STROOCK A GUIDE TO GREENHOUSE GAS REGULATION ALAN Z. YUDKOWSKY PETER F. JAZAYERI JENNIFER N. DUMAS JUNE 2007 UPDATE STROOCK & STROOCK & LAVAN LLP

Transcription

1 STROOCK A GUIDE TO GREENHOUSE GAS REGULATION ALAN Z. YUDKOWSKY PETER F. JAZAYERI JENNIFER N. DUMAS JUNE 2007 UPDATE STROOCK & STROOCK & LAVAN LLP 2029 Century Park East 180 Maiden Lane 200 South Biscayne Blvd. Los Angeles, CA New York, NY Miami, FL Telephone: Telephone: Telephone: Copyright 2007 All rights reserved

2 TABLE OF CONTENTS Page I. INTRODUCTION...1 II. FEDERAL...2 A. Legislation...2 B. Rulemaking and Executive Action...6 III. STATE...7 A. California Legislation and Rulemaking Litigation Governor s Actions News and Current Events...9 B. Florida...10 C. Maine...10 D. Minnesota...10 E. Montana...10 F. Washington...11 IV. REGIONAL...11 A. Regional Initiatives and Registries...11 B. Agreements...12 C. News and Current Events...12 i

3 I. INTRODUCTION As expected, May 2007 marked a busy month for developments in the greenhouse gas ( GHG ) regulation and climate change arena. At the federal level, three bills (two of which are comprehensive bill packages) emerged from their respective Congressional committees and are awaiting debate and vote by the full Senate. Meanwhile, five new bills ranging from the initiation of low-carbon fuel standards to the creation of a national greenhouse gas registry were introduced in both the House and the Senate. Even the President, who generally has taken a muted approach to climate change issues, entered the fray and issued an executive order directing federal agencies to regulate tailpipe emissions. With House Speaker Pelosi s deadline of getting an allinclusive global warming legislation package to the House floor before the July 4th recess rapidly approaching, federal action can be expected to increase. Not content to wait for the federal government, many states have moved ahead with GHG regulation and climate change efforts. Not surprisingly, the majority of the legislative and agency actions affected California. Among other things, California pressed forward with its attempt to obtain a federal waiver to regulate tailpipe emissions, issued rules for a baseload power generation standard, and took further regulatory actions clarifying how mandatory reporting of GHG emissions in 2008 will occur. Other states were not far behind. Washington and Minnesota enacted legislation setting GHG emission reduction goals, with Washington and Montana also adopting baseload electric generation standards. Lastly, Florida passed legislation providing for tax incentives for various renewable energy and efficiency technologies and creating a GHG emissions registry. Regional developments also have continued. The Western Regional Climate Action Initiative added Utah as a member, the multi-state Climate Registry launched with 31 member states, California and British Columbia signed a memorandum of understanding to combat global warming, 500 mayors signed the United States Conference of Mayors Climate Protection Agreement, and New York City hosted a climate summit for 40 large cities. These regional developments are likely to continue until the federal government enacts a comprehensive GHG regulation system. Finally, May 2007 marked an important month for market-based GHG developments. At the beginning of the month, the New York Mercantile Exchange ( NYMEX ) revealed that it was seeking actively to develop a standardized emissions contract and market. Subsequently, the Chicago Climate Exchange announced it would launch the California Climate Exchange to trade emissions products unique to California. Clearly, there has been no shortage of legislative, legal and other newsworthy developments during the past month. This Stroock GHG Regulation Update sorts through those developments, summarizing the most relevant information concerning GHG regulation through the end of May

