Category: Environmental Law

EV Buses: Arriving Now and Here to Stay

In the words of Miss Frizzle, “Okay bus—do your stuff!”1 A favorable regulatory environment, direct subsidy, private investment, and customer demand are driving an acceleration in electric vehicle (EV) bus adoption and the lane of busiest traffic is filling with school buses. The United States has over 480,000 school buses, but currently, less than one percent are EVs. Industry watchers expect that EV buses will eventually become the leading mode for student transportation. School districts and municipalities are embracing EV buses because they are perceived as cleaner, requiring less maintenance, and predicted to operate more reliably than current fossil fuel consuming alternatives. EV bus technology has improved in recent years, with today’s models performing better in cold weather than their predecessors, with increased ranges on a single charge, and requiring very little special training for drivers.2 Moreover, EV buses can serve as components in micro-grid developments (more on that in a future post).

The Investment Incline

Even if the expected operational advantages of EV buses deliver, the upfront cost to purchase vehicles or to retrofit existing fleets remains an obstacle to expansion.  New EV buses price out significantly more than traditional diesel buses and also require accompanying new infrastructure, such as charging stations.  Retrofitting drive systems in existing buses comparatively reduces some of that cost, but also requires significant investment.3

To detour around these financial obstacles, federal, state, and local governments have made funding available to encourage the transition to EV buses.4 In addition to such policy-based subsidies, private investment from both financial and strategic quarters has increased.  Market participants who take advantage of such funding earlier than their competitors have a forward seat to position themselves as leaders.

You kids pipe down back there, I’ve got my eyes on a pile of cash up ahead!

Government funding incentives for electrification are available for new EV buses and for repowering existing vehicles.5 Notably, the Infrastructure Investment and Jobs Act committed $5 billion over five years to replace existing diesel buses with EV buses. Additionally, the Diesel Emissions Reduction Act provided $18.7 million in rebates for fiscal year 2021 through an ongoing program.

In 2021, New York City announced its commitment to transition school buses to electric by 2035.  Toward that goal, the New York Truck Voucher Incentive Program provides vouchers to eligible fleets towards electric conversions and covers up to 80% of those associated costs.6  California’s School Bus Replacement Program had already set aside over $94 million, available to districts, counties, and joint power authorities, to support replacing diesel buses with EVs, and the state’s proposed budget for 2022-23 includes a $1.5 billion grant program to support purchase of EV buses and charging stations.

While substantial growth in EV bus sales will continue in the years ahead, it will be important to keep an eye out for renewal, increase or sunset of these significant subsidies.

Market Players and Market Trends, OEMs, and Retrofitters

The U.S is a leader in EV school bus production:  two of the largest manufacturers, Blue Bird and Thomas Built (part of Daimler Truck North America), are located domestically, and Lion Electric (based in Canada) expects to begin delivering vehicles from a large facility in northern Illinois during the second half of 2022.  GM has teamed up with Lighting eMotors on a medium duty truck platform project that includes models prominent in many fleets, and Ford’s Super Duty lines of vehicles (which provide the platform for numerous vans and shuttle vehicles) pop up in its promotion of a broader electric future. Navistar’s IC Bus now features an electric version of its flagship CE series.

Additionally, companies are looking to a turn-key approach to deliver complete energy ecosystems, encompassing vehicles, charging infrastructure, financing, operations, maintenance, and energy optimization. In 2021, Highland Electric Transportation raised $253 million from Vision Ridge Partners, Fontinalis Partners (co-founded by Bill Ford) and existing investors to help accelerate its growth, premised on a turn-key fleet approach.7

Retrofitting is also on the move.  SEA Electric (SEA), a provider of electric commercial vehicles, recently partnered with Midwest Transit Equipment (MTE) to convert 10,000 existing school buses to EVs over the next five years.8 MTE will provide the frame for the school uses and SEA will provide its SEA-drive propulsion system to convert the buses to EV.9 In a major local project, Logan Bus Company announced its collaboration with AMPLY Power and Unique Electric Solutions (UES) to deploy New York City’s first Type-C (conventional) school bus.10

Industry followers should expect further collaborations, because simplifying the route to adopting an EV fleet makes it more likely EV products will reach customers.

Opportunities Going Forward

Over the long haul, EV buses should do well. Scaling up investments and competition on the production side should facilitate making fleet modernization more affordable for school districts while supporting profit margins for manufacturers. EVs aren’t leaving town, so manufacturers, fleet operators, school districts and municipalities will either get on board or risk being left at the curb.

Article By Michael J. Small and Samantha Ruppenthal at Foley & Lardner LLP

For more utilities and transportation legal news, click here to visit the National Law Review.

 

 

1https://shop.scholastic.com/parent-ecommerce/series-and-characters/magic-school-bus.html

2https://www.busboss.com/blog/having-an-electric-school-bus-fleet-is-easier-than-many-people-think

3https://thehill.com/opinion/energy-environment/570326-electric-school-bus-investments-could-drive-us-vehicle

4https://info.burnsmcd.com/white-paper/electrifying-the-nations-mass-transit-bus-fleets

5https://stnonline.com/partner-updates/electric-repower-the-cheaper-faster-and-easier-path-to-electric-buses/

6https://www1.nyc.gov/office-of-the-mayor/news/296-21/recovery-all-us-mayor-de-blasio-commits-100-electric-school-bus-fleet-2035

7https://www.bloomberg.com/press-releases/2021-02-16/highland-electric-transportation-raises-253-million-from-vision-ridge-partners-fontinalis-partners-and-existing-investors

8https://www.electrive.com/2021/12/07/sea-electric-to-convert-10k-us-school-buses/#:~:text=SEA%20Electric%20and%20Midwest%20Transit,become%20purely%20electric%20school%20buses.

