Article by Kyle Danish, Shelley Fidler, Kevin Gallagher, Megan Ceronsky and Tomás Carbonell

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The long-awaited Kerry-Graham-Lieberman bill release has been delayed. Citing frustration with the newly-announced plan of Senate Majority Leader Harry Reid (D-NV) to give immigration reform an expedited spot on the legislative agenda, Senator Graham said this weekend that he will be "unable to move forward on energy independence legislation at this time." . . . President Obama is calling on the Senate to tackle climate change immediately following financial reform. Enactment of financial reform legislation could make it easier to move forward with a climate program that includes emissions trading . . . Senators continue to circulate proposals that would remove EPA's authority to regulate GHG emissions. A new proposal from Sen. Voinovich (R-OH) would have sweeping effect, and drew interest from Sen. Rockefeller (D-WV) . . . State Department Climate Envoy Todd Stern believes the United States and other major economies can pull together the $30 billion "fast-start" financial aid package promised by the Copenhagen Accord . . . A battle is looming in the Senate on the distribution of revenues from oil and gas drilling in coastal waters.

Executive Branch

  • President Obama Calls for Senate to Tackle Climate Change Following Financial Reform Debate. President Barack Obama called addressing climate change "one of these foundational priorities . . . that has to be done soon," and said he expects the Senate to take up climate change in a matter of weeks, once the chamber completes work on financial reform legislation. The President also complimented the "good bipartisan process" being used to develop a climate change bill in the Senate, while noting that any bill must attract support from the business community. The President acknowledged that individual members of Congress might fear the short-term impacts of a vote in favor of climate change legislation, but said that "if we don't take these steps soon, we're going to have some big, big problems." Carol Browner, President Obama's energy and climate advisor, told reporters that the Administration is open to using border tariffs to protect U.S. industry against any competitiveness impacts of climate regulation. President Obama had warned that the border adjustments in the Waxman-Markey bill could spark a trade war.
  • EPA Submits Tailoring Rule to OMB for Final Review. The Environmental Protection Agency (EPA) has transmitted its final "Tailoring Rule" to the White House Office of Management and Budget (OMB) for review, signaling that the rule is close to being promulgated. Proposed in September 2009, the Tailoring Rule would phase-in the application of the Clean Air Act's Prevention of Significant Deterioration (PSD) and Title V permitting requirements to greenhouse gas (GHG) emissions from stationary sources. Earlier this year, EPA Administrator Lisa Jackson indicated in a letter to Sen. Jay Rockefeller (D-WV) that the Tailoring Rule would require PSD and Title V permitting first for facilities that are already subject to these programs for non-GHG pollutants. The program would then expand to cover facilities with annual emissions that are "substantially" higher than the originally proposed threshold of 25,000 tons CO2e.
  • Major Economies Assembling Financial Package to Fulfill Copenhagen Commitments. According to the State Department's Special Envoy on Climate Change, Todd Stern, major economies – including the U.S. – have made progress toward preparing a $30 billion package of "fast start" assistance to developing countries; the package would be made available from 2010 to 2012. The assistance represents a step toward fulfilling the Copenhagen Accord commitment for developed countries to generate $100 billion per year in developing country assistance by 2020. Although it is not clear which other countries will contribute "fast start" funding, the Administration officials pointed out that the U.S. has tripled climate-related appropriations to the State Department, the U.S. Agency for International Development, and the Treasury Department in 2010. In addition, the Administration has requested $1.9 billion in appropriations for international climate finance for fiscal year 2011.


