Category: Environmental Law

Progress on the Western Front in the Solar Net Metering Battle?

 

The ongoing discussion between solar energy stakeholders and utilities concerning the merits of net metering and the best approach to ensure that ratepayers with installed solar power systems contribute appropriately to overall electric transmission and distribution costs spans the nation,  with state utility commissions from Georgia to California considering this issue.  However, nowhere is that discussion presently more heated and more closely watched than in Arizona and Colorado.

After a day of public comments and a full day of discussions with interveners, the Arizona Corporation Commission (A.C.C.) voted 3 – 2 on November 14, 2013 to modify APS’s Net Energy Metering (NEM) program. (A.C.C. Docket No. E-01345A-13-0248)  In brief, the A.C.C. voted to adopt a 70 cent/kW installed monthly charge for ratepayers with rooftop solar.  For the average-sized rooftop installation of 7 kW, this means a monthly charge of $4.90.  The two commissioners who voted against the decision felt that this did not go far enough in addressing the cost shift from NEM.

While the decision is likely to be perceived as a win for the rooftop solar companies, APS and other utilities can take solace in the fact that the Commission recognized that NEM does produce a cost shift and that the grid has value for all customers.  The details of the cost shift, including consideration of the value of the grid, will be the subject of A.C.C. workshops that will take place prior to the next APS rate case.

Prior to the open meeting, it appeared as though the A.C.C. would adopt a solution that would reduce the NEM subsidy based on a formula that took into consideration the lower cost of utility scale solar.  The monthly charge calculated through this formula ranged from $7.00 to $56.00 per month for a 7 kW installation, depending on the individual Commissioner’s proposal.

However, on the morning of the second day of the open meeting, the rooftop solar interveners and the Arizona Residential Utility Consumers Office (RUCO) negotiated a settlement that was the subject of most of the discussion.  This “settlement” proposed a monthly charge of 70 cents per kw installed or $4.90 for a 7 kW system.  While Commissioner Pierce and others mentioned the lower cost of utility scale solar, the final outcome had less to do with addressing the rate-shift and more to do with the amount that the DV industry said that the average customers, who they contend only save $5-10/month, could absorb and still be willing to install a system.  APS opposed the eventual outcome, as did Commissioners Pierce and Brenda Burns.

The following solution was adopted:

Monthly charge.  New rooftop PV customers beginning after December 31, 2014 will be billed a monthly charge of 70 cents per kW installed to help address the rate-shift from solar to non-solar customers.  For the average-sized system of 7 kW, that would mean a charge of $4.90/month.  The charge can be adjusted by the Commission in the future – either up or down – based on the volume of installations.  Reports of rooftop installation volumes will be provided quarterly.  There is no automatic escalation of the charge based on installation volume.  This charge will be added to the rooftop solar customer’s Lost Fixed Cost Recovery (LFCR) fund assessment currently paid by APS customers.  An offsetting reduction will be made to the monthly LFCR assessment currently paid by customers without rooftop solar.

Grandfathering.  Rooftop installations under the current NEM structure will be grandfathered.  There was a long discussion about grandfathering with a general consensus being reached that while any Commission can change any previous decision made, future Commissions were likely to honor grandfathering decisions made by previous Commissions.  Customers who sign up for systems under the new 70 cent charge will be grandfathered if the charge is increased to 80 cents or $1.00, but only until the next rate case in 2015.  Customers who then sign up under any increased charges (e.g., 80 cents or $1.00) will also be grandfathered until the next rate case.  However, all new rooftop customers (post December 2013) will be subject to any changes agreed to in the next rate case.

The NEM issue will be taken up again in the next APS rate case.

While the net metering discussion in Arizona has reached a conclusion – for now, the debate continues in Colorado.

On July 24, 2013, Public Service Company of Colorado (PSCo), Xcel Energy’s Colorado subsidiary, filed with the Colorado Public Utilities Commission (CPUC) its 2014 Renewable Energy Standard Compliance Plan detailing its updated proposal to meet Colorado’s requirement that 30% of PSCo’s retail electric sales come from eligible energy resources by 2020.  (CPUC Docket No. 13A-0836E)  Long recognized for its substantial commitment to wind energy, PSCo’s renewable energy portfolio also includes utility scale solar facilities and various programs designed to facilitate expansion of distributed solar energy installations, including the popular Solar*Rewards® program which has over 15,000 participants and represents more than 160 MW of installed solar capacity.

In its 2014 RES Compliance Plan PSCo proposed adding 42.5 MW of new distributed solar generation, including 36 MW of retail distributed solar generation through the Solar*Rewards® program and 6.5 MW of community solar gardens through the Solar*Rewards® Community program.  At the same time, the company proposed reducing the per kilowatt-hour incentives paid to customers with distributed solar installations.

The more controversial aspect of the utility’s filing related to PSCo’s call for more transparency in the NEM credit paid to customers with installed solar systems and the costs and benefits associated with distributed solar facilities.  PSCo explains that customers with installed solar arrays receive a 10.5 cent credit per kilowatt-hour of electricity they deliver to the grid, however, that electricity only provides 5 cents in benefits to PSCo systems and customers.  While PSCo acknowledges that distributed solar generation allows for some savings associated with fuel costs, energy losses, and the deferral of new generation resources, the utility argues that the NEM incentive paid to solar-owning customers does not adequately consider other costs related to generation, transmission, and distribution, costs that are presently being borne by non-solar customers.  As did APS in the NEM debate in Arizona, PSCo takes the position that the need for and nature of NEM incentives must be reevaluated as the solar industry moves toward becoming self-sustaining.  If the CPUC does not agree with PSCo’s NEM proposals, the utility indicated that it intends to acquire only enough distributed solar generation needed for minimum RES compliance – a total of 12.5 MW.

