Environmental Law Post

Environmental Law Post

EPA Announces Repeal of Clean Power Plan; New York AG Will Sue

Posted in Legislation

On Tuesday, October 10, Environmental Protection Agency (EPA) Administrator Scott Pruitt issued a Notice of Proposed Rulemaking (NPRM) that would effectively repeal the Clean Power Plan (CPP or “rule”). The CPP focused on reducing carbon emissions from electric-generating power plants to combat global warming. As we previously reported, the Supreme Court granted an unprecedented stay of the rule in early 2016 after several challenges by states and industry groups. Interestingly, as Oklahoma Attorney General, Administrator Pruitt was one of 27 attorney generals to challenge the rule.

This move by EPA comes as no surprise given Administrator Pruitt’s history and President Donald Trump’s promises to do away with the rule. An Executive Order (EO) signed by the President in March called for a review of the CPP while promoting energy independence and economic growth. The EO stressed the importance of reducing regulatory burdens that hinder domestic energy production – including electricity production from coal. In addition to the proposed repeal, EPA released a Regulatory Impact Analysis (RIA) that uses quantitative approaches to analyze the effects of the CPP and the impact of a potential repeal. The RIA estimates that the repeal could provide up to $33 billion in avoided CPP compliance costs in 2030.

New York Attorney General Eric Schneiderman swiftly announced that he will sue to stop the President’s “irresponsible and illegal efforts to turn back the clock on public health” if and when the repeal is finalized. Schneiderman has led a coalition of states and localities that intervened in defense of the CPP in federal court, and he continues to fight in favor of the Obama administration rule. New York Governor Andrew Cuomo, another strong supporter of the CPP, called the proposed repeal a “reckless decision that gives power plant operators free reign to do what they will without any concern for our climate.” The Governor stated that New York is on track to meet its Clean Energy Standard target, which mandates that renewable energy supply 50 percent of the State’s electricity needs by 2030, and also added that “we” will continue to fight to meet the CPP standards.

Once the NPRM is published in the Federal Register, the public will have 60 days to comment on the proposal. A controversial rule since its inception, the legality of the CPP and the potential repeal will not be resolved soon. States that support the CPP are likely to stand with Attorney General Schneiderman in an attempt to halt the repeal. Those proponents of the CPP claim that the Clean Air Act requires EPA to take action to cut carbon emissions. Parties opposing the CPP have long argued that the rule exceeded EPA’s statutory authority. It seems likely that EPA would propose a new rule to take place of the CPP, but the agency has not yet done so. It remains to be seen how receptive the courts will be to allowing a full repeal without any replacement plan.

A 360 for NY’s Part 360 Regulations: Overhauled Solid Waste Program to Take Effect November 2017

Posted in Uncategorized

The much-anticipated final version of the comprehensive revisions to New York’s Solid Waste Management Program was released on September 20, 2017. Initially proposed in early 2016 after two rounds of public comments, multiple hearings, and a second round of revisions issued over the summer, the New York State Department of Environmental Conservation’s (“NYSDEC’s”) new rules are set to take effect on November 4, 2017. Besides expected changes for solid waste landfills and waste transporters, noteworthy changes include stricter requirements for Beneficial Use Determinations (“BUDs”) and reuse of fill material, as well as new restrictions and prohibitions for wastes generated from oil and gas production. Compliance will generally be required within 180 days of the effective date (May 3, 2018), with some limited exceptions.

The new rules mark the first major revisions to New York’s Solid Waste Program in over 20 years, and are intended to incorporate changes in the law, policy, and technology, as well as streamline the regulatory process. In addition to substantive changes, NYSDEC’s overhaul will physically break up the current Part 360 regulations into groups based on the type of affected facility and create new Parts 360 through 363, 365, and 366 in a way that NYSDEC hopes will be more user-friendly.

Draft regulations for the revamp of the Solid Waste Program were first proposed in March 2016. A second round of revisions was issued in June 2017 in response to an overwhelming number of public comments. However, because the second set of revisions included substantial changes and newly proposed provisions, the timing of the release of the revisions during the summer with a short 30-day comment period raised eyebrows as NYSDEC pushed the regulations through to finalization. Major substantive revisions between the first and second versions included additional revisions to the BUD program, replacement of the proposed historical fill requirement with completely new regulations for reuse of fill materials, updated requirements for landfills, and extension of the transition timeframe, among others. The final version makes no substantive changes from the last release over the summer.

