California Cap & Trade Challenge Final Order Issued
On Friday, May 20, 2011, Judge Goldsmith of San Francisco Supreme Court issued a final order (PDF) with respect to a lawsuit challenging the environmental review of the Cap and Trade regulations created under California’s AB 32 Greenhouse Gas statute and the associated Scoping Plan. In its order, the Court enjoined the Cap and Trade portion of the Scoping Plan.
This revised final order is narrower than the draft order previously circulated in March. The order applies only to the Board Regulation O8-47 and Executive Order G-09-001 (approving the climate change scoping plan) as they relate to Cap and Trade; and the Cap and Trade regulations themselves Regulation 10-42. The Executive order enjoins the California Air Resources Board (CARB) from:
“[e]ngaging in any cap and trade-related Project activity that could result in an adverse change to the physical environment until ARB has comes into complete compliance with ARB’s obligations under its certified regulatory program and CEQA, consistent with the Court’s Order. This includes any further rulemaking and implementation of cap and trade especially but not limited to any action in furtherance of California Cap and Trade Program Resolution 10-42.”
Keep in mind, this lawsuit was filed challenging a CEQA type document which is procedural in nature. Thus, once CARB revises the environmental document in the manner required by the court and it is determined to be sufficient at the time the writ is returned, the project may go forward. Additionally, in the interim, those portions of AB 32 that are not related to Cap and Trade, such as mandatory reporting, are still in effect pursuant to the Implementation Schedule.
In the interim, it will be interesting to see whether various interests will attempt to make changes to the Cap and Trade program. The Sierra Club has already come out in favor of changes related to emissions levels and environmental justice issues.
EPA Issues Proposed RFS2 Rules for 2011
The EPA has issued proposed RFS2 rules for 2011 that provide some indications that the agency is dedicated to jump starting the advanced biofuels industry. Most notably, the EPA held fast to an overall mandate of 13.95 billion gallons of renewable fuel. While the agency intends to deviate downward on cellululosic biofuels with a cut of 90% or more anticipated, the proposed rule maintains the overall Advanced biofuel mandate at 1.35 billion gallons and the Biomass-based diesel requirement at 800 million gallons. Thus the agency is paying significant attention to the existing capacity of the biodiesel industry despite the lack of approval for the blender's credit six months into the year. Biofuel supporters hope that this policy gap will be addressed shortly or that RIN values will continue to increase for Biomass based diesel.
The proposed rule contains two other notable components: tentative but retroactive RIN credit for canola, sorghum, pulpwood and palm oil biofuel producers; and a petition process for foreign countries to avoid the onerous feedstock obligations that now apply in favor of the aggregate approach available within the US. The referenced feedstocks have been under consideration by EPA for Life Cycle Analysis since prior to the original RFS2 Final Rule was released but the work has still not been completed. The severe challenge for this group of biofuel producers is that EPA has previously indicated that RIN generation would trigger only when the pathway was certified. EPA's proposed new flexibility is an improvement but still falls short of providing full RIN value for these producers due to the lag time and uncertainty associated with the approach. The proposed petition process for foreign countries is an apparent attempt to level the playing field for foreign producers who now must trace and certify feedstocks such as soy and corn in a manner not required within the US.
The rules will be published in the Federal Register shortly and the public comment period will likely run to approximately August 13th.
Growing Green Jobs
Check out our recent client alert on President-elect Obama's selection of California congresswoman Hilda Solis as Labor Secretary, which we believe highlights the significance the incoming administration is placing on clean renewable energy and the contributing role of green jobs. Also highlighted in our client alert is the efforts of several states, including Minnesota, California and Oregon, to promote green jobs. In Minnesota, Governor Tim Pawlenty recently announced a "Green Jobs Investment Initiative" that includes several proposals for the 2009 Minnesota Legislature, including a Green JOBZ Program, Job Growth and Small Business Investment Tax Credits, and Biomethane and Solar Power Conservation Credits. Stay tuned!
ASTM Proposes Corporate Climate Change Disclosure Standard
ASTM International (formerly the American Society for Testing and Materials) recently published a proposed voluntary standard entitled “Financial Disclosures Attributed to Climate Change,” intended to provide guidance on when public company disclosure of climate change matters is required. While the standard itself isn’t available via the Internet, a summary is available from the Brattle Group, which helped craft the standard, and we have a copy of the ASTM proposal if you’re interested. There have been numerous discussions on the proposal over the last year (see, for example, Global Reporting Initiative and Carbon Disclosure Project materials), including last year’s detailed petition to the SEC by a coalition of environmental groups and investment funds. It remains to be seen to what extent companies will modify their disclosures if the proposal is adopted as written. Generally speaking, public disclosure is backward looking and conservative, and therefore currently includes only those items that are substantive and measurable, such as lawsuits, new environmental regulation, and capital expenditures. That being said, environmental groups, both on the disclosure front and the proxy proposals front, and the New York Attorney General, continue to voice their thoughts on this concept.
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