The Federal Energy Regulatory Commission (FERC) took swift action to respond to the recent United Airlines v. FERC decision regarding income tax allowances, as well as to implement changes stemming from the Tax Cuts and Jobs Act “to ensure that the economic benefits related to the reduction in the Federal corporate income tax rate are passed through to customers.” Specifically, FERC revised its income tax allowance policy for Master Limited Partnership (MLP) pipelines, with implications for other pass-through entities. In addition, it acted to implement federal income tax rate reductions and ordered changes affecting all FERC regulated entities.
Federal environmental requirements and regulations have been relaxed (or are proposed to be relaxed) since President Trump was elected, but those environmental regulatory changes have not yet realized benefits for renewable energy and transmission project permitting.
As mainstream media sources like the New York Times have reported, the Trump administration’s efforts to weaken environmental laws has been somewhat substantial; to date, 67 environmental actions have been targeted by the administration, including 33 that already have been overturned, 24 with rollbacks in progress, and 10 regulations in limbo. However, most of those regulatory changes are unrelated to transmission or renewable energy project permitting. And even those regulatory changes that are loosely related to permitting haven’t yet impacted the speed with which permits are issued by federal agencies (or state agencies with delegated authority to implement federal programs), or the number of permits issued (versus denied). However, the key here is that the impacts haven’t been realized yet; permit processing efficiency and issuance are likely to improve as time goes on, particularly since some of the changes are directly intended to speed up permitting. Continue Reading Trump Administration Actions to Relax Environmental Regulations Should Eventually Benefit Renewable Energy and Transmission Project Permitting
As a reminder, the State of Texas’s new stormwater construction general permit is now in effect. The Texas Commission on Environmental Quality’s (TCEQ) has renewed its General Permit to Discharge under the Texas Pollutant Discharge Elimination System Permit, Permit No. TXR150000, which authorizes discharges from construction sites into surface water in the state. Operators of large construction activities that were covered under the prior permit and continue to operate must now submit a Notice of Intent (NOI) to renew authorization within 90 days of the March 5 effective date. For more information on these changes, see our prior blog post on this topic.
U.S. Environmental Protection Agency’s January 25 change to its “once in always in” policy will allow facilities that have historically been regulated as “major sources” of hazardous air pollutants to be reclassified as “area” sources if they have reduced their potential to emit to below major source thresholds. This is important because companies that are no longer regulated as major sources could see significant cost savings. Husch Blackwell has prepared a list of questions to help facilities evaluate possible benefits from this policy change, as well as other resources including a summary of affected emission standards and a look back at the regulatory language EPA previously proposed to implement a similar change in policy. Review the complete materials on Husch Blackwell’s website.
On February 20, 2018, the U.S. Environmental Protection Agency (EPA) requested comments on whether pollutant discharges from point sources that reach jurisdictional surface waters via groundwater or other subsurface flow with a direct hydrologic connection to the jurisdictional surface water may be subject to regulation under the Clean Water Act (CWA).
The answer to this question will have far reaching implications because the scope of the agency’s powers under the CWA determines the scope of:
- National Pollutant Discharge Elimination System (NPDES) permitting programs;
- Section 404 wetlands permitting programs;
- Section 311 oil/hazardous substance release requirements; and
- Spill Prevention Control and Countermeasure (SPCC) requirements.
As a result, the extent to which a discharge to groundwater that reaches jurisdictional surface waters is subject to regulation under the CWA is a significant issue for farmers, manufacturers, and anyone who discharges to groundwater.
The CWA regulates the discharge of pollutants and placement of fill into “navigable waters,” and defines navigable waters as “the waters of the United States.” Since the CWA was passed in 1972, there has been much debate over the extent to which waters that are not considered navigable in fact and wetlands may be regulated as waters of the United States. This uncertainty has given rise to a variety of CWA citizen suits alleging that discharges from point sources that migrate via groundwater to waters of the United States require NPDES permits.
