Tuesday, February 24, 2015
Several months ago, Secretary of Energy Ernest Moniz made waves with a bold prediction: the United States could double its hydropower capacity by 2030. And that doubling, the Department of Energy argues, could be sustainable. If that prediction even comes close to coming true—and there are many reasons why it might not—a Maine project and some Maine-based research may provide some important guidance.
Of course, this all may seem rather implausible. Dams, according to many environmentalists, are “evil, placed and solid,” as John McPhee wrote in Encounters with the Archdruid. The notion of sustainable hydropower therefore may sound, to many people, like an ironic joke. And partly because of its environmental impacts, hydropower has been in decline. Legal attention has reflected that decline. Go to an energy law conference these days, and you’ll probably hear a lot about wind, solar, and fracking and little or nothing about dams. You might walk away thinking that hydropower is yesterday’s energy.
But there is some basis for Moniz’s enthusiasm about hydropower. In the United States, hydropower still generates more electricity than all other sources of renewable energy—combined. And across the nation, there are tens of thousands of existing dams and other waterworks that don’t generate hydropower. Putting turbines in those places would be a great way to generate relatively clean energy without creating significant environmental impacts. Sometimes, in places where downstream reaches have low dissolved oxygen levels, installing a new turbine can even bring environmental benefits. And if we compensated for the environmental impacts of new dams (and minimized those impacts by placing dams carefully) by taking out old, decrepit dams on river mainstems, new dam construction could actually have net environmental and energy benefits.
For over a year, Colin Apse, a scientist with The Nature Conservancy, and I have been thinking about legal structures that would facilitate that win-win future. Our conceptual model is the Penobscot River Restoration Project, an innovative and ambitious project that allowed continued operation of some dams in return for removals of other dams (and payment of a large sum of money). The net result of the project should be massive environmental improvements and a slight gain in hydropower capacity. Our study asks how that circumstance could be replicated, and, more broadly, how environmental trading system concepts could play a role in that replication. We don’t suggest that it will be easy. But we identify a list of legal reforms that could facilitate the same sort of win-win outcomes elsewhere, and, more broadly, could help achieve a better balance between hydropower development and environmental protection.
- Dave Owen
(The photograph (from nature.org) shows the Howland Dam).
D.C. Circuit Rejects Challenge to FERC Order Approving Cost Pooling Agreement for Trans Alaska Pipeline
On February 20, the D.C. Circuit (Griffith, Kavanaugh, Wilkins) issued a decision in Tesoro Alaska Co. v. FERC. Tesoro Alaska and Anadarko Petroleum ship oil on the Trans Alaska Pipeline System between points within Alaska. In 2013, FERC approved a cost pooling agreement among the owners of the pipeline. Tesoro Alaska and Anadarko Petroleum filed petitions for review challenging FERC's approval of the agreement. The D.C. Circuit denied the petitions, holding (1) that the Interstate Commerce Act gives FERC authority over intrastate oil pipeline traffic, at least where, as here, regulating the intrastate traffic is a necessary incident to regulating interstate traffic; and (2) that FERC did not act arbitrarily or capriciously and had sufficient evidence for its findings.
Tuesday, February 17, 2015
For years now, national attention has been focused on the Keystone XL Pipeline saga. But it isn’t the nation’s only pipeline fight. Here in Maine, what could be some very interesting pipeline litigation has just begun.
The case involves a pipeline that transports oil from South Portland, Maine to Montreal. Since World War II, oil in the pipeline has flowed only north. But with Albertan oil production escalating dramatically, Canada’s need for oil imports has declined, and the pipeline company would like to reverse the flow. That would mean turning the port of Portland, Maine into a major export site for tar sands oil.
But there’s a hitch. The southern terminus of the pipeline lies at the mouth of Portland Harbor, adjacent to South Portland’s most important park and across the water from parks and the Old Port district in Portland. Casco Bay, into which the harbor enters, is a beloved scenic and recreational resource for residents and a major destination for tourists. Still, seventy years ago, this was exactly the kind of place where cities would put oil pipes and tanks; providing industries with good water access often trumped everything else. But values have changed, and South Portland has started envisioning a different future for this part of its waterfront. When the pipeline proposal emerged, the city (through a long process described in more detail here) responded by enacting an ordinance restricting the construction of new “bulk oil” export facilities on its eastern waterfront.