4 II. FEDERAL A. Legislation Untitled (S. 1321) On May 2, 2007, the Senate Energy and Natural Resources Committee completed its mark-up of Sen. Jeff Bingaman s (D NM) four-bill energy package. This package includes: S. 1115, which, among other things, would amend the Energy Policy Act of 2005 ( EPACT ) to require at least 10% of the electricity consumed by the federal government in 2010 and at least 15% in 2015 to come from renewable sources; S. 731 and S. 962, both of which would enhance research and development for carbon capture and sequestration siting and technologies; and S. 987, a bill that focuses on the development of the biofuels industry through loan guarantees for renewable fuel facilities and a 36 billion gallon biofuels mandate by The committee ultimately approved the package, 20-3, after hours of debate. The debate centered on an amendment to S. 987, sponsored by Sens. Jim Bunning (R Ky.) and Craig Thomas (R Wyo.), that would mandate the use of a 21 billion gallon coal-to-liquids 1 fuels program by The amendment failed by a party line vote dominated by the Democrat committee members. S now is before the full Senate awaiting debate and vote. Advanced Clean Fuels Act (S. 1297) Introduced by Sen. Barbara Boxer (D Calif.) on May 3, 2007, this biofuels legislation would amend the Clean Air Act to promote the use of advanced clean fuels that help reduce air and water pollution and protect the environment. This bill would require the United States Environmental Protection Agency ( EPA ) to create a renewable fuel standard of 12 billion gallons in 2011, rising to 35 billion gallons in Of these 35 billion gallons, 13 billion must come from fuels with GHG emissions that are at least 50% lower than conventional fuels and 8 billion from fuels that are 75% lower. S also would require renewable fuels to have lifecycle GHG emissions 2 that are at least 20% less than conventional fuels, and would require the EPA Administrator to establish by January 2010 a methodology for determining the lifecycle GHG emissions of transportation fuel in commerce. S also would mandate an Advanced Clean Fuel Performance Standard that would reduce, by 2020, GHG emissions from the country s entire transportation fuel supply by up to 10% of 2008 levels. S currently is pending before the Senate Committee on Environment and Public Works. 1 Coal-to-liquids technology refers the chain of chemical processes to transform coal into liquid hydrocarbons for use as fuel. 2 Lifecycle GHG emissions are the aggregate quantity of GHGs emitted per unit of fuel from production to use (including feedstock production or extraction and distribution). 2

5 National Low-Carbon Fuel Standard Act of 2007 (S. 1324) On May 7, 2007, Sens. Barack Obama (D Ill.) and Tom Harkin (D Iowa) introduced a lowcarbon transportation fuels bill, which would amend the Clean Air Act to reduce GHG emissions from transportation fuel sold in the United States and would mirror the low-carbon fuel standard introduced by California Gov. Schwarzenegger earlier this year. S first would increase the renewable fuel standard to 12 billion gallons by 2009, with annual billion gallon increases through The EPA Administrator also would establish a fuel emission baseline by Over time, the bill would mandate the production of fuels that reduce lifecycle GHG emissions below the fuel emissions baseline as follows: by 5% by 2015; by 10% by 2020; and starting in 2025 and for every 5 years thereafter, by at least 13% below the fuel emission baseline (for the 2025 reduction) and for every 5th year thereafter, by at least 2% below the most recent reduction. By January 1, 2012, the EPA Administrator must identify qualifying lowcarbon transportation fuels based on certain environmental sustainability standards. Notably, S also would provide a market-based mechanism enabling the use or transfer of credits for parties that generate a greater amount of annual ultra low-carbon fuel requirements. These credits would last for up to two years after the calendar year in which they were generated. Finally, waivers from compliance may be granted by the EPA Administrator if a party shows that the bill s implementation would impose a severe hardship. Conversely, stricter state standards may prevail if a state chooses to adopt them. After S was introduced, it was referred to the Senate Committee on Environment and Public Works, where it currently is pending. Ten-in-Ten Fuel Economy Act (S. 357) Initially discussed in our Guide To Greenhouse Gas Regulation released in April 2007, S. 357 seeks to achieve a corporate average fuel economy ( CAFE ) for passenger cars and light trucks of 35 miles per gallon by the 2019 model year. On May 8, 2007, the bill was passed by the Senate Committee on Commerce, Science, and Transportation. S. 357 currently is awaiting placement on the Senate s legislative calendar for debate and vote. Untitled (H.R. 2215) Described as a bill [t]o provide a reduction in the aggregate [GHG] emissions per unit of energy consumed by vehicles and aircraft, H.R was introduced by Rep. Jay Inslee (D Wash.) on May 8, It would amend the Clean Air Act to require the EPA Administrator, by 2010, to promulgate low-carbon performance standards for fuels and other sources of energy used for vehicles. These standards would become effective in The EPA Administrator also would be required to create rules for the reduction in aggregate GHG emissions per Btu as follows: 3% from 2015 through 2019; 6% from 2020 through 2024; 9% from 2025 through 2029; 12% from 3 This baseline would be equal to the average lifecycle GHG emissions of the conventional transportation fuels used in the United States from 2005 through

