Energy and Climate Change: A Race between Congress and the EPA

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Summary

The oil spill in the Gulf of Mexico has increased the chances that Congress will send energy-related legislation to the President's desk before the midterm congressional elections in November. Senate Majority Leader Harry Reid (D-NV) has indicated that he will bring a measure to the Senate floor by July 26, 2010 that addresses energy and encompasses issues related to the oil spill (likely in the form of some sort of restriction on off shore drilling), renewables (likely in the form of a Renewable Energy Standard), and energy conservation. Will that legislation also include a price on carbon in the form of cap and trade for any sector? We note that last year the House of Representatives passed and sent to the Senate H.R. 2454, the American Clean Energy and Security Act of 2009, comprehensive climate change legislation which, in part, sets goals for reducing emissions of greenhouse gases ("GHGs), including carbon dioxide, via an economy-wide (read: utility, industrial and transportation sector) cap-and trade system. The Senate has now gotten involved, with Majority Leader Reid soliciting Senate committees proposals, especially those that can muster the support of a 60-vote super-majority by Reid's July 26th deadline to bring a bill to the Senate floor. Given the debate, and divisions, on climate change, it is not clear whether any cap-and-trade system (economy-wide or merely utility only) for greenhouse gas emissions will ultimately be included in an energy bill that reaches the President's desk. However, if Congress fails to act in this area, the Environmental Protection Agency ("EPA") will step in and use its authority under the Clean Air Act (42 U.S.C. 7401) to regulate greenhouse gases from the utility, transportation and industrial sectors, and there is a small possibility that such regulation by EPA will include a cap-and trade program. EPA has already taken several steps to regulate GHGs.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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