Is that ordinance valid? According to a federal court complaint just filed by Portland Pipe Line Company, the answer is an emphatic no. The complaint foreshadows a whole host of arguments, most of them grounded in the idea that the ordinance is just regulating the contents and flow direction of an international pipeline, and such regulation is the exclusive province of the federal government. As the complaint succinctly puts it, “[o]ne city in Maine cannot impede federal decision-making on international relations, trade, and resource transportation and replace it with its own foreign policy.” And as Maine goes, so goes the nation and, perhaps, the world. The complaint warns of drastic consequences if the ordinance stands: it “sets a precedent for inconsistent local harbor regulation that could cripple import and export activities nationally and invite reciprocal commerce curtailment from other nations.” Even the founding fathers would be horrified. South Portland, according to the complaint, has “contravene[d] fundamental principles upon which our Republic was founded,” and the complaint offers Federalist Papers citations to back that claim up.
South Portland, of course, will have a different story. The ordinance clearly was kick-started by larger-scale events, and it may well have ramifications that extend beyond South Portland’s boundaries. But local land use ordinances are often inspired by larger events, and they often have consequences extending across city lines. That alone, the city will argue, does not make them constitutionally suspect. Indeed, there are dozens, if not hundreds, of cities whose land use ordinances would probably preclude construction of new oil export facilities. Are those ordinances also unconstitutional? If they are, then another venerable constitutional principle—respect for local land use planning authority—may well be in danger.
Beyond that basic conflict, the case will raise many more intriguing sub-issues. By my rough count, perhaps a dozen law school courses seem implicated by the complaint, and once the litigation proceeds, that number could easily get higher. And these questions aren’t just academic. The tension between energy development and transport and local governance has become one of the central legal issues of our age, with very real economic and environmental consequences.
For me, there’s also a personal dimension to the fight. I live in South Portland, about a mile from the oil terminal. And while others deserve far more credit (or blame) than me, I did play a minor part in getting the ordinance passed, and, more generally, in advocating for South Portland to begin thinking about a future in which it no longer is the East Coast’s second largest oil port. I won’t be here to see that future; in a few months, I move back to the San Francisco Bay Area. But the neighborhood in dispute will always be the place where my children were born, and a place that I love. I hope it also will be a place that gets to decide its own future.
- Dave Owen
Friday, February 6, 2015
On January 20, the D.C. Circuit (Garland, Pillard, Sentelle) issued a decision in Grunewald v. Jarvis. The National Park Service adopted a plan in 2012 for managing the deer population in Rock Creek National Park in Washington, D.C., by lethal and non-lethal means. Animal rights advocates sued to prevent the agency from killing deer. The district court granted summary judgment for the Park Service, and the D.C. Circuit affirmed. First, the court held that the deer management plan was consistent with the Rock Creek Park Enabling Act, which the court interpreted to allow killing some animals within the park to prevent serious harms to other natural resources. Second, the court held that the Park Service had adequately supported its findings that lethal action to manage the deer population was warranted to protect park resources. Third, the court held that the Park Service’s Environmental Impact Statement complied with the National Environmental Policy Act. The Park Service appropriately set the objective of reducing the deer population in Rock Creek Park; reasonably decided to analyze an exotic plant plan in a separate, rather than single consolidated, Environmental Impact Statement; and adequately considered the effects of its plan on humans who might witness the killing of deer.
Although animal rights advocates and environmentalists are often aligned, this case is one of several in which efforts by federal agencies to manage animal populations that are damaging public lands lead to conflicts between animal rights and environmental interests. See, e.g., In Defense of Animals v. U.S. Dep't of Interior, 751 F.3d 1054 (9th Cir. 2014) (wild horses and burros); Feldman v. Bomar, 518 F.3d 637, 640 (9th Cir. 2008) (feral pigs).
