Symposium: Climate Change Strategies Regional Developments in - - PDF document

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More recently, however, public concern has taken a large leap forward. What once seemed a controversial idea—that human activity is responsible for extraordinary change in climate patterns—is now considered nearly uncontroverted fact. And new mantras, such as Sterling Planet’s1 “Reduce, Renew, Offset,”2 are setting the tone for regulation on every level. Amidst this heightened concern for climate change, it is no wonder that most of the Ameri- can public is celebrating the award of the Nobel Peace Prize to Al Gore for his efforts to promote understanding of and appropriate regulatory responses to climate change.

• II. International “First Responders” to Climate

Change

Although the general public has only relatively re- cently recognized the role of humans in climate change, scientists and policymakers have collaborated officially to understand climate change since as early as 1988. During that year, the Intergovernmental Panel on Climate Change (the “IPCC”), the organization that shares the 2007 Nobel I hope you will all join us for our December 6, 2007, quarterly program (you should be able to find the details

• n our website), for a chance to listen to an ethics program,

meet the new Executive Committee members, and catch up with colleagues. We also have planned a full-day CLE program on February 27, 2008, quarterly programs on March 27, September 25, and December 11, 2008, and of course, a great Midyear program scheduled for May 15-17, 2008 at Semiahmoo. Chair-Elect Maia Bellon has been working with this year’s co-chairs, Courtney Flora, of McCullough Hill, PS, and Brent Lloyd, of the Seattle City Attorney’s Office, to plan a broad and interesting program that highlights differing perspectives on environmental and land use issues in Washington state. Thanks to all of the Section members for allowing me the opportunity to serve as Chair for the upcoming year, and I hope that if you have ideas, suggestions, even com- plaints, you won’t hesitate to contact me.

Section Report from page 1

decisions from the Washington environmental and growth management hearings boards (Andrea McNamara Doyle and Brent Lloyd, respectively). Finally, there are reports from Washington law school environmental groups. As always, responses from readers on any Newsletter subject are welcomed and encouraged. Thanks to all authors and to the Editorial Board that was responsible for the content of this Newsletter issue. The Newsletter relies on members of the Editorial Board to produce articles and other contributions for publication— either by authoring articles or updates or by soliciting

• thers to author contributions. Editorial Board members

also as a group determine what topics may be timely for articles and whether article proposals should be pub- lished. The Editorial Board will soon be developing the con- tent for the next issue of the Newsletter. Anyone who would like to contribute an article for the next or any future issue, or who has questions, comments, or suggestions regarding the Newsletter, its content, or the Editorial Board, is encouraged to contact either me or another member of the current Editorial Board, as listed on the back page of this issue. Thank you for your interest in the Newsletter!

Editor’s Message from page 1

I. Introduction

Against a backdrop of heightened public concern, progress in the regulation of greenhouse gas emissions and climate change in the United States has been erratic, based not on any uniform federal policy, but instead on a patch- work of local, state and regional solutions. In the face of virtual inaction at the federal level, climate change legisla- tion has been limited to the state and local level. Not surprisingly, Washington and Oregon have been particu- larly active in implementing climate change laws and regulations. Public concern regarding climate change over the past few decades has been a complicated dance, going two steps forward, one step back. In the 1980s, the American public moved two steps forward in a decade that featured the first widespread environmental movement and the mantra “Reduce, Reuse, Recycle.” That decade saw Seattle lead the world with a recycling pilot program that was the first of its kind. The initial environmental movement was de- scribed by some as a fad, and eventually the public took

• ne step back.

continued on next page

Symposium: Climate Change Strategies

Regional Developments in Climate Change and Renewable Energy

By Eric E. Freedman, Denise M. Lietz, and Carmen M. Butler, K&L Gates

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conflicting state and local requirements that might result from the absence of federal action. Earlier this year, several key environmental groups and ten major energy and chemi- cal corporations formed the United States Climate Action Partnership (“USCAP”) to lobby for federal greenhouse gas emission caps consistent with the most restrictive standards contained in proposed federal legislation.10 Pressure on the federal government has come also from the judiciary. In Massachusetts v. United States Envi- ronmental Protection Agency, several states with strong cli- mate change policies argued that the United States Envi- ronmental Protection Agency (the “EPA”) had abdicated its responsibility under the Clean Air Act to regulate carbon dioxide emissions from vehicles.11 In a landmark decision issued in April 2007, the United States Supreme Court held that greenhouse gas emissions from vehicles are pollutants under the Act, and held that the EPA has the authority to regulate greenhouse gases from vehicles if the EPA determines that those emissions contribute to climate change.12 In response to the Supreme Court’s ruling, the EPA is currently drafting automobile tailpipe rules, and many expect that the ruling may lead to additional EPA regulation of greenhouse gases.13 So far this year, Congress has only begun to address methods to control and reduce the carbon dioxide and

• ther greenhouse gas emissions that cause global warm-
• ing. Although a wide variety of renewable energy bills

have been introduced, two—one favored by the House and the other by the Senate—have emerged as apparent front