6 2030 through 2034; 15% from 2035 through 2039; 18 % from 2040 through 2044; and 21% from 2045 through The EPA Administrator also would be granted the authority to promulgate stricter standards for any of these time periods based on his/her assessment of the available technology and resources at the time. H.R also would require the EPA Administrator to promulgate a low-carbon fuel performance standard for aircraft fuels to take effect in The baseline for both vehicle fuels and aircraft fuels would be determined by the aggregate GHG emissions per Btu from all such fuel and other sources used by vehicles and aircrafts, respectively, in The EPA Administrator also would be required to promulgate the regulations required under H.R by January 1, These regulations would apply to the producers, importers and blenders of the fuel at issue. If these companies reduce their GHG emissions more than required, they would be given credits that may be traded or banked for use in either the year they were generated or in the following calendar year. Additionally, by 2009, the EPA Administrator would be required to identify and label fuels as low-carbon transportation fuels if 1) the fuel is responsible for at least 20% lower lifecycle GHG emissions compared to the 2007 baseline, 2) it is likely to be more environmentally friendly than conventional fuels, and 3) the fuel achieves reduction in petroleum content over its lifecycle. H.R expressly states that it is not intended to preempt or limit state actions to address climate change. It currently is pending before the House Committee on Energy and Commerce. National Greenhouse Gas Registry Act of 2007 (S. 1387) Introduced on May 14, 2007 by Sens. Amy Klobuchar (D Minn.) and Olympia Snowe (R Maine), S would require major industries to register their GHG emissions with a national GHG registry to be administered by the EPA. S. 1387, also referred to as the Carbon Counter bill, would amend the Emergency Planning and Community Right-to-Know Act (the Act ) by requiring businesses to include GHG emissions in their annual report of other pollutants to their respective state emergency response commission (as required under the original Act). A thirdparty verifier would be required to approve data submitted after Importantly, small businesses having less than 500 employees, under $6.5 million in annual revenue, and fewer than 10,000 metric tons of GHG emissions per year, would be exempt from compliance. Not only would the registry contain the data submitted to the state emergency response commissions, but it also would contain an estimate of the level of GHG emissions by each source category and a trend analysis of the quantity, source, and composition of the emissions. The registry also would include an estimate of mobile source emissions, direct stationary combustion source emissions, the estimated emissions from the use of petroleum products sold or imported by each participating facility as transportation fuels, and reductions due to GHG offsets. The EPA Administrator also would be granted the discretion to create a new GHG reporting system three years after the date this proposed system is implemented. S currently is pending before the Senate Committee on Environment and Public Works. 4

