Volume 7, Issue 2
Welcome
Welcome to our second issue of Currents for the year.
As always, thank you for reading.
Nicholas S. Preservati , Co-Editor, Currents, Co-Chair, Energy Practice Group
Joseph C. Unger, Co-Editor, Currents
“GOP senators, joined by Manchin, oppose the new rule, which gives asset managers more freedom.”
Why this is important: The article describes reaction to issuance of a Labor Department regulation under ERISA that allows retirement plan managers to consider “environment, social, and governance” (“ESG”) factors in making investment decisions; this rule actually reverses Trump administration guidance. A large group of Republican state Attorneys General have sued the Labor Department, arguing that the rule is, among other things, “arbitrary and capricious” in allowing non-pecuniary factors to be considered when making investment decisions.
The article notes that some opponents of the GOP lawsuit argue that the new rule is actually agnostic with respect to ESG, meaning it allows ESG to be considered, but does not mandate it. In that vein, while some state legislatures are pursuing legislation to prohibit ESG consideration in these and similar circumstances, other states are proposing legislation that embrace the spirit of the new rule.
At the same time, as reflected in the article, at the federal level Congress is seeking to overturn the rule through the Congressional Review Act (“CRA”), which allows such regulations to be overturned by Joint Resolution within 60 days of issuance; it appears that with Senator Manchin there would be enough votes in both Houses to approve such a resolution (the 60-vote filibuster does not apply to the CRA). The resolution, however, would still be subject to veto by the President, which is highly likely.
The upshot is that the consideration of ESG factors attendant to statutory directives and administrative policy and rule-making has created a bees’ nest of activity at both the state and federal level, and in the Courts. ---
Derrick Price Williamson
“Indian coal power plants that have relied on imported coal have not run at full capacity recently because they cannot compete with those using cheaper domestic coal supply.”
Why this is important: India says its coal power generation will increase in the coming year as its coal-fired units maximize electricity production from imported coal. The move comes as India has decided to continue burning coal to meet its electric needs and avoid electricity shortages. Coal still generates around 70 percent of India’s electricity. India now sees significant use of coal until 2040, and that coal will play a role in power generation for two to three more decades. --- Mark E. Heath
“The plan is the result of a 2021 law that pushes it to reach a 70% reduction in greenhouse gas emissions by 2030.”
Why this is important: The North Carolina Carbon Plan seeks to reduce carbon in North Carolina by 70 percent by 2030 and 100 percent by 2050 through the retirement of carbon generating resources (coal plants and gas) and the build-out of carbon free resources (solar, wind, battery storage, and nuclear). Under the legislation setting these carbon reduction goals (HB 951), the North Carolina Utilities Commission (“NCUC”), the state regulatory body that oversees utilities in North Carolina, is tasked with ensuring the carbon reduction goals of HB 951 are met. Every two years the state’s largest electric utility, Duke Energy, will file a “carbon plan” with the NCUC that presents paths to achieve both the interim 70 percent target and the 100 percent ultimate target. The first such Carbon Plan proceeding took place in the fall of 2022, and the Commission issued a decision on that inaugural plan in December 2022. As the article notes, multiple paths forward were presented, and the Commission declined to “select” a singular path. While only some of the paths presented meet the 70 percent interim target, the fact a new carbon plan proceeding will occur every two years will allow the NCUC and Duke Energy to adjust the path for compliance incrementally as we obtain greater information and detail on the best path forward. --- Carrie H. Grundmann
“Rise in renewable energy production helped keep coal-fueled power in check, think tank Ember finds.”
Why this is important: When Russia invaded Ukraine and disrupted natural gas supplies to Europe, many feared increases in greenhouse gas from burning more coal. Coal use did rise 7 percent in 2022, but that only accounted for 16 percent of EU electricity in total. In the last four months of 2022, coal-fired plants only ran at 18 percent and the European Union only used one-third of the extra 22 million tons of coal it imported. Renewables surged and helped keep coal use down. The EU now believes it will meet its goal of 45 percent renewable generation by 2030. --- Mark E. Heath
“The Keystone-Conemaugh plant was one of six sites tagged by federal regulators.”
Why this is important: The U.S. Environmental Protection Agency ("EPA") determined that six coal-powered plants that have not upgraded their coal ash disposal systems can no longer dump toxic coal ash into unlined ponds. In 2015, the EPA implemented safeguards to prevent against coal ash heaps leaking into water supplies. If a plant chose not to upgrade their disposal systems, the EPA allowed it to apply for an "alternate liner demonstration" to show that its system is just as good as the 2015 standards.