9 Id.

10https://stnonline.com/news/new-york-city-deploys-first-type-c-electric-school-bus/

© 2022 Foley & Lardner LLP

One Less Way for Ohio Landowners to Challenge Royalty Severances

On February 15, 2022, the Ohio Supreme Court issued a significant decision in Peppertree Farms, L.L.C. v. Thonen establishing that, unless expressly stated otherwise, an oil and gas royalty interest retained in a deed executed prior to 1925 is not limited to the lifetime of the grantor. In so holding, the Ohio Supreme Court cut off one of the only grounds, other than the Dormant Minerals Act and Marketable Title Act, for landowners to quiet title and eliminate past oil and gas severances.

Ohio follows a legal tradition under which the default rules of English “common law” were adopted and then adapted by statute to form the basis of our legal system. At common law, a conveyance of real property had to include “words of inheritance” (i.e., an express statement that the royalty interest would last in perpetuity and be inheritable) or the interest being conveyed would be limited to the lifetime of the grantee (a life estate). Additional complications arose when a grantor sought to retain an interest by deed. If the grantor was retaining a right which had already been conveyed to him in perpetuity, then the retention qualified as a “technical exception” of a pre-existing right and additional words of inheritance were not required. However, if the grantor was creating and then retaining a new right, the retention qualified as a “technical reservation” and was limited to a life estate.

As new modes of production and corresponding property rights were discovered, it became unclear exactly what rights pre-existed a severance and the whole system of distinctions fell apart. In 1925, the General Assembly passed a law establishing that all future conveyances of real property were presumed perpetual unless stated otherwise. While eliminating this issue as to future deeds, the General Assembly did not settle the issue as to deeds executed before 1925 or clarify whether the retention of an oil and gas royalty was a “technical exception” or “technical reservation.”

In the Peppertree Farms case, Plaintiffs Peppertree Farms, Jay Moore and Amy Moore (collectively, “Peppertree”) sought to quiet title to certain lands in Monroe County, Ohio, against a severed oil and gas royalty interest (the “Royalty Interest”) originally retained by the grantor under a 1921 deed. In addition to a claim for extinguished under Ohio’s Marketable Title Act, Peppertree asserted that the Royalty Interest did not include words of inheritance and was therefore a newly created right which terminated upon the death of the grantor under the 1921 deed. Conversely, the defendant royalty owners (“Royalty Owners”) argued that the Royalty Interest was a pre-existing right which the grantor already held, and therefore could retain, in perpetuity without words of inheritance.

While Peppertree was able to convince both the trial and appellate court that the Royalty Interest was a newly created interest which was limited to a life estate, it was unsuccessful with the Ohio Supreme Court. Reasoning that a royalty was nothing more than the retention of part of the right to receive the proceeds of oil and gas production, the Court ultimately found that the Royalty Interest was a “technical exception” which survived the lifetime of the grantor. As a result, Peppertree was limited to its claims for extinguishment under the Marketable Title Act and Ohio surface owners lost another means to challenge ancient royalty reservations.

©2022 Roetzel & Andress
For more articles on local state litigation, visit the NLR Litigation section.

Super Bowl Ads and Greenwashing: Critics Quick To Attack

Over 112 million people tuned in on Super Bowl Sunday to watch the NFL championship game, many of them also (or even exclusively) to watch the commercials that aired throughout the night. Even the casual viewer likely noticed almost ten different commercials that centered on themes of sustainability, zero waste, carbon offset, and climate change. Yet, critics were quick to argue that the commercials were greenwashing consumers, marking perhaps the first year that Super Bowl ads and greenwashing became a topic of morning water cooler conversation. For corporations, though, the point underlies the reality that in today’s market, any and all statements that are put forth touching on environmental issues run the risk of accusations and lawsuits alleging greenwashing.  Now more than ever, globally situated companies of all types that are advertising, marketing, drafting ESG statements, or disclosing information, as required by regulatory agencies, must pay extremely close attention to the language used in all of these documents and media, or else run the risk of enforcement action or lawsuits.

Super Bowl Ads and Greenwashing

Some of the more prominent commercials during the Super Bowl that featured environmentally-friendly themes came from the automobile industry. Several commercials touted new lines of 100% electric vehicles, with obvious themes centered on reducing carbon emissions and helping to combat global warming. One commercial went so far as to even directly state “no greenwashing!” in the commercial. Not to be left out, Salesforce and the food industry also aired commercials with environmental and sustainability undertones. Critics of the transparency of the messaging in these commercials, though, quickly argued that the commercials merely provided green-friendly messaging to consumers who may only be familiar with the more heavily-reported environmental issues.

