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2010 OFII General Counsel Conference Washington, D.C.
Granta Y. Nakayama, P.C. David R. HillKirkland & Ellis LLP Sidley Austin LLPgranta.nakayama@kirkland.com drhill@sidley.com
October 19, 2010
Recent Developments inU.S. Energy and Climate Policy
2010 OFII General Counsel Conference Washington, D.C.
U.S. Legal and Policy Developments
• Brief Background on Current EIA Supply/Demand Projections
• U.S. Congress Action Concerning Greenhouse Gases and Energy Issues
• EPA – GHG-Related Regulations and Source-Specific Controls
• DOE – Efficiency Standards and Enforcement; Loan Guarantee Program
• EPA – Enforcement Trends and Targets
• Litigation – GHG Nuisance Cases; Section 526 Litigation
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2010 OFII General Counsel Conference Washington, D.C.
World Energy Consumption OutlookIncreases 35% from 2007-2035; Non-OECD accounts for 86% of the increase
(in quadrillion Btu; Source: EIA International Energy Outlook, 2010)
3
0
200
400
600
800
2007 2015 2020 2025 2030 2035
Non-OECDOECD
495543
590639
687739
50%
62%
50% 38%
2010 OFII General Counsel Conference Washington, D.C.
Energy supply will grow from all sources(World primary energy consumption, in quadrillion Btu
Source: EIA International Energy Outlook, 2010)
4
0
50
100
150
200
250
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
Liquids (including biofuels)
Renewables (excluding biofuels)
Natural gas
Coal
Nuclear
History Projections
35%
27%
23%
10%
5%
30%
28%
22%
14%
6%
Share of world total
2010 OFII General Counsel Conference Washington, D.C.
Energy-related CO2 emissions will grow 43% 2007-2035 (assuming no policy changes)
(Energy CO2 emissions, in billions of metric tons;Source: EIA International Energy Outlook, 2010)
5
0
5
10
15
20
25
30
35
40
45
2007 2015 2020 2025 2030 2035
Non-OECDOECD
30 3234
36
3942
53%
67%
47% 33%
2010 OFII General Counsel Conference Washington, D.C.
Congressional Action to Address GHGs
• Prospects have steadily diminished, mid-2009 to the present• American Clean Energy and Security Act (Waxman-Markey)
– Passed U.S. House June 26, 2009
• American Clean Energy Leadership Act (Bingaman)– Passed Senate Energy & Natural Resources Committee July 16, 2009
• Clean Energy Jobs and American Power Act (Boxer-Kerry)– Introduced September 30, 2009
• Kerry-Graham-Lieberman bill– Graham abandoned process April 2010; bill never acted on
• Attempts at targeted bills (utility only, RPS only) as well as bills going in the other direction (e.g., Rockefeller bill to slow or stop EPA action)
• Also, bills to address Gulf of Mexico oil spill, hydraulic fracturing, etc.
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2010 OFII General Counsel Conference Washington, D.C.
EPA Regulatory Program for Greenhouse Gases
• Endangerment Determination
• Johnson Memorandum
• Motor Vehicle Emissions Rule
• PSD Tailoring Rule – Stationary Sources
• GHG Reporting Rule
• Renewable Fuels Standard
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2010 OFII General Counsel Conference Washington, D.C.
U.S. Department of Energy Efficiency Standards and Enforcement Efforts
• Significant New DOE Enforcement Effort – Major Public Focus of the General Counsel and of the Department’s Overall Efficiency Effort
• New Efficiency Standards, and More on the Horizon
• Changes in Test Procedures – GHG Pricing, Life Cycle Analysis
• Changes in the Energy Star Program – Certification, Standards
• Also, Federal Trade Commission Revision of its “Green Guides”
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2010 OFII General Counsel Conference Washington, D.C.
U.S. Department of Energy Loan Guarantee Program and Possible Changes
• Energy Policy Act of 2005, Title XVII Loan Guarantee Program– Authority to issue tens of billions in loan guarantees– Stimulus Act provided $6 billion to pay credit subsidy costs; Congress
subsequently rescinded $3.5 billion to pay for other programs– A few significant loan guarantees closed to date– Many complications – EPAct, FCRA, NEPA, OMB– One utility recently rejected terms of potential loan guarantee for nuclear plant
• Efforts underway to significantly change program or create new federal green energy financing mechanism (e.g., CEDA)
• Issues with existing and new programs include – program’s primary objective, scope of authority and projects, Federal Credit Reform Act, annual appropriations cycle, effect on private sector markets
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2010 OFII General Counsel Conference Washington, D.C.
Big Expectations for Enforcement
• Bigger EPA budget (> 35% increase FY10)
• Comparisons to prior annual results
• Negative enforcement press – – “EPA Enforcement-Related Penalties Plummeted in Fiscal 2009”
NY Times, January 5, 2010 (“EPA during the first year of the . . . administration saw deep declines in the amount of penalties . . .”
• Result »»» need to show results
10
2010 OFII General Counsel Conference Washington, D.C.
EPA Enforcement – Continued (?) Increases
0
2
4
6
8
10
12
14
2003 2004 2005 2006 2007 2008 2009
$ (B
illio
ns)
Injunctive Relief ($)
11
2010 OFII General Counsel Conference Washington, D.C.
EPA Enforcement Targets (FY 2011 to 2013)• “Energy Extraction Sector” – New Initiative
– EPA justification: “urgent need to . . . develop “clean energy” sources . . . . new techniques for oil and gas extraction and coal mining, pose a risk of pollution of air, surface waters and ground waters”
• Coal-Fired Utility, Cement, Glass, and Acid Sectors
• Air Toxics – “wide range of industrial and commercial facilities”
• FY 2011-2015 EPA Strategic Plan – Sept. 30, 2010– “Enforcement supports reductions in greenhouse gases (GHG) through
enforcement settlements that encourage GHG emission reductions.
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2010 OFII General Counsel Conference Washington, D.C.
Enforcement – EPA’s Evolving View
Many paths toward compliance
Goal is the environmental result
Compliance Assistance
Administrative Enforcement
Civil/Judicial Enforcement
Criminal Enforcement
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2010 OFII General Counsel Conference Washington, D.C.
GHG-Related Litigation
• Courts can be, and are, used to press policy objectives• Nuisance cases focusing on GHG emissions
– State of Connecticut v. American Electric Power Co.– Comer v. Murphy Oil USA– Native Village of Kivalina v. Exxon Mobil Corp.
• Case challenging Defense Department’s purchase of fuel derived in part from Canadian oil sands– Sierra Club and Southern Alliance for Clean Energy v. U.S.
Defense Energy Support Center
• Cases directed at forcing, or stopping, GHG regulations
15
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