On January 27, the Sixth Circuit (Merritt, Gibbons (dissenting), McKeague) issued a decision in Sierra Club v. ICG Hazard, LLC. ICG Hazard, LLC, operates the Thunder Ridge surface coal mine in Kentucky under a Coal General Permit issued by the Kentucky Division of Water pursuant to the federal Clean Water Act. ICG’s permit did not contain a discharge limit for selenium. Kentucky does, however, have a state water quality standard for selenium. Some of ICG’s discharges from the Thunder Ridge mine caused exceedances of the selenium water quality standard. Sierra Club filed a Clean Water Act citizen suit based on the selenium discharges. The district court granted summary judgment for ICG, and the court of appeals affirmed. The court upheld EPA’s interpretation of the Clean Water Act’s permit-shield provision, which states that “compliance with a permit . . . shall be deemed compliance” with the statute, 33 U.S.C.§ 1342(k), as allowing discharges of pollutants not specifically listed in a general permit. The court of appeals saw no distinction to be made on this question as between individual permits and general permits. Because the Clean Water Act by its interpretation authorized ICG’s selenium discharges, the court held that the Surface Mining Control and Reclamation Act did not apply.
Judge Merritt dissented. He would have held that ICG, by causing water quality violations, violated the Clean Water Act.
Wednesday, January 21, 2015
I’ve just returned from Israel, where I presented a draft paper to an environmental workshop hosted by David Schorr and Issi Rosen-Svi at the University of Tel Aviv. The trip was short, but between my interactions at the university and some quality time with a very good traveling companion—Alon Tal’s book Pollution in a Promised Land: An Environmental History of Israel—I had a chance to form a few preliminary thoughts about Israeli environmental politics and law.
One reaction is that environmental politics in any developed country can have a certain sameness. The basic clash between development and environmental protection, the constant challenges of creating effective environmental agencies, and the interplay between advocacy groups, government, and industry are just as much a part of the Israeli story as they are part of the American one. But there are also ways in which Israeli environmental politics struck me as quite distinctive.
The most striking differences involves the intertwinement between environmental politics and the Arab-Israeli conflict. In that conflict, one of the Zionists’ central strategies, which they adopted well before Israel became a nation, has been to assert physical possession of space. Sometimes that has meant building settlements, sometimes watering farms in the Negev Desert, sometimes establishing military reserves, and sometimes buying land and planting forests, but a common theme has been to take territory by physically transforming it. That creates a potentially enormous challenge for an environmental movement, for much of traditional environmentalism has involved leaving spaces alone. Indeed, in the United States, environmentalists have succeeded in developing a patriotic narrative of non-development, arguing, in a tradition that dates back the Transcendentalists and Frederick Law Olmstead, that it affirms and strengthens our national character. In Israel, a sense of connection to the land also is a key element of the national character, but even committed environmentalists like Tal agree that the American-style wilderness ideal has little place. Both Issi and David agreed, as did Tal, that open space preservation has become the key environmental issue in Israel, and Israel’s history and current politics would seem to make that issue particularly challenging.
Yet two other details of Israeli environmental politics jumped out at me. First, as I walked around Tel Aviv, I did not see any single-family homes. I asked Issi and David about this, and they confirmed what I suspected: while some Israelis in more rural areas live in single-family homes, the norm is a high-rise apartment. That is a much more efficient use of space than is typical among Americans. And, second, Israel still has wolves (and some other pretty charismatic megafauna). Wolves, to Americans, are one of the ultimate symbols of wildness, and even some states that are pretty wild, like my home state of Maine, don’t have any. Perhaps that little fact doesn’t indicate too much—after all, one would expect to find a lot of biodiversity at the crossroads between Africa, Asia, and Europe—but still, it struck me as a hopeful little reminder of the resilience of nature.
- Dave Owen
Friday, January 16, 2015
Fifth Circuit Holds Designer and Supplier of Dry Cleaning System Is Not Liable under CERCLA as an Arranger
On January 14, a panel of the Fifth Circuit (King, Jolly, Costa) issued a decision in Vine Street LLC v. Borg Warner Corporation. A subsidiary of Borg Warner sold dry cleaning machines to a dry cleaning business in Tyler, Texas, and assisted with the design of the building housing the business, installed the machines, tested the machines, and initially assisted customers with operating the machines. The Borg Warner subsidiary also designed the system that connected the dry cleaning machines to the sewer system, including equipment that attempted to separate out perchloroethylene (PERC) for reuse. Environmental contamination occurred when PERC escaped from the sewer system into the ground. The district court held Borg Warner 75% responsible under CERCLA for the costs of cleaning up the contamination.