Taking the automobile industry as an example, there were more electric vehicle commercials than ever during the 2022 Super Bowl. All of them displayed new lines of 100% electric vehicles, with varying themes of their impact on reducing carbon emissions. Electric vehicles are almost universally powered by lithium-ion batteries. It is that fact that greenwashing accusers say that average consumers are not told because the batteries themselves present environmental issues of potentially equal or greater concern than gasoline-powered vehicles. The issues start with the mining of lithium and the manufacture of lithium-ion uses enormous amounts of water, and the technology used to extract and transform the raw material into a usable resource also creates carbon emissions. Further, while many companies are investing millions of dollars into reuse and recycling options for lithium-ion batteries, there is growing concern regarding the practice of disposing of the batteries into landfills, which may therefore present land contamination concerns. Finally, critics point to the necessity of manufacturing, transporting, and installing recharging stations throughout the country in order to make the mass use of electric vehicles a reality as processes that will generate waste, air pollution and carbon emissions.

Critics therefore claim that while the outward messaging from car companies is one of sustainability and clean energy, pulling the curtain back on the electric vehicle industry will reveal a different story.

Corporate Preparation Is Key

In less than two months in 2022, the fashion industry, the cosmetics industry, and the restaurant industry have seen litigation and regulatory agency activity increase with respect to greenwashing concerns. We predict that 2022 will see a great degree of regulatory enforcement action and legislation seeking to curb overzealous marketing language or statements that could be seen as greenwashing.

While there are numerous avenues to examine to ensure that ESG principles are being upheld and accurately conveyed to the public, the underlying compliance program for minimizing greenwashing allegation risks is absolutely critical for all players putting forth ESG-related statements. These compliance checks should not merely be one-time pre-issuance programs; rather, they should be ongoing and constant to ensure that with ever-evolving corporate practices, a focused interest by the regulatory agencies on ESG, and increasing attention by the legal world on greenwashing claims, all statement put forth are truly “ESG friendly” and not misleading in any way.

©2022 CMBG3 Law, LLC. All rights reserved.

Article By John Gardella of CMBG3 Law

For more articles on greenwashing, visit the NLR Environmental, Energy & Resources section.

Agriculture Groups Sue FDA on Chlorpyrifos Ban

  • As previously reported, the Environmental Protection Agency (EPA) published a final rule on August 30, 2021 that revoked all tolerances for the pesticide chemical chlorpyrifos on raw agricultural commodities; the rulemaking was driven by toxicity concerns, primarily concerning exposure in children. The tolerances are set to expire on February 28, 2022, effectively banning the use of chlorpyrifos on food crops. In light of the expiration, FDA published a guidance document to assist food producers and processors that handle foods which may contain chlorpyrifos restudies.
  • In October of 2021, agriculture stakeholders submitted formal written objections and a request to stay the tolerance revocations to EPA. More than 80 stakeholders signed the document, arguing that significant harms would result from banning chlorpyrifos and urging the agency to stay implementation of the rule until objections were formally addressed by EPA.
  • Agriculture stakeholder groups are now seeking a court injunction against EPA’s ban on chlorpyrifos. On February 10, 2022, agricultural trade groups representing thousands of members filed a lawsuit against EPA before the Eight Circuit Court of Appeals, alleging that the agency ignored its own scientific findings regarding 11 high-benefit and low-risk crop uses for chlorpyrifos and that the revocation will cause irreparable damage. It remains to be seen how EPA will respond to the lawsuit.

Article By Food and Drug Law Practice Group at Keller and Heckman LLP

For more food and drug legal news, click here to visit the National Law Review.

© 2022 Keller and Heckman LLP

Red States Move to Penalize Companies That Consider Climate Change When Making Investments

A number of conservative-leaning states, particularly those with a significant fossil fuel industry (e.g., Texas, West Virginia), have begun implementing polices and enacting laws that penalize companies which “pull away from the fossil fuel industry.”  Most of these laws focus on precluding state governmental entities, including pension funds, from doing business with companies that have adopted policies that take climate change into account, whether divesting from fossil fuels or simply considering climate change metrics when evaluating investments.

This trend is a troubling development for the American economy.  Irrespective of the merits of the policy, or fossil fuel investments generally, there are now an array of state governments and associated entities, reflecting a significant portion of the economy, that have adopted policies explicitly designed to remove climate change or other similar concerns from consideration when companies decide upon a course of action.  But there are other states (typically coastal “blue” states) that have enacted diametrically opposed policies, including mandatory divestments from fossil fuel investments (e.g., Maine).  This patchwork of contradictory state regulation has created a labyrinth of different concerns for companies to navigate.  And these same companies are also facing pressure from significant institutional investors, such as BlackRock, to consider ESG concerns when making investments.

Likely the most effective way to resolve these inconsistent regulations and guidance, and to alleviate the impact on the American economy, would be for the federal government to issue a clear set of policy guidelines and regulatory requirements.  (Even if these were subject to legal challenge, it would at least set a benchmark and provide general guidance.)  But the SEC, the most likely source of such regulations, has failed to meet its own deadlines for promulgating such regulations, and it is unclear when such guidance will be issued.

In the absence of a clear federal mandate, the contradictory policies adopted by different state governments will only apply additional burdens to companies doing business across multiple state jurisdictions, and by extension, to the economy of the United States.

“Republicans and right-leaning groups fighting climate-conscious policies that target fossil fuel companies are increasingly taking their battle to state capitals. Texas, West Virginia and Oklahoma are among states moving to bar officials from dealing with businesses that are moving to ditch fossil fuels or considering climate change in their own investments. Those steps come as major financial firms and other corporations adopt policies aligned with efforts to reduce greenhouse gas emissions.”