• runners. The two bills are vastly different, and informal

efforts are being made to reconcile their differences. The bill favored by the House—the New Direction for Energy Independence, National Security, and Consumer Protection Act (H.R. 3221)—mandates that utilities pro- vide 2.75 percent of their retail electricity from renewable resources (or through renewable energy credits) by 2010, rising to 15 percent by 2020, and extends renewable energy production tax credits and investment tax credits through the end of 2012.14 The bill favored by the Senate—the Renewable Fuels, Consumer Protection, and Energy Effi- ciency Act of 2007 (H.R. 6)—would increase Corporate Average Fuel Economy (“CAFE”) standards to 35 miles per gallon by 2020 and mandate increased use of ethanol and other biofuels.15 There are also two versions of federal climate change legislation under consideration. The first is a bipartisan Senate bill sponsored by Senator Joseph Lieberman (D-CT) and Senator John Warner (R-VA).16 The second is a House bill that has been proposed by Representative John Dingell (D-MI), Chairman of the House Committee on Energy and Commerce.17 Each of the two climate-change bills contem- plates a cap-and-trade market system to control green- house gas emissions. Although the ultimate shape of the pending renewable energy and climate-change initiatives is difficult to predict at this point, there is a growing consensus that Congress Peace Prize with Al Gore, was established by the World Meteorological Organization and United Nations Envi- ronment Programme to evaluate the risk of climate change brought on by human activity.3 One of the main activities

• f IPCC is to publish special reports on topics relevant to

climate change.4 In 1992, at the Earth Summit held in Rio de Janeiro, most countries in attendance signed the United Nations Framework Convention on Climate Change (the “UN Framework”), a nonbinding agreement to consider mea- sures to reduce greenhouse gas emissions.5 Since the UN Framework entered into force on March 21, 1994, it has been signed and ratified by a total of 191 countries. Signa- tories to the UN Framework agreed to gather and share information on greenhouse gases, launch national strate- gies to address greenhouse gases and provide financial and technological support to developing countries.6 The Kyoto Protocol, negotiated in 1997 in Kyoto, Ja- pan, represents the most important addition to the UN Framework, and a step toward the more powerful and binding measures envisioned by the framework’s drafters. By October 23, 2007, a total of 175 countries had signed and ratified the agreement.7 The Kyoto Protocol strengthened the UN Framework by committing “Annex I” countries (generally developed countries) to individual, legally bind- ing targets to limit or reduce greenhouse gas emissions.8 In

• rder to achieve their targets, Annex I countries have

committed to implement domestic policies and measures to mitigate climate change and promote sustainable devel-

• pment.

The United States, currently the world’s largest green- house gas emitter, has so far resisted legally binding tar- gets to limit or reduce greenhouse gas emissions. The United States signed and ratified the UN Framework. President Clinton also signed the Kyoto Protocol, but the Senate refused to ratify it, thereby avoiding the obligation to implement any of its measures. Instead, the United States has undertaken only voluntary programs address- ing greenhouse gas emissions, such as the Asia-Pacific Partnership on Clean Development and Climate, also known as the “AP6.”9 The AP6 is a non-binding agreement between member countries Australia, India, Japan, China, South Korea and the United States. Members of the AP6 have agreed to discuss measures that would help reduce greenhouse gas emissions, but have not agreed to manda- tory limits. Although the AP6 has been applauded for initiating collaboration between developed and develop- ing countries, it has been sharply criticized for its lack of teeth.

• III. United States Federal Legislation

Notwithstanding the United States’ rogue stance on climate change policy in the international arena, the fed- eral government has over the past year experienced in- creased domestic pressure to act on climate change, partly because of concerns on the part of industry regarding

November 2007 Environmental & Land Use Law

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will enact federal legislation to limit greenhouse gas emis- sions within the next couple of years.

• IV. Regional Developments in the United States

Inspired by international efforts, regional and state initiatives have rushed to fill the void left by the absence of federal legislation. The first regional cap-and-trade pro- gram for carbon dioxide emissions from electric generat- ing facilities was the Northeast Regional Greenhouse Gas Initiative (“RGGI”). RGGI was formed in 2005 by seven Northeastern and Mid-Atlantic states, and currently has nine member states. The states participating in RGGI have agreed to reduce greenhouse gas emissions to 1990 levels by 2009, and to 10 percent below 1990 levels by 2018. In

• rder for the participants’ agreement to become legally

enforceable, each individual RGGI member state must adopt its own implementing legislation and regulations.18 The Western Regional Climate Action Initiative (the “Western Climate Initiative”) is the West’s analogue to