On appeal, the issue was whether Borg Warner is liable as an arranger under CERCLA § 107(a)(3)—that is, whether Borg Warner “arranged for disposal” of a hazardous substance. Applying Burlington Northern & Santa Fe Railway v. United States, 556 U.S. 599 (2009), the Fifth Circuit held that Borg Warner had not intentionally disposed of any PERC—indeed, Borg Warner designed its machines and drain system to prevent PERC from reaching the sewer system—and therefore was not liable as an arranger.
Wednesday, January 14, 2015
Back on June 4, 2014, a panel of the Fifth Circuit (King, Benavides, Dennis) held that BP and Anadarko, co-owners of the Macondo Well involved in the Deepwater Horizon disaster of 2010, are strictly liable for fines under Clean Water Act Section 311. In re Deepwater Horizon, 753 F.3d 570 (5th Cir. 2014). The panel subsequently issued a short per curiam supplemental decision addressing arguments raised in BP’s and Andarko’s rehearing petitions. In re Deepwater Horizon, 772 F.3d 350 (5th Cir. 2014).
On January 9, the Fifth Circuit, by a vote of 7-6, narrowly voted against granting rehearing en banc. Judge Clement, joined by Judges Jolly, Jones, Owen, Elrod, and Southwick, wrote an opinion dissenting from the denial of rehearing en banc. The dissent opined (1) that the panel’s “loss of controlled confinement” test is inconsistent with the text of the Clean Water Act, which imposes liability based on a “discharge”; (2) that at the very least the Clean Water Act is ambiguous, and ambiguities in civil-penalty statutes should be resolved in favor of defendants; (3) that the panel misapplied its “loss of controlled confinement” test because hydrocarbons were never confined in the well; and (4) that the panel’s supplemental opinion changed its original holding, creating lingering uncertainty in the precedent.
Saturday, January 10, 2015
Arizona State University Law School is planning a new annual law professor conference focused on sustainability-related law. Here's a quick blurb:
The Law and Sustainability Program at the Sandra Day O’Connor College of Law is pleased to announce its First Annual Sustainability Conference of American Legal Educators to be held on May 8, 2015 at the Sandra Day O’Connor College of Law in Armstrong Hall on the Arizona State University Campus in Tempe, Arizona.
This new conference will be an annual, national event for legal academics researching in sustainability-related areas. The conference will offer a unique forum for panels and presentations falling within one or more broad subject matter areas pertaining to sustainability, including but not limited to:
- Climate Change Law
- Energy Law
- Water Law
- Environmental Law
- Natural Resources Law
- Land Use and Zoning Law
- Agricultural and Food Law
- Disaster Law
The conference’s inaugural keynote speaker will be Professor Daniel Esty, Director of the Yale Center for Environmental Law & Policy at Yale Law School.
Presenters who are interested will also have an opportunity to join in an organized hike of a nearby mountain on the morning of Saturday, May 9, 2015.
Arizona State University will provide hotel lodging and a $500 travel stipend for all panelists and presenters.
ASU's conference page also includes a link to a site with more information about how to submit an abstract.
Tuesday, December 23, 2014
On December 23, the D.C. Circuit (Tatel, Srinivasan, Randolph) issued a decision in NRDC v. EPA, a case arising out of EPA regulations implementing its 2008 ozone air quality standard. NRDC filed a petition for review of the regulations.
NRDC first challenged EPA’s decision to tie the attainment deadline—that is, the date on which an air quality control region had to reach attainment with the new ozone standard—to the end of the calendar year in which the region was designated as nonattainment under the new ozone standard, rather than the actual date of designation. The D.C. Circuit panel majority agreed with NRDC, holding that, although the Clean Air Act does not specifically address the attainment deadline for an air quality control region designated as nonattainment under a revised air quality standard, the Act consistently ties compliance deadlines to the actual date of designation or classification. Indeed, in its regulations implementing the 1997ozone air quality standard, EPA had interpreted the Clean Air Act to require such an approach.
NRDC’s second argument challenged EPA’s decision to revoke requirements regarding transportation conformity—essentially, a Clean Air Act requirement that regions ensure that new transportation projects will not interfere with the region’s timely attainment of air quality standards—under the prior 1997 ozone standard. Again, the court agreed with NRDC, holding that EPA lacked authority under the Clean Air Act to revoke the transportation conformity requirements under the 1997 standard. The court explicitly left open the possibility that EPA could revoke the 1997 standard altogether, as the agency has proposed to do.