Beneficial Use Determinations (“BUDs”) Rescinded Unless “Renewed”

All existing case-specific BUDs without an express expiration date will be rescinded unless a request for a renewal is filed within 180 days of November 4, 2017, the effective date of the final regulations. Any such “renewal” will require submission of a written petition with a demonstration that the material will not adversely affect public health and the environment, and that a market exists for the material, among other requirements. Existing BUDs with an express expiration date will need to comply with new reporting requirements, but should be prepared to follow the new “renewal” requirements when the existing BUD expires. All categorical predetermined BUDs that were not incorporated into the final rule will be required to now apply for a case-specific BUD using the new process and standards.

In order to show no adverse health or environmental impact, analytical testing will be required to show compliance with the Part 375 Residential Use and Protection of Groundwater soil cleanup objectives (“SCOs”), or otherwise show that that material or use is “unique” in a way that is acceptable to NYSDEC. If a petition for renewal of an existing BUD is filed in a timely manner, the BUD can continue until NYSDEC makes a final determination.

Because BUDs are deemed a “jurisdictional determination” that a material is not a solid waste and, therefore, not a permit, few administrative procedures are available to challenge a denial or revocation. While NYSDEC acknowledged in its general response to comments that revocation of a case-specific BUD would trigger an opportunity to request a hearing on the revocation, under the new regime, many BUDs are at risk of termination with little due process rights or recourse for survival.

Testing Required for Re-Use of Fill

Reuse of fill material will now be classified as a predetermined BUD if the new requirements outlined in Part 360.13 are met. As part of its “enhanced regulatory scheme to address historic fill management and disposal,” NYSDEC abandoned its first proposal to regulate historic fill based on the likely date of deposition. Agreeing with commenters that the concept of characterizing fill based on an unknown historical date would be too difficult to implement, NYSDEC will instead now require analytical and physical characterization of existing material to determine whether and where the fill can be reused.

Compliant reuse of fill material will be based on the extent of contamination, using the Part 375 SCOs as the metric. The characterization and quantity of fill will also require certification by a qualified environmental professional and reporting to NYSDEC in advance of the delivery. Fill material that does meet these requirements will be considered a solid waste and must be disposed of at an appropriate facility.

These new provisions will apply to both off-site and on-site management of fill with limited exemptions, such as for sites remediated under Part 375. For management of on-site fill, the new regulations follow the like-with-like principle. For example, fill used to backfill the same excavation or reused in other areas of the same property with “similar” characteristics will be exempt, although “similar” is not expressly defined. However, if any sign of contamination is noted, including odors, the fill must be covered with a minimum of 12 inches of clean soil or fill that otherwise meets the new requirements of Part 360.13.

Oil and Gas Production Wastes

Going forward, case-specific BUDs for reuse of gas storage brine or production brine on roads will now be available, but only for those brines generated from sources other than Marcellus Shale. Along with following the new process and standards to obtain a BUD, a prospective BUD-holder must disclose the origin of the brine, where and how the brine will be used, and certain chemical analysis of the brine. For drilling fluids and flowback water, not only does the final rule expressly prohibit the reuse of those fluids on roads, the regulations expressly prohibit their disposal in a solid waste landfill, meaning such oil and production wastes may need to be disposed of as hazardous, shipped out of state, or managed through other costly alternative means.

Drill cuttings will continue to be allowed in solid waste landfills as NYSDEC noted that “disposal of drill cuttings does not pose the potential for any adverse environmental impact.” However, any landfills that accept drilling wastes must have radiation detection installed to monitor for Normally Occurring Radioactive Materials (“NORM”).

Highlights of Other Relevant Changes

With illegal dumping of Construction and Demolition (“C&D”) debris tagged as an “emerging threat” by NYSDEC, Part 361 of the final rule will require tracking documentation for C&D transportation, handling, and disposal, much like the manifest system. For the C&D processing facility itself, stricter limitations will govern the height, setbacks, and spacing for storage piles, and the processing threshold to avoid registration will be set at less than 500 tons per day based on a weekly average.