  • Kerry-Graham-Lieberman Bill Release Delayed as Graham Pulls Out. Senator Lindsey Graham (R-SC) has stepped away from his efforts with Senators John Kerry (D-MA) and Joseph Lieberman (I-CT) to develop climate legislation. In a letter, Sen. Graham attributes his withdrawal to recent reports indicating that Congressional leadership and the Administration are prioritizing immigration reform over energy-climate legislation, stating: "This has destroyed my confidence that there will be a serious commitment and focus to move energy legislation this year. . . . I deeply regret that election year politics will impede, if not derail, our efforts to make our nation energy independent." In response, Majority Leader Harry Reid (D-NV) released a statement describing immigration and energy reform as "equally vital" to the nation's economic success and security, and said that "energy could be next if it's ready." Sen. Kerry released a statement describing the postponement of the bill's release as temporary, and committed to continuing to work with Sen. Lieberman, and if possible with Sen. Graham. White House energy and climate advisor Carol Browner also released a statement, describing the Administration as "determined" to pass energy-climate legislation this year, and urging Senators Kerry, Graham, and Lieberman to continue their work. In an interview with reporters, Sen. Lieberman said that the three Senators had talked at length over the weekend and that they "are still working together." Sen. Lieberman also said that Sen. Graham had suggested sending the bill draft to EPA so that the Agency can begin the economic modeling, which will take five to six weeks. Sen. Lieberman said that it will take the help from the White House and Majority Leader Reid to "get back on track" and reassure Sen. Graham that there is a commitment to move forward with energy-climate legislation, and suggested that Sen. Graham and Majority Leader Reid needed to talk directly. The letter attributed to Sen. Graham is available here . The statement released by Sen. Kerry is available here . The statement released by Majority Leader Reid is available here . The statement released by Carol Browner is available here .
  • Voinovich Circulates Preemption Proposal. Senator George Voinovich (R-OH) floated a draft proposal that would bar the president, federal agencies, and state and local governments from taking any action to control GHG emissions that is independent of the actions mandated in federal climate legislation. The proposal goes farther than previous initiatives to preempt GHG regulation in that it would preclude federal action not only under the Clean Air Act, but also any other federal statutes, such as the National Environmental Policy Act, the Endangered Species Act, and the Clean Water Act. In addition, it would preempt civil litigation based on climate damages, such as tort and public nuisance lawsuits. The proposal would invest the Department of Transportation with "exclusive authority" to regulate vehicular GHG emissions, thereby depriving the EPA of such authority. In this way, the measure would prevent EPA from complying with its part of the Obama Administration's agreement with the State of California and the automakers on vehicle GHG emission standards and fuel economy. Sen. Voinovich released a statement saying that a climate bill must include comprehensive preemption in order to gain his support. Sen. Jay Rockefeller (D-WV), who circulated a similar but less sweeping draft preemption bill, said he would support the Voinovich proposal. Senator Kerry told reporters that he could not support the Voinovich proposal. The proposal is available here .
  • Offshore Drilling Revenue Sharing Debate Continues. Senators Jeff Bingaman (D-NM), Byron Dorgan (D-ND), and Jay Rockefeller (D-WV) have circulated a "Dear Colleague" letter in the Senate urging Senators to oppose distributing a portion of federal revenues from Outer Continental Shelf (OCS) drilling leases to the relevant coastal states. The letter argues that the revenue loss would be devastating to the federal Treasury, and that revenues rightly belong to the country as a whole, as the OCS is a federal resource. Sen. Mary Landrieu (D-LA), however, told reporters that there is "not going to be any drilling unless there is revenue sharing." The letter is available here .
  • Pelosi Supports Immigration Bill Before Climate. House Speaker Nancy Pelosi (D-CA) told reporters: "If the Senate is ready with an immigration bill, we don't want anybody holding it up for any reason." Reportedly, Speaker Pelosi also said it would be "fine" if action on the climate bill in the Senate was delayed to address immigration reform.
  • Lincoln Derivatives Legislation Includes Carbon Market Study. Legislation to reform regulation of over-the-counter derivatives reported by the Senate Agriculture Committee would create an interagency working group to make recommendations to Congress on oversight of existing and prospective carbon markets. The working group would be chaired by the head of the Commodity Futures Trading Commission and include the Federal Energy Regulatory Commission Chairman, the EPA Administrator, the Energy Information Administration Administrator, the Secretary of Agriculture, the Treasury Secretary, the Securities and Exchange Commission Chairman, and the Commissioner of the Federal Trade Commission. The legislation, the Wall Street Transparency and Accountability Act of 2010, does not otherwise explicitly reference carbon markets or carbon financial products. However, the bill explicitly provides authority to the Commodity Futures Trading Commission to regulate "emissions swaps."
  • Republican Senators Introduce Bill to Block GHG Impact Consideration Under NEPA. Republican Senators James Inhofe (OK), John Barrasso (WY), David Vitter (LA), Mike Enzi (WY), James Risch (ID), Bob Bennett (UT), and Pat Roberts (KS) have introduced the "NEPA Certainty Act." The legislation would bar federal agencies from considering GHG impacts in analyzing the environmental impacts of federal activities under the National Environmental Policy Act (NEPA).