Article By Jacob H. Hupart of Mintz

For more environmental legal news, click here to visit the National Law Review.

©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Restaurant Greenwashing: Diners Beware or Industry Beware?

In June 2021, a class action lawsuit was filed in California in which restaurant greenwashing was alleged due to sustainability statements made on Red Lobster’s menus. Now, Red Lobster has filed pleadings with the court seeking to have the case dismissed, arguing that plaintiffs failed to establish any colorable claim on which they can prevail. While it remains to be seen what the court will do with the lawsuit, the critical takeaway from the litigation is that any industry, not just the consumer goods industry, must realize that marketing buzzwords such as “sustainable”, “environmentally friendly”, and “responsibly sourced” are in the crosshairs. Now more than ever, globally situated companies of all types that are advertising, marketing, drafting ESG statements, or disclosing information as required by regulatory agencies must pay extremely close attention to the language used in all of these types of documents, or else run the risk of enforcement action or lawsuits.

Restaurant Greenwashing Lawsuit

The 2020 Red Lobster lawsuit alleged that “Seafood With Standards” statements on Red Lobster’s menus regarding the sustainability, traceability and responsible sourcing of its lobster and shrimp were false. Instead, the lawsuit argues, the Maine lobster served by Red Lobster are not sustainably sourced and the farmed shrimp used by the restaurant chain are not responsibly sourced. The lawsuit alleges that Red Lobster’s purveyors instead use environmentally damaging and inhumane methods for catching or harvesting the seafood supplies.  As such, marketing statements made on Red Lobster’s menus and in other advertising were false and misleading.

The claims in the Complaint range from allegations that fishing practices harm whale populations to allegations of inhumane treatment of female shrimp to boost reproductivity to allegations of antibiotic and chemical use in shrimp farms to promote rapid growth. The relief sought in the lawsuit is injunctive relied for the court to stop any practices found to be deceptive and misleading, as well as over $5 million in damages (which are as of yet unspecified in terms of exact amount).

Last week, Red Lobster fought back, arguing that the plaintiffs’ allegations regarding the marketing slogan and the information on the restaurant chain’s menus are overbroad. Instead, the company argues, the language on the menus merely invites diners to visit the Red Lobster website to learn more about the company’s commitment to sustainable, tracing and sourcing initiatives. The plaintiffs disagree and argue that an ordinary consumer would not view Red Lobster’s menus as merely a “redirect” to the company’s website, but instead an assertion about the products found on the menu.

Corporate Preparation Is Key

In less than two months in 2022, the fashion industry, the cosmetics industry, and the restaurant industry have seen litigation and regulatory agency activity increase with respect to greenwashing concerns. Restaurant greenwashing complaints provide a natural supply of potential plaintiffs for potential class action lawsuits given the number of consumers that would be subject to the reach of marketing by the industry. We predict that 2022 will see a great degree of regulatory enforcement action and legislation seeking to curb over zealous marketing language or statements that could be seen as greenwashing, and the Red Lobster lawsuit is certainly one to watch to determine the future impact on the industry.

While there are numerous avenues to examine to ensure that ESG principles are being upheld and accurately conveyed to the public, the underlying compliance program for minimizing greenwashing allegation risks is absolutely critical for all players putting forth ESG-related statements. These compliance checks should not merely be one-time pre-issuance programs; rather, they should be ongoing and constant to ensure that with  ever-evolving corporate practices, a focused interest by the regulatory agencies on ESG, and increasing attention by the legal world on greenwashing claims, all statement put forth are truly “ESG friendly” and not misleading in any way.

This article was written by John Gardella of CMBG3 law firm. For more articles on greenwashing, please see here.

Crossing the Wires of Energy and Cryptocurrency Policy: U.S. Congress Investigates the Environmental Impact of Crypto Mining

The rapid adoption of cryptocurrency and other popular blockchain applications has captured our global economy’s attention. Even as the value of cryptocurrencies slid from their all-time highs, the promise of these digital assets and the infrastructure being developed to support them has been transformative.

As with most emerging technologies, policymakers are still exploring the best approaches to regulating these new digital assets and business models. Questions about consumer protection, security, and the applicability of existing laws are to be expected; however, the environmental impact of these energy-intensive business practices has prompted considerable study and regulatory activity across the globe, including attention in the United States.

To understand the increasing energy demands associated with major cryptocurrencies – predominantly, Bitcoin and Ethereum – it is important to understand how many cryptocurrencies are generated in the first instance. Many countries, including China, have banned cryptocurrency mining, and, with the United States becoming the largest source of cryptocurrency mining activity, Congress began active investigations and hearings into the energy demands and environmental impacts in January 2022.

Proof of What? Why certain cryptocurrencies create high energy demands. 

Not all cryptocurrencies – or blockchain platforms, for that matter – are created equal in their energy demands. The goal of most major cryptocurrency platforms is to create a decentralized, distributed ledger, meaning that there is no one authority to verify the authenticity of transactions and ensure that assets are not spent twice, for example. There needs to be a trustworthy mechanism – a consensus system – to verify new transactions, add those transactions to the blockchain, and to confirm the creation of new tokens. Bitcoin alone has well over 200,000 transactions per day,[1] so it should not come as a surprise that these platforms take an enormous amount of processing power to maintain.