Solid waste landfills will be addressed in the new Part 363. New technical and construction requirements were established to incorporate new technology as well as address “frequently variance conditions.” While the current program exempts disposal of certain materials such as uncontaminated concrete, asphalt pavement, brick, glass, soil, and rock, but with no volume or size restrictions, the final rule imposes a 5,000 cubic yard lifetime limit in order to qualify as an exempt facility.

Other notable changes to the overall program will include radiation detection for landfills, combustors, and thermal treatment facilities that receive municipal solid waste, and for transfer facilities that transport out of state; tighter tracking and registration requirements for waste transporters as well as exemptions for waste “incidentally” transported by a public utility; reorganized rules for medical waste; first-time regulation of mulch-processing facilities; mandatory requirements for local solid waste management planning; and new rules for state assistance projects.

What Now?

The comprehensive nature of the new rules will have wide-ranging impacts. Generators, waste transporters, and landfills, as well as developers and all BUD-holders, will need to assess how and to what extent they will be affected by the final rule, and comply with any interim filing deadlines to secure continued operations. Overall, while portions of the regulations were in need of an update, because some new requirements may have far-reaching and potentially deep financial and operational impacts, adoption of these new rules is sure to draw litigation.

EPA Administrator Takes Aim at Aging Superfund Sites

Posted in Superfund

Despite condoning a 34 percent cut to his agency’s funding for fiscal year 2018, U.S. EPA Administrator Scott Pruitt this week announced a seemingly ambitious plan to expedite the federal Superfund process to address the roughly 1,300 sites listed on the National Priorities List. Characterizing these sites as “languishing,” Pruitt promised that the “days of talking are over,” and that EPA would take immediate action to accelerate cleanup efforts nationwide.

Specifically, on July 25, Pruitt and the U.S. EPA Superfund Task Force released their “Recommendations to Streamline and Improve the Superfund Program.” The Report detailed 42 recommendations organized into five goals, which Pruitt believes will have the effect of expediting the remedial process and promoting reuse of contaminated sites. The high-level goals identified are: (1) expediting cleanup and remediation; (2) re-invigorating responsible party cleanup and reuse; (3) encouraging private investment; (4) promoting redevelopment and community revitalization; and (5) encouraging partners and stakeholders.

(Source: https://www.epa.gov/newsreleases/epa-announces-superfund-task-force-recommendations)

Additionally, Pruitt directed a letter to EPA Regional Administrators across the nation outlining 11 specific action items which the administrators are directed to undertake over the next year. These actions include utilizing interim response actions and removal authority more frequently to address immediate risks and prevent migration at Superfund sites, focus their attention and resources on sites with the most reuse potential, and delete or partially delete sites that meet CERCLA requirements from the National Priorities List.

(Source: https://www.epa.gov/sites/production/files/2017-07/documents/receipt_of_superfund_task_force_report_and_next_steps_for_revitalizing_the_superfund_program_memo.pdf)

Pruitt further promised to use the Agency’s resources to identify a ‘top-10’ list of Superfund sites which pose a risk to public health today, including specifically the West Lake landfill in Missouri and the USS Lead site in East Chicago, Indiana, and to become personally involved in the remediation of those ‘top-10’ Superfund sites.

While the announcement was greeted with optimism by some, it did not go unnoticed that Pruitt’s announcement placed the Superfund program at what he termed its “rightful place at the center of the agency’s core mission,” and admittedly diverted the Agency’s attention away from Obama-era efforts to fight global climate change.

The announcement also left some scratching their heads. “We have Superfund sites, but we don’t have a super fund,” Nancy Loeb, director of the Environmental Advocacy Center at Northwestern University’s Pritzker School of Law commented to the Washington Post. Because the Superfund program has not been adequately funded for years, EPA has had to rely upon polluting parties to fund cleanups, and that process tends to be slower than EPA-conducted cleanups because responsible parties mount legal and administrative challenges along the way. Pruitt played down the need for additional funding to accomplish his goals, and instead stressed the “excitement” of his team to take on the Superfund program.

Only time will tell whether Pruitt’s initiative is the much-needed reboot to the Superfund program.