• RGGI. In February 2007, the governors of Washington,

Oregon, California, Arizona and New Mexico signed an agreement to form the initiative, providing that members will “collaborate in identifying, evaluating and imple- menting ways” to reduce greenhouse gas emissions.”19 Since then, the state of Utah and the provinces of British Columbia and Manitoba have joined the Western Climate Initiative, and the states of Colorado, Kansas, Nevada, Wyoming and Alaska, along with the provinces of Ontario, Quebec and Saskatchewan and the Mexican state of Sonora, have become observers.20 The members of the Western Climate Initiative agreed (1) to establish an overall greenhouse gas reduction goal by August 2007, (2) to develop a “design for a regional mar- ket-based multi-sector mechanism, such as a load-based cap and trade program,” by August 2008, and (3) to partici- pate in a multi-state greenhouse gas registry.21 In accor- dance with these undertakings, members of the Western Climate Initiative have agreed to reduce greenhouse gas emissions by 15 percent below 2005 levels by 2020.22 The members have also joined a multi-state greenhouse gas registry, The Climate Registry.23 As with RGGI, each state and province participating in the Western Climate Initia- tive must adopt its own legislation and regulations to make the initiative’s commitment legally enforceable.

• V. State Action: Washington and Oregon

Climate change is expected to affect Washington and Oregon in similar ways. Each state anticipates that its coastal communities will be challenged by rises in the sea level associated with climate change.24 In addition, each state is concerned about prospects for reduced rainfall in the region as a result of climate change, since each depends

• n snow pack for the summer stream flows necessary to

support energy generation, municipal water supplies, and irrigation.25 Not surprisingly, then, Washington and Or- egon have responded to climate change in similar ways. Both have recently adopted climate change laws that estab- lish greenhouse gas emission reduction goals and have implemented renewable portfolio standards requiring that utilities acquire increased shares of their electric power from renewable resources.26

• A. Washington’s Climate Change Initiatives

For Washington, 2007 has been the year of legislative and regulatory action on climate change. Figure 1 summa- rizes Washington’s simultaneous ongoing climate change initiatives on various fronts.

Figure 1. Washington’s Current Climate Change Efforts27

1. Executive Order 07-02 Early in 2007, Governor Christine Gregoire issued an executive order setting ambitious goals for reducing green- house gas emissions and increasing clean energy sector jobs in Washington.28 To assist in meeting these goals, the

• rder directed the Department of Ecology (“Ecology”) and

the Department of Community, Trade, and Economic De- velopment (“CTED”) to lead a task force on climate change to assist in developing additional measures to address global warming and strategize on goals. The effort, called the Washington Climate Challenge, created a group com- posed of representatives from business, community groups, and environmental groups—the Climate Advisory Team. Two groups serve in advisory roles to the Climate Advi- sory Team: (1) the Technical Working Groups, which rep- resent the energy supply, residential, commercial and industrial, forestry, agriculture, and transportation sec- tors, and (2) the Preparation/Adaptation Working Groups, which are responsible for assessing impacts on water, the coast and infrastructure, human health, agriculture and

• forestry. The Climate Advisory Team’s process is expected

to be complete by the end of 2007 and will result in a report to Governor Gregoire by February 2008. This report will include specific steps necessary for meeting the goals set

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forth in the order and to prepare for the impacts expected from climate change.29 2. Climate Change Mitigation Legislation In May 2007, Governor Gregoire signed Engrossed Substitute Senate Bill 6001 (“ESSB 6001”), which had been adopted by the Washington Legislature during the 2007 legislative session.30 The bill was inspired in large part by the goals set forth in Governor Gregoire’s Executive Order. Codified at Chapter 80.80 RCW, the operative portions

• f ESSB 6001 address several aspects of climate change.

Specifically, the legislation sets the following emissions reduction goals, modeled after the goals set in the Governor’s executive order:

• Reduction of the state’s greenhouse gas emissions to

1990 levels by 2020;

• Reduction of the state’s greenhouse gas emissions to

25 percent below 1990 levels by 2035; and

• Reduction of the state’s greenhouse gas emissions to

50 percent below 1990 levels (or 70 percent below the emissions projected for the state that year) by 2050.31 The legislation also sets a goal to increase the state’s clean energy sector jobs—informally termed “green collar jobs”—to 25,000 by 2020.32 In order to measure the state’s progress in meeting these goals, Ecology and CTED must estimate the state’s greenhouse gas emissions in 1990 to establish a baseline against which to measure the emission reduction goals.33 In 2010, Ecology and CTED will begin making biennial reports of total and sector greenhouse gas emissions.34 In the 2008 legislative session, the Governor must make policy recommendations to the Legislature addressing the manner in which market-based mecha- nisms (like a cap-and-trade system), sequestration options, replacement of high-polluting older thermal power plants, use of indigenous resources, and state regulatory or tax policies could support the reduction of greenhouse gas emissions.35 Under ESSB 6001, effective on July 1, 2008, Washington will have an emissions performance standard of 1,100 pounds per megawatt hour (an amount determined to be equivalent to the greenhouse gas output of a new com- bined cycle natural gas-fired power plant) for baseload electric generation.36 This standard applies to all baseload electric generating plants (i.e., plants having an annualized capacity factor of at least 60 percent) located in Washington and becoming operational after July 1, 2008, or in which Washington utilities acquire an ownership interest or make upgrades after July 1, 2008, and all long-term power pur- chase agreements (i.e., power purchase agreements having terms of five years or more) entered into or renewed by Washington utilities after that date. Emissions that are permanently sequestered—in geologic formations or oth- erwise—do not count for purposes of determining compli- ance with the performance standard if the Energy Facility Site Evaluation Council (“EFSEC”) or Ecology approves the sequestration.37 All baseload electric generation facili- ties in operation as of June 30, 2008, are deemed to be in compliance with the greenhouse gases emissions perfor- mance standard established under the statute until such time as a Washington utility acquires a new ownership interest in the facility, makes an upgrade to the facility, or enters into an agreement having a term of five or more years to purchase power from the facility.38 By June 2008, rules for implementing and enforcing the standard are required to be adopted by EFSEC and Ecology.39 The agencies have begun this rulemaking pro- cess, in which they are working very closely to coordinate the rule development.40 3. Clean Energy Incentive Legislation The Washington Legislature also addressed the Governor’s Executive Order in Engrossed Second Substi- tute House Bill 1303 (“E2SHB 1303”).41 This bill directs CTED and Ecology to develop a framework for the state to participate in “global markets to mitigate climate change,