7 Energy Policy Reform and Revitalization Act of 2007 (H.R. 2337) Introduced on May 16, 2007, Rep. Nick Rahall s (D W. Va.) bill addresses carbon sequestration, alternative fuels, and energy production. H.R is intended to promote energy policy reforms and public accountability, alternative energy and efficiency, and carbon capture and climate change mitigation. Among other things, H.R authorizes the U.S. Geological Survey to create a national inventory of potential locations for carbon dioxide storage, and the Department of the Interior to promulgate regulations for geological carbon sequestration on federal lands. Wildlife also would be protected under a national program that would be created to mitigate the effects of climate change on wild animals. H.R currently is pending before the House Science and Technology Committee s Subcommittee on Energy and Environment. Renewable Fuels, Consumer Protection and Energy Efficiency Act of 2007 (S. 1419) This bill package, introduced by Sen. Harry Reid (D Nev.) on May 17, 2007, provides an expansive approach to the mitigation of GHG emissions by merging together several bills previously voted out by various Senate committees. S addresses biofuels for energy security and transportation; energy efficiency promotion; carbon capture and storage; research, development, and demonstration; public buildings cost reduction; CAFE standards; price gouging; and energy diplomacy and security. S incorporates, among others, S (Sen. Bingaman s four bill energy package, which is discussed in greater detail above), S. 357 (35 miles per gallon CAFE average legislation), S. 992 (federal building energy efficiency legislation), and S. 193 (legislation requiring the State Department to establish strategic energy partnerships with major energy producing and consuming nations already approved by the Senate Foreign Relations Committee). S has been placed on the Senate legislative calendar and currently is awaiting debate. H. Con. Res. 25 Introduced on January 10th of this year, this House Concurrent Resolution was approved by the House Agriculture Committee on May 17, The resolution expresses the sense of Congress that it is the goal of the United States that, not later than January 1, 2025, the agricultural, forestry, and working land of the United States should provide from renewable resources not less than 25% of the total energy consumed in the United States. Although not included in the draft resolution passed by this committee, Rep. Michael Conaway (R Texas) is working to include an amendment supporting market-based mechanisms as the resolution moves through the legislative process. International Climate Cooperation Re-Engagement Act of 2007 (H.R. 2420) After weeks of discussion, Rep. Tom Lantos (D Calif.) introduced legislation on May 22, 2007 that would require the United States to participate in international negotiations on a new global 5

8 warming treaty. Such negotiations would include participating in high level dialogue on climate change within the Group of Eight ( G-8 ), the European Union ( EU ), and with other industrialized and developing countries. H.R also would require active participation in the thirteenth Convention Conference of the Parties ( COP-13 ) to take place in December 2007 in Bali, Indonesia. It also sets forth several provisions that must be included in the new international agreement, such as a GHG emission target, binding mitigation commitments, and mechanisms for market-based solutions. H.R also would create two new offices: the Office on Global Climate Change, within the State Department, to advance the country s goals respecting the reduction of GHG emissions and global climate change; and the International Clean Energy Foundation, to carry out long-term foreign policy and energy security goals for reducing global GHG emissions. H.R was approved by the House Foreign Affairs Committee on May 23, 2007, and will be included in the House Democrats comprehensive energy and climate bill package set to arrive on the House floor before the July 4th recess. Untitled (S. 645) This bill, introduced by Sen. Craig Thomas (R Wyo.) on February 15, 2007, clarifies the types of projects that would be eligible for funding under the Department of Energy s ( DOE ) Clean Coal Power Initiative under the EPACT by providing an alternate sulfur dioxide removal measurement for certain coal gasification project goals. 4 On May 22, 2007, the Senate Committee on Energy and Natural Resources Subcommittee on Energy held a hearing on S B. Rulemaking and Executive Action Department of Energy Loan Guarantee Program On May 10, 2007, the DOE issued a Notice of Proposed Rulemaking concerning an advanced energy project loan guarantee program for early commercial use of new or significantly improved GHG sequestration technologies in energy projects. Under these proposed rules, the loan guarantee program would be implemented through a series of solicitations; the DOE would be permitted to guarantee up to 90% of the amount of any loan as long so long as it did not issue guarantees for more than 80% of the total cost of the project; the DOE would have a superior lien on all project assets pledged as collateral for the guaranteed loan in the event of a loan default; and receipt of other governmental assistance would not disqualify a project from receiving a loan guarantee, though the DOE would consider the extent to which a project will receive other governmental assistance. 4 Under the EPACT, the sulfur removal standard requires the removal of 99% of sulfur in coal. Because coal from Western states contains very little sulfur in its natural state, this standard was nearly impossible to meet. This bill allows for an alternative sulfur removal standard: by 2020, coal gasification projects must either meet the original 99% standard or emit not more than 0.04 pound sulfur dioxide per million Btus, based on a 30-day average. 6