(Source: https://www.washingtonpost.com/news/energy-environment/wp/2017/07/25/pruitt-says-epa-will-create-top-10-list-for-superfund-cleanup/?utm_term=.629f0440bae8)

Follow our team at Phillips Lytle as EPA’s Superfund initiative unfolds for up-to-date analysis.

NYSDEC Set to Propose Revisions to the Brownfield Cleanup Program: A Preview of Changes

Posted in Brownfield

ExcavatingmachineA preview of at least some of the proposed revisions to the New York State Department of Environmental Conservation’s (“NYSDEC”) regulations for the Brownfield Cleanup Program (“BCP”) (6 N.Y.C.R.R. Part 375) was revealed in May 2017, with official release anticipated later this year. Key changes are expected to include new program and tax credit eligibility requirements as well as clarifications to aspects of program implementation, all in an effort to provide more consistency across remedial programs and to generally update the BCP, now over a decade old. To what extent the revisions will provide clarity to BCP applicants remains to be seen once the changes are officially published. However, the preview reveals there is likely to be more questions and concerns than answers.

New eligibility requirements will likely include a formalized obligation for BCP applicants to conduct a search for potentially responsible parties (“PRPs”) before the application will be deemed complete. The scope and extent of PRP searches are expected to be outlined in the proposed regulations and will likely warrant close review as PRP searches can be time-consuming and costly.

The revised rules may allow sites listed as Class 2 on the NYSDEC’s Registry of Inactive Hazardous Waste Sites to be eligible if the site is owned by a volunteer and no viable PRP is found, a change from the current regime which deems Class 2 sites ineligible. Class 1 sites would remain ineligible under the revisions.

Other new requirements are expected to include formalization of the tangible property credit (“TPC”) as related to the source of contamination, such that if contamination is entering the site from an off-site source, TPC would not be available. TPC eligibility will also require a demonstration of economic hardship for sites in cities with a population of one million or more.

New deadlines are likely to be imposed for execution and recording of environmental easements. While previously the regulations contained no set timeframe, the NYSDEC intends to propose new rules that sites with institutional or engineering controls will be required to execute an environmental easement within 180 days of the commencement of the remedial design or at least three months prior to the anticipated date of the Certificate of Completion (“COC”).

A number of areas that have previously been the subject of uncertainty and debate are expected to be “clarified,” including waivers for environmental permits, the factors used to determine if the application will serve the public interest, transfer of COCs to successors-in-interest of the real property, mitigation of off-site impacts, contamination levels for eligibility purposes, contents of reports, and the NYSDEC’s authority to execute “cash out” consent orders.

While the cleanup tracks will generally remain the same, the NYSDEC may propose a “conditional Track 1” for volunteers that use long-term institutional or engineering controls for groundwater contamination, such that the volunteer will first receive a Track 2 cleanup, and if groundwater levels reach asymptotic levels within five years, then a Track 1 COC would be issued. However, that change would conflict with the clear statutory definition of Track 1 in Article 27 of the Environmental Conservation Law, which permits volunteers to qualify for Track 1 under these same circumstances without showing five years of asymptotic levels – certainly a change to look out for when the revisions are formally proposed.

Once the proposed revisions are published in the New York State Register, the minimum 45-day public comment period will commence to allow stakeholders to weigh in on the proposed changes. The NYSDEC anticipates at least two public hearings will be held as well as webinars to explain the proposed revisions and anticipated timeline. While the changes may provide more certainty in some respects, a close review will be warranted to evaluate the potential impact to new and existing projects to ensure that the program continues to drive redevelopment and sustainable economic growth across the state.

Significant Changes Proposed for NYSDEC’s SEQRA Regulations

Posted in Legislation

Four years after beginning the process, the New York State Department of Environmental Conservation (“NYSDEC”) issued its proposed amendments to the New York State Environmental Quality Review Act (“SEQRA”) regulations (“SEQRA Regulations”). According to NYSDEC, the “principal purpose of the amendments is to streamline the SEQR[A] process without sacrificing meaningful environmental review.”

For many, the most notable proposed amendments to the SEQRA Regulations include revisions to the lists of Type I and Type II actions. Those revisions reduce certain Type I action thresholds, which may require agencies to render Type I action determinations that previously may have been considered Unlisted or Type II. For Type I actions, an applicant must submit a full environmental assessment form, and an agency must perform a coordinated environmental review; in addition, they are most likely to require an environmental impact statement. Unlisted actions only require a short environmental assessment form and an uncoordinated environmental review, while Type II actions are not subject to SEQRA’s environmental review.