There are currently two primary ways that network participants lend their processing power, which are framing part of the modern energy policy debates around cryptocurrency. The first form is “proof of work,” which is the original method that Bitcoin and Ethereum 1.0 employ. When a group of transactions (a block) needs to be verified, all of the “mining” computers race to solve a complex math puzzle, and whoever wins gets to add the block to the chain and is rewarded in coins. The competitive nature of proof of work consensus systems has led to substantial increases in computing power provided by institutional cryptocurrency mining operations and, with that, higher energy demands.

The second form is “proof of stake,” which newer platforms like Cardano and ETH2 use, promises to require considerably less energy to operate. With this method, validators “stake” their currency for a chance at verifying new transactions and updating the blockchain. This method rewards long-term investment in a particular blockchain, rather than raw computing power. A validator is picked based on how much currency they have staked and how long it has been staked for. Once the block is verified, other validators must review and accept the data before it’s added to the blockchain. Then, everyone who participated in validating the block is rewarded with coins.

While proof of stake consensus systems are becoming more common, the dominant – and most valuable – cryptocurrencies are still generated through energy-intensive proof of work systems.

Turning out the lights on Crypto: China bans domestic mining and other countries follow.

China has been incredibly influential in the modern cryptocurrency debate around energy use. For several years, China was the cryptocurrency mining capital of the world, providing an average of two-thirds of the world’s processing power dedicated to Bitcoin mining through early 2021.[2] In June 2021, however, China banned all domestic cryptocurrency mining operations, citing the environmental impacts of Bitcoin mining energy demands among its concerns.[3]

As Bitcoin miners fled China, many relocated to neighboring countries, such as Kazakhstan, and the United States became the largest source of mining activity – an estimated 35.1% of global mining power.[4] The surge in Bitcoin mining activity in Kazakhstan has not been without its controversy. Many Kazakhstan-based crypto mining operations are powered by coal plants, and there has been considerable unrest sparked by rising fuel costs.[5]

With some countries experiencing negative impacts from cryptocurrency mining operations, several countries have followed China’s lead in banning cryptocurrencies. According to a 2021 report prepared by the Law Library of Congress, at least eight other countries – Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia, and Bangladesh – have banned cryptocurrencies.[6] Many other countries have impliedly banned cryptocurrency or cryptocurrency exchanges, as well.[7]

U.S. Congress shines its spotlight on the energy demands of cryptocurrency mining.

Now home to over a third of the global computing power dedicated to mining bitcoin, the United States has turned its attention to domestic miners and their impacts on the environment and local economies.

In June 2021, U.S. policymakers were still predominantly focused on the consumer protection and security concerns raised by digital currencies; however, Senator Elizabeth Warren alluded to her growing concerns about the environmental costs of, particularly, proof of work mining.[8] On December 2, 2021, Senator Warren sent a letter requesting information on the environmental footprint of New York-based Bitcoin miner Greenridge Generation.[9] The letter observed that, “[g]iven the extraordinarily high energy usage and carbon emissions associated with Bitcoin mining, mining operations at Greenridge and other plants raise concerns about their impacts on the global environment, on local ecosystems, and on consumer electricity costs.”[10] Senator Warren’s concerns sparked several rounds of congressional oversight and inquiries into the environmental impacts of, particularly, proof of work cryptocurrencies, over the past month.

Committee Hearing on “Cleaning up Cryptocurrency” begins oversight and investigation into the energy impacts of blockchains.

On January 20, 2022, the U.S. House of Representatives Committee on Energy and Commerce’s Subcommittee on Oversight and Investigations held a hearing, where the externalities of cryptocurrency mining were the focus of the agenda. An early indicator of the Subcommittee’s views on the issue, the title for the hearing was “Cleaning up Cryptocurrency: The Energy Impacts of Blockchains.”[11]

The hearing focused heavily on the amount of energy used to power proof of work cryptocurrency mining. Bitcoin Mining has been widely criticized for the massive amounts of power it consumes – globally, more than 204 terawatt-hours as of January 2022. Although some operations are attempting to utilize renewable energy, the machines executing these algorithms consume enormous amounts of energy primarily sourced from fossil fuels.

The five industry experts testifying before the House Energy and Commerce Oversight Subcommittee had competing views on how regulators should address the energy consumption of cryptocurrencies—with some experts opining that the computational demands were a “feature, not a bug.”[12] Two of the experts – Brian Brooks, CEO of Bitfury Group, and Professor Ari Juels, Faculty member at Cornell Tech – debated the technical merits between proof of work and proof of stake systems, described earlier in this article.[13] Similarly, Gregory Zerzan, an attorney with Jordan Ramis, P.C. who previously held senior positions in the United States Government, encouraged the Subcommittee not to lose sight of the fact that cryptocurrencies are but “one aspect of a larger innovation, blockchain.”[14] Although the viewpoints of the experts varied considerably, there was a clear consensus among the experts: energy-efficient alternatives should guide the path forward.

John Belizaire, the founder and CEO of Soluna Computing, said that cryptocurrency mining could further accelerate the transition to renewable energy sources from an energy perspective.[15] Renewables currently suffer from one significant deficiency – intermittency. An example of this challenge is the so-called “duck curve,” which illustrates major differences between the demands for electricity as compared to the amount of renewable energy sources available throughout the day. For example, when the sun is shining, there is significantly more power than consumers need for a few hours per day; however, solar energy does not provide nearly enough energy when demand spikes in the late afternoon and evening.[16] While there has been progress in the development of lithium battery storage – a critical piece in solving the issues mentioned above– for the time being, deploying these batteries at scale is still too expensive.

