on public health rules by barring academic researchers from joining the panels. EPA is also proposing to limit the types of scientific research that officials can take into account when writing new public health policies.
A federal judge in Montana ordered the US Bureau of Land Management to review how allowing use of Powder River Basin coal affects US greenhouse gas emissions.
Various plaintiffs are suing BLM to prevent the agency from leasing government land to coal companies to mine coal.
The court determined that the National Environmental Policy Act, or NEPA, requires consideration of the downstream impacts from agency management decisions.
The judge ordered BLM to complete a new NEPA analysis by November 29, 2019. He declined to prohibit any leasing or to overturn existing resource management plans in the meantime.
This is the second court to require downstream greenhouse gas emissions impacts analysis under NEPA. Last year, a US court of appeals ordered the Federal Energy Regulatory Commission to consider such impacts before authorizing construction of a pipeline in the southeast.
The case is Western Organization of Resource Councils v. BLM.
This issue features articles from the United Kingdom, Australia and Canada.
Welcome to the twelfth edition of Global asset management quarterly.