Solar businesses and trade groups, renewable energy advocates, and environmental groups have strongly opposed PSCo’s analyses and have characterized the utility’s proposal as declaring war on the solar industry.  These stakeholders argue that PSCo’s analyses fail to properly consider distributed solar’s grid, environmental, and job creation benefits.  To that end, the Vote Solar Initiative (VSI) filed a motion requesting that the CPUC sever the NEM issue from PSCo’s RES Compliance docket and conduct a separate, comprehensive NEM cost-benefit analysis.  While VSI’s motion was supported by various other stakeholders, it was opposed by PSCo and CPUC Staff, and was ultimately denied.

An evidentiary hearing on PSCo’s 2014 RES Compliance Plan, including consideration of PSCo’s proposed NEM changes, is scheduled for February 3-7, 2014.  Until then, it is likely that the NEM battle in Colorado will continue both in the CPUC docket and in the public debate concerning the costs and benefits associated with distributed solar generation, how those costs and benefits should be accounted for and allocated, and the continued need for incentives related to this distributed energy resource.

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Lewis Roca Rothgerber LLP

Rite Aid to Pay $12.3 Million for Failing to Properly Manage Waste Products from its California Stores

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Rite Aid Corporation has agreed to pay more than $12.3 million to settle a civil lawsuit alleging that Rite Aid improperly managed, transported, and disposed of hazardous waste at hundreds of its California stores and distribution centers.  The hazardous wastes at issue include: pharmaceuticals and over-the-counter medications, bleaches, photo processing chemicals, pool chlorine and acids, pesticides, fertilizers, batteries, electronic devices, mercury containing lamps, paints, lamp oils and other ignitable liquids, aerosol products, oven cleaners and various other cleaning agents, automotive products, and other flammable, reactive, toxic and corrosive materials.

Background

The case against Rite Aid began in 2009 when local environmental health agencies began to investigate Rite Aid facilities’ management of hazardous wastes. Prosecutors, investigators, and environmental regulators statewide conducted a series of waste inspections at Rite Aid stores and local landfills. The inspections revealed that over a six-and-a-half year period, Rite Aid had improperly managed certain hazardous wastes at its facilities, transported hazardous waste without meeting regulatory requirements, and in some cases illegally disposed of hazardous waste in landfills not authorized to accept such waste. On September 17, 2013, fifty-three California district attorneys and two city attorneys filed a joint environmental protection lawsuit against Rite Aid. Pursuant to California Health and Safety Code sections 25516 and 25516.1, the prosecutors brought a civil action in the name of the People of the State of California and sought to enjoin violations of California’s hazardous waste, medical waste, hazardous waste transportation and hazardous materials release response laws and implementing regulations.

The Allegations

The prosecutors asserted that Rite Aid stores engaged in numerous violations of California’s hazardous waste laws and regulations, including:

  • Disposal of hazardous waste at unauthorized points, such a trash compactors, dumpsters, drains, sinks, toilets, Rite Aid facilities, and landfills or transfer stations not authorized to receive hazardous waste, in violation of Health and Safety Code sections 25189 and 25189.2;
  • Failure to determine whether each waste generated at each facility in question as a result of a spill, container break, or other means of rending the product not useable for its intended purpose was a hazardous waste, as required under the California Code of Regulations (“CCR”), Title 22, sections 66262.11 and 66260.200;
  • Transporting or transferring custody of hazardous wastes without a properly licensed and registered transporter, as required by Health and Safety Code section 25163;
  • Failure to dispose of accumulated hazardous wastes from facilities at least once during every 90 day period, as required by CCR Title 22, section 66262.34;
  • Failure to timely file with the Department of Toxic Substances Control (“DTSC”) a hazardous waste manifest for all hazardous waste transported for offsite handling, treatment, storage, disposal or combination thereof, as required by Health and Safety Code section 25160(b)(3) and CCR Title 22, section 66262.23;
  • Failure to contact the transporter or owner/operator of the designated receiving facility to determine the status of hazardous waste in the event of non-receipt of a copy of a manifest with the signature of the owner/operator within 35 days of the date the waste was accepted by the transporter, as required by CCR Title 22, section 66262.42;
  • Treatment, storage, disposal, and transport of hazardous waste without receiving and using a proper EPA or DTSC identification number for the originating facility, as required by CCR Title 22, section 66262.12(a);
  • Failure to maintain a program for the lawful storage, handling and accumulation of hazardous waste, as required by Health and Safety Code section 25123.3 and CCR Title 22, sections 66262.34, 66265.173 and 662165.177;
  • Failure to properly designate hazardous waste storage areas, segregate hazardous wastes, and failure to conduct inspections, as required by CCR Title 22, sections 66262.34 and 66265.174;
  • Failure to comply with employee training obligations for the management of hazardous waste, as required by CCR Title 22, section 66262.34;
  • Failure to have in place at all times a hazardous waste contingency plan and emergency procedures for each facility, as required by CCR Title 22, section 66262.34;
  • Failure to continuously implement, maintain, and submit a complete hazardous materials business plan, as required by Health and Safety Code sections 25503(a), 25504, 25505 and CCR Title 19, sections 2729 et seq.;
  • Failure to immediately report any release or threatened release of a reportable quantity of any hazardous material from any facility into the environment, as required by Health and Safety Code sections 25501 and 25507;
  • Failure to properly manage, mark, and store universal waste in compliance with management standards in CCR Title 22, sections 66273.1 et seq.;
  • Failure to comply with the California Medical Waste Management Act (Health and Safety Code sections 117600 et seq.); and
  • Causing to deposit, without permission of the owner, hazardous substances upon the land of another, in violation of California Penal Code section 374.8(b).

