July 11, 2010

Energy and Climate Legislation
As Congress returns from the July 4th recess, the future of climate and energy legislation is still uncertain.
Though Majority Leader Harry Reid (D-NV) is expected to have a bill on the floor perhaps as early as the
week of July 19, the contents of that package are still unknown, and though there is some agreement as
to which pieces to include in the march toward 60 votes, the quantity and quality of those pieces are still
to be determined. Senators are likely to be presented with options of what could be included in the
package this Tuesday or Wednesday, and a debate is expected either in mid-July or the first
of August if Majority Leader Reid keeps the Senate in session that long.

Though the Obama Administration has continued its call to put a price on carbon, it increasingly appears
that if Senate leadership hopes to include any price at all, it will be on the utility sector alone, language for
which is currently being drafted by Senators Jeff Bingaman (D-NM) and Olympia Snowe (R-ME). If
Majority Leader Reid opts away from a climate bill, he is likely to cobble together energy pieces from a
number of packages, beginning with the bipartisan bill passed out of the Senate Energy Committee last
summer. Other likely sources of language will come from Senator Dick Lugar (R-IN)’s recently unveiled
energy plan, as well as several pieces that address the Gulf of Mexico oil spill, including the bipartisan bill
recently passed out of the Energy Committee and a proposal from Senator Bob Menendez (D-NJ) that
eliminates the liability cap, and numerous energy tax pieces on which the Senate Finance Committee is
currently working.

The Congressional Budget Office released an analysis last Wednesday that shows that the American
Power Act would save $19 billion from the federal deficit over 10 years and would bring in over $750
billion through 2020 from the sale of carbon credits.

A coalition comprised of several environmental groups sent a letter to President Obama last Tuesday
urging the White House to take a bigger leadership role in the Senate climate and energy negotiations,
including helping to draft a bill that responds to the Gulf of Mexico oil spill and limits greenhouse gas
emissions while creating jobs and protecting the health of Americans. The Alliance for Climate Protection,
the BlueGreen Alliance, the Center for American Progress Action Fund, Environment America, the
Environmental Defense Fund, the League of Conservation Voters, the National Wildlife Federation, the
Natural Resources Defense Council, and the Union of Concerned Scientists signed onto the letter.
As the Senate works to piece together a package that can garner 60 votes, leadership will have to
carefully weigh which pieces to include in order to secure support from enough moderate, coal and rustbelt
Democrats, as well as a few Republicans. Just as passage of other big ticket items this Congress
necessitated it, this will require leadership from the White House as well its greatest supporters such as
Senators John Kerry (D-MA) and Joe Lieberman (I-CT).

One thing is for certain, however, and that is that the Senate is facing an increasingly short timeframe
before the August recess and midterm elections, and in addition to addressing climate and energy
legislation, they will need to confirm a Supreme Court Justice, finish the tax extenders legislation, and
address several other pressing matters. If the Senate is able to pass an energy or energy-climate bill,
differences between it and the Waxman-Markey legislation the House passed last summer will have to be
reconciled either before the November midterm elections or during a lame duck session.

Congress
Congressional Offices Protest Yucca Decision
A group of 91 members of Congress led by Senator Patty Murray (D-WA) and Congressman Doc
Hastings (R-WA) sent a letter last Thursday to Energy Secretary Steven Chu asking that he stop moving
forward on closing the nuclear waste repository site at Yucca Mountain, Nevada. This year the Obama
Administration stopped funding the project, which has been in the works for more than two decades.
Earlier this year, Washington and South Carolina filed suits questioning whether the administration has
the legal right to halt the project.
The Nuclear Regulatory Commission board recently ruled that the administration did not have the right to
withdraw its license for the project without Congressional approval.
Additional Issues to Address Before August Recess
When the Senate returns from the July 4th recess this week, they plan to continue work on the tax
extenders bill. Senate leadership has been unable to advance the legislation (H.R. 4213) thus far, as
several motions to cut off debate on a substitute amendment have fallen short of the 60-vote threshold
required to move forward on legislation that includes an extension of emergency unemployment
insurance benefits.

Legislation Introduced
On June 28, Representative Earl Blumenauer (D-OR) introduced legislation with seven House colleagues
(H.R. 5612) that would provide a 30 percent tax credit through 2016 to investments in geothermal energy.
Geothermal energy resources exist in all 50 states, and there are over 40 plants in California that
contribute to almost 5 percent of the energy in the state.

Upcoming Hearings
The House and Senate will return from the July 4th recess the week of June 12.
On Monday, the Management, Investigations, and Oversight Committee of the House Homeland Security
Committee will hold a hearing titled The Deepwater Horizon Oil Spill Chain of Command: An Examination
of Information Sharing Practices During a Spill of National Significance.
On Wednesday, July 14, the House Natural Resources Committee will mark up mineral energy and
resources consolidation legislation.