9 The Notice of Proposed Rulemaking is open to the public for comment until July 2, The DOE held a public meeting on the proposed rulemaking in Washington on June 15th. President Bush Issues Executive Order for Federal Agencies to Regulate Vehicle Emissions President Bush addressed the Supreme Court decision of Massachusetts v. EPA 5, on May 14, 2007, when he directed the EPA, the DOE, the Department of Transportation, and the Department of Agriculture to take steps toward promulgating regulations using the Twenty In Ten plan he set forth in his State of the Union Address earlier this year. Under this plan, the Bush administration seeks to achieve the goal of a 20% reduction in GHG emissions in ten years by having Congress establish a mandatory fuels standard and reform the CAFE standards. As a complement to this agenda, President Bush signed an executive order requiring the aforementioned agencies to coordinate their regulatory efforts to regulate tailpipe emissions. III. STATE A. California 1. Legislation and Rulemaking Carbon Dioxide Containment Program (AB 114) This bill, originally introduced by Assembly Member Sam Blakeslee on January 9, 2007, was amended on May 2, 2007, to require the California Energy Commission ( CEC ) to submit a report to the California State Legislature containing recommendations regarding containment, scrubbing, and capture technologies to decrease carbon dioxide emissions from thermal power plants and other industrial processes. The CEC would be required to include the report in its 2009 integrated energy policy report, and to share its findings with the California Air Resources Board ( CARB ). A second hearing has been set, and AB 114 currently is under submission. Untitled (SB 411) Originally introduced on February 21, 2007 and amended on April 18, 2007, Sens. Joe Simitian s and Don Perata s bill would amend the Public Utilities Act to require retail sellers of electricity to increase their total procurement of eligible renewable resources to a minimum of 33% by December 31, 2020, in furtherance of the GHG emissions limit adopted pursuant to California s Global Warming Solutions Act ( AB 32 ). 5 The Supreme Court s April 2, 2007 opinion evaluated the EPA s claim that it does not have the authority to regulate new motor vehicle emissions and that even if it does have the authority to do so, it would be unwise to do so at this time. The Court held that the harms associated with climate change are serious and well recognized and that the EPA s steadfast refusal to regulate GHG emissions presents a risk of harm to Massachusetts that is both actual and imminent. Following the Supreme Court s ruling that the EPA has the authority under the Clean Air Act to regulate GHG emissions, states and other interested observers anxiously have awaited the Bush administration s reaction to the Court s opinion. 7

