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in always in” policy “created an artificial time limit” contrary to the plain language of the Clean Air Act and must be withdrawn.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?

First, the nationwide stay of the Rule is likely to be lifted since the Sixth Circuit has been ordered to dismiss the case and does not have jurisdiction. In anticipation of the Supreme Court’s decision and potential lifting of the Sixth Circuit’s nationwide stay, the Trump Administration has already proposed to delay the effective date of the Rule until 2020. EPA and the Corps have indicated that they want to take final action on this proposal by early 2018. If the Sixth Circuit’s stay is lifted before the effective date delay is final, it could result in the WOTUS Rule becoming effective for a period of time. However, parties are almost certain to seek stays from district courts. A North Dakota district judge already issued a stay of the Rule in thirteen states before the Sixth Circuit issued its stay, so the Rule may continue to be stayed in those thirteen states, and opponents of the Rule would likely seek to have that injunction applied nationwide.

Second, the several district court cases challenging the Rule which were on hold may be restarted. However, these cases may have a short life. The Trump Administration has already announced plans to rescind the WOTUS Rule and to re-codify the regulatory definition that existed prior to 2015 (Step 1), followed by a second outreach period and rulemaking to propose a new definition of “waters of the United States” (Step 2). EPA is already in the process of reviewing the comments on the Step 1 proposal, but, according to comments by EPA staff, EPA likely won’t make a final decision on Step 1 until March 2018. The Step 2 rulemaking would follow that decision.

In the meantime, the Supreme Court’s decision should be good news for anyone who needs to challenge the Rule because district courts are closer to where the Rule impacts local landowners and facilities and because there are more opportunities for review by higher courts. But, as noted above, this benefit may be moot if the Trump Administration acts quickly to rescind the Rule and issues a new proposal. Watch this space for additional updates.

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

The Menominee Indian Tribe of Wisconsin has sued the U.S. Environmental Protection Agency (“EPA”) and Army Corps of Engineers (“Corps”) over the proposed Aquila Resources Back Forty Mine, arguing that EPA and Corps have failed to take responsibility for reviewing wetland permits for the project. The lawsuit was expected since the Tribe filed a notice of intent to sue in November 2017.  

Aquila Resources has proposed an open pit mine, deemed the “Back Forty Mine,” to extract gold, zinc, and other metals. The mine would be located in Michigan’s Upper Peninsula and adjacent to the Menominee River, which forms the boundary between Wisconsin and Michigan. The river flows into Lake Michigan. The Michigan Department of Environmental Quality (“MDEQ”) is the permitting authority and has issued three of the four permits required for the project, including a Nonferrous Metallic Mineral Mining Permit, a Michigan Air Use Permit to Install, and a National Pollutant Discharge Elimination System (NPDES) permit. A permit for wetland impacts is still required and is under review by MDEQ. Given the location of the wetlands near a commercially navigable interstate waterway, normally the Corps and EPA would have wetland permitting authority and permitting would also trigger an obligation for the federal agencies to consult with the Tribe under the National Historic Preservation Act. However, MDEQ is one of two state agencies which has been delegated additional permitting authority under the Clean Water Act by EPA for permitting of wetlands under federal jurisdiction, and MDEQ is not required to consult with the Tribe.  

The Tribe is alleging that the federal government has deprived it of treaty rights that are supposed to protect its cultural and historical sites. The Tribe’s sacred place of origin is within its 1836 treaty territory at the mouth of the Menominee River and there are numerous sacred sites and burial mounds located along the river, including in the area of the proposed mine. The Tribe is also concerned about the potential impact of acid mine drainage from the mine on the water and fishery resources in the area and Great Lakes ecosystem. According to the Tribe, it has been trying to meet and consult with the Corps and EPA for months, but the agencies have not responded in a meaningful way. The Tribe has asked the court to order EPA and the Corps to take over the wetland permitting process. 

Watch this blog for additional updates.

On January 8, 2018, the Federal Energy Regulatory Commission (FERC or the Commission) issued an Order terminating the rulemaking proceeding that it established to address DOE Secretary Rick Perry’s proposed Grid Resiliency Pricing Rule.  The proposed rule directed FERC to provide special compensation to certain coal and nuclear power plants (for a full summary of the proposal, refer to Husch Blackwell’s client alert).  In response, FERC found that Secretary Perry’s proposal did not meet “clear and fundamental legal requirements[.]”  FERC stated that Comments from Regional Transmission Operators (RTOs) and Independent System Operators (ISOs) did not indicate that the grid is threatened by the retirement of coal and nuclear power plants.