The same day, the House Agriculture Committee will hold a business meeting to consider the Rural
Energy Savings Program Act (H.R. 4785), which authorizes the USDA’s Rural Utilities Service to provide
interest-free loans to financial institutions, which would then provide loans to qualified consumers who
wish to implement energy efficiency measures.

Administration
Efforts to Promote US Exports Underway
Last Tuesday, the National Export Initiative released a full progress report. Since President Obama called
for the NEI in his State of the Union Address, the initiative has made significant progress on each of its
five main objectives, including improving advocacy efforts on behalf of U.S. exporters, increasing access
to export financing, reinforcing efforts to remove barriers to trade, enforcing trade rules, and promoting
internationally policies that lead to strong, sustainable and balanced economic growth.

On Wednesday, President Obama announced his appointments to the President’s Export Council. The
40-member group is composed of business and labor leaders as well as representatives from the
Administration, House, and Senate who will offer advice on how to promote U.S. exports, jobs, and
growth. In March, President Obama announced that Boeing CEO James McNerney will serve as Chair of
the PEC, and Xerox CEO Ursula Burns will serve as Vice Chair.
Advanced Vehicle Battery Market Growing

During a speech at the Smith Electric Vehicles factory in Kansas City, MO, last week, President Obama
announced that the U.S. share of the world market for advanced batteries for electric and hybrid vehicles
would grow by a factor of 20, up to 40 percent of the world’s market, by 2015.
President Calls for Expansion of 48C Program

During a speech at the University of Nevada with Senate Majority Leader Harry Reid last Friday,
President Obama continued touting economic progress since taking office. Though much of the speech
was a detailed outline of improvements in the economy, the President also reiterated his call for a $5
billion expansion of the Advanced Energy Manufacturing Tax Credit, the widely successful and overly
subscribed program that encourages development in the manufacturing sector by awarding a 30 percent
tax credit to successful applicants.

Department of Energy
Solar Energy Demonstration Projects Announced
Energy Secretary Steven Chu, Interior Secretary Ken Salazar, and Majority Leader Harry Reid
announced the site of the new Solar Demonstration Zone in Nevada last Thursday. The Solar
Demonstration Zone will be located on a 25 square mile area in the southwest corner of the Nevada Test
Site, a former nuclear site, on lands owned by the Department of Interior’s bureau of Land Management
and administered by DOE’s National Nuclear Security Administration. The two Secretaries signed an
interagency Memorandum of Understanding that will enable DOE to use the site to demonstrate
innovative Concentrating Solar Power technologies. The Zone will complement BLM’s establishment of
24 Solar Energy Study Areas on public lands in the U.S. Southwest by helping to ensure that the most
advanced CSP technologies are ready for commercial deployment.
BLM and DOE are also working in close coordination with the U.S. Air Force to identify and address
potential problems with locating and operating the Zone on the Nevada Site, and both the DOE and the
DOI will continue to collaborate with the Air Force and the Department of Defense on similar projects near
military installations across the country.

Domestic Emissions Up for 2010
The Energy Information Administration released its latest short-term energy outlook last week and
concluded that domestic emissions of CO2 would rise 3.2 percent this year. The agency also estimated
that emissions from the burning of natural gas, coal, and petroleum will rise an additional 1.6 percent in
2011 after falling 7 percent last year. The outlook credits the 2010 rise to projected economic growth and
the increased use of coal and natural gas in the electric power sector, and the expected 2011 increase
may be attributed to an increased demand for gasoline, diesel, and jet fuel in the transportation sector
and to the continued demand for more coal from electric utilities.

$67 Million for CCS Projects
The Department of Energy announced $67 million in grants over the next three years for 10 advanced
carbon capture and sequestration technology projects for existing and new coal power plants last
Wednesday. The projects will improve the efficiency and lower the cost of CCS so that it can add less
than 30 percent to the price of new pulverized coal plants and 10 percent for coal gasification plants.
State Energy Program Begins to Receive Funding

A state-based program administered by the Department of Energy, the State Energy Program, is on track
to obligate $3.1 billion in Recovery Act funds by September 30 for renewable energy and energyJuly

efficiency projects after encountering initially delayed progress. Thus far, $2.5 billion has been obligated
for projects via grants, rebates, and revolving loans.