• n a multisector basis.”42 In addition, the bill implements a

school bus replacement incentive program to remove older, less efficient buses from school fleets and implements

• ther programs to encourage biofuels production and fuel

efficiency improvements. B. Oregon’s Climate Change Legislation Like Washington, Oregon has taken aggressive action in response to climate change in 2007. 1. Climate Change Mitigation Legislation In July 2007, the Oregon Legislature passed House Bill 3543 (“HB 3543”).43 Governor Ted Kulongoski signed the bill in August. HB 3543 establishes greenhouse gas emis- sion reduction goals for Oregon that are similar to those established for Washington by ESSB 6001. Emission growth is to be arrested by 2010; emission levels are to be reduced to percent below 1990 levels by 2020, and to 75 percent below 1990 levels by 2050.44 HB 3543 also establishes a global warming commission that will include 11 voting members appointed by the Governor and 14 ex officio nonvoting members. The ex officio members, who are specified in the legislation, are composed of ten members representing state agencies and four legislators.45 The commission’s mission includes recommending “ways to coordinate state and local efforts to reduce greenhouse gas emissions in Oregon consistent with the greenhouse gas emissions reduction goals established by section 2 of th[e] 2007 Act and … efforts to help Oregon prepare for the effects of global warming.”46 HB 3543 also creates the Oregon Climate Change Re- search Institute, which will be administered by the Oregon State University.47 Unlike Washington’s ESSB 6001, HB 3543 does not set an emissions performance standard for

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power-generating facilities. In a letter to the chair of Oregon’s Environmental Quality Commission, Governor Kulongoski asked that the Commission, with the assis- tance of the Oregon Department of Energy, the Oregon Public Utility Commission and the Oregon Department of Environmental Quality, develop a greenhouse gas report- ing rule in order to assist Oregon with its activities in the Western Climate Initiative and its efforts to implement the goals of HB 3543.48 2. Renewable Energy Legislation Oregon has also implemented several measures en- couraging renewable energy use. HB 2210 encourages the development and use of biofuels. Oregon also implemented both residential and business tax credits for renewable energy projects.49 And, as described below, Oregon, like Washington, has recently implemented a renewable port- folio standard. C. Renewable Portfolio Standards and Renewable Portfolio Goals About half of the states plus the District of Columbia have enacted either a renewable portfolio standard (“RPS”)