The prosecutors sought civil penalties for each violation and reimbursement of the costs of investigation, enforcement, prosecution, and attorneys’ fees.

The Consent Judgment

On September 24, 2013, Judge Linda L. Lofthus issued an order approving the consent judgment negotiated by the parties. Under the agreement, Rite Aid agreed to fully comply with the Code sections and regulations at issue in the Complaint. Moving forward, stores will be required to retain their hazardous waste in segregated, labeled containers so as to minimize the risk of exposure to employees and to ensure that incompatible wastes do not combine to cause dangerous chemical reactions. The company will continue to designate four full-time employees responsible for environmental, health, regulatory and safety compliance assurance in California. California Rite Aid stores will work with state-registered haulers to document, collect and properly dispose of hazardous waste produced through damage, spills and returns. Moreover, Rite Aid has implemented a computerized scanning system and other environmental training to manage its waste.

Rite Aid agreed to pay $9,500,000.00 in civil penalties pursuant to Health and Safety Code sections 25189 and 25514 and Business and Professions Code section 17206, to the prosecuting and regulatory agencies. Rite Aid also agreed to pay $1,974,000 for certain supplemental environmental projects. Finally, Rite Aid will pay $950,000 for reimbursement of attorneys’ fees, costs of investigation, and other costs of enforcement.

According to the Los Angeles County District Attorney’s Office, Rite Aid was cooperative with prosecutors and investigators throughout the case.

Conclusion

The Rite Aid case reflects continued active enforcement by California’s prosecutors and regulators of the state’s environmental protection laws against retailers related to alleged mismanagement of hazardous wastes. Since 2011, California regulators have secured more than seven multi-million dollar settlements in hazardous waste enforcement actions against large retailers.

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Beveridge & Diamond PC

Federal Energy Regulatory Commission (FERC) Delays Electric Quarterly Reports (EQRs) Filing Deadline

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On October 10, after many weeks of speculation, the Commission issued an order extending the filing deadline of the 2013 Q3 Electric Quarterly Reports (EQRs) filings from October 31 to “a date to be determined.”  This extension follows a series of similar delays and significant technical issues associated with the revised EQR filing requirements put in place by Order Nos. 768, 768-A, and 770.

As part of the preparation for the new filing requirements, FERC had made available to the public an EQR Sandbox Electronic Test Site (Sandbox) that was meant to be a testing platform to help users acclimate to and prepare for the new filing requirements and system.  The Sandbox was made available on July 12 and was meant to be available until September 1.  Following the testing period, the Sandbox would be taken offline to prepare it to go live well in advance of the original October 31 filing deadline.  Commission Staff encouraged filers to utilize the Sandbox “as often as possible” and to contact Staff with questions and concerns during the planned six week testing period.  From the beginning of the testing period, there were significant and wide-ranging problems encountered with the Sandbox.  After vocal feedback from industry, the Commission extended the Sandbox availability from September 1 to September 15.  It was hoped that this extension would allow ample time to address and resolve the problems and allow filers additional time to test a functioning Sandbox.  Unfortunately, the issues were not resolved, and on September 13 the Commission extended the availability of the Sandbox “until further notice.”

Since the indefinite extension of the Sandbox availability, filers have continued to experience difficulties.  As a result of these ongoing issues, the Commission has implemented a similar indefinite extension of the filing deadline.

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Watt's New? Michigan Energy News – September 2013

Varnum LLP

Still Getting Ready to Make Good Energy Decisions

After reviewing and analyzing the submissions from seven public forums and from the 114 questions posted on the web for feedback, Energy Office Director Steve Bakkal and MPSC Chairman John Quackenbush will be issuing four reports on the following schedule:

■ Renewable Energy: Draft report release for comments – 9/20/13

Due date for public comments – 10/11/13

Release final report – 11/4/13

■ Additional Areas: Draft report release for comments – 10/1/13

Due date for public comments – 10/22/13

Release final report – 11/15/13

■ Electric Choice: Draft report release for comments – 10/15/13

Due date for public comments – 11/1/13

Release final report – 11/20/13

■ Energy Efficiency: Draft report release for comments – 10/22/13

Due date for public comments – 11/6/13

Release final report – 11/26/13

All this material will be posted at: www.michigan.gov/energy

Net Metering Participation Increases

The Michigan Public Service Commission issues an annual report on electric customers participating in the statewide net metering program required under the Clean, Renewable, and Efficient Energy Act of 2008. [Under net metering, when a customer produces electric energy in excess of its needs, energy is provided back to the serving utility and the customer receives a credit.] In 2012 the size of the net metering program increased 55 percent to 9,583 kW. The number of net metering customers has gone from 53 in 2008 to 1,330 in 2012. While most of the recent increase was due to new solar installations, a 535 kW methane digester in Great Lakes Energy Cooperative’s service territory is Michigan’s first Category 3 (methane digester up to 550 kW) modified net metering project.

