State Climate Legislation Takes Aim at Natural Gas Industry

Pierce Atwood LLP

This is the second post in an ongoing series focused on how state and federal measures addressing climate and carbon reduction are affecting the natural gas industry. You can find the first post in this series here.

Nevada

In the latest effort to phase out or reduce the use of natural gas, a bill was introduced to the Nevada Legislature on March 23, 2021 (A.B. 380) that would set emissions reduction targets for buildings over the next 30 years to achieve a 95% decrease in emissions from buildings by 2050. The latest bill builds on Nevada’s 2019 climate strategy, which established a goal of economy-wide net-zero emissions by 2050.[1]

The bill would direct the Nevada Public Utilities Commission (“Nevada PUC”) to open an investigatory docket to examine how gas utilities can assist the state in achieving its 2050 emissions goal and how gas utilities can maintain safety standards while being affected by energy efficiency measures. The bill also proposes other topics the Nevada PUC could investigate, including: (1) the cost, availability, and environmental impacts of alternative fuels to replace gas; (2) improvements to forecasting and analysis of gas demand; (3) adjusting depreciation schedules for gas system investments; and (4) financial tools to mitigate rate impacts of declining use of gas systems.

The bill proposes to require gas utilities to submit an Infrastructure, Supply and Alternatives Plan every three years beginning on May 1, 2023. The Plan would include projections for the annual demands on the gas utility’s transmission and distribution, a description of planned investments and activities, and alternatives to those investments and activities. Gas utilities may also identify replacement projects to address safety and reliability concerns.

On March 22, 2021, Senate Majority Leader Nicole Cannizzaro (D-Las Vegas) introduced a bill (S.B. 296) that would authorize gas utilities to seek Nevada PUC approval of a gas infrastructure modernization plan. The plan would be applicable to certain projects, such as: (1) replacement projects; (2) projects that reduce greenhouse gas emissions through reduction of natural gas system leaks; and (3) other projects the Nevada PUC finds mitigate system integrity risks.

Update:  Massachusetts

On March 26, 2021, the Baker Administration signed a comprehensive climate bill into law. The new law, which aims to ramp up clean energy development, will place increasing pressure on the state’s reliance on natural gas generation. The new law establishes an ambitious net-zero emissions by 2050 goal, comprised of interim milestones of 50% lower emissions than 1990 by 2030, and 75% lower emissions than 1990 by 2040. The new law calls for an additional 2,400 MW of offshore wind by 2027, clean energy technology development benchmarks, and requires utilities to purchase increasing amounts of renewable energy. The law authorizes the Secretary of Energy and Environmental Affairs to establish emissions limits for six sectors of the Massachusetts economy, including the electric power and natural gas distribution and service industries.

The law also targets emissions attributable to leaking gas infrastructure by requiring gas companies to file with the Department of Public Utilities (“DPU”) a plan to address aging or leaking gas infrastructure. Each company’s gas infrastructure plan will include interim targets for the DPU’s review to ensure that the gas company is on pace to reduce the leak rate and replace the company’s infrastructure. The DPU may leverage a penalty against any gas company that fails to meet its interim target, up to 2.5% of the company’s transmission and distribution service revenues for the previous calendar year. The law also incentivizes natural gas companies to experiment with new clean technologies by creating a pilot program through the DPU for development of utility-scale renewable thermal energy.

[1] An Act Relating to Greenhouse Gas Emissions; Requiring the State Department of Conservation and Natural Resources to Issue an Annual Report Concerning Greenhouse Gas Emissions in This State; and Providing Other Matters Properly Relating Thereto, SB 254 (80th Sess. 2019).

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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