• r a renewable portfolio goal (“RPG”) with the aim of

reducing greenhouse gas emissions from load-serving re- tail utilities. An RPS is a requirement that a minimum amount of energy from eligible renewable resources be included in the power supply portfolio of load-serving utilities subject to the requirement. An RPG is a non- binding renewable energy goal. Simply put, the purpose of both systems is to displace an increasing amount of fossil- fuel burning energy, or “dirty energy,” with an increasing amount of renewable energy generation, or “clean en- ergy.” Generally, RPS and RPG systems aim for a certain percentage of retail load to be served by renewable re- sources by a certain year. In addition to promoting the displacement of dirty energy with clean energy, some state RPSs or RPGs also promote energy efficiency or conserva- tion. RPS and RPG systems vary widely in the manner in which they define eligible renewable resources, in the limitations that they impose on the geographic area from which the renewable energy source can be purchased, in the parameters that they establish for how “new” the eligible renewable energy project must be, and in the extent to which they will allow a utility to use a renewable energy credit (“REC”) associated with the generation of renew- able energy to satisfy the RPS or RPG independently of the associated energy from the renewable resource.50 These variations have caused multi-state utilities considerable concern that they will be caught in the midst of conflicting state requirements in their operations from one state to another. Common examples of eligible renewable energy sources include wind, solar (including photovoltaic and concentrated thermal solar energy), biomass, some hydro- electric, geothermal, and biofuels. By requiring load-serv- ing electric utilities to use these renewable energy sources (or the RECs associated with them), states are creating demand for new clean technologies (“cleantech”). Cleantech investment is given a significant boost by federal and state production tax credits and investment tax credits that typically account for 30 to 35 percent of the capital costs of renewable energy projects. 1. Washington’s Renewable Portfolio Standard (I-937) Washington Initiative 937—the “Energy Independence Act”—was passed by slight majority of voters in Novem- ber 2006 and is codified in Chapter 19.285 RCW. It applies to Washington’s 17 largest utilities, which collectively serve 84 percent of the retail load in the state.51 Utilities serving 25,000 or fewer retail customers are exempt.52 The Act establishes a legal requirement that by 2020, all but the smallest utilities in the state serve at least 15 percent of their load with renewable resources.53 The requirement is to be implemented in phases: three percent of load by 2012, nine percent of load by 2015, and 15 percent of load by 2020.54 The Act defines “load” as “the amount of kilowatt-hours of electricity delivered in the most recently completed year by a qualifying utility to its Washington retail custom- ers.”55 The penalties for failure to meet the requirements of the act are expressed in terms of dollars per megawatt hour.56 Thus, the requirements of the act seem to apply to the amount of energy provided by eligible renewable resources rather than the generating capacity of those resources. The Act defines eligible renewable resources as water, wind, solar, geothermal, various kinds of biomass, landfill and sewage treatment gas, wave/ocean/tidal power, biodiesel, and efficiency upgrades to utility-owned hydro- electric projects located in the Pacific Northwest.57 Washington’s RPS excludes large, existing hydro projects, including the federally owned hydro facilities on the Co- lumbia and Snake Rivers from which the Bonneville Power Administration markets the output.58 Qualifying projects must have been built after March 31, 1999, and can be located anywhere in the Pacific Northwest or elsewhere if their energy can be delivered to Washington on a real-time basis without shaping, storage or integration services.59 Distributed renewable resources (i.e., renewable resources having a generating capacity of five megawatts or less) are counted at double the actual output of the facility.60 Utilities may satisfy the RPS requirement during any year with RECs produced during that year or during the immediately preceding or succeeding years.61 Any such RECs must, however, have been produced by eligible renewable resources located in the Pacific Northwest.62 In addition, a utility may not count any renewable resource energy toward satisfaction of the RPS requirement if RECs associated with the energy are owned by a person other than the utility.63

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Utilities are exempt from the RPS requirement if they experience no load growth and invest at least one percent

• f their annual retail revenue requirement on renewable

resources or RECs.64 Utilities are deemed to be in compli- ance with the requirement if they invest not less than four percent of their total annual retail revenue requirement on RECs or the “incremental costs” of renewable resources (i.e., the levelized delivered cost of eligible renewable resources in excess of the levelized cost of non-eligible resources).65 In addition to promoting renewable energy, Washington’s RPS also promotes energy conservation. Chapter 19.285 RCW obligates utilities to identify and pursue cost-effective energy efficiency opportunities in their service territories, and to set two-year conservation acquisition targets beginning in 2010.66 Utilities are subject to penalties of $50 per megawatt hour (adjusted for inflation) for failing to meet the Act’s RPS or conservation requirements.67 Penalty revenues are deposited into an “energy independence account” and used to fund RECs or energy conservation for use in public sector facilities.68 The agencies tasked with adopting rules for the imple- mentation of Washington RPS are the Washington Utilities and Transportation Commission (the “WUTC”) (for inves- tor-owned utilities that are subject to the jurisdiction of the WUTC) and the State Department of Community, Trade and Economic Development (“CTED”) (for the state’s con- sumer-owned utilities that are not subject to the jurisdic- tion of the WUTC). Both agencies have released draft rules, and are required to formulate and adopt final regulations by the end of 2007.69 Chapter 19.285 RCW will create considerable compe- tition among Washington utilities for energy from eligible renewable resources. It will also impose significant addi- tional power supply and energy conservation costs on Washington utilities. The statute provides, however, that “[a]n investor-owned utility is entitled to recover all pru- dently incurred costs associated with compliance with this chapter.”70 There is no statutory entitlement on the part of a utility to recover in rates any penalties that the utility incurs as a result of failing to meet the RPS or conservation require- ments of the Act. Nor is there any prohibition against seeking such recovery. The Act provides that “[t]he com- mission shall determine if an investor-owned utility may recover the cost of this administrative penalty in electric rates, and may consider providing positive incentives for an investor-owned utility to exceed the targets established in section 4 of this act.”71 2. Oregon’s Renewable Portfolio Standard (SB 838) Oregon’s RPS, adopted in late May 2007, applies to Oregon electric utilities and any “electricity service sup- plier” (“ESS”) that serves commercial or industrial cus- tomers located in the service area of an Oregon utility.72 Under the statute, the larger the utility, the greater its requirement to displace fossil-fuel burning sources with renewable sources. For the state’s largest electric utilities (i.e., those serving at least three percent of all electric power sold in the state), the RPS requirements are phased in at 5 percent by 2011, 15 percent by 2015, 20 percent by 2020, and 25 percent by 2025.73 Mid-sized electric utilities (i.e., those serving between 1.5 percent and 3 percent of all electric power sold in the state) must serve at least 10 percent of their retail load with renewable energy by 2025.74 All other electric utilities (i.e., any utility serving less than 1.5 per- cent of all electric power sold in the state) must serve at least five percent of their retail load with renewable energy by 2025.75 ESSs must meet the requirements of the electric utilities in whose service territories the ESSs serve retail customers.76 Eligible resources must be new—becoming opera- tional on or after January 1, 1995—and be either wind, solar, wave, tidal, geothermal, biomass, new hydro (not located inside environmentally protected areas) or effi- ciency upgrades to existing hydro facilities.77 Electric utili- ties can use bundled or unbundled RECs to satisfy the RPS requirement, so long as the RECs are associated with renewable energy generated within the Western Electric- ity Coordinating Council (“WECC”) region.78 However, utilities may use unbundled certificates (i.e., RECs that are acquired without acquisition also of the renewable energy with which they are associated) only to satisfy up to 20 percent of the RPS requirements (although ESSs are ex- empt from this limitation).79 RECs must be acquired by March 31 of the year following the year for which the RECs are to be used, and RECs not used in any year may be banked indefinitely and used (in order of date of issuance) at any subsequent time.80 Oregon’s RPS also features safety valves for electric utilities struggling to comply with its requirements. First, if utilities are unable to satisfy the requirement in any given year, they may make alternative compliance payments in amounts established by the Oregon Public Utility Com- mission.81 Second, suppliers may be exempted from the RPS requirement during any year in which compliance would cost more than four percent of a supplier’s annual revenue requirement.82 If a utility or ESS fails to comply with the standards established by the RPS, it is subject to monetary penalties.83