10 SB 411 narrowly passed the state Senate on May 17, 2007, and it now moves to the state Assembly for review. California Energy Commission Adopts New Performance Standard to Regulate Power Plants On May 23, 2007, the CEC adopted new rules pursuant to SB , prohibiting California s local publicly owned utilities from entering into long-term financial commitments for baseload power from generation facilities that exceed 1,100 pounds of carbon dioxide per megawatt hour. In essence, these rules prevent utilities from signing new contracts with coal-fired power plants, unless such plants find a way to effectively sequester their emissions. (Washington Gov. Gregoire signed a similar bill into law on May 3, 2007.) California Air Resources Board s Public Workshop Held on May 23, 2007 On May 23, 2007, CARB held a public workshop to discuss its development of the state GHG inventory of 1990 emissions levels, as well as its proposals for mandatory GHG reporting both of which CARB is required to do under AB 32. Respecting the GHG inventory, CARB explained that it is focusing on the sectors responsible for the largest amounts of GHG emissions in California: (1) refineries; (2) transportation; (3) electric power; (4) landfills; (5) cement; (6) agriculture and agricultural soil management; and (7) forest and rangeland. As for mandatory reporting, there was a lengthy discussion of the various proposed methodologies and rules for initial mandatory reporting of GHG emissions. Generally speaking, the reporting requirements discussed focus on reporting at the facility level, and would account for 94% of point source carbon dioxide emissions. Sectors targeted for mandatory reporting would be: (1) power plants and utilities; (2) oil refineries; (3) cement plants; and (4) large stationary combustion sources. Facilities would be required to report emissions from stationary combustion, manufacturing processes, fugitive emissions, mobile combustion (if significant), and energy purchases. Since AB 32 also requires the verification of reported emissions, CARB staff proposed the use of third party verifiers who are trained and accredited. 2. Litigation Ninth Circuit Hears Oral Argument in California v. National Highway Traffic Safety Administration On May 14, 2007, a three-judge panel of the United States Court of Appeals for the Ninth Circuit heard oral arguments in California v. National Highway Traffic Safety Administration. 7 In this action, California along with ten other states, 8 alleged that the National Highway Traffic Safety Administration violated federal environmental laws and ignored the effects of carbon dioxide 6 SB 1368 establishes a GHG emissions standard for baseload generation resources seeking extended access to California markets. Future long-term investments in such facilities are prohibited under the bill unless the power plant s emissions are as low as, or lower than, those coming from clean and efficient natural gas power plants. 7 This lawsuit was filed in November Connecticut, Maine, Massachusetts, Minnesota, New Jersey, New Mexico, New York, Oregon, Rhode Island, and Vermont. 8

11 emissions by making only a de minimus increase in automobile mileage standards from the current 22.5 miles per gallon to 23.5 miles per gallon by 2010 for model years 2008 through The federal government, however, argued that its standards adequately weigh the need to mitigate global warming with the need to protect the consumer both economically and physically. 3. Governor s Actions Gov. Schwarzenegger Releases a Calculation Plan for California s Low-Carbon Fuel Standard On May 18, 2007, Gov. Schwarzenegger issued a report containing the technical methodology for calculating the GHG emissions of all fuels sold in the state from the moment of production through consumption. The implementation and measurement of this low-carbon fuel standard ( LCFS ) provides the methodology necessary to reach the Governor s goal of reducing the carbon intensity in fuel by at least 10% by CARB is expected to incorporate the Governor s report into a new emissions plan for California to be announced in June News and Current Events Mayor Antonio Villaraigosa Unveils Green LA Plan On May 15, 2007, Los Angeles Mayor Antonio Villaraigosa released his Green LA proposal to reduce Los Angeles carbon dioxide emissions 35% below its 1990 levels by Some of the more noteworthy provisions include: an increase in the use of renewable energy to 35% by 2020; an increase in the efficiency of natural gas-fired power plants; the installation of 50 cool roofs per year by 2010 on new or remodeled city buildings; the decrease of per capita water consumption by 20% ; the requirement that 85% of the city fleet be powered by alternative fuels; the recycling of 70% of trash by 2015; the completion of a strategic plan for the Port of Los Angeles, including sustainable and green growth options; the evaluation of options to reduce aircraft-related GHG emissions; the creation of 35 new parks by 2010; and collaboration with the private sector to offer effective incentives for the growth of local green businesses. EPA Holds Two Public Hearings on the California Air Resources Board s Waiver Request On May 22 and May 30, 2007, the EPA held two public hearings related to California s request to obtain a Clean Air Act waiver to regulate tailpipe emissions pursuant to AB As expected, California officials, along with representatives from Maine, Pennsylvania, New York, New Jersey, and Rhode Island, requested the EPA to act by October 24, Automobile and business interest groups countered by stressing that California had failed to demonstrate a compelling state interest sufficient to obtain a waiver. The written public comment period on California s waiver request closed on June 15, Chicago Climate Exchange Announces Formation of the California Climate Exchange On May 29, 2007, the Chicago Climate Exchange announced the creation of the California Climate Exchange to trade financial instruments relative to AB 32. The exchange will operate in accordance with the regulations used to implement AB 32. 9