In addressing gaps in battery storage, Belizaire testified that “Computing is a better battery.”[17] Computing, he states, “is an immediately deployable solution that can allow renewables to scale to their full potential today.”[18] Belizaire highlighted that, unlike other industrial consumers, cryptocurrency miners can turn their systems off when necessary, giving miners the ability to absorb excess energy from a given area’s electrical grid rather than straining it. This ability to start and stop or pause computing processes can increase grid resilience by absorbing excess energy from renewable resources that provide more power than the grid can handle. Brooks shared similar hopes for how Bitcoin mining could help stabilize electric grids, support the viability of renewable energy projects, and drive innovation in computing and cooling technology.[19]

Steve Wright, the former general manager of the Chelan County Public Utility District in Washington, testified that “the portability of cryptocurrency operations could be a benefit in terms of locating operations based on underutilized transmission and distribution capacity availability.”[20] Still, with ambitious goals to expand transmission and increase and integrate large amounts of carbon-free emitting generation, Wright testified that “substantial collaboration and coordination will be necessary to avoid cryptocurrency mining exacerbating an already very difficult problem.”[21]

Congressional Democrats continue the investigation into domestic mining operations and the Cryptomining Industry response.

The January 20, 2022 Hearing made clear that policymakers are doing their due diligence into the impact that the United States could experience as the number of domestic cryptocurrency mining operations increase. Commentary from the Hearing forecasted that scrutinizing the sources and costs of energy used in cryptocurrency mining would be a priority for Democrat members of Congress.

To that end, on January 27, 2022, eight Democrat members of Congress led by Senator Elizabeth Warren “sent letters to six cryptomining companies raising concerns over their extraordinarily high energy uses.”[22] Citing the same concerns raised in her December 2021 letter to Greenridge, Senator Warren and her colleagues observed that “Bitcoin mining’s power consumption has more than tripled from 2019 to 2021, rivaling the energy consumption of Washington state, and of entire countries like Denmark, Chile, and Argentina.”[23] To assist Congress in its investigation, Riot Blockchain, Marathon Digital Holdings, Stronghold Digital Mining, Bitdeer, Bitfury Group, and Bit Digital were all asked for information related to their mining operations, energy consumption, possible impacts on the climate and local environments, and the impact of electricity costs for American consumers.[24] Senator Warren and her colleagues requested written responses by no later than February 10, 2022, so this increased oversight will likely continue.

Even with increased oversight, current trends in crypto mining and renewables could soon make such inquiries a moot point. Amid the heated debate over the environmental impact of cryptocurrencies, miners are increasingly committed to changing the negative reputation that it has built over the years – especially as these operations move to the United States. In November of last year, Houston-based tech company Lancium announced that it raised $150 million to build bitcoin mines across Texas that will run on renewable energy.[25] In 2022, the company plans to launch over 2,000 megawatts of capacity across its multiple sites.[26] Bitcoin mining company Argo Blockchain, a company listed on the London Stock Exchange, secured a $25 million loan to fund its “green” mining operation.[27] The 320-acre site will only use renewable energy, the majority being hydroelectric.[28] This deal is set to transform Argo’s mining capacity and is expected to be completed in the first half of 2022.[29]

Capital Markets also appear to have a growing appetite for the development of green crypto mining. In April of last year, Gryphon Digital Mining raised $14 Million Series A to launch a zero-carbon footprint Bitcoin mining operation powered exclusively by renewables.[30] In a raise that closed in just over two weeks, institutional investors – who were significantly oversubscribed – accounted for over thirty percent of the round.[31]

As congressional, social, and economic pressures grow, it is evident that there is going to be a big focus on the sustainability of Bitcoin mining. As such, we may very well see announcements, like the deals mentioned above, well into 2022 and beyond.

FOOTNOTES

[1] Bitcoin Transactions Per Day, YCharts, https://ycharts.com/indicators/bitcoin_transactions_per_day (last visited Jan. 29, 2022).

[2] Bitcoin Mining Map, Cambridge Centre for Alternative Finance, https://ccaf.io/cbeci/mining_map (last visited Jan. 29, 2022) [“Bitcoin Mining Map”].

[3] Samuel Shen & Andrew Galbraith, China’s ban forces some bitcoin miners to flee overseas, others sell out, Reuters, June 25, 2021, https://www.reuters.com/technology/chinas-ban-forces-some-bitcoin-miners-flee-overseas-others-sell-out-2021-06-25/ (last visited Jan. 29, 2022).

[4] See Bitcoin Mining Map.

[5] Tom Wilson, Bitcoin network power slumps as Kazakhstan crackdown hits crypto miners, Reuters, Jan. 7, 2022, https://www.reuters.com/markets/europe/bitcoin-network-power-slumps-kazakhstan-crackdown-hits-crypto-miners-2022-01-06/ (last visited Jan. 29, 2022).

[6] Regulation of Cryptocurrency Around the World: November 2021 Update, Global Legal Research Directorate, The Law Library of Congress, available at https://tile.loc.gov/storage-services/service/ll/llglrd/2021687419/2021687419.pdf (last visited Jan. 29, 2022).