• VI. Summary

Federal climate change regulation is inevitable, but the federal government has been slow to take steps in that

• direction. The resulting void has inspired state and re-

gional climate change initiatives across the United States. Washington and Oregon are among the leaders in imple- menting such initiatives. Although there are now signs of movement towards federal climate-change legislation, it is clear that, whatever the ultimate results of that movement,

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all of those who live and work in Washington and Oregon have already entered the carbon-constrained future. Eric Freedman is a partner in the Energy and Utilities Group at K&L Gates, focusing on energy and utilities transactional mat- ters, including mergers and acquisitions, joint ventures, power project development, power supply contracts, renewable energy credit trading contracts and emissions allowance trading con- tracts. Denise Lietz focuses her practice on environmental, land use, natural resources and energy and utilities issues. Her practice emphasizes environmental permitting, municipal utility au- thority and operation, and conservation projects. She provides regulatory and litigation services to clients, including corporate, private and municipal entities. Carmen Butler is an associate in the Seattle office of K&L Gates, where she is developing a practice in real estate and energy and utilities with an emphasis on renewable energy. Prior to joining the firm, Carmen worked with the United Nations in Bosnia, where she monitored compliance with postwar property law to ensure the safe return of displaced persons and refugees.

1 Sterling Planet, like The Climate Trust, helps utilities, businesses and individu- als “green up” by selling Renewable Energy Certificates (also known as “RECs”

• r “green tags”) and energy efficiency certificates (also known as “White

TagsTM”), and by guiding utilities and companies in the development of green

• projects. More information on Sterling Planet is available online at

www.sterlingplanet.com. Additional information on The Climate Trust is avail- able at http://www.climatetrust.org. 2 An offset is an activity, such as the reduction, avoidance, or sequestration of greenhouse gas emissions, that counteracts or offsets greenhouse gases that would have been emitted into the atmosphere. 3 More information on the IPCC is available online at http://www.ipcc.ch. 4 The IPCC has published three reports this year: Climate Change 2007: The Physical Science Basis (Feb. 2, 2007), Climate Change 2007: Impacts, Adaptation and Vulnerability (Apr. 6, 2007), and Climate Change 2007: Mitigation (May 6, 2007). These reports are available at http://www.ipcc.ch. 5 The predominant greenhouse gas is carbon dioxide. Other greenhouse gases include methane and nitrous oxide. 6 An overview of the UN Framework is available on its website at http://unfccc.int/ essential_background/convention/items/2627.php. 7 Information on the Kyoto Protocol and updates on the status of its ratification are available online at http://unfccc.int/kyoto_protocol/background/ status_of_ratification/items/2613.php. 8 An overview of the Kyoto Protocol and a link to the Kyoto Protocol Reference Manual on Accounting of Emissions and Assigned Amounts are available at http://unfccc.int/kyoto_protocol/items/2830.php. 9 Information on the AP6 is available online at http://www.asiapacificpartnership.org. 10 Information on USCAP is available online at http://www.us-cap.org. 11 549 U.S. __, 127 S. Ct. 1438, 167 L.Ed.2d 248 (2007). 12 Id. 13 Information on EPA rule-making is available online at http://www.epa.gov/ epahome/rules.html#proposed. 14 H.R. 3221 is available online at http://www.rules.house.gov/110/text/110_hr3221.pdf. 15 Information about H.R. 6 is available online at http://democrats.senate.gov/dpc/ dpc-new.cfm?doc_name=lb-110-1-91. 16 The Lieberman-Warner bill and links to more information are available online at http://lieberman.senate.gov/issues/globalwarming.cfm. 17 Information regarding the Dingell bill is available online at http:// energycommerce.house.gov/CHIP_110/index_chip110.shtml. 18 Information on RGGI is available online at http://www.rggi.org/index.htm. 19 Western Regional Climate Action Initiative Agreement (Feb. 26, 2007) (the “Western Climate Initiative Agreement”). 20 Membership information is available at the Initiative’s website: http:// www.westernclimateinitiative.org/Index.cfm. 21 Western Climate Initiative Agreement. 22 Press Release, Western Climate Initiative, “Western Climate Initiative Mem- bers Set Regional Target to Reduce Greenhouse Gas Emissions” (Aug. 22, 2007). 23 The Climate Registry is developing an emissions reporting system to be used by its members. Additional information is available on the Registry’s website at http://www.theclimateregistry.org. 24 See RCW 80.80.005(1)(a); Oregon House Bill 3543, § 1(4). 25 Id. 26 In recent years, Washington and Oregon also adopted clean fuels standards. In 2005, Washington passed House Bill 1387, later codified in Chapter 70.120A