12 B. Florida Untitled (HB 7123) On May 3, 2007, the Florida Legislature passed HB 7123, which creates an Energy Policy Governance Task Force, provides a number of tax incentives and other credits for the use of various renewable or energy efficient technologies, and imposes more stringent green building codes. In addition, the law establishes a GHG inventory to account for annual GHGs emissions. Major emitters of GHGs will be required to report emissions according to the methodologies and reporting systems established by rules to be promulgated pursuant to this legislation. C. Maine An Act to Authorize the State s Participation in the Regional Greenhouse Gas Initiative (L.D. 1851) On May 1, 2007, Maine s Joint Committee on Natural Resources approved L.D. 1851, which mandates a state auction of emissions credits for power plants affected by the Regional Greenhouse Gas Initiative. L.D includes a safety valve to limit costs to ratepayers. If carbon allowances sell for less than $5 per ton, then the money collected from the participating companies will be used for energy efficiency projects directly benefiting the ratepayers. If the price rises above this threshold, any money collected over that amount will be returned to the ratepayers as credits to their power bills. D. Minnesota Gov. Pawlenty Signs the Next Generation Energy Act of 2007 On May 25, 2007, Gov. Pawlenty signed the Next Generation Energy Act of 2007, which seeks to provide more renewable energy, more energy conservation, and less carbon emissions for the state of Minnesota by establishing statewide GHG reduction goals of 15% below the 2005 baseline by 2015, 30% by 2025, and 80% by The Act also empowers the Governor s Minnesota Climate Change Advisory Group to develop a plan to meet those goals. E. Montana Untitled (HB 25) On May 14, 2007, Gov. Schweitzer signed HB 25, which creates a carbon dioxide emissions performance standard for electric generating units in the state. Coal-fired electric generating units cannot be approved by the Montana Public Utilities Commission unless at least half of the carbon dioxide emitted from the facility during its operations is captured and sequestered. This law applies only to electric generating units constructed after January 1, Jobs and Energy Development Incentives Act (HB 3) Rep. Llew Jones bill, HB 3, was signed into law on May 29, 2007 by Gov. Schweitzer. It provides tax incentives for future development and the transmission of clean and renewable energy. 10

13 These tax abatements will support the development of, among other things, new, clean and green transmission lines, liquid fuel pipelines, coal-to-liquid plants, carbon sequestration pipelines, and coal gasification plants. F. Washington Untitled (ESSB 6001) On May 3, 2007, Gov. Gregoire signed into law ESSB 6001, a bill designed to commit Washington to achieving the goals of the Governor s Climate Change Challenge. The two primary effects of the bill are the establishment of state goals to reduce GHG emissions and the creation of a GHG emissions performance standard for electric utilities operating in the state. ESSB 6001 establishes the following statewide GHG emissions goals: 1990 levels by 2020; 25% below 1990 levels by 2035; and either 50% below 1990 levels by 2050 or 70% below expected emissions for that year. By December 31, 2007, the Department of Ecology ( Washington DOE ) and the Department of Community, Trade, and Economic Development ( CTED ) must report the total GHG emissions for 1990 and the GHG emissions for each major sector for 1990 to the state Legislature. The Governor also is required to develop policy recommendations on how the state can achieve the specified GHG emissions reduction goals. These recommendations must be submitted to the state Legislature during the 2008 legislative session. Starting on July 1, 2008, the GHG emissions performance standard for all baseload electric generation for which electric utilities enter into long-term financial commitments 9 will be the lower of 1,100 pounds of GHG per megawatt hour or the average available GHG emissions output as updated by the CTED. All baseload electric generation that commences operation after June 30, 2008 and is located in Washington must comply with this performance standard. Sequestered or otherwise mitigated carbon emissions will not count against the performance standard. The Washington DOE and the Energy Facility Site Evaluation Council must adopt rules by June 30, 2008 to implement and enforce these performance standards. ESSB 6001 will take effect 90 days after the adjournment of the current state Legislative session. IV. REGIONAL A. Regional Initiatives and Registries The Climate Registry Thirty-one states 10 announced on May 8, 2007 that they would participate in this newly created voluntary national GHG emissions registry. Based in Washington D.C., with regional offices 9 A long-term financial commitment means: (1) either a new ownership interest in baseload electric generation or an upgrade to a baseload electric generation facility; or (2) a new or renewed contract for baseload electric generation with a term of five or more years for the provision of retail power or wholesale power to end-use customers in Washington. 10 The following states have agreed to participate in the Climate Registry: Arizona, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mis- 11

