United States: Energy Sector Alert Series: Hot Topics in California

Important energy issues continue to arise at the intersection of law and policy in California. Here are eight hot topics that require the attention of entities with interests in California's energy sector.

1. Fallout From Spills and Leaks

The past year brought two high-profile incidents in the energy sector: (1) the May 2015 rupture of the Plains All American Pipeline, which discharged approximately 3,000 barrels of crude oil along the California coast; and (2) the October 2015 discovery of a leak from the Aliso Canyon storage facility, which emitted 100,000 tons of methane into the air near Los Angeles. Legal and policy responses to these incidents continue to emerge at the state and federal levels. For example:

  • on October 8, 2015, Governor Jerry Brown approved AB 864, which requires certain oil pipelines to use leak detection systems and other technologies to reduce potential environmental impacts; 
  • on February 5, 2016, the California Department of Conservation's Division of Oil, Gas, and Geothermal Resources issued emergency rules requiring daily inspections of wells and other testing at underground natural gas storage facilities;
  • on February 5, 2016, the US Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) issued an advisory bulletin calling for operators of underground storage facilities used for the storage of natural gas to undertake specific practices to prevent and mitigate the breach of integrity, leaks, or failures; to ensure the safety of workers and the public; and to protect the environment; and
  • on February 17, 2016, PHMSA issued a report citing corrosion as the cause of the pipeline failure, prompting calls for federal requirements for pipeline technology. 

These incidents illustrate the need for energy companies (many of which may be struggling to meet daily demands and budgetary pressures) to kept abreast of recent regulatory changes, review and update their compliance programs as needed, and be ready to deploy strategic responses in the event an incident occurs. A "multi-branch" approach is critical to successfully addressing the legal, policy, and media dimensions of high-profile incidents, when they occur.   

2. Expanding Mandate for Renewables

In October 2015, Governor Brown approved SB 350, the Clean Energy and Pollution Reduction Act of 2015. SB 350 increased the state's renewables portfolio standard (RPS) to 50% by 2030. (Previously, the state's RPS was set at 33% by 2020.)

New initiatives are underway to achieve SB 350's goals. For example:

  • the California Air Resources Board (ARB) has proposed a regulation to create a penalty mechanism to support enforcement of the RPS;
  • the California Energy Commission (CEC) has opened a new proceeding to address amendments to the RPS guidelines needed to implement SB 350; and
  • the CEC is working with the California Public Utilities Commission (CPUC) and California Independent System Operator (CAISO) to launch Renewable Energy Transmission Initiative (RETI) 2.0 to establish the relative potential associated with various renewable locations in California.

As these agencies modify their regulations and programs to address the expanded RPS mandate, interested entities should ensure that their views are well represented, and identify new obligations and potential business opportunities that may result.

3. Streamlined Permitting

The CEC, Bureau of Land Management, US Fish and Wildlife Service, and California Department of Fish and Wildlife have collaborated to create the Desert Renewable Energy Conservation Plan (DRECP) to streamline renewable energy and transmission permitting while advancing conservation goals. The DRECP covers 22.5 million acres in seven California counties. It has been split into two phases: Phase I (for federal lands) and Phase II (for non-federal lands).

In November 2015, in compliance with the National Environmental Policy Act (NEPA), the Final Environmental Impact Statement was released for Phase I, which triggered a 30-day "protest" period. The collaborating agencies are now analyzing the protests, but it is not anticipated that any resulting changes to the DRECP will be significant enough to warrant further NEPA analysis. Interested parties should prepare for the release of the Record of Decision, after which implementation of Phase I will begin immediately. Meanwhile, Inyo and Imperial counties have issued plans of their own as part of Phase II, and the other counties' plans are forthcoming.

4. Energy Storage Needs

SB 350's mandate for more renewable energy, much of which is produced intermittently, is likely to trigger further interest in energy storage. This may focus attention on AB 33, a bill that would require the CPUC to determine what role large-scale energy storage could play as part of the state's overall strategy to diversify energy resource portfolios. And energy storage will become a hotter topic as the CPUC develops a framework for making residential electricity rates based on "time of use."2 Interested entities should seek opportunities to engage in the legislative and regulatory processes.   

5. Energy Efficiency Targets

SB 350 requires the CEC, CPUC, and local utilities to establish annual targets for statewide energy efficiency savings and demand reduction that will achieve a cumulative doubling of statewide energy efficiency savings in retail electricity and natural gas usage by January 1, 2030. SB 350 sets a deadline of November 1, 2017 to establish these targets, and requires a public process that allows input from stakeholders. Owners of existing building stock, significant consumers of electricity or natural gas, and others with affected interests should evaluate the impact these targets may have on their current operations, and consider participating in the stakeholder process as appropriate.