Energy Efficient Lighting Could Save $2.2 Million
On July 8 the Inspector General released an audit report that detailed the Department of Energy’s role as
the lead agency for promoting new technologies and helping other federal agencies to conserve energy.
However, an audit of 96 buildings at seven DOE sites found that the agency continues to use outdated,
less efficient, lighting systems. About a third of the buildings did not use occupancy sensors, and 80
percent did not use scheduling systems to automatically turn off lights. The report concluded that DOE
could save over $2.2 million per year by using the light technology it has promoted and for which it has
provided millions in research and development funding.

$18.2 Million for Nuclear Research and Training
The Department of energy awarded $18.2 million to U.S. colleges and universities last Thursday to
bolster their nuclear energy research and train scientists and engineers. The Nuclear Energy University
Program is providing $13.2 million to 39 institutions to upgrade their research reactors and buy laboratory
equipment, and $5 million will support 85 scholarships for undergraduate students and 32 fellowships for
graduate students in engineering and science programs related to nuclear energy.

Department of Transportation
Nearly $300 Million for Streetcar and Bus Projects
The Department of Transportation, through the Federal Transit Administration, announced July 8 $293
million in federal support for streetcar and bus projects around the country. The Department will help to
fund six streetcar projects with $130 million from the Urban Circulator grant program, and another $163
million from the Bus and Bus Facilities Livability Program will go to 47 bus vehicle and facility projects in
31 states. The programs are designed to further the Administration’s livability initiative, which seeks to
improve quality of life by coordinating transportation, housing, and environmental decisions.

Environmental Protection Agency
EPA Proposes New Interstate Rules
On Tuesday, July 6, the EPA proposed interstate rules to replace its Clean Air Interstate Rule by requiring
31 Eastern and Midwestern States and the District of Columbia to curb emissions of sulfur dioxide and
nitrogen oxides from power plants beyond what was required under CAIR, which was overturned by the
U.S. Court of Appeals for the District of Columbia in 2008. The proposed rule, which would take effect in
2012, would strictly limit interstate trading to cover unforeseen increases in power plant emissions, but
would allow unlimited intrastate trading between the plants themselves. EPA estimates that by 2014, its
proposed interstate rule would reduce SO2 emissions by 6.3 million MT per year, or 71 percent below
2005 levels, and NOx emissions by 1.4 million MT per year, or 52 percent from 2005 levels.
CAIR was issued in 2005 to reduce ozone and fine particle pollution from power plants that transported
across state lines and to help downwind states attain air quality standards by establishing an interstate
emissions trading scheme. It originally applied to 28 states and DC, but the updated version now also
includes. The rule was overturned in 2008 because EPA had failed to adequately ensure that the upwind
emissions reductions would be sufficient to help downwind states meet the standards, and because the
agency improperly tied SO2 and NOx emissions reductions required by CAIR to acid rain portion of the
Clean Air Act.

EPA will accept comments on the proposal for 60 days, and the agency will hold three public hearings on
the proposal. The final standards are expected in August.

Worries that this proposal could also be rejected in court could prompt Congress to move forward with
legislation. One such bill (S. 2995) from Senators Tom Carper (D-DE) and Lamar Alexander (R-TN) would
reduce power plants’ SO2 emissions 80 percent by 2018 and NOx emissions 50 percent and mercury
emissions 90 percent by 2015. Hearings on the bill have occurred in the last year, and Senator Carper
recently stated that he plans to seek a markup once the EPA releases its modeling of the legislation.
25 Lawsuits Challenge GHG Limits and Fuel Economy Rules

With many industries objecting to GHG regulation under the Clean Air Act because it could harm their
businesses, industry groups have filed 25 lawsuits in the past few weeks challenging a final rule
establishing limits of greenhouse gas emissions from cars and light trucks and increasing fuel economy.
Eighteen of the suits were filed July 6, the deadline for filing challenges to the emissions limits. The EPA
published the GHG limits and fuel economy increase May 7 in a final joint rulemaking with the National
Highway Traffic Safety Administration in the first federal effort to place mandatory control requirements
under the Clean Air Act.

Groups Support EPA’s Biomass Decision
Four conservation groups, the Conservation Law Foundation, the Natural Resources Council of Maine,
Georgia ForestWatch, and Wild Virginia, filed a motion last Tuesday to intervene in a lawsuit against the
EPA to defend the agency’s decision not to exempt emissions from biomass energy production from the
June GHG limitations from large stationary sources. The agency announced in June that while the rule
will include biomass for the time being, it will soon take comment on exempting emissions from some
types of biomass burning, and will make a final decision by July 2011. The groups said that some
biomass burning may produce more GHG emissions than other fuels, and should therefore be included in
the rule.