14 around the country, the Climate Registry will be a nonprofit corporation run by a board of directors with representatives from each participating state. Data will be tracked formally beginning in January 2008, and the Climate Registry will impose common standards for quantification and verification, accounting, and source categories, including third-party verification of reported emissions. Western Regional Climate Action Initiative On May 21, 2007, Utah became the sixth state to join the Western Regional Climate Action Initiative. Gov. Huntsman joins the governors of Arizona, California, New Mexico, Oregon, and Washington in this pact to reduce regional GHG emissions through trading emission credits, set to begin in B. Agreements United States Conference of Mayors Climate Protection Agreement On May 15, 2007, more than 500 mayors representing cities from all 50 states signed the United States Conference of Mayors Climate Protection Agreement. By signing this agreement, the mayors pledge to reduce GHG emissions in their respective cities by 7% below 1990 levels by 2012, though compliance with reaching this goal still is voluntary. (This target would have been the nation s emission reduction goal if the United States had ratified the Kyoto Protocol.) Gov. Schwarzenegger Signs Emissions Agreement with British Columbia Premier Gov. Schwarzenegger and British Columbia Premier Gordon Campbell signed a Memorandum of Understanding to combat global warming on May 31, Like California, this Canadian province already has committed to reducing its GHG emissions to below 1990 levels by The agreement makes a number of commitments, including British Columbia s commitment to adopt California s LCFS. The agreement also commits the governor and the premier to work to bring the LCFS to Baja California, Washington and Oregon, to work to protect marine life and to synchronize environmental protections at the ports. This is the eighth climate change agreement with other states, nations and Canadian provinces to which California is a party. C. News and Current Events C40 Large Cities Climate Summit As a sequel to a similar gathering held in 2005, the mayors of more than 30 cities and other leaders from across the globe met at the C40 Large Cities Climate Summit in New York City on May 15, The summit was hosted by former President Clinton and New York City Mayor souri, Montana, New Hampshire, New Jersey New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Utah, Vermont, Washington, Wisconsin, and Wyoming. The Native American Campo Kumeyaay Nation and the Canadian provinces of British Columbia and Manitoba also have signed onto the Registry. 12

15 Michael Bloomberg in an effort to facilitate discussions on how participant cities have committed to environmentally-friendly policies. The meeting primarily focused on the transformation of waste into energy, the employment of renewable energy sources, and the implementation of green building codes and development policies. NYMEX Announces Plans to Offer Carbon Dioxide Trading Contracts NYMEX President James Newsome recently announced that the exchange is considering developing a carbon dioxide futures market and standardized emissions trading contract, although it would take 12 to 18 months before such a market would be operational. Bob Levin, NYMEX s Senior Vice President, said that the exchange will offer credit trading for both mandatory and voluntary allowances. 13