Archive for October, 2010

Keystone Pipeline Causing XL Reactions

Photo by Loozrboy. Some rights reserved.

The Hill’s E2-Wire today released a copy of a letter sent to Secretary of State Clinton on behalf of eleven senators urging her not to be hasty in expressing her approval of the TransCanada Keystone XL pipelines project. The senators were mostly reacting to concerns raised in the recently issued Environmental Impact Statement (EIS) for the proposal, and requested answers to more than twenty probing questions on the state of the project and the Department of State’s (DOS) plan of action.

The “Keystone XL” project is a proposed pipeline that would carry crude oil from Alberta, Canada, 1,702 miles south to Texas. Because the pipelines cross into the US from Canada, TransCanada must obtain a permit from the DOS for the project to proceed. The EPA’s National Environmental Policy Act (NEPA) is therefore triggered, which means that as part of the approval process, a detailed EIS must be prepared. The EIS discloses the specifics of the project, as well as, more importantly, the potential environmental consequences and discussion of possible alternatives.

It’s this document that has been causing quite a fuss. The DOS, designated as lead agency for the EIS, released their draft EIS on April 16, 2010. The EPA, like the aforementioned senators, was not pleased with what they saw. In the EPA’s letter to the DOS, they gave the EIS the lowest “adequacy” rating possible, concluding that “the Draft EIS does not provide the scope or detail of analysis necessary to fully inform decision makers and the public, and recommend that additional information and analysis be provided.” To rub it in, they reminded that State that, “as with all projects that have not addressed potentially significant impacts, this proposal is a potential candidate for referral to CEQ.” One of the duties of the Council on Environmental Quality is to, according to the DOE, review “interagency disagreements concerning proposed major federal actions that might cause unsatisfactory environmental effects.”

Public comment on the draft EIS has ended, and input from other federal agencies was supposed to be given by September 15, 2010. However, after further consultation with the other agencies about “whether granting the application would be in the national interest,” the DOS has extended the agency input due date until 90 days after the final EIS is published. Of course, any extension at all is too much of a delay for the author of this bulletin from the Canadian law firm Gowlings, Peter Burn, who calls the EPA’s recommendations for the EIS “an unprecedented American intrusion into Canadian sovereign affairs.”

Despite all the protests, the project still seems to keep chugging along. A lawsuit brought by the Natural Resources Defense Council was thrown out by a federal judge who claimed the NRDC lacked authority to bring the suit. And Canada’s National Energy Board has, of course,  already approved TransCanada’s behemoth of an application to construct and operate the pipeline, and Keystone XL has plenty of American fans in the Consumer Energy Alliance. Mr. Burn might just be in luck.

How Much For That Nature In The Window?

I was pleased to see not one, but two articles in the past two days on one of my favorite topics: environmental valuation!

The first story was in CBC News, calling attention to recent research by the David Suzuki Foundation and Pacific Parklands Foundation. Their study found that the “natural capital” in British Columbia’s lower mainland region was worth an estimated $5.4 billion per year (or about $2,462 per person, per year, for those living in the area). The benefits from the region’s “ecosystem services” with the highest values turned out to be climate regulation, water supply, and flood protection/water regulation.

Original photo by Tim Marchant. Some rights reserved.

Now, what is “natural capital”? And what are “benefit values” of “ecosystem services”? The study broadly defines natural capital as “the earth’s land, water, atmosphere and resources.” It’s this capital that provides the “ecosystem services,” which then provide beneficial outcomes to people and the planet. For example, wetlands are natural capital. The services wetlands offer are the storage and regulation of water. The benefits are flood control and water supply, and the value is…whatever an economist determines as the monetary worth of  those services and benefits. Obviously, how one makes that determination is going to vary from economist to economist, and there is a spectrum of complexity on which any method of valuation may fall (e.g. a more simple method may only include concrete natural resources such as water or timber, while more complex systems of valuation may try to account for the joy that you experience when you walk in a park).

So why bother trying to put a price tag on nature’s bounty? Nature is providing us with stuff – good stuff – for free. All the time. We hardly even notice most of the benefits, let alone acknowledge nature for the favors. However, every day costs & benefits are being weighed for the purpose of major policy decisions. Because the wetlands are just sitting there, not charging us a thing (but still providing us with $$$$$$$ in clean water!), they are typically far undervalued by decision makers.

Therefore, the most practical application of ecosystem valuation is in policymaking. The website has answered our “why?” in five succinct bullet points:

  • To justify and decide how to allocate public spending on conservation, preservation, or restoration initiatives.
  • To consider the public’s values, and encourage public participation and support for environmental initiatives.
  • To compare the benefits of different projects or programs.
  • To prioritize conservation or restoration projects.
  • To maximize the environmental benefits per dollar spent.

As one of our nation’s foremost environmental regulators, the EPA understandably has an Ecosystem Services Research Program, but the program itself mostly focuses on the services aspect, and looks to outside economists to help assign value.