Methane-to-Methanol Plant Operational

Oil wells also produce natural gas. When there is no way to get the natural gas to market it is usually “flared”. Now Gas Technologies LLC of Walloon Lake has demonstrated its 25-foot, portable, singlestep, gas-to-liquids plant in a Kalkaska County oil field. This first in the industry process can monetize stranded natural gas, biogas, coal mine methane, and landfill gas. www.gastechno.com

Adopt-A-Watt Helps Library

Dearborn’s Henry Ford Centennial Library has installed 25 energy efficient street lights and an electric vehicle charging station under the national Adopt-A-Watt program. Modeled on the AdoptA-Highway program, sponsorships are sold to fund new, energy-efficient equipment, alternative fuel vehicles and other green technologies for financially challenged public agencies. The agencies then realize the cost savings into the future.

Restrictive Wind Zoning Struck Down by Michigan Court

Forest Hill Energy recently won a court order striking down alleged “police power” ordinances passed by townships attempting to regulate the construction and operation of wind turbines. The Clinton County Zoning Ordinance already had extensive wind energy provisions. Nonetheless, three townships passed ordinances that were more restrictive to wind energy development than the county zoning. The additional restrictions related to height, noise, setbacks, and shadow flicker. Forest Hill Energy brought suit seeking a declaration that the townships’ “police power” actions were really zoning ordinances in disguise. The Clinton County Circuit Court ruled that since the townships were subject to the county’s zoning, the township ordinances were invalid because they were inconsistent with the county’s zoning plan—the townships could not get a “second bite at the zoning apple.” Forest Hill Energy had already obtained a special use permit for the construction of a 39 turbine project in January of 2012, and now expects to move forward with construction in late 2013.

More Wind Farms to Commence Construction in 2013

NextEra’s 150 MW Pheasant Run Wind projects are commencing construction this fall, with the energy to be sold to DTE Electric Company. The two projects will be located in Brookfield, Fairhaven, Grant, Oliver, Sebewaing and Winsor townships, all in Huron County. The Michigan Public Service Commission approved a 20 MW power purchase agreement (PPA) for DTE Electric Company with Big Turtle Wind Farm, LLC. The twenty year PPA has estimated pricing of up to 5.3 cents per kilowatt-hour. The project will have more than 50 percent Michigan-sourced content, and brings the DTE renewable energy portfolio to 9.8 percent. Consumers Energy will begin construction on its 105 MW Cross Winds Energy Park in Akron and Columbia townships in Tuscola County before the end of the year.

Michigan Shorts

ΩΩ Bay City Electric, Light & Power has signed a 20-year contract to purchase 4.8 MW of energy from the Beebe Community Wind Farm at a price starting at 4.5¢/kWh and increasing to 7.2¢/kWh Ω Revolution Lighting Technologies has acquired Relume Technologies, a Michigan manufacturer of LED lighting products and control systems Ω The City of Ypsilanti has set a goal to have 1000 solar roofs within the city limits by 2020 Ω DTE Energy is offering its customers the opportunity to buy BioGreenGas derived from the Sauk Trail Hills Landfill in Canton Ω Lansing Board of Water & Light has announced it will purchase energy from eight wind turbines in Gratiot County under a power purchase agreement with Exelon Wind ΩΩ

Virtual Solar Engineering Center Meeting with Success

GreenLancer.com, a Detroit-based solar energy technology company, has announced its initial $500,000 in funding. The company, launched in 2011, combines state-of-the-art cloud computing with a national network of green energy engineering freelancers (“greenlancers”). Their goal is to reduce the soft costs associated with solar energy projects. Initial investors include Bizdom (Detroit), Start Garden (Grand Rapids), Blue Water Angels (Midland), Northern Michigan Angels (Traverse City), and a private investor. The company has projects in 33 states and six foreign countries.

Converting Corn Stalks into Biofuel

Using a fungus and E. coli bacteria, University of Michigan researchers have turned inedible waste plant material into isobutanol. The waste used in the initial work was corn stalks and leaves. Isobutanol has 82 percent of the energy in gasoline, whereas ethanol has only 67 percent. It also has the added advantage over ethanol of not mixing easily (or absorbing) water. So it is a viable candidate to replace ethanol as a gasoline additive. The fungi turns the plant roughage into sugars that are then converted by escherichia coli to isobutanol. Through bioengineering the researchers believe they can produce a variety of petroleum-based chemicals through this same process.

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Working with 3rd Party Providers to Make Dodd Frank Conflict Mineral Compliance Easy

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At your firm or within your company dealing with conflict minerals, you might have recently heard the buzz about the latest Dodd Frank Conflict Mineral Compliance requirements. If these requirements affect the way law firms or companies do business, then working towards compliance initiatives remains a priority.

Regulatory Assessment and Scope Analysis

This involves examining the law firm’s client or company seeking compliance product portfolio and doing an analysis of whether the product are affected by the law and therefore must be in compliance, or “in scope” Vs “out of scope.” It can also include:

  • Examining corporate obligations
  • Determination of key regulatory compliance decision points
  • Creation of a conflict minerals technical document

Creation of a Compliance Plan

This involves creating an end to end compliance plan and associated processes

  • All activities detailed in chronological order
  • Creation of application of due diligence standards
  • Responsibilities assigned to personnel
  • Determination of compliance communication pathways

Software Set Up

Industry standard to date for the majority of companies in scope of this regulation involve using a software platform to manage the large amount of data and suppliers that will be surveyed.Vendor Selection

  • Vendor Selection
  • Decisions to integrate with Enterprise Resource Planning system  (ERP), which is used to design and manage resources within a company, as well as Product Lifecyle Management (PLM), used to design, manufacture and plan the development of products
  • Methodology of supplier communication

Supplier Engagement

This portion of the process involves communication and data collection from the supply chain. Includes:

  • Data collection methodology
  • Reporting and analytics of the data collected
  • Corrective action and addressing problem suppliers

Reporting

Once data has been collected firms enter the reporting phase to complete the process for the first year. This process is then replicated year over year. With the infrastructure in place firms enter the “maintenance” phase of compliance.