• RCW. In 2006, Oregon’s Environmental Quality Commission adopted Oregon

Administrative Rule (OAR) Chapter 340, Division 257, available online at http:/ /arcweb.sos.state.or.us/rules/OARs_300/OAR_340/340_257.html. 27 Conceptual diagram provided courtesy of Janice Adair, Department of Ecol-

• gy, on October 17, 2007.

28 Executive Order 07-02, Washington Climate Change Challenge (Feb. 7, 2007). 29 Additional information about the Climate Action Team and its process can be found on its website at http://www.ecy.wa.gov/climatechange/cat_overview.htm. 30 Information about ESSB 6001 is available at http://apps.leg.wa.gov/billinfo/ summary.aspx?bill=6001&year=2007. 31 RCW 80.80.020(1)(a)-(c). 32 RCW 80.80.020(1)(d). 33 RCW 80.80.020(2)(a). 34 RCW 80.80.020(2)(b). 35 RCW 80.80.030. 36 RCW 80.80.040(1)(a). 37 RCW 80.80.040(7). 38 RCW 80.80.040(2). 39 RCW 80.80.040(10). 40 See St. Reg. 07-16-024 (July 20, 2007); St. Reg. 07-15-084 (July 18, 2007). Ecology has set up a website reporting on the rule development process: http:// www.ecy.wa.gov/laws-rules/activity/wac173407_218.html. 41 Information regarding E2SHB 1303 is available at http://apps.leg.wa.gov/billinfo/ summary.aspx?year=2007&bill=1303. 42 HB 1303, § 403(1). 43 HB 3543 is available online at http://www.leg.state.or.us/07reg/measpdf/hb3500.dir/ hb3543.en.pdf. 44 HB 3543, § 2(1). 45 HB 3543, § 4(1). 46 HB 3543, § 9. 47 HB 3543, §§ 15(1), (16). 48 Letter from Governor Theodore R. Kulongoski to Lynn Hampton, Chair- woman, Environmental Quality Commission (July 17, 2007). 49 The Oregon Department of Energy developed a summary of Oregon’s 2007 Energy Legislation, which is available, along with other information regarding Oregon’s climate change and renewable energy efforts, at http://www.oregon.gov/ ENERGY/GBLWRM/index.shtml. 50 The process of permitting RECs to be utilized separately from the associated renewable energy is called “unbundling.” 51 RCW 19.285.030(16). 52 Id. 53 RCW 19.285.040(2)(a)(iii). 54 RCW 19.285.040(2)(a). 55 RCW 19.285.030(12). RCW 19.285.040(2)(c) provides that “[i]n meeting the annual targets … of this subsection, a qualifying utility shall calculate its annual load based on the average of the utility’s load for the previous two years.” 56 RCW 19.285.060(1). 57 RCW 19.285.030(10). The act defines “Pacific Northwest” by incorporation from the Pacific Northwest Electric Power Planning and Conservation Act, 16 U.S.C. § 839, et seq., which defines “Pacific Northwest” to include Washington, Oregon, Idaho, Western Montana, and adjacent portions of California and Utah and Nevada within the Columbia River Basin, or within 75 miles of the Columbia River Basin. 16 U.S.C. § 839a(14). This is the service area of the Bonneville Power Administration (“BPA”). The historical rationale for BPA’s service area was that BPA marketed power from the Federal dams on the Columbia River. The dams produced power from water runoff from the entire Columbia River Basin, and BPA was accordingly obligated to make the power available to the residents of the basin.