  • Settlement Obligates Tenaska to Capture CO2 at New Coal Plant. In an agreement reached with the Environmental Defense Fund (EDF), Tenaska, Inc. agreed to install equipment that would capture 85% of the CO2 emissions from a new 600 MW coal-fired power plant to be built near Abilene, Texas. Tenaska plans to transmit the captured CO2 to oil fields in the Permian Basin, where it will be injected to enhance oil production. In exchange for this commitment, EDF agreed to withdraw its objections to state air quality permits for the plant. If the plant fails to meet the specified capture rate, Tenaska would be obligated to pay liquidated damages to EDF. The plant is scheduled to enter service in 2016.

States and Cities

  • Utah Withdraws from WCI, Arizona Bill Demands Legislative Approval of Participation. Utah announced that it will not participate in the Western Climate Initiative when that regional cap-and-trade program begins in 2012. The stated reason for the withdrawal was a lack of authorizing legislation. Utah joins Arizona, Montana, Washington and Oregon as original members of the seven member trading program that have signaled their intent not to implement the cap-and-trade program. The remaining members committed at this point to the cap-and-trade program include California, Manitoba, British Columbia, Ontario and Quebec. In related news, the Arizona legislature passed a bill, expected to be signed by Gov. Jan Brewer (R), that would prohibit state agencies from implementing GHG regulations without prior legislative approval.

Studies and Reports

  • RFF Paper Calls NSPS "Most Predictable, Likely, and Practical" Form of CAA Regulation of GHGs. The think tank Resources for the Future (RFF) issued a paper evaluating EPA's policy options if the agency regulates GHGs under the Clean Air Act's (CAA) New Source Performance Standards (NSPS) program. Under the NSPS program, EPA is directed to establish standards of performance for categories of new and modified stationary sources that significantly contribute to pollution that endangers public health and welfare. These standards must reflect the "best system of emission reduction . . . adequately demonstrated," taking into account economic, environmental, and energy consideration. In addition, states must establish standards of performance for existing facilities in source categories that are subject to NSPS. Although NSPS standards have almost always taken the form of maximum emission rates for individual facilities, the RFF paper argues that these NSPS provisions are flexible enough to accommodate an emissions trading program. Further, the paper argues that NSPS could be effectively used to mandate significant GHG emission reductions at coal-fired generating facilities. The paper is available at .
  • Commerce Department Releases Analysis of U.S. GHG Sources. The Commerce Department released an analysis of energy-related CO2 emissions for 349 industries, government (Federal, state, and local), and households for the 1998-2006 period. The report found that the CO2 intensity of the economy had declined between 1997 and 2007, such that without the efficiency gains U.S. CO2 emissions would have been 25% higher in 2007. The manufacturing sector reduced its CO2 emissions intensity during that period, but intensity gains and losses varied within the sector. The transportation services sector slowed only small gains in emissions efficiency. Households showed declining emissions efficiency, mostly due to efficiency loses in vehicular emissions. The report is available at .

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