Standard practise in the compliance industry has also seen that Law firms or the company seeking Dodd Frank compliance are engaging 3-4 outside service providers.

They are usually:

1.       Law firms: To determine exact requirements and legal requirements.

2.       Software: To provide the platform for data collection, management and analytics.

3.    Accounting: To audit the data collected and ensure strong data backing the program.

4.    Consulting: To develop the processes, work with /train suppliers and help with data collection.

Assisting your clients with Dodd Frank Conflict Mineral Compliance does not have to be complicated. Working through the 5 step process above and working with other 3rd party providers makes compliance at any level easy.

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Argentina Legal Highlights (Volume II, 2013)

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Latin American Region Enviromental Report, Second Quarter, 2013

Packaging Waste Management Bill Introduced in Chamber of Deputies

On April 11, 2013, a bill (No. 1859-D-2013; the “Bill”) was introduced in the Chamber of Deputies that would create a national, comprehensive packaging-waste management system. The Bill would apply to most packaging and packaging waste, and would regulate most entities that are involved with the packaging of products, the marketing of packaged goods, or the recycling or recovery of packaging waste. (Arts. 2, 7) A covered entity could comply with its responsibilities through one of two methods. (Art. 9) One option would allow it to pay a fee and participate in a provincially or municipally administered Packaging-Waste Management Program (Programa de Gestión de Residuos de Envases), which would set requirements for collection, transportation, temporary storage, processing, and recovery of packaging waste. (Arts. 10-23) Alternatively, a covered entity could administer its own government-approved Deposit and Return System (Sistema de Depósito, Devolución y Retorno). (Arts. 24-26) The Bill was referred to the committees on Industry, Natural Resources and Conservation of the Human Environment, and Budget and Finance.

Reference Sources (in Spanish):

Battery Waste Bill Introduced in Chamber of Deputies

On April 25, 2013, a battery waste management bill (No. 1859-D-2013; the “Bill”) was introduced in the Chamber of Deputies. The Bill would cover nearly all batteries, with the exception of industrial and car batteries. (Art. 2) Most of the obligations established by the Bill would fall on battery producers: i.e., manufacturers, importers, brand owners, and resellers. These companies would be responsible for collection and management of battery waste and required to implement one of the following waste-management options: (a) establishing their own Individual Battery Waste Management System (Sistema de Gestión Individual de Residuos de Pilas y Acumuladores ); (b) participate in an Integrated Battery Waste Management System (Sistema Integrado de Gestión de Residuos de Pilas y Acumuladores); or (c) establish a deposit-and-return system. (Art. 5) Regardless of the option chosen, approval of the Secretariat of Environment and Sustainable Development (Secretaría de Ambiente y Desarrollo Sustentable) would be required. (Arts. 6-8) The Bill would also set standards for battery collection, treatment, recycling, and disposal (Arts. 9-10), impose labeling requirements (Art. 15), and require equipment manufacturers to make battery removal easy (Art. 16). Under the Bill, as under current Argentine law, used batteries would be deemed hazardous by definition, and thereby subject to Argentina’s extensive restrictions on transport, storage and handling of hazardous wastes. (Art. 3)

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Mexico Legal Highlights (Volume II, 2013)

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Latin American Region Enviromental Report, Second Quarter, 2013

Mexico Enacts Landmark Environmental Liability Law

On June 7, 2013, Mexico published its long-awaited Federal Environmental Liability Law (Ley Federal de Responsabilidad Ambiental; the “Law”), establishing the types of harms that incur liability and specifying which parties have standing to sue for environmental restoration.  The scope of occurrences that create liability under the Law is broad: “Any person or entity who by act or omission directly or indirectly occasions a harm to the environment, will be liable and will be obligated for the reparation of the harm or, when reparation is not possible, to environmental compensation.”  (Art. 10)  The Law provides important exceptions, stating that “environmental harm” is not deemed to have occurred if: (1) the activity that caused it was previously authorized through an environmental impact assessment process; or (2) the limits (i.e., of emissions, etc.) established by the relevant laws or regulations were not exceeded.  (Art. 6)  Where there is a qualifying activity and harm, the Law grants standing to the following: (1) the inhabitant of the community adjacent to the environmental harm; (2) Mexican environmental non-profit organizations; (3) the federal government through its environmental prosecution office (Procuraduría Federal de Protección al Ambiente; commonly known as “PROFEPA”); and (4) the state governments through their prosecutorial offices or institutions that exercise environmental protection functions.  (Art. 28)