[7] Id.

[8] Press Release, United States Senate Committee on Banking, Housing, and Urban Affairs, At Hearing, Warren Delivers Remarks on Digital Currencies (June 9, 2021), https://www.banking.senate.gov/newsroom/majority/at-hearing-warren-delivers-remarks-on-digital-currency (last visited Jan. 29, 2022).

[9] Elizabeth Warren, Letter to Greenridge Generation on Crypto, Dec. 2, 2021, available at https://www.warren.senate.gov/imo/media/doc/2021.12.2.%20Letter%20to%20Greenidge%20Generation%20on%20Crypto.pdf (last visited Jan. 29, 2022).

[10] Id. at p.2.

[11] Hearing Notice, United States House Committee on Energy & Commerce, Hearing on “Cleaning Up Cryptocurrency: The Energy Impacts of Blockchains” (Jan. 20, 2022), https://energycommerce.house.gov/committee-activity/hearings/hearing-on-cleaning-up-cryptocurrency-the-energy-impacts-of-blockchains (last visited Jan. 29, 2022) [the “January 20 Hearing”].

[12] January 20 Hearing Testimony. See also Statement of Brian P. Brooks before House Committee (Jan. 20, 2022), available at https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/Witness%20Testimony_Brooks_OI_2022.01.20_0.pdf  (last visited Jan. 29, 2022) [the “Brooks Statement”].

[13] See, e.g., Brooks Statement; Statement of Prof. Ari Juels before House Committee (Jan. 20, 2022), available at https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/Witness%20Testimony_Juels_OI_2022.01.20.pdf (last visited Jan. 29, 2022) [the “Juels Statement”].

[14] Statement of Gregory Zerzan before House Committee (Jan. 20, 2022), available at https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/Witness%20Testimony_Zerzan_OI_2022.01.20.pdf (last visited Jan. 29, 2022).

[15] See, e.g., Statement of John Belizaire before House Committee (Jan. 20, 2022), available at https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/Witness%20Testimony_Belizaire_OI_2022.01.20_0.pdf (last visited Jan. 29, 2022) [the “Belizaire Statement”].

[16] Office of Energy Efficiency & Renewable Energy, Confronting the Duck Curve: How to Address Over-Generation of Solar Energy (October 12, 2017)

https://www.energy.gov/eere/articles/confronting-duck-curve-how-address-over-generation-solar-energy (last visited Jan. 29, 2022).

[17] See, e.g., Belizaire Statement, p.4.

[18] Id.

[19] See generally Brooks Statement, pp.8-10.

[20] See, e.g., Statement of Steve Wright before House Committee, p.5 (January 20, 2022) available at https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/Witness%20Testimony_Wright_OI_2022.01.20.pdf (last visited Jan. 29, 2022) [the “Wright Statement”].

[21] Id. p.9.

[22] Press Release, Office of Senator Elizabeth Warren, Warren, Colleagues Press Six Cryptomining Companies on Extraordinarily High Energy Use and Climate Impacts (Jan. 27, 2022), available at https://www.warren.senate.gov/newsroom/press-releases/warren-colleagues-press-six-cryptomining-companies-on-extraordinarily-high-energy-use-and-climate-impacts (last visited Jan. 29, 2022).

[23] Id.

[24] Id.

[25] MacKenzie Sigalos, This Houston Tech Company wants to build renewable energy-run bitcoin mines across Texas CNBC (November 23, 2021), https://www.cnbc.com/2021/11/23/lancium-raises-150-million-for-renewable-run-bitcoin-mines-in-texas.html (last visited Jan 31, 2022).

[26] Id.

[27] Namcios Bitcoin Magazine, Argo blockchain buys Hydro data centers to realize Green Bitcoin Mining Vision, (May 13, 2021), https://www.nasdaq.com/articles/argo-blockchain-buys-hydro-data-centers-to-realize-green-bitcoin-mining-vision-2021-05-13 (last visited Jan 31, 2022).

[28] Id.

[29] Id.

[30] GlobeNewswire News Room, Gryphon Digital Mining raises $14 million to launch bitcoin mining operation with zero carbon footprint, (April 13, 2021), https://www.globenewswire.com/newsrelease/2021/04/13/2209346/0/en/Gryphon-Digital-Mining-Raises-14-Million-to-Launch-Bitcoin-Mining-Operation-with-Zero-Carbon-Footprint.html (last visited Jan 31, 2022).

[31] Id.

Copyright ©2022 Nelson Mullins Riley & Scarborough LLP
For more articles about cryptocurrency, visit the NLR Financial Securities & Banking section.

Electrification of the Fleet is on the Horizon, Preparing Now is Key

While we often hear how EVs will revolutionize the lives of the average consumer, commercial fleet owners are starting to take note of the impact these new powertrain systems will have on their own business and operations. As OEMs find creative ways to increase aerodynamics, extend battery range, and increase charging speeds, the zero emission and lower long-term cost of EVs compared to ICE (internal combustion engine) vehicles makes a compelling argument for adoption, at least on paper. What really matters is how those factors play out as the rubber hits the road, which OEMs are starting to see play out in real time. Over the past few years, there has been an explosion of commercial fleet platforms from existing and new entrants in the commercial vehicle space. From light to heavy trucking to fleet platform automobiles, EV technology is looking to capture every corner of the commercial fleet sector. Coupled with a slow reduction in the number of ICE vehicles produced in future years, the market may start pushing fleet operations towards EVs, whether they like it or not.