Judge Randolph dissented. As to the deadlines, he believes the statute is ambiguous and EPA’s interpretation is reasonable. As to the transportation conformity requirements, he believes NRDC waived any argument that EPA lacks the authority to revoke the requirements without revoking the entire 1997 standard. According to Judge Randolph, NRDC did not raise such an argument until its reply brief. Even if the merits of that issue were before the court, Judge Randolph believes the Clean Air Act allows EPA to revoke transportation conformity requirements for prior air quality standards.
On December 23, the D.C. Circuit (Tatel, Millett, Pillard) issued a decision in Trumpeter Swan Society v. EPA. In 2010, five environmental organizations petitioned EPA to regulate spent lead bullets and shot under Toxic Substances Control Act (TSCA) § 21, 15 U.S.C. § 2620, which allows “[a]ny person” to petition for a rulemaking proceeding. In this case, the environmental organizations alleged that spent lead bullets and shot constitute “chemical substances” that “present an unreasonable risk of injury to health or the environment” and therefore warrant regulation under TSCA § 6(a), 15 U.S.C. § 2605(a). EPA rejected that petition on the ground that TSCA § 3(2)(B)(v), which exempts cartridges and shells from the definition of “chemical substance,” deprives the agency of authority to regulate spent bullets and shot as chemical substances. Six months later, two of the environmental groups joined 99 other environmental groups to petition again to regulate spent lead ammunition as a chemical substance under TSCA. This time, EPA ruled that the new petition was “not . . . cognizable” under TSCA § 21 because it duplicated the earlier petition, and that in the alternative the agency would deny the petition on the same ground it denied the earlier petition. The environmental organizations sued EPA, and the district court upheld EPA’s action. On appeal, the D.C. Circuit held (1) that EPA lacked the authority to classify the petition as non-cognizable merely because it was duplicative; but (2) that EPA correctly determined in the alternative that the petition failed on the merits, given that spent lead bullets and shot cannot be regulated without also regulating cartridges and shells, which TSCA § 3(2)(B)(v) precludes.
Monday, December 22, 2014
On December 22, the Ninth Circuit (Tallman, Rawlinson, Rice (by designation)) issued a decision in San Luis & Delta-Mendota Water Authority v. Locke. In 2009, the National Marine Fisheries Service (NMFS) issued a Biological Opinion for Central Valley Project/State Water Project operations in California’s Central Valley, requiring the Bureau of Reclamation to change its operations to avoid jeopardizing populations of endangered Salmonids. Irrigation districts, who would be adversely impacted by the changes in operation, sued. The district court found for the plaintiffs, concluding that NMFS had acted arbitrarily and capriciously in developing the BiOp.
The Ninth Circuit reversed, holding that the district court had failed to give NMFS sufficient deference and that the BiOp—when reviewed under the proper standard—was valid. Among the more notable rulings in its lengthy opinion addressing numerous issues, the court of appeals held (1) that the district court erred by supplementing the administrative record with dozens of extra-record declarations; and (2) that NMFS was not required to show how each of the requirements it imposed was “essential to avoid jeopardy” or to address non-jeopardy factors. The court of appeals also rejected the plaintiffs’ cross-appeals. The court’s reasoning frequently relied on its recent decision in San Luis & Delta-Mendota Water Authority v. Jewell, 747 F.3d 581 (9th Cir. 2014), which addressed a 2008 BiOp regarding irrigation impacts on the threatened Delta Smelt.
Wednesday, December 17, 2014
Back on June 30, a Fifth Circuit panel (Jones, Smith, Garza) reversed a district court judgment, following an eight-day bench trial, in favor of The Aransas Project against directors of the Texas Commission on Environmental Quality. Aransas Project v. Shaw, 756 F.3d 801, 805 (5th Cir. 2014). Aransas’s suit had alleged that the Commission violated the Endangered Species Act by allowing excessive water withdrawals from rivers that feed the estuary where whooping cranes live during winter. The Fifth Circuit panel, in reversing, faulted the district court’s finding that the Commission’s actions had caused the deaths of twenty-three whooping cranes in 2008-2009. According to the panel, the district court “either misunderstood the relevant liability test or misapplied proximate cause when it held the state defendants responsible for remote, attenuated, and fortuitous events following their issuance of water permits.” 756 F.3d at 817.