The Law enumerates the factors that judges must observe in the issuance of judgments, both in determining the appropriate measure of liability (Art. 39) and in the elements that a judicial decision must contain (Art. 37).  Rather than money damages, the principal restoration due under the Law is either remediation of the harm or “compensatory” investment in other environmental improvements.  For cases of intentional causation of environmental harm, in addition to requiring restoration, courts may assess “economic sanctions” (apparently a counterpart to punitive damages) ranging from 300 to 50,000 (for individuals) or 1,000 to 600,000 (for companies) times the daily minimum wage in Mexico City.  (Art. 19)  The Law provides for two forums in addition to the existing court system: first, the Law envisions the creation of District courts specialized in environmental issues to be established within two years (Art. 30; Third Transitory Art.); second, the Law encourages the use of alternative dispute resolution in parallel with formal judicial proceedings (Arts. 47-51).   The statute of limitations for bringing actions under the Law is twelve years from the date on which the environmental harm and its effects were caused.  (Art. 29)

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Mexico Regulates Vehicle Greenhouse Gas Emissions

A new Official Mexican Standard (Norma Oficial Mexicana; “NOM”), NOM-163-SEMARNAT-ENER-SCFI-2013, limits the emissions of greenhouse gases allowed from passenger vehicles and light trucks sold in Mexico.  The emission limits are mandatory for new vehicles up to 3, 857 kilograms, and apply to the fleets of vehicles sold by a given company in model-years 2014-2016; however, companies that sell less than 500 vehicles per model-year are exempt.  (Art. 2)  The bulk of NOM-163 sets forth the parameters and methodology used to calculate corporate targets and actual averages of carbon dioxide emissions (reported in grams of carbon dioxide per kilometer) and its equivalent in terms of fuel efficiency (reported in kilometers per liter).  Companies that registered sales of between 501 and 2,500 vehicles in 2012 may opt for an alternative, potentially less stringent program that requires emissions reductions of approximately 25% from 2012 levels.  (Art. 6)  A credit system will be established in order to incentivize the use and development of high-efficiency vehicles.  (Art. 5.5.2)

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Mexico Issues Product Stewardship Requirements for Plastics

Through a May 21, 2013, decree (the “Decree”) amending the General Law for the Prevention and Integral Management of Wastes (Ley General para la Prevención y Gestión Integral de los Residuos; the “Waste Law”), Mexico has enacted product stewardship requirements for plastics at both the beginning and end of their life.  The Decree provides for the issuance of Official Mexican Standards (Normas Oficiales Mexicanas; “NOMs”) that establish environmental and technical criteria for the plastic and expanded polystyrene materials used in products and packaging and which becomes wastes.  (Art. 7(VI))  The NOMs must consider the principles of reduction, recycling and reuse.  Unlike the technical standards of most countries, most NOMs stand as binding law (i.e., without being incorporated by legal provisions), so criteria developed in Mexico can potentially have a direct impact on materials used internationally.  At the end of life, the Decree subjects plastics and expanded polystyrene to the producer take-back requirements that apply to special management wastes.  (Art. 28)  For certain circumstances, plastics and expanded polystyrene had already been included in the regulation on special management waste take-back plans, NOM-161-SEMARNAT-2011, issued in February 2013.  Their inclusion in the Waste Law may be intended to backfill a legal gap, and could also be used as authority to expand take-back requirements for these materials.

Reference Sources (in Spanish):

Mexico Will Establish Voluntary Sustainability Certification for Goods and Services

On May 24, 2013, Mexico amended its General Law of Ecological Balance and Environmental Protection (Ley General del Equilibrio Ecológico y la Protección del Ambiente; “LGEEPA”) to provide for the establishment of a certification and labeling program for environmentally sustainable goods and services.  Specifically, LGEEPA now directs the Secretariat of Environment and Natural Resources (Secretaría del Medio Ambiente y Recursos Naturales; “SEMARNAT”) “to promote the identification of those products, goods, inputs and services with lesser environmental impact.”  (Art. 37 bis)  Such identification would be through a voluntary marking or certificate, and would have to be based on environmental criteria taking into account the life cycle of the product or service to be certified.  The new LGEEPA text also includes a broadly worded directive for SEMARNAT to issue regulations on the “requirements, specifications, conditions, procedures, goals, parameters and permissible limits that must be observed . . . in the use of natural resources, in the development of economic activities, in the production, use and disposition of goods, in inputs and in processes.”  (Art. 36)

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Watt’s New? Michigan Energy Law News – August 2013

Varnum LLP

Natural Gas Power Plant Approval Case Gets Started

The first hearing at the Michigan Public Service Commission (MPSC) regarding the application of Consumers Energy to build a 700 MW natural gas-fired power plant (Case U-17429) occurred August 19. Twelve intervenors were granted party status: the Michigan Energy Innovation Business Council; Energy Michigan; Attorney General for the State of Michigan; Association of Businesses Advocating Tariff Equity (ABATE); Midland Cogeneration Venture Limited Partnership; Renaissance Power LLC; New Covert Generating Company LLC; Interstate Gas Supply, Inc.; First Energy Solutions Corp.; Michigan State Utility Workers Council; Sierra Club; National Resources Defense Fund; and Michigan of Environmental Council.  Potential issues to be raised by the interveners include the assumptions in the filed Integrated Resource Plan on:

  • alternative and renewable energy generation availability and costs;
  • the limitations of the customer choice program;
  • the closure of seven coal plants with a total capacity of 950 MW; and
  • the impact of energy optimization and conservation on future load demand.

