Vol.2 Issue 4 (April/May 2014)
Welcome to the April/May issue of Plugged In, NCSL’s state and federal energy newsletter. This month, Plugged In highlights state legislation in Pennsylvania regarding forced pooling of oil and gas leases, Utah’s net metering policies, and an Ohio bill to suspend the state’s alternative energy resource standard. Plugged In also provides updates on seismic activity rules related to oil and gas drilling, state action to allow or ban Tesla Motors from selling cars directly to consumers, as well as the latest federal energy news.
For questions regarding the newsletter or to be added to the distribution list, please contact Kristy Hartman or call 303-856-1509.
Forced pooling or compulsory pooling allows oil and gas companies to gain access to minerals beneath private property, even if the landowners object. A majority of states have some form of a forced pooling law. The specific provisions vary from state to state, but generally companies can extract minerals from a large area or "pool" if leases have been negotiated for a certain percentage of that land. In Pennsylvania, a group of 57 landowners of 16 leases tried to prevent EQT Corporation from performing horizontal drilling activities on the leased land by arguing that the company could not pool the leases. EQT argued that recently passed Pennsylvania Senate Bill 259 allows forced pooling, but landowners countered that the bill violates a state constitution prohibition on new laws changing existing contracts. However, a Pennsylvania judge has ruled that forced pooling is constitutional as long as the existing contracts did not explicitly prevent it.
The Utah legislature enacted a bill in March to amend the state’s net metering policies, requiring the Public Service Commission and the boards of directors of electric cooperatives to seek public comment and determine the costs and benefits of net metering programs to both utilities and customers. These entities may then impose a charge, credit or ratemaking structure (including a tariff) based on these findings. The legislation now allows the Public Service Commission to authorize customer credits for excess electricity generated annually for use in low-income assistance programs. Utah has 18 megawatts (MW) of solar energy installed, ranking 27th in the country in terms of installed capacity, according to the Solar Energy Industries Association. The state has a voluntary renewable energy goal.
Oklahoma Governor Mary Fallin recently signed Senate Bill 1456, which directs retail electric suppliers to develop a new rate class for distributed generation customers to cover infrastructure costs. The measure will take effect later this year and does not apply to customers with distributed generation as of Nov. 2014. The new rate class and any associated tariffs must be created by the end of 2015 and approved by the state’s Corporation Commission. Governor Fallin also issued an Executive Order saying that the legislation is not a mandate for utilities to develop a tariff system for distributed generation. According to the order, approximately 350 Oklahomans are distributed generation customers.
A bill in California is sparking a debate over whether the state’s oil industry is a fair contributor to the state’s economy. Senate Bill 1017, sponsored by Senator Noreen Evans, would enact a 9.5 percent severance tax per barrel of petroleum—expected to raise an additional $2 bill annually. Revenue from the tax would be provided to education-related projects, state park maintenance and improvements, and health and human services. However, the oil industry trade organization Western States Petroleum Association recently released a studying saying that the oil sector already contributes $21.6 billion annually in state and local taxes. According to the study, implementing a new tax would threaten jobs and production in the state.
The legislature of the U.S. Virgin Islands has sent a bill to the Governor establishing a feed in tariff for renewable energy. The legislation would authorize entities to generate electricity from renewable energy sources and sell the electricity to the Virgin Islands Water and Power Authority through power purchase agreements. Rates will be determined by the Public Service Commission. Legislation also establishes caps on net metering capacity.
An Ohio Senate bill would suspend 2008 legislation which created the state’s Alternative Energy Resource Standard and Energy Efficiency Resource Standard. The suspension would create a two-year freeze on the state’s requirement for utilities to purchase 12.5 percent of their electricity from renewable energy sources by 2025 and a requirement for investor-owned utilities to reduce electricity demand 22 percent by 2025 while a panel studies the costs and benefits of the requirement. The bill passed the Senate and has been sent to the House.
Recent seismic activity has prompted studies examining whether a direct link exists between earthquakes and the wells used to dispose of waste water from the hydraulic fracturing process. State legislators and regulators are taking a variety of actions to address concerns surrounding induced seismicity. For example, Ohio’s Department of Natural Resources (ODNR) announced new permitting rules in April for oil and gas drilling in the state. According to ODNR, operators will be required to install seismic monitors if horizontal drilling techniques are used within three miles of a known fault or seismic activity area. If the monitors record seismicity above 1.0 magnitude, all drilling activities will be put on hold while the agency investigates. Operations will be suspended if the investigation finds a connection between the seismic activity and the hydraulic fracturing process. ODNR announced that the change in policies is “in response to recent seismic events in Poland Township (Mahoning County) that show a probable connection to hydraulic fracturing near a previously unknown microfault.” Additionally, the Oklahoma Corporation Commission approved rules that would require oil and gas operators to report daily injection pressure and volume measurements. However, the proposed rules must be approved by the legislature and governor before they are formalized.