In contrast, however, NYSDEC is proposing to increase the list of Type II actions, particularly for projects that align with New York State’s environmental and energy policy goals. Examples of actions that would be considered Type II under the proposed amendments include (1) retrofitting an existing structure or facility to incorporate green infrastructure, (2) installing fiber-optic or other broadband cable technology in existing highway or utility rights of way, and (3) installing five megawatts or less of solar energy arrays on certain properties or structures. The proposed amendments to the lists of Type I and Type II actions are likely to impact many applicants and agencies.

NYSDEC is accepting comments on the proposed amendments until close of business on May 19, 2017. As a result, agencies such as IDAs, developers and applicants should analyze the proposed amendments to the SEQRA regulations, and consider whether it may be appropriate to submit comments to NYSDEC.

New York PSC Opens Evidentiary Hearing on ESCO Markets

Posted in Energy

Lightbulb-evolutionConsiders Full-scale Regulation, Tariffs and Voiding Existing Contracts

On December 2, 2016, the New York Public Service Commission issued a Notice of Evidentiary and Collaborative Tracks and Deadline for Initial Testimony and Exhibits, which initiates a new round in the agency’s regulatory investigation of New York’s retail energy markets. The proceeding will examine measures that may be taken to ensure customers are receiving “valuable services and paying just and reasonable rates for commodity and other services” from Energy Service Companies (ESCOs). In its notice, the Commission reiterated its determination (from 2014) that the retail markets serving mass-market customers “are not providing sufficient competition or innovation.” The Commission will consider three broad questions:

  1. Whether ESCOs should be completely prohibited from selling their current products to mass-market customers;
  2. Whether the regulatory regime, rules and Uniform Business Practices applicable to ESCOs need to be modified to implement such a prohibition, to provide additional guidance as to acceptable rates and practices of ESCOs, or to create enforcement mechanisms to deter customer abuses and overcharging, including whether ESCOs should be subject to Article 4 of the Public Service Law, and
  3. Whether new ESCO rules and products can be developed that would provide sufficient real value to mass-market customers in the future in a manner that would ensure just and reasonable rates.

“Track I” of this proceeding will consider the first two measures through an evidentiary hearing before the Commission followed by the filing of post-hearing briefs. “Track II” will consider the third measure, which will include a series of collaborative stakeholder meetings and the opportunity to comment prior to Commission action. It is expected that Commission Staff, ESCOs, regulated utilities, and consumer groups will provide testimony and exhibits throughout this process. A PSC “Statement,” issued in conjunction with the Notice, stated that the hearings “will give ESCOs the opportunity to explain their pricing practices and to hear from consumers who have been harmed by these practices.”

The Commission provided a total of twenty topics that it expects parties to address throughout their Track I testimony and exhibits. Those topics relate to the general structure of the ESCO markets, including, among others:

  • Whether the “regulatory regime of how the Commission applies the Public Service Law to ESCOs should be modified . . .?”
  • Whether and how the Commission’s key 1997 interpretation that Public Service Law (PSL) Article 4 does not apply to ESCOs should be revisited?
  • Whether penalties can be applied under its current interpretation of PSL Article 4?
  • If Article 4 regulation is necessary, what burdens would be imposed on ESCOs—such as whether stock issuances or transfers/sales would require commission approval? (These are burdensome requirements that typically apply to entities regulated by PSL Article 4, such as utilities or merchant power plants).
  • Should ESCOs be required to file tariffs?
  • Whether “the Commission should take steps to void existing ESCO contracts” if tariffs are required?
  • Whether the requirements of Public Service Law Article 6 should be applied to ESCOs? (Article 6 includes, among other things, authority for control of holding companies and transactions between affiliated transactions, as well as authority for refunds, reparations, and temporary rates) (The bulk of Article 6 is used to protect captive utility customers from financial manipulation or unwise financial decisions).
  • Whether ESCOs should be required to obtain Certificates of Public Convenience and Necessity under Public Service Law Section 68?
  • Whether door-to-door and outbound telemarketing practices should be prohibited?
  • Evidence that an ESCO has, in fact, in recent years offered or is currently offering lower prices on an annual basis compared to the incumbent utility consistently (and evidence that the price offering was profitable or resulted in a loss)
  • The Commission is also requesting extensive and detailed data for 2014, 2015 and 2016:
  • prices charged for retail electric and gas to mass-market ESCO customers (including prices for comparable default service), and prices for different product offerings (fixed vs. variable). Prices are to be provided on an annual, seasonal and monthly basis where possible, and separated by residential and small commercial;
  • number of ESCO customers served;
  • volume of sales; and
  • extensive complaint data.