One organization with no shortage of economic insights? The World Bank. The second story I came across today was a NY Times blog post highlighting remarks from the president of the World Bank, who announced the launch of a new partnership, the Global Partnership for Ecosystems and Ecosystem Services Valuation and Wealth Accounting, and called for the world’s “‘natural capital’ to be included on nations’ books when they do their accounting.” The World Bank! If they can get on board, what a good example they could set. You can see past research papers on environmental valuation the World Bank has compiled and commissioned in the “Environmental Economics” portion of their website, but we hope to see more targeted guidance as their new partnership moves forward.


Again, there are as many approaches to ecosystem valuation as there are ecosystems. Here is a great compilation of links to a variety of related websites and organizations that are tackling the topic.

Flying the Climate-Friendly Skies

Photo by heidielliott. Some rights reserved.

The FAA and the USDA want you to know that efforts to achieve “carbon neutral aviation growth by 2020” are really taking off. Last week, the USDA announced a five-year agreement between the two agencies to “develop aviation fuel from forest and crop residues and other ‘green’ feedstocks in order to decrease dependence on foreign oil and stabilize aviation fuel costs.”

US Secretary of Agriculture Tom Vilsack also mentioned the FAA partnership as part of recent remarks before the National Press Club, in which he spoke at length about general USDA efforts to promote renewable fuels. One related measure, the Biomass Crop Assistance Program (BCAP), helps ensure that sufficient “non-food, non-feed” biomass crops are available to meet future demand for renewable energies such as aviation biofuels by providing financial assistance to “owners and operators of agricultural and non-industrial private forest land who wish to establish, produce, and deliver biomass feedstocks.”

USDA collaboration with aviation associations is nothing new. Three months ago, the USDA signed a resolution with the Air Transport Association of America (ATA) to work together on a “Farm to Fly” project, intended to “accelerate the availability of a commercially viable sustainable biofuel industry in the United States.” According to the resolution, USDA will “commit to work on feedstocks that may show particular promise for biojet fuel,” and the ATA, along with Seattle’s own Boeing Company, will “use regional opportunities and pilot programs[…]to assess and evaluate means for meeting[…]mutual goals.” The team aims to issue a final report on their progress by mid-2011.

Whither Goes Sitka’s Water?

An eerie article in Newsweek earlier this month painted a gloomy picture of the future of water access. Down the road, it portends, scarce water supplies will have been gobbled up by private corporations, only to be doled back out to the thirsty public at exorbitant costs. And in a way, this scenario is already playing out across the globe.

Photo by Alaskan Dude. Some rights reserved.

The article begins with a still-unfolding story set in Sitka, Alaska, where the city’s scenic neighbor, the Blue Lake reservoir, is set to quench thirst more than 6,000 miles away in India. The city of Sitka hold permits from the state that allow it to export up to 95 billion gallons of water every year. In 2006, the True Alaska Bottling Company (TAB) secured a contract with Sitka, handing over to TAB the right to 2.9 million gallons of water per year from the lake, which it intends to ship to Mumbai for processing and further distribution. TAB has partnered with S2C Global, who will build the water-processing facility in India. TAB’s project website explains how the water will make the long journey via ships that can carry between 70 to 100 million gallons of water per trip.

According to one of several S2C Global EDGAR filings mentioning the TAB arrangement, the city of Sitka will receive one cent per gallon of water, making this project very lucrative to the small Alaska town. With arrangements like this bolstering waterside communities and ensuring water for arid nations, what’s the downside?

While water sales from cities looking to privatize utilities may initially boost funds, Newsweek points out that private utilities, with virtual monopolies on the water supply, quickly become very difficult to work with. Performance is hard to monitor, and “according to some reports, private operators often reduce the workforce, neglect water conservation, and shift the cost of environmental violations onto the city.” And as water sources become more limited and demand skyrockets, it’s hard to imagine that private companies won’t see the profit potential in securing water rights wherever they can nab them.

Water rights laws are usually established by the states. In Alaska, these rights, which allow the holder “a specific amount of water from a specific water source to be diverted, impounded, or withdrawn for a specific use,” are defined under the Alaska Water Use Act and administered by the Department of Natural Resources, Division of Mining, Land, and Water. There are no restrictions on who can hold a water right in Alaska. According to the Bureau of Land Management, “state law says any ‘person’ can hold a water right and ‘person’ is defined as ‘an individual, partnership, association, public or private corporation, state agency, political subdivision of the state, and the United States.'” Guess they’ll just go to the highest bidder.

FERC (finally) asking public opinion on intrastate pipeline capacity transfers

Photo by Glen Dillon. Some rights reserved.

FERC buy/sell transactions, in the words of Fulbright & Jaworski, “involve a holder of transportation rights buying gas, transporting the gas using its transportation capacity, and then reselling the gas to the entity from which the gas was originally purchased.” These types of arrangements are often prohibited by FERC because they “can (a) be motivated by a desire to circumvent the shipper-must-have-title rule and (b) deprive shippers of equal access to transportation capacity.” However, FERC recently opened up for discussion the permissibility of these transactions on section 311 and Hinshaw pipelines.