On December 15, the Fifth Circuit denied Aransas’s petition for rehearing en banc by an 11-4 vote. Judge Prado, joined by Judges Dennis and Graves, issued a strongly worded dissent from the denial, accusing the panel of engaging in a de novo reweighing of the evidence inappropriate for appellate review. Judge Prado characterized the panel’s “reweighing of facts” as “particularly egregious” in light of what he regards as a gross mismatch between the credibility of Aransas’s expert witnesses, with credentials that included a Nobel Prize and MacArthur Fellowships, and the intervenor-defendants’ expert witnesses, whom he characterizes as having “limited experience and insignificant expertise.” In addition, contrary to the panel’s conclusion regarding proximate causation, Judge Prado regards the causal connection between the Commission’s permitting decisions and the death of the whooping cranes as “straightforward” and “foreseeable.”
Seventh Circuit Upholds EPA Redesignations of Milwaukee, Chicago, and St. Louis as in Attainment with Ozone Air Quality Standard
On December 16, the Seventh Circuit (Flaum, Kanne, Sykes) issued a decision in Sierra Club v. U.S. EPA, a case challenging EPA’s 2012 decision redesignating the Milwaukee-Racine, Greater Chicago, and Illinois portion of St. Louis areas as in attainment with the 1997 National Ambient Air Quality Standard (NAAQS) for ozone. Sierra Club argued that, contrary to the requirements of Clean Air Act § 107(d)(3)(E)(3), 42 U.S.C. § 7407(d)(3)(E), the observed improvements in air quality in the areas at issue were not “due to permanent and enforceable reductions in emissions.” The Seventh Circuit first held that the Sierra Club had established its Article III standing by virtue of showing that EPA’s redesignation led to less stringent regulation than would have been in place had the areas remained designated as nonattainment for ozone. As to the merits, Sierra Club had argued (a) that EPA, before attributing improved air quality to regulation, should have given greater consideration to whether the improvements were caused by the economic recession, fuel prices, weather, or other temporary conditions; (b) that EPA inappropriately used actual emissions data from power plants, rather than maximum permitted emissions, in its modeling; and (c) that EPA erred in relying on the effects of a NOx emissions regulation program that allows trading within a region. The court of appeals, citing the deferential standard of review, held that EPA reasonably modeled the effects of regulation to conclude that regulation caused the observed air quality improvements. Accordingly, the Seventh Circuit denied Sierra Club’s petition for review.
Tuesday, December 16, 2014
On December 16, the Ninth Circuit (Thomas, O’Scannlain, McKeown) issued a decision in Conservation Congress v. Finley. Two environmental groups—Conservation Congress and the Environmental Protection Information Center—sued the Forest Service and Fish and Wildlife Service, alleging that the agencies’ approval of the Beaverslide timber thinning project in Trinity County, California, violates the Endangered Species Act, NEPA, and National Forest Management Act because of the project’s potential impacts on endangered Northern Spotted Owls. The Forest Service, with the Fish and Wildlife Service’s concurrence, issued a Biological Assessment concluding the project “may” but is “not likely to adversely affect” the Northern Spotted Owl. The district court granted summary judgment to the government, and Conservation Congress appealed.
The Ninth Circuit affirmed, holding (a) that Conservation Congress, although it could have been more specific, provided sufficient notice of its intent to sue under the Endangered Species Act; (b) that a new consultation between the Forest Service and Fish and Wildlife Service did not moot Conservation Congress’s claims, because the new consultation focused only on the effects of a critical habitat redesignation; (c) that the Forest Service did not violate consultation requirements by not reinitiating consultation upon the release of a 2011 Recovery Plan for the Northern Spotted Owl; (d) that the Forest Service and Fish and Wildlife Service used the best scientific data available to reach their conclusions; and (e) that the Forest Service’s Environmental Impact Statements adequately discussed the project’s short-term effects on Northern Spotted Owls.
Monday, December 8, 2014
On Friday, the Solicitor General indicated that the government will be filing a petition for certiorari to the Supreme Court in Electric Power Supply Association v. FERC. The government’s cert petition will ask the Supreme Court to review a May 23, 2014, decision from a divided panel of the D.C. Circuit that invalidated FERC’s Order 745.