FERC none-the-less emphasized the importance of grid reliability and resilience, and determined that it has consistently taken action to address the issue, including:  (i) extensive reliability planning and standard setting through NERC, (ii) examination of fuel assurance methods during the 2014 Polar Vortex, (iii) certain capacity market reforms, and (iv) coordination of wholesale gas and electricity market scheduling.  To continue its reliability work, FERC initiated a new proceeding in Docket No. AD18-7 “to specifically evaluate the resilience of the bulk power system in the regions operated by regional transmission organizations (RTO) and independent system operators (ISO).”   In the new proceeding, FERC directs each RTO and ISO to submit information on certain resilience issues and concerns identified by the Commission to enable it to examine holistically the resilience of the bulk power system.  FERC stated that this new proceeding will provide further information on whether further action is warranted.    Continue Reading FERC Rejects DOE Proposal for Special Compensation for Coal and Nuclear Generators

FERC Holds its First Meeting in Nearly Two Years with a Full Slate of Commissioners.

At the December 21, 2017 FERC open meeting, the first with the agency’s new Chairman, Kevin McIntyre and a full slate of Commissioners, several major new orders and policy initiatives were announced that are important to the energy industry, including initiating a more RTO-specific approach to fast-start resource pricing policies, new reporting requirements for cyber security incidents and a preliminary announcement of FERC’s intent to review the current pipeline certificate procedures. Continue Reading FERC Off to a “Fast Start”

On December 18, 2017, EPA Administrator Scott Pruitt signed an advanced notice of proposed rulemaking (“ANPRM”) to solicit input regarding the emissions guidelines limiting greenhouse gas (“GHG”) emissions from existing electric utility generating units (“EGUs”) that the U.S. Environmental Protection Agency (“USEPA”) is considering proposing.

The Clean Power Plan regulations adopted by the Obama administration would have limited GHG emissions by substituting generation from lower-emitting existing natural gas combined cycle units and zero-emitting renewable energy generating capacity. Continue Reading EPA Solicits Input on Greenhouse Gas Emissions Limits for Existing Electric Utility Generating Units

Since 2001, Wisconsin law has required a permit to discharge fill into wetlands that do not fall under federal jurisdiction (“nonfederal wetlands”). Of the approximately five million acres of wetlands in Wisconsin, an estimated 10 to 30 percent are nonfederal wetlands.

State lawmakers held hearings on December 21 on proposed legislation, AB547/SB600, which would exempt nonfederal and artificial wetlands from the state wetland permitting requirements administered by the Department of Natural Resources (“DNR”). The bill would still require a developer to mitigate the nonfederal wetland loss by creating a minimum of 1.2 acres of wetlands for every acre filled, but a permit would no longer be required.

The proposed bill also authorizes the DNR to apply to the U.S. Environmental Protection Agency (EPA) for delegation of permitting authority for federal wetlands within Wisconsin. If EPA approves the application, the DNR become the permitting authority for fill in federal wetlands instead of the U.S. Army Corps of Engineers.

Proponents of the legislation argue that the existing nonfederal wetland permit program often protects low-value wetlands and stands in the way of development projects. Opponents argue that the existing program is necessary given the uncertainty of the definition of federal wetlands; that nonfederal and artificial wetlands provide valuable ecosystem services such as flood control and water quality protection; and that mitigation attempts often fail or do not create the same benefits as the fill wetland.

Legislative action on the bill is expected when the legislature returns to session in January 2018.

The renewables industry can breathe easier this weekend as details emerge from whirlwind negotiations that appear to clear the path toward passage of the first comprehensive tax bill in more than 30 years.

The final language, released by the Conference Committee last night, scraps a House provision which would have effectively gutted Production Tax Credits (PTCs) critical to the wind industry; eliminates the corporate Alternative Minimum Tax; and takes the teeth out of the so-called BEAT (Base Erosion Anti-Abuse) Tax Continue Reading Congressional Compromise Mollifies Renewable Industry Concerns