Over the years, various federal courts have reached differing conclusions on the question of whether discharges to groundwater can be considered discharges to waters of the United States. Most recently, the Ninth Circuit addressed this issue in Hawaii Wildlife Fund v. County of Maui, 881 F.3d 754 (9th Cir. 2018). In that case, the County of Maui (the “County”) discharged treated effluent from its wastewater reclamation facility into injection wells. Tracer dye studies confirmed that this effluent migrated through the groundwater to the Pacific Ocean. A three-judge panel for the Ninth Circuit Court of Appeals ruled that the County’s discharge triggered Clean Water Act jurisdiction and the need for an NPDES permit because the groundwater was hydrologically connected to the Pacific Ocean, a water of the United States. Under the court’s ruling, an indirect discharge of contaminants from point sources that travels through groundwater and ultimately reaches navigable waters will now be subject to federal permitting requirements. Continue Reading EPA Considers Whether a Discharge of Pollutants to Groundwater that is Connected to Navigable Waters Requires a Federal Permit
The U.S. Environmental Protection Agency (“EPA”) and the U.S. Department of Justice (“DOJ”) have recently issued memoranda concerning civil enforcement of violations, including violations of environmental laws.
The January 22, 2018 EPA memorandum, entitled “Interim [Office of Enforcement and Compliance Assurance] Guidance on Enhancing Regional-State Planning and Communication on Compliance Assurance Work in Authorized States,” provides interim guidance on a collaborative partnership between EPA and authorized States in their compliance assurance activities. The document lays out plans for collaboration by EPA and States to meet and share information on environmental compliance issues. Further, the memorandum specifies that, with respect to inspections and enforcement, EPA will generally defer to authorized States to handle the primary day-to-day implementation of their programs.
The January 25, 2018 DOJ memorandum, entitled “Limiting Use of Agency Guidance Documents in Affirmative Civil Enforcement Cases,” provides that DOJ may not use its enforcement authority to convert agency documents into binding rules, and DOJ litigators may not use non-compliance with agency guidance documents as a basis for proving violations of law or treat lack of compliance as a presumption of a violation. DOJ may continue to use agency guidance documents for other purposes. This will reduce the environmental compliance burden on companies who previously sought to comply not only with clearly mandatory laws and regulations but also with advisory guidance documents, and keep the Department in check when seeking to use those guidance documents in negotiating penalties for violations.
The policies announced by this memoranda are unsurprising given the current political climate in which EPA Administrator Scott Pruitt and President Trump seek to reduce EPA responsibilities and shift environmental duties to the States and to minimize the burdens facing companies.
On January 25, 2018, the U.S. Environmental Protection Agency (“EPA”) withdrew its 1995 “once in always in” guidance. Under that guidance, facilities classified as “major sources” of hazardous air pollutants (“HAP”) as of the “first compliance date” of a maximum achievable control technology (“MACT”) standard under Section 112 of the Clean Air Act are required to comply permanently with the MACT standard. Now, EPA’s current policy is that a major source that limits its potential to emit (“PTE”) to below major source thresholds can become an area source and will no longer be subject to the major source MACT.
The Clean Air Act defines “major source” as “any stationary source or group of stationary sources located within a contiguous area and under common control that emits or has the potential to emit considering controls, in the aggregate, 10 tons per year or more of any hazardous air pollutant or 25 tons per year or more of any combination of hazardous air pollutants.” This definition expressly allows PTE to be calculated “considering controls,” and does not address the timing for when a source will be classified as a major source. As a result, EPA found that its “once in always in” policy “created an artificial time limit” contrary to the plain language of the Clean Air Act and must be withdrawn. Continue Reading Withdrawal of EPA’s “Once in Always In” Policy for Major Sources of Hazardous Air Pollutants Reduces Burdens and Encourages Emission Reduction
On the heels of last week’s Hearing on the Merits, the proposed transition of Lubbock Power & Light (“LP&L”) from the Southwest Power Pool (“SPP”) to the Electric Reliability Council of Texas (“ERCOT”) was back on the agenda at this week’s Public Utility Commission of Texas (“PUCT” or the “Commission”) open meeting.
During last week’s hearing Chairman DeAnn Walker instructed representatives of LP&L and ERCOT to finalize an agreement in which LP&L pays to help counterbalance some of the transmission infrastructure costs that may be incurred by ERCOT customers as a result of the transition. Walker also advised LP&L and SPP to try to reach a similar agreement for the benefit of the ratepayers in that region.
In response to that directive, LP&L, the Commission Staff, the Office of Public Utility Counsel (“OPUC”), and the Texas Industrial Energy Consumers (“TIEC”) have reached an agreement in principle that would, if approved by the Commission, resolve the outstanding ERCOT issues. A letter summarizing the terms of the agreement in principle filed in PUCT Docket No. 47576 last week states that LP&L will pay $22 million each year for five years to ERCOT wholesale transmission customers through the tariff proposed by Commission Staff to shield ERCOT ratepayers against the expected financial impacts of LP&L’s requested transition, and that LP&L will pay SPP’s study costs of approximately $172,000.