The six plants detailed in the article failed these demonstrations, which means that the Keystone-Conemaugh plant in western Pennsylvania could close prior to its planned retirement in 2028. According to the article, the plant can submit comments to try to delay the regulatory action, but if the decision remains the same, the plant will either have to: (1) stop depositing new coal ash within 135 days, or (2) implement changes to their coal ash disposal systems. --- Steven W. Lee
“To protect regional air quality, Virginia’s Department of Environmental Quality regulates when and how frequently data centers can run their emergency on-site generators to ensure they are working while limiting their cumulative impact.”
Why this is important: This article recognizes the growth of data centers in the Northern Virginia area. It discusses a concern that during the period of March to July 2023, there could be transmission issues that may require these data centers to run off back-up power during this five-month period. Because most back-up power is powered by carbon emitting resources, the DEQ is taking public comments on a variance in its emissions rules to facilitate the data center use of this back-up power. Moreover, because of the substantial number of data centers in Northern Virginia and the number of generators anticipated to serve those data centers, the article mentions concerns of emissions and risks to air quality impacting the Chesapeake Bay. Whether the DEQ will grant a variance will be determined after the 45-day comment period expires in mid-March 2023.
Transmission issues have been a growing concern throughout the country, not just Northern Virginia. There have also been issues with transmission project delays in PJM, the regional transmission organization, that oversees transmission in Virginia and numerous other states in the Mid-Atlantic. PJM has taken steps to address these delays by reforming their project approval process. It is anticipated that these steps will help address transmission issues throughout the Mid-Atlantic. --- Carrie H. Grundmann
“China and Australia’s top trade officials are due to meet where more details of the coal trade will likely be revealed.”
Why this is important: For the first time since 2020, China has purchased Australian coal. When Australia made accusations that China was the source of COVID-19 in 2020, China stopped buying all Australian coal. That led to disruptions in world coal markets and price increases. Now, 10 shiploads of Aussie coal have been shipped to China. The focus will now be on how the world’s coal markets react to the resumption of sales. --- Mark E. Heath
“Coastal states across the country, from North Carolina to California to Louisiana to Maine, are pushing for offshore wind projects.”
Why this is important: Offshore wind is an important renewable resource that has the potential to bring much-needed renewable energy to much of the United States. The article notes that to make substantial amounts of offshore wind a reality, much greater coordination is needed at all levels. Among other things, it will be critical that the United States develop its own supply chain for the components necessary to build offshore wind projects. Without such infrastructure, the United States will be subject to the global supply chain that has been increasingly burdened in recent years. The article notes that a domestic supply chain would also bring substantial economic benefits to the United States.
The article also notes that coordination is needed between states and various regional transmission organizations to ensure that offshore wind is brought online in the most cost effective and efficient manner. Bordering states with offshore wind lease availability can generate economies of scale by working together; the article notes some instances where such coordination has occurred. Bringing offshore wind online will also require substantial upgrades to the transmission system. Again, here, the article discusses the need for coordination on these projects. Ultimately, while there is much potential, there is also much work to be done to effectively harness the power created by offshore wind. --- Carrie H. Grundmann
“This will be the second European Union ban targeting Russian energy in the past two months.”
Why this is important: The first ban, implemented in December 2022, prohibited imports of Russian oil. The second ban prohibits imports of refined oil products from Russia, including diesel fuel. Prior to the ban, half of Europe’s total imports were comprised of Russian diesel, so the EU will have a large hole to fill after its reserves wane. The ban comes along with a price cap agreed by the G7. The goal is allowing Russian diesel to keep flowing to countries like China and India and avoiding a sudden price rise that would hurt consumers worldwide, while reducing the profits funding Moscow’s war in Ukraine. --- Joseph C. Unger
“’These EDA investments will create jobs, get workers the skills they need, and build economic resiliency for communities that have been impacted by the declining use of coal.’”
Why this is important: The U.S. Department of Commerce has given $4 million to groups supporting business growth and workforce development in coal-impacted West Virginia communities. The grants are for projects such as: 1) construction of water capacity for several local manufacturing facilities, 2) establishing a new green technology job training program for an electric vehicle manufacturing facility, and 3) the Southern Appalachian Labor School, Kincaid, received a $548,000 grant for establishment of the Coalfields Workforce Construction Training program, providing workforce certifications for displaced coal economy workers. --- Mark E. Heath
Here is a round-up of the latest statistics concerning the energy industry.
PETROLEUM
NATURAL GAS
COAL
RENEWABLES