311 pipelines are intrastate pipelines that offer interstate natural gas transportation and storage services pursuant to section 311 of the Natural Gas Policy Act, and Hinshaw pipelines, according to a recent Sutherland Alert, “are pipelines that receive gas from interstate commerce but operate wholly within one state.” Both pipelines typically fall outside of FERC jurisdiction.

Earlier this year, in an Order issued by FERC in a case involving Arizona Public Service Company, FERC unexpectedly expanded the scope of its prohibition on buy/sell transactions to include transactions on these intrastate pipelines. Because the prohibition came about via an order rather than through traditional rulemaking, several industry participants filed a request for rehearing, complaining that “the Commission notice issued in [the Arizona Public Service Co] proceeding provided no indication that the subject matter of the proceeding was anything other than a transaction specific waiver request. It was only after an order was issued that the significance of this proceeding could be known by industry participants.”

While FERC denied the request and declined to reverse the ruling, they opted to open a Notice of Inquiry on the topic, soliciting public comment on “whether and how holders of firm capacity on intrastate natural gas pipelines providing interstate transportation and storage services […] should be permitted to allow others to make use of their firm interstate capacity.”

In the meantime, FERC is temporarily allowing all existing and new buy/sell transactions involving section 311 and Hinshaw pipelines to go forward. Stakeholders wishing to comment on the NOI should do so within 60 days of publication in the Federal Register (which is expected later this week). For further detail on this subject, I highly recommend the Fulbright article and the Sutherland Alert quoted at the beginning of this post.


Tip for knowledgemosaic subscribers: to be kept informed of further developments, consider setting up a law firm memo alert using the term Hinshaw. You will be sent a daily email when newly posted memos match your search terms.

Renewing, Reusing, Redeveloping Brownfields

Last week, the EPA announced the release of their freshly drafted Management Plan for the RE-Powering America’s Land Initiative. The Initiative was launched more than two years ago in an effort to promote brownfields (contaminated lands) as candidates for renewable energy facility sites, and the management plan lays out Initiative goals for the next two years.

The EPA currently tracks approximately 15 million acres of potentially contaminated land across the US. The primary goal of the Initiative is to turn this wasted and potentially dangerous space into viable renewable energy facilities, thereby diverting development of “greenfields” (undeveloped areas such as wetlands) for the same purpose.

Photo by Massachusetts Dept. of Environmental Protection. Some rights reserved.

The Initiative has clear developer appeal. One of the most compelling arguments for re-purposing brownfields is existing infrastructure – many locations already have electric transmission lines, roads and water on site, and are zoned for development of this sort. Given that these sites are usually tucked away from the public eye, developers are also much less likely to face opposition to some of renewable energy’s larger and more objectionable structures such as wind turbines or solar farms.

Pepper Hamilton published a great memo touting the Initiative earlier this year. The author points out that if Senate bill S.1642 passes, then developers building renewable energy projects on contaminated land could be eligible for triple credits “toward meeting a national renewable electricity standard.” Existing federal and state incentives have been assembled into a nifty database by the EPA.

Based on feedback solicited from stakeholders last fall and winter, the EPA crafted the management plan to address barriers to using contaminated sites as proposed. On the docket? Providing more guidance on the topic, promoting incentives, and clarifying liability protections. All available EPA resources can be accessed here, and comments on the plan will be accepted until November 30, 2010.

$3 million to help farmers comply with oil spill regulation

Today the USDA announced the launch of a pilot initiative that will make up to $3 million in assistance available to agricultural producers complying with EPA’s Spill Prevention Control and Countermeasure (SPCC) program.

The SPCC program (the rules of which are codified at 40 CFR 112) is intended to prevent and mitigate the discharge of oil into US waters and adjoining shorelines. The rule requires farms and other facilities to prepare and implement SPCC plans detailing preventative measures and response plans for oil spills. The funds of the pilot program are earmarked for helping farms develop and execute these plans.

Photo by 0x6612390. Some rights reserved

Of course, not every single farm is subject to SPCC regulations. According to an EPA fact sheet for farmers, only farms that store “more than 1,320 US gallons [of oil] in aboveground containers or more than 42,000 US gallons in completely buried containers,” and “could reasonably be expected to discharge oil to waters of the US” are covered by SPCC. A covered farm is responsible for preparing and implementing a plan, if it doesn’t already have one. Farms with a greater oil storage capacity (or those with a history of oil spills!) may need their plan to be certified by a professional, while other farmers may be eligible to “self-certify” plans online. Earlier this year, NRCS  jointly published guidance to help farmers determine if they need an SPCC plan and whether or not they can self-certify those plans.

Those eligible for self-certification can also use the EPA’s SPCC plan template, intended to help the owner of a qualified facility develop a self-certified plan. (The completed template may be used to comply with the SPCC regulation.) SPCC plans must be in place no later than November 10, 2011 (the compliance date was extended one year by the EPA earlier this month).

Currently, only eight states – Idaho, Louisiana, Nevada, New York, North Dakota, Oklahoma, Texas, Utah and the Caribbean area – are eligible for the pilot program’s funds, which will be administrated by the USDA’s Natural Resources Conservation Service (NRCS). Farmers interested in participating should contact the NRCS at the appropriate service center.

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