ABATE has indicated it will be filing a Motion for Summary Judgment seeking the dismissal of the application, asserting that Consumers Energy has not properly shown a need for a new power plant. Assuming the case is not dismissed, a schedule has been set calling for cross examination of witnesses the second week of December, and a decision by the MPSC on or before the 8th of April, the statutory deadline for a decision on the Certificate of Necessity request. See www.tinyurl.com/mpsc-conDeep Water Offshore Floating Wind Turbines Showcased On August 15 Detroit-based Charles Nordstrom, P.E. of Glosten Associates Inc. (naval architects and marine engineers out of Seattle) presented the latest design and deployment plans for the Pelastar floating wind turbine system at the Michigan Alternative and Renewable Energy Center in Muskegon.

Emphasizing the opportunity to locate near load demand, Nordstrom explained the system avoids the difficulties of offshore construction and assembly by allowing the floating platform to be build dockside, with tower, nacelle and blades attached by a land-based crane. The entire assembly is then floated to its location and tethered to the lake or sea bed. The first 6 MW demonstration project, supported by Alstom Wind, NREL, BP, Rolls-Royce, Shell, Caterpillar, and others is targeted for offshore at Cornwall, England, in late 2015. Cost of energy estimates for first generation offshore wind farms is $0.170 per kWh, and below $0.13 in the second generation design for 10 MW wind turbines. The floating platform must be in at least 50m of water depth, and can be deployed at up to 500m depth.

Cellulosic Ethanol Plant Loses Partner

Mascoma Corporation has lost a major funding source in its efforts to build a 20 million gallon ethanol plant in Kinross. Valero Energy Crop has pulled its $50 million investment in the project. An IPO for Mascoma that would have raised $100 million has been placed on hold. The company has stated it will not proceed with the project until all funding is secured.  The total cost for the facility, which has $120 million in public funding pledged, is $232 million.

Anaerobic Digester Opens at MSU

Michigan State University has commissioned an anaerobic digester to create energy for its East Lansing campus. The digester will utilize about 17,000 tons of organic waste to generate 2.8 million kilowatt hours of electricity per year. The organic material used by the system includes cow manure, food waste from several campus dining halls; fruit and vegetable waste from the Meijer Distribution Center in Lansing; and fat, oils and grease from local restaurants. It will take 20 to 30 days to digest the material in the 450,000 gallon tanks. Total cost of the project was about $5 million, and is expected to pay for itself in less than 15 years. MSU is also involved in a similar project in Costa Rica. that will provide power to a local village.

MIchigan Shorts

Orisol Energy US, Inc. of Ann Arbor has been named as one of eight wind developers eligible to participate in the upcoming lease sale of 112,8000 acres of offshore Virginia for commercial wind energy leasing  Ω  DTE Energy plans to construct a 502 kw ground-mounted solar installation in Sigel Township on farm acreage as part of its 15 MW utility-owned solar initiative  NextEnergy has its MATch (Michigan Accelerating Technologies) Energy Grant program to provide matching funds for federal gudning of advanced energy research, development, and demonstration programs

University of Michigan has received a National Science Foundation four-year, $2 Million grant to determine what combinations of algae make the most efficient fuel source Lights Out at Detroit’s Municipal Utility? The Detroit Public Lighting Department (PLD) currently serves 115 customers, including: Detroit Public Schools; Joe Louis Arena; Cobo Hall; the Detroit Institute of Arts; Wayne State University; McNamara Building Federal Building; and the city’s traffic signal system (almost 1300 intersections).

The Detroit Emergency Manager recently notified DTE Energy Company that PLD will be winding down its electricity distribution and transmission services and requested that DTE provide service to PLD’s customers. The switchover will take five to seven years, as DTE will replace the PLD grid over time. How DTE will recover the costs of the transfer and upgrades has become an issue to be decided by the MPSC in Case No. U-17427. See www.tinyurl.com/mpsc-pld

The Incredible Shrinking Renewable Energy Surcharge

Consumers Energy is asking to eliminate its authorized renewable energy surcharge beginning in July 2014. The residential charge under PA 295, was initially pegged at $2.50/month, then lowered twice to its current $0.52/month charge. Meanwhile DTE Energy has asked the Michigan Public Service Commission to lower its monthly residential renewable energy surcharge from $3/month to $0.43/month. Commercial and industrial surcharge reductions are also being requested by both utilities.

Made in Michigan Microgrid Under Development

In 2006, NextEnergy in Detroit was contracted by TARDEC and the Defense Logistics Agency to develop equipment to provide US-grid quality power in remote locations using renewable and conventional power sources. Although the project was successfully tested, it was too large and too heavy to be deployed in the field, as it required a 20-foot long container for shipping. But the concept of an intelligent management for remote power systems had been proven and the Tactical Modular Mobile Microgrid was born. TM3 Systems of Royal Oak is now working to reduce the size and commercialize the concept. The building blocks for its system are four-foot cubes capable of managing up to 360 kW of generation. By metering and controlling both inputs (generators, solar panels, and battery banks), and outputs (downstream loads), this “microgrid,” is more reliable, efficient, configurable, and controllable than a typical remote power system. It can use dissimilar power sources (fossil fuel generators, solar arrays, and batteries) to reduce fuel consumption while supplying uninterrupted power to critical assets in remote location.

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Could Your Business Qualify for a 179D Green Building Tax Break?

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If your company has built a new facility or upgraded an existing one anytime in the past six years, you might find that you qualify — at least partially — for a tax break of up to $1.80 per square foot under federal tax code section 179D, or the energy efficient commercial buildings deduction. This could be the case even if you had no concrete intention to focus on green building standards at the time.

