Greenhouse Gases, What Now? What Next?

The U.S. power industry is all too familiar with trendy policies and ideas, oftentimes thrust upon it by outsiders with an agenda. However, there are trends that energy companies and their vendors would do well to follow closely over the course of the next year. One such trend in the United States is the regulation of Greenhouse Gases (GHGs). Climate change and energy are now intertwined as demonstrated by the following major legislation proposed in Congress in 2009:

• The American Clean Energy and Security Act of 2009 (passed by the House Representatives and stalled in the Senate) and
• The Clean Energy Jobs and American Power Act of 2009 (proposed and stalled in the Senate)

Current political events and a still recovering economy strongly preclude the likelihood of these bills or any compromise being passed during 2010. In other words "Climate Change/GHG" legislation is dead until after the fall elections.

However, as proponents' hopes for climate change legislation dimmed and in the absence of Congressional action, the U.S. Environmental Protection Agency (EPA) has stepped up to the plate. Conveniently timed to predate the Copenhagen Summit, on September 22, 2009, the EPA Administrator, Lisa Jackson signed a new rule requiring facilities to begin reporting GHG emissions as early as 2011. According to the EPA:

"Under the rule, suppliers of fossil fuels or industrial greenhouse gases, manufacturers of vehicles and engines, and facilities that emit 25,000 metric tons or more per year of GHG emissions are required to submit annual reports to EPA. The gases covered by the proposed rule are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), perfluorocarbons (PFC), sulfur hexafluoride (SF6), and other fluorinated gases including nitrogen trifluoride (NF3) and hydrofluorinated ethers (HFE)."

Following closely on the heels of this announcement, on September 30, 2009, Administrator Jackson announced in a speech that the EPA has "… taken a significant step to address greenhouse gas (GHG) emissions under the Clean Air Act." The Administrator announced a proposed rulemaking requiring large industrial facilities that emit at least 25,000 tons of GHGs a year to obtain construction and operating permits covering these emissions and that these facilities must use "best available control technologies and energy efficiency measures" to minimize GHG emissions when facilities are "constructed or significantly modified." This includes power plants, refineries, and factories. According to the Administrator, small businesses would be excluded from these requirements.

Finally, on January 12, 2010, Administrator Jackson announced her seven priorities for the EPA. They are:

• Taking Action on Climate Change,
• Improving Air Quality,
• Assuring the Safety of Chemicals,
• Cleaning Up Our Communities,
• Protecting America's Waters,
• Expanding the Conversation on Environmentalism and Working for Environmental Justice and
• Building Strong State and Tribal Partnerships.

The EPA's top 2 priorities involve Clean Air/GHG emissions. EPA's first step is making emitters begin submitting annual reports on GHG emissions mandatory.

However new environmental regulations are often challenged in court and we expect the EPA's reporting requirement will witness a similar fate. Groans already being heard about why some industries need to report and others not to report are the first such indications of challenges to come. And Republicans, emboldened by their surprise victory in Massachusetts, are already raising the ante. Last week, Alaska Republican Sen. Lisa Murkowski proposed a "resolution of disapproval" seeking to keep the EPA from regulating GHG emissions. This is a rarely used Congressional action authorized in the Congressional Review Act of 1996. If Sen. Murkowski can get both Houses of Congress to pass the resolution and the President to sign it, then the EPA's rule will not take effect.

This year's trend? It's looking like yet another year of "wait and see" with respect to GHG emissions or "cap and trade" regulation and without clarity, all that's left for those most likely affected by potential legislation or regulation is to continue reading the political tea leaves. UtiliPoint will continue to closely monitor events in Washington D.C. and at the state level, and will report on important developments.