Discussions with ERCOT continued this week regarding what terms the final transition agreement will need to contain to satisfy ERCOT’s concerns. LP&L has completed a draft settlement agreement with ERCOT’s guidance in mind and circulated it to all parties the day before the open meeting. LP&L’s attorney conducted preliminary conversations with the parties regarding the draft and the settlement discussion is ongoing; LP&L expects to gain more guidance from the parties over the course of the next several days. Continue Reading Updates in the LP&L Case on the Heels of the Hearing on the Merits
On January 22, 2018, the U.S. Supreme Court unanimously held that challenges to the 2015 Waters of the United States Rule (the “WOTUS Rule” or “Rule”) belong in district court rather than the appellate court. The WOTUS Rule was developed by the U.S. Environmental Protection Agency (“EPA”) and Army Corps of Engineers (“Corps”) to clarify which waters and wetlands fall under federal jurisdiction. Numerous parties challenged the Rule in both federal district courts and circuit courts of appeals. The circuit court actions were consolidated in the Court of Appeals for the Sixth Circuit. In 2016, the Sixth Circuit held that it had jurisdiction to hear petitions related to the legality of the Rule and issued a nationwide stay. This decision was appealed to the Supreme Court by industry groups who argued that, under the plain text of the Clean Water Act, the district courts were the proper jurisdiction.
In an opinion authored by Justice Sonia Sotomayor, the Court noted that the Clean Water Act lists seven specific categories of EPA actions that federal courts of appeals have the exclusive power to review and the Rule did not fall into a category on the list. The Court determined that it had “no basis to depart from the [Clean Water Act]’s plain language” despite arguments by the U.S. government (forwarded by both the Obama and Trump Administrations) that the Rule was “functionally related” to categories on the list and that efficiency, national uniformity, and other policy arguments weighed in favor of making the circuit courts of appeals the appropriate jurisdiction. The Court reversed and remanded the case to the Sixth Circuit, directing the court to dismiss the petitions for review that had been filed.
Because the Supreme Court’s decision was related to jurisdiction and not the merits of the Rule, what does this mean for the Rule’s future? Continue Reading U.S. Supreme Court Sends Waters of the US Rule to District Courts; Nationwide Stay in Question
The announcement of the Office of the U.S. Trade Representative (“USTR”) on January 22, 2018, that the Trump Administration is granting relief for the domestic solar panels and modules industry under section 201 of the Trade Act of 1974, confirmed the fears of many consumers that substantial additional duties would be imposed on those products. USTR announced that the relief would come in the form of a tariff increase of 30% in the first year, decreasing to 25% in year two, 20% in year three, and then to 15% in year four. On January 23, 2018, President Trump signed the Proclamation implementing the relief. The relief will go into effect on February 7, 2018.
Despite the above tariffs, the relief announced provides that the first 2.5 gigawatts of imported cells are excluded from the additional tariffs. The use of the exemption for the first 2.5 gigawatts makes the relief a form of a “tariff rate quota,” meaning that tariffs only apply if imports rise above a certain quota amount. This type of relief has been imposed in the past, including on certain steel products. The ITC Commissioners made various recommendations to the President in this case, some of which included types of tariff rate quotas.
The nature of the relief will mean that exporters now are likely want to rush to import their products in order to be within the 2.5 gigawatt exclusion. The Proclamation states that the quota of 2.5 gigawatts “shall be allocated among all countries except those countries the product of which are excluded from such tariff rate quotas…” While this statement seems to imply that there will be a base time period used to determine different market shares within the total quota for different countries, our discussions with government officials indicate that this was not what was intended. Instead, the intention was to have one worldwide quota of 2.5 gigawatts that will apply to all countries, without any allocation among countries. Regardless of whether allocations are made among countries or there is just one overall quota, if shipments are made in the hope that they will fall within the exclusion but the 2.5 gigawatt quota already is filled at the time of entry, the 30% tariff that then will be applied may change the economics of a deal if the possibility of a tariff has not been taken into account. It is not clear at this time whether there will be some kind of pre-clearance for such imports before the time of exportation, or whether there will be a free-for-all at the time of entry. Continue Reading Solar Panels and Modules Trade Decision Creates New Uncertainty for Purchasers