Order 745 directs Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) to establish rules that compensate demand response resources at the wholesale market price—the same rate that electric power suppliers receive for selling electricity. A group of organizations affiliated with generators of electricity sued FERC, alleging that Order 745 had overstepped the agency’s authority. A majority of the D.C. Circuit panel (Brown, Silberman) agreed, holding that Order 745 exceeds FERC’s jurisdiction over wholesale electricity markets under the Federal Power Act, 16 U.S.C. § 824. The panel majority reasoned that, because demand response involves decisions by end users regarding their energy use, it is inherently “part of the retail market.” Judge Edwards dissented.
Demand response and other smart grid technologies raise challenging legal questions, because they are upending assumptions about how the grid and electric power markets work. Just as distributed generation is integrating generation resources at places in the electric power grid that traditionally involved only distribution to end users, demand response resources are being aggregated and coordinated in ways that allow them to compete effectively in wholesale markets.
Characterizing demand response as merely a decision not to purchase electricity in the retail market, as the panel majority did, fails to appreciate the important functions that demand response resources play in contemporary electric power markets. Demand response, for example, can provide effective frequency regulation that helps to stabilize the grid, and frequency regulation is an ancillary service procured through wholesale power markets.
FERC’s jurisdiction is determined by statute, and the agency cannot rewrite its authority merely because times have changed. But courts need to understand the context in which FERC is operating and should not apply outdated and rigid assumptions about how electric power markets should operate. Hopefully the Supreme Court will grant certiorari in this case and give FERC the flexibility it needs to apply its existing authority in the context of changing technologies and markets.
Friday, December 5, 2014
On December 5, the D.C. Circuit (Rogers, Wilkins, Williams) issued a decision in Louisiana Public Service Commission v. FERC, the latest in a string of decisions arising out of cost allocations amongst . Entergy Corporation, through six operating subsidiaries, sells electricity in Arkansas, Louisiana, Mississippi, and Texas. The six subsidiaries own their generation and transmission facilities individually, but operate jointly as a single system. Because of this joint operation, the six subsidiaries share production costs pursuant to a FERC-approved System Agreement. In 1995, the Louisiana Public Service Commission complained that the allocation of capacity costs under the System Agreement was unjust and unreasonable, in violation of the Federal Power Act. After much litigation, remands, and rehearings, FERC eventually agreed with the Louisiana Public Service Commission that the costs were unjust and unreasonable but declined to order refunds of the misallocated costs. Unlike excessive rates, FERC reasoned, misallocated costs involve a zero-sum game where the system overall has not over-recovered. The D.C. Circuit granted Louisiana’s petition for review, holding that FERC had failed to justify its decision not to order a refund of the misallocated costs. The court noted that FERC does not follow a strict policy against refunds of misallocated costs, and so had to explain why the particular circumstances in this case did not warrant a refund.
On December 2, the Tenth Circuit (Kelly, Bacharach, Phillips) issued a decision in Kane County v. United States, the latest in a series of cases involving challenges to federal title under Revised Statute 2477. This case is part of an ongoing dispute between Kane County, in southern Utah, and the federal government, in which the County has sought to establish rights-of-way in and across federal lands to allow off-road vehicle use in areas that would otherwise be subject to closure or restrictions under federal law. Kane County filed this action in 2008, seeking to quiet title to portions of 15 roads under Section 8 of the Mining Act, commonly referred to as Revised Statute 2477, or “R.S. 2477.” R.S. 2477 was repealed by the Federal Land Policy and Management Act in 1976, except as to “valid existing” R.S. 2477 rights. The government moved to dismiss the County’s claims on the basis that a jurisdictional trigger in the Quiet Title Act – disputed title – was lacking. The district court disagreed. On appeal, the Tenth Circuit reversed, establishing, for the first time, that only unambiguous and consistent assertions of title by the federal government are sufficient to create a title dispute. In other words, “actions of the United States that merely produce some ambiguity regarding a plaintiff’s title are insufficient to constitute ‘disputed title’” and prevent the court from exercising jurisdiction. With respect to the individual roads at issue in the case, the court held that the district court erred in asserting jurisdiction over a handful, but affirmed jurisdiction over several others. The court also addressed a statute of limitations argument under the Quiet Title Act for one of the road sections traversing a Wilderness Study Area, holding that federal designation of the WSA was not sufficient to give notice to the county of federal ownership of the roads because it was not an adequate assertion of “exclusive control” by the federal government. Finally, the court reaffirmed its rule regarding the scope of an R.S. 2477 right-of-way: once established, an R.S. 2477 road can be widened in a “reasonable and necessary manner”, but only in light of pre-1976 uses of the road.