The Notice states that “[a]ll parties to the proceedings may be subject to discovery regarding Track I issues.”

The Commission, apparently, intends this process to provide the administrative record that the New York Supreme Court found lacking in the Reset Order litigation earlier this year. As indicated by its Statement, the Commission believes that doing so will lead to a retail market that provides “useful, value-added, economical services to New York consumers particularly as part of [its] efforts under Reforming the Energy Vision.”

Phillips Lytle’s Energy Practice Team has extensive expertise in Public Service Commission/Utility regulatory matters, including all aspects of retail energy regulation in New York. For more information about Phillips Lytle’s Public Service Commission practice, contact: Thomas F. Puchner, Partner, (518) 472-1224 Ext. 1245, tpuchner@phillipslytle.com.

New York Public Service Commission Clarifies REC and ZEC Obligations

Posted in Energy

LSE Obligation Deadlines ApproachEnergySourcesing

In August 2016, the Public Service Commission (“Commission”) issued the Clean Energy Standard Order to set the framework for accomplishing two goals: achieving 50 percent renewable generation by 2030 and preserving the economic viability of three zero-emissions nuclear power plants as a bridge to the clean energy future. To meet the first goal, the Commission directed each Load Serving Entity (“LSE”) to purchase Renewable Energy Credits (“RECs”) from new renewable sources built after January 1, 2015. LSE’s are required to meet their obligations in one of three ways: (1) by purchasing RECs from the New York State Energy Research and Development Authority (“NYSERDA”), (2) purchasing RECs from other eligible sources, or (3) making Alternative Compliance Payments (“ACPs”) to NYSERDA.

In order to maintain the economic viability (and operation) of New York’s upstate nuclear plants as a bridge to a low-carbon future, the Commission also established a Zero Emissions Credit (“ZEC”) program to subsidize the nuclear fleet, which is struggling to compete against low-cost gas generation. The ZEC program is structured similarly to the REC program, requiring LSEs to purchase ZECs, which recognize the zero-emissions attributes of nuclear power, proportionate to their annual energy sales. NYSERDA will contract with each eligible nuclear plant for ZECs, and each LSE will be required to purchase its pro rata share.

On November 17, 2016, the Commission issued an Order Providing Clarification regarding the LSE’s REC obligations. The Commission will require each LSE to procure a quantity of RECs equal to 0.035% of the LSE’s total 2017 load. The Commission’s order clarifies that the 0.035% target mandate relates only to the estimated number of RECs from renewable energy projects that were not in operation prior to January 1, 2015 that will be available to NYSERDA for sale to LSE’s during 2017. Based on that calculation, NYSERDA will offer 56,142 MWh of RECs for 2017 compliance at a price of $21.16/MWh. If a LSE intends to purchase RECs from NYSERDA during the 2017 compliance period, it must inform NYSERDA by December 1, 2016 and compete the REC request form using the confirmation ID supplied by NYSERDA.

Also on November 17, 2016, the Commission issued an Order Approving Administrative Cost Recovery, Standardized Agreements and Backstop Principles. The order established the system through which RECs and ZECs will be bought and sold. NYSERDA will build a purchase and sale platform and will enter into contractual relationships with each LSE to provide monthly REC and ZEC payments. The order also approved standardized REC and ZEC contracts established in the appendix. Each LSE must provide NYSERDA with executed agreements by December 17, 2016. Each LSE is also required to register an account in the New York Generation Attribute Tracking System (“NYGATS”) in order to transact RECs and ZECs, receive communications, and generate compliance reports for each annual compliance period.