6. The Energy-Water Nexus

California's historic drought is intensifying the competition for water between the energy sector and others. The State Water Board has begun to issue curtailment notices with greater frequency, calling for water rights holders to limit or stop diverting water. On February 18, 2016, the Department of Water Resources (DWR) released draft regulations for groundwater management. The regulations must be finalized by June 1, 2016, and DWR is currently soliciting public input. As a major water users, the energy sector should consider commenting on DWR's draft regulations, and more generally also needs to plan ahead, protect water rights, and engage in advocacy as agencies formulate processes to address sustainability.

In addition, the energy sector should monitor and participate in water rate-setting procedures, as water suppliers seek to regain revenues lost from water conservation measures that have been put in place due to the drought.

7. Revisions to Greenhouse Gas Regulations

Through the Global Warming Solutions Act, AB 32, California was well on its way to complying with the greenhouse gas (GHG) emissions reductions set by the US Environmental Protection Agency's Clean Power Plan (CPP). On February 9, 2016, the US Supreme Court stayed implementation of the CPP pending judicial review in the DC Circuit. But California is leading a coalition of states in support of the CPP, and continues to work toward CPP compliance despite the stay. On February 16, 2016, Governor Brown was among a group of 17 governors that signed the Governors' Accord for a New Energy Future, which includes commitments to expand clean energy sources, encourage clean transportation options, and other policy changes. And the ARB recently proposed changes to the state's mandatory GHG emissions reporting and cap-and-trade regulations to address CPP compliance. Generators, refineries, fuel suppliers, and other energy industry members should review the ARB's proposal and consider providing feedback if their interests so merit.

8. Impacts of Proposed Projects' GHG Emissions

California is plowing new ground in efforts to incorporate climate change into environmental impact reviews. The Supreme Court of California recently held that an individual project could have a significant impact on the environment based on its GHG emissions, under the California Environmental Quality Act (CEQA), the state analogue of NEPA.3 That contrasts with federal GHG guidance, which states that, for any given project, significant impacts would not be expected "based on cumulative impacts of GHG emissions alone."4 While the Court suggested a few "potential pathways" to evaluate the cumulative significance of a proposed project's GHG emissions, it conceded that none of those approaches would guarantee CEQA compliance. Energy project proponents need to be prepared to deal with this uncertainty, and are advised to help develop the evaluation and compliance standards that may be required to fulfill this CEQA requirement.

Conclusion

Success in California's energy sector will require strategic thinking and advocacy. Energy companies should be prepared to work quickly and with all three branches of government—on the state level and federal level—as incidents occur and legal frameworks take shape. There are coalitions to be built and governmental interactions to navigate. Beyond merely watching legal and policy developments, California's energy industry should be actively participating.

WilmerHale's Presence in California

Established in 2007 and 2005, respectively, our Los Angeles and Palo Alto offices are built upon the firm's guiding principles of a dedication to excellence in our legal work and our client service, a collaborative and collegial environment, diversity, and a commitment to public service. Our California-based attorneys advise clients on a range of regulatory, transactional, intellectual property, securities and litigation/controversy issues. WilmerHale's Strategic Response Group assists clients in navigating multifaceted challenges at the intersection of law, policy, and business. Our recent experience on energy matters in California has included assisting independent power producers with obtaining and defending regulatory approvals for energy project development, advising a utility company in its effort to develop and implement a best-in-class compliance system, advising a wholesale electricity supplier regarding proposed transmission projects, and defending a client against allegations of energy market manipulation in an enforcement action brought by the Federal Energy Regulatory Commission in the Federal District Court for the Eastern District of California. 


1 Mr. Gold is a special counsel in WilmerHale's Boston office. Ms. Smith is an associate in WilmerHale's Denver office. Ms. Gellman is a counsel in WilmerHale's Los Angeles office.
2 CPUC, Order Instituting Rulemaking to Assess Peak Electricity Usage Patterns and Consider Appropriate Time Periods for Future Time-of-Use Rates and Energy Resource Contract Payments (Dec. 28, 2015) ("[time-of-use] rates can provide an incentive for customers to store solar energy during the early afternoon hours for use during the later afternoon and early evening peak hours").
3Center for Biological Diversity v. Department of Fish & Wildlife, 62 Cal. 4th 204 (2015).
4 Council on Environmental Quality, Revised Draft Guidance on the Consideration of Greenhouse Gas Emissions and the Effects of Climate Change in NEPA Reviews (Dec. 2014).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.