A couple of great features of this deduction are, first, that you might be able to substantially mitigate your tax burden  as far back as six years and, second, it’s very likely that you will qualify if your facility exceeds 50,000 square feet and it meets current state building codes, according to a business tax writer for Forbes, who spent eight years as the U.S. Senate Finance Committee’s tax counsel.

The 179D tax deduction gives the business an immediate deduction in the current year plus a basis reduction for the value of the facility, which can be anything from a warehouses or parking garage to an office park or a multi-family housing unit. For private-sector projects, the building owner, assuming it paid for the construction or improvements, generally gets the deduction. In public projects, the architect, engineer or contractor can obtain it by seeking a certification letter from the government unit. Nonprofits and native American tribes are not eligible.

The green building deduction was created in recognition of the fact that around 70 percent of all electricity used in the U.S. is consumed by commercial buildings. The deduction, which is up for renewal — and possible expansion — this year, has already proven that efforts to mitigate the tax burden of businesses in a technology-neutral way is an effective way to encourage energy efficiency, according to the Forbes writer.

What improvements must be made to qualify for the green building credit? Currently, the new or renovated building merely needs to exceed the 2001 energy efficiency standards developed by the American Society of Heating, Refrigerating and Air Conditioning Engineers, or ASHRAE — and most state building codes already require this. That means the vast majority of new and improved buildings already meet this requirement.

It’s also possible to partially qualify for the deduction by meeting the standards only for the building envelope itself, which includes HVAC, the hot water system, and the interior lighting system. A building could qualify based upon only one of these systems, or all three.

Source: Forbes, “179D Tax Break for Energy Efficient Buildings — Update,” Dean Zerbe, Aug. 19, 2013

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Federal Energy Regulatory Commission (FERC) Initial Decision Lowers Return on Equity (ROEs) for New England Transmission Owners

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On August 6, 2013, FERC Administrative Law Judge Michael J. Cianci issued an initial decision on the complaint filed against the New England Transmission Owners (NETOs) seeking to reduce their currently effective 11.14% base return on equity (ROE) (FERC Docket Nos. EL11-66-000, et al.). Applying FERC’s traditional discounted cash flow (DCF) analysis to financial data largely for the period May 2012 – October 2012, Judge Cianci would require the NETOs to use a 10.6% base ROE to make refunds for transmission service provided between October 1, 2011 and December 31, 2012. Applying the same DCF analysis to financial data largely for the period October 2012 – March 2013, Judge Cianci would allow the NETOs a 9.7% ROE that would apply prospectively once FERC ultimately issues its order in the case (assuming FERC sustains Judge Cianci’s rulings; see PP* 544, 559-560). These rulings undoubtedly are disappointing both to the NETOs, who opposed any reduction in the 11.14% base ROE, and the complainants, who advocated substantially lower ROEs (8.3% to 8.9%) than Judge Cianci would allow.

On the positive side for the NETOs, Judge Cianci found that reducing utility ROEs below 10% for a prolonged period could be harmful to the industry (P 576). He also resolved virtually all conventional DCF methodological issues in the NETOs’ favor and his 10.6% and 9.7% ROEs were the ROEs developed in the NETOs’ conventional DCF analysis (PP 551, 552, 557). This would suggest that the 10.6% and 9.7% ROEs represent the maximum possible ROEs given the financial market data and the constraints of FERC precedent.

Judge Cianci expressly declined to rule on an issue that was hotly contested by both the NETOs and the complainants. The issue is whether post-2007 financial market conditions cause the DCF method to understate ROE costs and require modification of FERC’s conventional DCF analysis by use of alternative ROE methodologies (e.g., CAPM) to determine the NETOs’ actual common equity costs. A related issue, also hotly disputed by the parties, is whether the billions of dollars of required new transmission investment should also impact the ROE calculus.

The NETOs and the complainants are free to dispute all aspects of Judge Cianci’s decision through the FERC appeal process. The initial appellate briefs (known as briefs on exceptions) are due September 20, 2013, and briefs opposing exceptions are due October 24, 2013. The ultimate FERC ruling in this case will clarify and/or modify FERC’s ROE policy and is likely to be of extreme importance not only to the NETOs and their customers but to all utilities who charge or pay FERC jurisdictional transmission rates.

Two elements of Judge Cianci’s decision merit additional comment.

First, his decision concerned the NETOs collectively with the result that the ROE benchmark was the so-called “mid-point” of the zone of reasonableness (the mid-point is the average of the highest and lowest returns within the zone). The benchmark for an individual utility would be the “median” (the median is the point within the zone of reasonableness where half the returns are higher and half the returns are lower). Under current conditions, the median would be somewhat lower than the midpoint. Thus, other things being equal (they never are), a hypothetical Judge Cianci decision in an individual utility rate case would result in somewhat lower ROEs.

Second, due to the statutory fifteen-month limitation on retroactive refunds, the NETOs will not be required to make Docket No. EL11-66-000 refunds for the period between January 1, 2013 and the issuance date of the final FERC order. However, FERC has not yet acted on a second ROE complaint currently pending against the NETOs (Docket No. EL13-33-000). Although FERC would need to make new ROE findings in the new docket, this second complaint could close the Docket No. EL11-66-000 gap, and expose the NETOs to “back-to-back” ROE refunds for a 15-month period beginning January 1, 2013.

The initial decision is available here.

* “P” refers to the relevant numbered paragraph in the initial decision.

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