With each LSE purchasing RECs and ZECs in the NYSERDA platform, the Commission hopes to move toward a 50 percent renewable generation goal while subsidizing nuclear base-load generation to avoid sharp increases in carbon emissions that could fill the generation gap if nuclear exited the market in the short term. In support of the Clean Energy Standard Order, the Commission recently approved the $110 million sale of the FitzPatrick nuclear power plant from Entergy to Exelon Corporation. While the 830 MW plant was scheduled to close due to low natural gas prices undercutting its competitiveness in the market, the Commission approved state subsidies (funded primarily via the sale of ZECs) and the sale to Exelon in order to keep the plant operational as a bridge until more renewable energy capacity is constructed. State approval is only the first step. Before the sale is finalized it must also be approved by the Nuclear Regulatory Commission and the Federal Energy Regulatory Commission.

NY DPS Staff Report on Value of DER

Posted in Energy

solarhouseThe New York Department of Public Service Staff released a complex report of recommendations to the New York Public Service Commission on how to properly value distributed energy resources (“DERs”) as the state transitions away from net energy metering (“NEM”). Reforms to NEM—which credits distributed generation at the retail rate of electricity—have been a controversial topic in numerous states as utilities warn of revenue losses and customer cross-subsidies caused by outdated rate designs that do not properly calculate the costs and benefits of NEM to the grid.

As many states continue to quibble over the details and fairness of NEM, New York’s Reforming the Energy Vision (“REV”) proceeding recognizes the broader forces reshaping the power sector and attempts to modernize the ill-equipped, industrial-age regulatory model. One of the key pieces to that modernization puzzle is creating a comprehensive framework for valuing DER, including energy efficiency, demand response, distributed storage and distributed generation, all of which will become integral tools in the operation of the modern electric grid. This Staff report marks a major milestone in the creation of that value framework.

The report proposes to replace NEM with its “Phase One” tariff by the end of 2016, which will ultimately be replaced by a “Phase Two” methodology in 2018. The report notes that while NEM has provided a simple and easy-to-understand compensation mechanism, it is an “imprecise and incomplete signal of the full value and costs of DER.” More precise price signals will be required in order for the NY REV model to replace the outdated regulatory model and create a system where customers and third parties make choices about how to use power and invest in DERs. The report proposes to gradually transition New York away from NEM, grandfathering current NEM customers into that compensation policy for the next 20 years and allowing new behind-the-meter customers to continue using the NEM framework until 2020, at which point the credits would gradually decline until they ultimately merge with the value of DER formula adopted by the Commission.

To replace the NEM formula, the Staff report outlines a value stack consisting of four primary benefits that DERs can provide and assigns a value formula to calculate each benefit. Those benefits fall into four categories: (1) energy (electricity generation); (2) capacity (availability of the system to provide electricity during peak demand); (3) distribution system value (deferment of infrastructure upgrades); and (4) environmental and public health.

Importantly, the report adopts monetary crediting as opposed to volumetric crediting. While volumetric crediting accounts for only the volume of electricity generated, monetary crediting provides a more complete value because it accounts for additional metrics, such as the location and time at which the electricity is generated.

While the energy value is fairly straightforward, there could be debate around the capacity value and environmental value. Calculating a capacity value for intermittent resources is inherently difficult for certain DER resources due to uncontrollable events such as clouds and wind patterns. Part of that formula could be tied to the variability of intermittent resources, but that would present issues for securing project finance. Solar advocates will certainly want to be a part of that discussion to ensure the Commission reaches the proper balance.

The report recommends crediting DER for its environmental value that is at least as high as the Social Cost of Carbon as defined by the EPA, or higher as reflected in Tier 1 REC prices established by the New York State Energy Research and Development Authority (“NYSERDA”). NYSERDA expects to publish the quantity and price of Tier 1 RECs for 2017 compliance in November 2016.

One major component of the value stack that the report did not address is the value of DERs to the local distribution grid. In the absence of detailed distribution-level data, the report recommends a Market Transition Credit (“MTC”) which recognizes that such a value exists, but its exact numerical value is unknown. Determining the value of DER to the distribution system will be a key task of the Commission as it works on a Phase Two methodology, which is expected by 2018.

In its final iteration, the value stack for DER may prove to be more of an art than a science. As U.S. Supreme Court Justice Stephen Breyer once wrote in Regulation and its Reform, “To spend hours of hearing time considering ‘rate of return’ models is of doubtful value; and suggestions of a proper rate – carried out to several decimal places – give an air of precision that must be false.”