EPA Submits Enforcement Plan to OMB
On July 8, the EPA submitted to the White House Office of Management and Budget a proposed federal
implementation plan to ensure that GHG permitting requirements would be enforced across the country.
The federal implementation plan, Action to Ensure Authority to Issue Permits Under the Prevention of
Significant Deterioration Program to Sources of Greenhouse Gas Emissions, would make the permitting
requirements enforceable even in states that do not have their own laws and regulations to implement the
agency’s tailoring rule.
Federal Housing Finance Agency
Fannie and Freddie Assessment Could Threaten Energy Efficient Loan Program
The Federal Housing Finance Agency announced last week that the Property Assessed Clean Energy
Program, which encourages homeowners to invest in renewable energy and energy efficiency
improvements with financing at a municipal bond rate, could damage the already fragile mortgage
system. The FHFA has urged state and local governments to put the program, which attaches the loans
to property tax bills, on hold. The Office of the Comptroller of the Currency recently said that the approach
poses significant risk to homeowners.

Miscellaneous
China to Host October Climate Change Negotiations
Though the official announcement is expected sometime after July 12, the October round of UNFCCC
climate negotiations will be held in Tianjin, China. The meetings will be the final round of large scale UNsponsored
meetings before the December Conference of Parties summit in Mexico, and will be the first to
take place in China, possibly paving the way for China to host the 18th COP in 2012. But first, the UN has
one more set of negotiations before the China talks, a set of inter-sessional negotiations August 2-6 in
Germany.

Chinese and Indian Emissions Increase
The Netherlands Environmental Assessment Agency released a study July 1 that noted that while global
CO2 emissions remained stable in 2009, increases in China and India offset decreases in industrialized
countries. The study, No Growth in Total Global CO2 Emissions in 2009, shows that emissions from
fossil-fuel combustion fell 7 percent in industrialized countries, while in China and India, they increased by
9 and 6 percent. The International Energy Agency last year forecasted that global emissions would drop
by 3 percent in 2009.

Two New Reports from Ceres
According to a new report from Ceres and Navigant Consulting, utilities across the U.S. will need become
more energy efficient and environmentally sustainable in order to remain competitive and attract
necessary investment in the upcoming decades. The report, “The 21st Century Electric Utility: Positioning
for a Low-Carbon Future,” contends that a comprehensive energy bill will be necessary to accomplish
this.

Another report released last week outlines 95 climate-change or sustainability related shareholder
resolutions that were filed with U.S. companies in 2010. 47 of the resolutions were withdrawn after
successful negotiations, and 16 percent garnered more than 30 percent of voting shares in annual
meetings.

OK Passes Energy Credits Legislation
Oklahoma enacted legislation (H.B. 3024) June 9 to modify and limit the application of tax credits for
manufacturing, zero-facilities, hydrogen fuel cell vehicles, and the rehabilitation of historic property. The
legislation also creates a new credit for the manufacture of electric vehicles.

WCI Would Save $100 Billion
The Western Climate Initiative released a new report July 6 that shows that its GHG reduction plan would
save the participating states and providences about $100 billion in reduced energy costs by 2020. The
analysis also found that the 11 member entities could achieve their goal of reducing GHGs to 15 percent
below 2005 levels by 2020 while also supporting continued economic growth.

VT Updates Solar Energy Tax Credit
Vermont enacted legislation (H.B. 781) June 4 to amend its solar energy tax credit to make it available to
investments made after January 1 in small solar energy plants with a capacity of 2.2 MW or less. The
legislation requires that plant owners file a petition by this Thursday with the public service board for a
certificate of good service and an application for the credit with the clean energy development board. The
legislation also makes the credit applicable against personal income tax, and may be carried forward for
five years.

MA Court Upholds Wind Farm Project
The Massachusetts Supreme Judicial Court upheld a lower court finding July 6 that state environmental
officials had acted properly in ruling that a wind farm project proposed for the western part of the state
complied with the state’s Wetlands Protection Act. As a result of the ruling, Iberdrola Renewables will
construct 20 wind turbines in the 30-MW Hoosac Wind Project in Berkshire County, MA.
Switzerland and Mexico Plan Climate Strategy Meeting

Switzerland and Mexico will co-host a ministerial meeting September 1-3 in an attempt to increase the
prospects for an international climate change agreement at the UNFCCC’s Conference of Parties in
December. The meeting will focus on issues related to the long-term financing of climate change
mitigation and adaptation measures in underdeveloped countries.

France Seeks CCS Project Funders
On July 8 the French government called for demonstrations of interest from manufacturers in an effort to
identify French candidates for special EU funding for carbon capture and storage and renewable energy
projects. The EU’s 2009 climate-energy package created a New Entrant Reserve 300 fund to finance
industrial-scale demonstration projects for renewable energy and CCS projects. The mechanism set
aside CO2 allowances worth up to $11.37 billion for new entrants into the EU Emission Trading System.

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