Environmental & Land Use Law November 2007

9

58 RCW 19.285.030(10)(b). 59 RCW 19.285.030(10)(a). The act does not define the phrase “real-time basis without shaping, storage or integration services,” nor do the WUTC’s proposed regulations as of this date. In comments on the WUTC’s proposed regulations, certain Washington electric companies have proposed that the phrase be defined as “any timeframe shorter than the day-ahead market.” That proposed definition is consistent with regional electric transmission scheduling practices. 60 RCW 19.285.040(2)(b). 61 RCW 19.285.040(2)(e). 62 RCW 19.185.030(17). 63 RCW 19.285.040(2)(f)(i). 64 RCW 19.285.040(2)(d). 65 RCW 19.285.040(2)(e). 66 RCW 19.285.040(1). 67 RCW 19.285.060(1). 68 RCW 19.285.060(5). 69 Information on WUTC rule-making is available online at http://www.wutc.wa.gov/

• hearingrulemaking. Specific information on CTED’s draft rulemaking for I-937 is

available at http://www.cted.wa.gov/site/1001/default.aspx. 70 RCW 19.285.050(2). 71 RCW 19.285.060(4). 72 An ESS is an alternative electric service provider that has received certification from the Oregon Public Utility Commission to provide electric power to commercial and industrial electric customers in Oregon that are eligible to purchase their electric supply from a supplier other than their local electric

• utility. Oregon Revised Statutes 757.600.

73 SB 838, Section 6(1). 74 SB 838, Section 7(3). 75 SB 838, Section 7(2). 76 SB 838, Section 9. 77 SB 838, Sections 3 and 4. Oregon’s RPS is more generous than is Washington’s RPS in permitting certain output from existing BPA and utility-owned hydro- electric facilities to be applied in satisfaction of a utility’s RPS requirements. See, e.g., SB 838, Sections 3(3) and 8(2)(a). 78 SB 838, Section 15(1) and (2). By contrast, as noted above, Washington’s RPS requires that qualifying RECs must have been produced by eligible renewable resources located in the Pacific Northwest, a region that is only a portion of the WECC. 79 SB 838, Section 17. 80 SB 838, Sections 11 and 16. 81 SB 838, Sections 10(1)(c) and 20. 82 SB 838, Section 12(1). 83 SB 838, Section 22.

Climate Change and Environmental Review: Trends under State and National Environmental Policy Acts

By Dustin T. Till, Marten Law Group

I. Introduction

There is a widespread and growing consensus among scientists and policy makers that fossil fuel combustion and land use changes such as deforestation and urban development are increasing atmospheric concentrations of carbon dioxide and other heat-trapping greenhouse gases (“GHGs”). Increasing GHG concentrations are believed to contribute to rising global average surface temperatures. The International Panel on Climate Change (“IPCC”) pre- dicts that rising temperatures may result in significant adverse consequences over the next 100 years, including rising sea levels, increased flooding, increased stress on forest resources, and disruption to agriculture.1 The IPCC has concluded there are two broad strategies for address- ing the consequences of climate change: (1) mitigating or reducing GHG emissions; and (2) adapting to environmen- tal changes attributable to global warming.2 While Congress is presently debating the merits of various legislative proposals to reduce GHG emissions, it has not yet adopted any comprehensive plan for address- ing global climate change. In the absence of federal guid- ance, states have taken the lead in establishing frameworks for addressing GHG emissions and other climate change

• impacts. To date, at least sixteen states have adopted

legislation or agreed to participate in regional pacts that establish aggressive, economy-wide GHG emission reduc- tion targets.3 For example, under ESSB 6001, adopted by the Washington Legislature in 2007, Washington has com- mitted to reducing its GHG emissions to 1990 levels by 2020, and fifty percent below 1990 levels by 2050.4 In order to achieve emission reduction targets, Washington and

• ther states must quantify historic and contemporary GHG

emission levels and adopt measures for eliminating or reducing state-wide GHG emissions. The Washington State Environmental Policy Act (“SEPA”) and other state-level environmental review stat- utes will likely play an important role in states’ efforts to address climate change, particularly in states with legisla- tively-mandated GHG reduction targets. First, all SEPAs share a fundamental information-gathering purpose and require project proponents to reveal and quantify the environmental impacts associated with their proposals.5 SEPA review documents which assess GHG emissions will help regulators identify the GHG emissions associated with various activities, formulate baseline emission inven- tories, and identify potential sources for mitigating emis-

• sions. Indeed, one Washington jurisdiction (King County)

and the State of Massachusetts have adopted policies which require project proponents to quantify the GHG emissions and other climate change impacts attributable to their

• proposals. The City of Seattle is considering its own SEPA

proposal, and similar requirements in other jurisdictions seem inevitable—either through legislation or pending litigation. Second, some SEPAs grant permitting agencies sub- stantive authority which may be used to modify or deny projects based on GHG emissions and could play an im- portant role in achieving GHG emission reduction targets.6 The GHG targets mandated by ESSB 6001 are economy- wide and will require emission reductions from the en- ergy, transportation, and other sectors of the economy.7 While the energy and transportation sectors account for a large portion of national GHG emissions, discretionary land use decisions will continue to come under increasing scrutiny because the built environment is also responsible