If successful, New York’s innovative approach to valuing the costs and benefits of DERs to the grid could spark discussions in other states around how to modify NEM policies. Meanwhile, stakeholders in New York will begin to dissect this report and draft comments to ensure their products and services are valued appropriately in the Commission’s expected order in December.

New York’s Clean Energy Standard and its Impact on the State’s Energy Portfolio

Posted in Legislation

The New York State Public Service Commission (“PSC”) recently issued an order that will shape New York’s energy portfolio for years to come. The Clean Energy Standard (“CES”), issued and effective August 1, 2016, is a bold initiative that mandates renewable energy supply 50 percent of the State’s electricity needs by 2030. New York seeks to achieve this goal by focusing on three major areas: (1) large utility scale solar, wind and other renewables; (2) offshore wind; and (3) subsidized nuclear power. The expectation is that by 2030, New York greenhouse gas emissions will be reduced by 40 percent from 1990 levels.

Currently, New York generates about 23 percent of its electricity from renewable resources, but about 80 percent of that comes from hydroelectric. This means that solar, wind and non-hydro renewables account for only five percent of New York’s current electricity requirements.

In order to meet these ambitious goals, solar and wind generation will have to substantially increase. The State believes that there is a lot of potential in offshore wind in the Atlantic Ocean, and the CES sets out a path to developing this resource. The Deepwater Wind Project, off the coast of Montauk, Long Island, is currently going through the regulatory approval process with support from the State. The State hopes that this 90 megawatt wind farm is only the beginning of tapping into offshore wind potential. It is unclear what role offshore wind in the Great Lakes will play, and whether or not it will receive the same State support.

The plan to subsidize nuclear power is somewhat surprising given Governor Andrew Cuomo’s historic position on nuclear energy… Most notably, Cuomo has called for the permanent shutdown of Indian Point Energy Center, a nuclear power plant about thirty miles north of Manhattan. In marked contrast, the State is planning on entering into long-term subsidized contracts with two “at risk” nuclear power plants in upstate New York. Although these plants are no longer competitive in the New York market due to their high operation and maintenance costs, the fear of losing up to 17 percent of the State’s “clean” energy from nuclear power has made the nuclear subsidies a key component in reaching the 2030 Renewable Energy Standard (“RES”).

The CES order reinforces the Governor’s opposition to natural gas – as the resource that many considered to be the bridge between today and 2030. Governor Cuomo banned high volume hydraulic fracturing in New York in December of 2014. Doubling down in April of this year, the Cuomo administration denied necessary water quality permits for the federally approved Constitution Pipeline which proposes to deliver Marcellus formation natural gas from Pennsylvania to New York and other northeast markets.

The CES sets lofty goals in a relatively short amount of time and will have significant impacts on energy generators and customers. The CES requires utilities and retail energy service providers to build new renewable facilities, enter into purchase agreements with other renewable energy generators, or otherwise purchase Renewable Energy Certificates to meet the new RES. Whether the “50 by 30” goal can be met, and the economic impacts absorbed, remains to be seen.

Additional Assistance
Phillips Lytle Partner, David P. Flynn, was assisted in the preparation of this article by Luke Donigan.

For assistance regarding New York’s Clean Energy Standard, please contact David P. Flynn at (716) 847-5473, dflynn@phillipslytle.com, or any of the attorneys on our Energy Industry Practice Team.

Reset of New York Toxic Tort Statute of Limitations Signed into Law

Posted in Legislation

On June 23, 2016, we wrote about legislation that had passed both the New York State Assembly and New York State Senate that would allow people to bring a timely personal injury claim arising from claimed exposure to contaminants within three years of a site’s designation as either a Federal or New York State Superfund Site.

On July 21, 2016, Governor Andrew Cuomo signed this legislation into law as Chapter 128 of the laws of 2016.

As we previously mentioned, this new law could create an incentive for the New York State Department of Environmental Conservation to be more aggressive in the listing of new sites. Also, as every new Superfund Site designation in New York now opens up the possibility of previously time-barred suits becoming viable, a PRP’s response strategy to known or suspected contaminated sites will be as important as ever.