Thursday, December 4, 2014
Earlier this week I attended the National Summit on Smart Grid and Climate Change, organized by the Association for Demand Response & Smart Grid. The conference addressed ways that smart grid technologies, including demand response and energy efficiency, can be used as climate mitigation and adaptation tools, including as means of complying with EPA’s forthcoming Clean Air Act 111(d) rule for existing power plants (also known as the Clean Power Plan). Takeaways from the conference included:
- As increases in distributed generation and renewable energy entail decreased centralized control over power generation, there is a need for a compensating increased centralized control over demand for power (load). Smart grid and demand response technologies help to fill that need, thereby facilitating integration of distributed generation and renewable energy into the grid. In addition, some of the concerns about the unpredictability of distributed resources (both generation and demand response) can be addressed by aggregating and coordinating distributed resources, to operate them as a “virtual power plant.”
- The 111(d) rulemaking process is inducing a convergence of energy and environmental regulation. Utility regulators and air regulators are meeting and starting to attempt to coordinate in ways they have never done before. That being said, there is clearly a lot more work to be done in this area.
- Demand response measures and smart grid technologies have benefits independent of emissions reduction. EPA’s 111(d) rule will have important impacts on the energy sector, including creating strong incentives for increased utilization of smart grid and demand response technologies. Thus, the 111(d) rule may have significant benefits beyond emissions reduction, especially if EPA, FERC, state energy and air regulators, and the energy sector can work together to create synergies between 111(d) compliance and grid modernization.
- Smart grid technologies and distributed generation are causing forward-thinking people and entities in the energy sector to rethink electric power distribution systems. Peter Fox-Penner of the Brattle Group, for example, advocates moving distribution systems toward open access platforms for a variety of grid services. Many speakers expressed interest and excitement about the New York State Public Service Commission’s Reforming the Energy Vision (REV) initiative as an example of a promising forum for such forward thinking.
On December 2, the D.C. Circuit (Garland, Griffith, Williams) issued a decision in Midland Power Co-op. v. FERC. This case arose out of a dispute between Gregory and Beverly Swecker, who own and operate a wind turbine on their Iowa farm, and Midland Power Cooperative, an Iowa electric utility. The Sweckers’ wind turbine is a qualifying facility under § 210 of the Public Utility Regulatory Policies Act of 1978 (“PURPA”), 16 U.S.C. § 824a–3. PURPA requires utilities to purchase power from qualifying facilities at “avoided cost.” When the Sweckers decided that Midland was not paying them a rate that reflected avoided cost, they stopped paying Midland for the power they used. Midland responded by disconnecting the Sweckers, which had the effect of preventing the Sweckers from buying retail power from Midland and stopping Midland’s purchases of power from the Sweckers’ wind turbine. FERC issued an order under PURPA requiring Midland to reconnect with the Sweckers’ turbine, and Midland filed a petition for review. Midland invoked Federal Power Act § 313(b), 16 U.S.C. § 825l(b), which as codified provides that “[a]ny party to a proceeding under this chapter aggrieved by an order issued by the Commission in such proceeding may obtain a review of such order in the United States court of appeals.” Since PURPA § 210 is codified in the same chapter as the Federal Power Act, Federal Power Act § 313(b) would seem to create jurisdiction. The D.C. Circuit, however, observed that as enacted § 313(b) actually referred to “a proceeding under this Act,” with “this Act” meaning the Federal Power Act, and PURPA § 210 is not part of the Federal Power Act. Accordingly, Midland could not sue under Federal Power Act § 313(b). Nor, the court of appeals held, did FERC’s order create a new rule regarding disconnections of retail service for customers’ nonpayment in a way that might trigger jurisdiction under PURPA § 210(h), 16 U.S.C. § 824a–3(h). Citing its precedent, the D.C. Circuit noted that enforcement of PURPA § 210 is generally vested exclusively in district courts, not courts of appeals.