Environmental Update

April 01, 2010 | By Andrew Giaccia in Washington, DC|New York

A decision by the US Fish & Wildlife Service in early March to list a ground-dwelling bird called the greater sage grouse as a “candidate species” for protection under the Endangered Species Act is expected to affect permitting for new wind, solar and geothermal projects in the western United States.

The greater sage grouse is found in California, Colorado, Idaho, Montana, Nevada, North Dakota, Oregon, South Dakota, Utah, Washington and Wyoming.

The agency issued three findings about the greater sage grouse on March 5. The most significant is that although the greater sage grouse meets the criteria for listing as “endangered” under the federal Endangered Species Act, it is being listed for now as only a “candidate species” because the agency needs to focus on species that are at a greater risk of extinction. The Endangered Species Act makes it unlawful to “take” (that is harm, harass or kill) any endangered or threatened species and it also requires the government to designate the boundaries of the critical habitat for the species.

Designation as a “candidate species” requires the US Fish & Wildlife Service to review the status of the species each year and propose protection when funding and workload priorities allow, but there is no immediate protection for the species. Instead, the government “encourages voluntary cooperation efforts for these species because they are, by definition, species that warrant future protection.” An environmental group has challenged the finding as too weak.

Most of the greater sage grouse habitat is on federal land. The US Fish & Wildlife Service said that 52% of it is in existing greater sage grouse management zones managed by the Bureau of Land Management (BLM). Another 31% is owned by private parties. Other federal agencies — like the Bureau of Indian Affairs and US Forest Service — and states own the remaining acreage.

The US Fish & Wildlife Service designation is expected to affect how the BLM handles requests for rights-of-way over its land. BLM issued Instructional Memorandum 2010-071 on the same day the greater sage grouse was designated as a candidate species to say that the agency plans on wind and solar projects to screen new right-of-way applications to identify whether the wind or solar energy development or site testing and project area includes priority habitat. If so, [BLM will] alert the applicant as early as possible that the application may be denied or that terms and conditions may be imposed on the right-of-way grant to protect priority habitat as supported by NEPA analysis.

Projects located on private land are also subject to guidance. For example, existing draft US Fish & Wildlife Service guidance (issued in 2003 on “Avoiding and Minimizing Wildlife Impacts from Wind Turbines”) makes suggestions for how wind tower siting, operation and monitoring should be done to minimize the effect on wildlife. This guidance recommends avoiding putting up turbines in a manner that fragments contiguous habitat for certain species like the greater sage grouse.

Some private landowners have entered into “Candidate Conservation Agreements with Assurances” with the US Fish & Wildlife Service. Landowners who agree to take conservation measures to protect certain species receive assurances that no additional restrictions will be imposed on use of their land if the species are later listed as endangered.

States like Wyoming and Colorado have also have taken steps to conserve the greater sage grouse and its habitat. Developers and project lenders should be sure to do their diligence.

Climate Change

The US Environmental Protection Agency is expected to regulate greenhouse gas emissions in the United States unless blocked by Congress. Key members of Congress want to block EPA from acting, but that requires an affirmative vote by Congress which, in the current era of gridlock, may be hard to achieve.

There is considerable uncertainty around three basic questions when it comes to what EPA might do. The questions are what stationary sources of greenhouse gases will be regulated, when the regulations will take effect and how major stationary sources of greenhouse gas emissions will comply with the existing “Prevention of Significant Deterioration,” or “PSD” program.

EPA is required to regulate utility and industrial boilers, turbines and other major stationary sources of greenhouse gases under the Clean Air Act after finding on December 7, 2009 (effective on January 14, 2010) that elevated concentrations of greenhouse gases like carbon dioxide (CO2) in the atmosphere endanger the public health and welfare of current and future generations and that the combined emissions from new motor vehicles and new motor vehicle engines contribute to pollution.

Although the endangerment finding does not directly involve stationary sources of greenhouse gases, EPA is required to issue regulations controlling such gases under the PSD program. The PSD program requires permits to construct new and major modifications to major sources (those with a potential to emit at least 250 tons per year of a regulated pollutant) and use of the best available control technology — called “BACT” — to control emissions of such pollutants.

Eight Democratic Senators, including Jay Rockefeller (D.-West Virginia), sent a letter to EPA on February 19 asking the agency to provide a “clear understanding” of the agency’s responsibilities with respect to the regulation of greenhouse gases and processes to carry out those responsibilities. EPA responded on February 22, 2010. Its letter provided a road map of what it intends to do.

The agency said it does not plan to require stationary sources to get Clean Air Act permits to cover their greenhouse gas emissions in calendar year 2010.

It anticipates phasing in permit requirements for large stationary sources of greenhouse gases beginning in 2011. Initially, only facilities applying for permits under the Clean Air Act because of emissions of non-greenhouse gas pollutants will have to address greenhouse gas emissions in their permit applications.

The agency expects to address greenhouse gas emissions from other large emitters of greenhouse gases in the last half of 2011. Through 2013, EPA expects that the threshold for needing a permit will be substantially higher than the 25,000-ton threshold that EPA proposed earlier.

EPA does not intend to require the smallest sources of greenhouse gases to have permits covering their emissions any sooner than 2016.

The question of what major sources of greenhouse gases will be regulated has not been resolved. Despite legal arguments that EPA cannot increase the threshold of 250 tons per year that triggers limits under the existing PSD program, EPA is considering raising the threshold to at least 25,000 tons per year of CO2 equivalent. A CO2 equivalent is a measure of the global warming potential of a greenhouse gas.

EPA hinted at how it intends to answer the question of when major sources of greenhouse gases will be subject to regulation in late March. On March 31, 2010, it issued a decision after reviewing a ruling by the Environmental Appears Board that required EPA to consider CO2 emissions and apply BACT before issuing air emissions permits under the PSD program. The agency said any tightening of PSD regulations should not take effect until after regulations it issued on greenhouse gas emissions from motor vehicles takes effect. These regulations were issued on April 1 with an effective date of January 2, 2011. Greenhouse gas regulations for stationary sources would apply to any permits issued after this date, regardless of when the application was received. Thus, it is not clear that a developer will be able to avoid the contemplated restrictions by applying today for a permit. Opponents of projects may seize on this as an incentive to stall development work.

There is no answer yet to the question of how greenhouse gas emissions will be controlled. EPA has not yet identified what is BACT for CO2 emissions. There are no CO2-specific emissions control devices, and technologies such as carbon capture are not yet commercially available.

Meanwhile, Republicans, led by Senator Lisa Murkowski (R.-Alaska), the senior Republican on the Senate Energy Committee, are lining up behind a joint resolution to disapprove of EPA’s endangerment finding. EPA has acknowledged that if this resolution is enacted, it will not be able to regulate emissions from greenhouse gases since an endangerment finding is a prerequisite to such legislation. There have also have been a number of lawsuits filed in court to force the agency to reconsider the endangerment finding. Senator Rockefeller introduced a bill in March that would prohibit the agency from regulating CO2 and methane from stationary sources for two years.

As long as the uncertainty remains, lenders may decide there is less risk in lending to renewable energy projects that do not emit any greenhouse gases.