According to the Department of Transportation, over eight million vehicles made up commercial fleets in the US in 2020, which includes a mix of trucks and automobiles used in commercial and government operations. Even more make up commercial vehicles on the road that are not considered part of a fleet. As consumer demand drives most traditional OEMs toward EV dominated fleets, commercial fleet owners and operators need to start to prepare now for the same shift in their vehicle suppliers, or risk playing catchup once the market does turn from ICE to EV. This isn’t to say that failure to be an early adopter will be the death-knell to commercial fleet businesses; it likely won’t be. What businesses with commercial fleets should consider is their own business needs and their timeline for their own fleet replacement as EV technology and infrastructure support continues to evolve. Establishing a process and plan for upgrading existing fleets, training personnel, upgrading infrastructure, and understanding available programs for conversion will be key.

The switch from an ICE to EV fleet isn’t as simple as flipping a switch or plugging in a car – EVs bring a new powertrain and new sources of information. EVs in their current state are expensive, new vehicle supply is constantly in question, current operators are unaware of the nuances involved with operating an EV, and the infrastructure necessary to support a commercial fleet of EVs isn’t universally robust. For the average fleet operator, there also is a need to focus on route optimization, installing and maintaining new hardware capable to supporting charging on-site, revamping their maintenance and care procedures, and working with their local energy providers to understand how power demands in their local market may impact their own energy costs and needs. Additionally, although data analytics has improved existing fleet operations over the past few years, expect to see more nuanced data availability to the benefit of fleet operators.  As commercial and consumer EVs come out with ever more connectivity to the web and each other, coupled with the ability for “smart cities” to increase data available to drivers and vehicles, expect future fleet operators to get even more granular and predictive understanding of traffic patterns to optimize commercial routes. Managing these dynamics and capitalizing on new sources of information will better enable operators to adapt to the changing landscape. The ability to adapt to this new frontier will be a key trait for successful fleet operations in the Auto-2.0 operated environment.

Article By Christopher R. Boll of Foley & Lardner LLP

For more infrastructure and transportation legal news, click here to visit the National Law Review.

© 2022 Foley & Lardner LLP

Fashion Sustainability and Social Accountability Act Proposed in New York

Happy New Year (are we still saying that?) from the Global Supply Chain Law Blog!  In our ever-evolving society, the fashion industry has taken new heights.  And with those heights, the industry is on pace to account for more than a quarter of the world’s carbon budget, according to the New Standard Institute.   Indeed, the group indicates that apparel and footwear are responsible for roughly 4-8.6% of global greenhouse gas emissions.  You may be wondering, “but how?”  Well after that sweater you bought last year (or even last month!) goes out of style, you may donate it.   According to CBS, some of those donations go overseas to Ghana, for example, to be sold.  The unsold clothes, however, end up as landfills creating an environmental nightmare.

As a result and in an effort to create more regulation, New York is taking action with respect to the environmental nightmare. Earlier this year, the New York legislator proposed a bill—the Fashion sustainability and social accountability act, which would amend the general business law, requiring fashion retail sellers and manufacturers to disclose environmental and social due diligence and policies.

Specifically, every fashion retail seller and fashion manufacturer doing business in the State of New York and having annual global gross revenues that exceed $100 million dollars must disclose its:

  1. environmental and social due diligence[1] policies,
  2. processes and outcomes, including significant real or potential negative environmental and social impacts, and
  3. targets for impact reductions, implementation, improvement and compliance on an annual basis.

The required disclosures would include supply chain mapping of at least 50% of suppliers (which the retail seller or manufacturer could choose) by volume across all tiers of production, a sustainability report, independently verified greenhouse gas reporting, volume of production displaced with recycled materials, and median wages of workers of suppliers compared with local minimum wage, to name a few.

All disclosures must be posted on the retail or manufacturer’s website within a year of enactment.  Enforcement of the bill would fall to the state’s attorney general, who would publish a report listing the fashion retail sellers and manufactures who are out of compliance with the act. Public shaming would not be the only punishment, however.  Retailers and manufacturers who fail to comply may be fined up to 2% of annual revenues of $450 million or more.  The money from the fines will be deposited into a community benefit fund, which will be used for environmental benefit projects that directly and verifiably benefit environmental justice communities.

In short, if the Fashion sustainability and social accountability act is enacted into law, fashion retailers and manufactures will be held accountable for environmental and social impacts stemming from their supply chain and production of apparel and shoes.  According to Vogue, “proponents say the bill will make history” as it could “shift how the fashion industry operates globally.” Thus, stay tuned as we will be tracking the legislation closely and will provide real time updates!

[1] “Due diligence” shall mean the process companies should carry  out to  identify,  prevent, mitigate and account or how they address actual and potential adverse impacts in  their  own  operations,  their  supply chain  and other Business relationships, as recommended in the Organisation for Economic Co-operation and Development Guidelines  for  Multinational  Enterprises,  the  Organisation  for Economic  Co-Operation and Development Due Diligence Guidance for Responsible Business Conduct  and United Nations Guiding Principles for Business and Human Rights.

© Copyright 2022 Squire Patton Boggs (US) LLP
For more articles on sustainability, visit the NLR Environmental, Energy & Resources type of law page.