Tesla Motors filed an appeal in New Jersey Superior Court in April following a decision by the state Motor Vehicle Commission to prohibit direct sales of new cars by automakers. At issue is whether Tesla or any other auto manufacturer can sell cars directly to the consumer, bypassing the traditional franchise model. Several New Jersey legislators have introduced bills this session to allow exemptions for Tesla sales, but those bills are still pending. New Jersey isn’t the only state to ban direct sales—Arizona, Maryland, Texas and Virginia have similar laws protecting car franchises. In these states, a consumer can view a Tesla in stores, but cannot test-drive or buy a car directly from the showroom. Automotive dealers have argued that the franchise system gives the consumer choices and drives competition since the consumer can buy from any one of a number of dealers. Officials in other states, however, are working with car dealers to allow Tesla to sell vehicles directly to consumers. Washington approved a bill in March, which allows Tesla to open additional stores in the state. The bill language includes a provision to prevent car companies from circumventing the traditional model, unless the company held a vehicle dealer license in the state of Washington on Jan. 1, 2014. Additionally, New York’s Governor Cuomo announced an agreement permitting Tesla to sell cars from five licensed retail locations and in Ohio, the Senate recently approved a bill that would allow for three direct-sale locations. The Ohio House is expected to consider the bill shortly, where approval is likely.
Virginia Governor Terry McAuliffe announced in March that he plans to reinstate a climate change commission. The Governor’s Climate Change Commission was established in 2007 by Executive Order, following the release of a state energy plan. The commission released a final report in Dec. 2008 and has not been active in recent years.
Wyoming regulators are considering new rules examining the minimum distance between oil and gas operations and buildings such as schools, hospitals and residences. However, it’s unclear exactly when and how the rule would be implemented. Wyoming regulations currently require a minimum setback of 350 feet from a residence or public building.
The Energy Information Administration reports that domestic solar capacity has increased 418 percent since 2010, the majority of which has been through installations on home and businesses. Large-scale installations have also increased during this period and recent examples include Boeing Co.’s announcement in April that they will be constructing Guam’s first solar plant. The plant will be managed by NRG Energy; the 25 MW plant will generate enough electricity to power 12,000 homes annually. Additionally, the 11 MW Maywood Solar Farm recently opened on the 43-acre Reilly Tar and Chemical Superfund site in Indianapolis. Not to be outshined, Ikea recently announced plans to purchase a 98 MW wind farm in Illinois. This purchase would be Ikea’s largest single renewable energy investment globally and serve 18 percent of the company’s electricity needs globally.
The Environmental Protection Agency (EPA) retroactively lowered its mandates in April for the 2013 renewable fuel standards that refiners must blend into traditional fuels. EPA’s original mandate was based on a projection of how many gallons of ethanol-equivalent biofuel producers would make. The actual production was much lower than the agency projected; therefore the mandates were lowered to meet the actual production of biofuel, at .0005 percent.
The National Transportation Safety Board (NTSB) held a public forum in Washington D.C. in April to explore how to improve the safety of crude oil and ethanol shipments. The board heard from a number of panelists on the engineering of rail cars and issues with rail tracks and shipments. NTSB continues to investigate issues with oil transport following multiple fire and crash incidents involving rail-cars. The Department of Transportation has also announced an emergency order that will require railroad operators to notify local emergency responders whenever oil shipments travel through their states. In the meantime, the oil and rail industry have imposed voluntary safety standards. Canada has also announced it will phase out the use of older rail cars for transporting oil by May 2017. The move is in response to last year’s rail-car derailment in Lac-Megantic, Quebec that killed 47 people.
The Office of Management and Budget (OMB) is moving forward with review of EPA’s new greenhouse gas emissions from existing power plants proposed rule. OMB officials met with representatives from a number of energy companies in April to discuss the rule. The proposed rule was submitted to OMB for interagency review on March 31.
The Department of Energy (DOE) released its incident report for its investigation into radiological releases at the Waste Isolation Pilot Plant (WIPP) in New Mexico on February 14. The report, the first phase of the department’s investigation, includes the initial investigation focusing on the release of the radioactive material and related exposure to the workers. The investigative board will produce a second report that explores the cause of the release once entry teams determine the source of the event.
As part of his Climate Action Plan, President Obama announced a new strategy to reduce methane emissions through a number of federal agency programs. Some upcoming programs and changes within the new strategy include: updating standards from the Department of Interior to reduce venting and flaring of methane from oil and gas production; a Bureau of Land Management program for the capture and sale of methane; proposed standards from the EPA to reduce methane emissions from landfills; and more.
The Mine Safety and Health Administration (MSHA) released its final rule for the amount of coal dust allowed in coal mines, in an effort to reduce cases of black lung disease. According to the Department of Labor, 76,000 coal miners have died at least in part due to black lung disease since 1968. The rule reduces the overall dust standard from its current 2.0 milligrams per cubic meter of air, to 1.5 milligrams. In certain mine entries and miners that have black lung disease, the standard is cut in half from 1.0 milligrams to 0.5. The rule will also require more frequent sampling of areas and will require immediate action when dust levels are too high.
Please join us in Minneapolis, Minnesota in August for NCSL’s annual Legislative Summit. NCSL’s Energy Policy Summit pre-conference will take place on Aug. 19 and includes sessions on the future of domestic energy sources, the benefits and challenges of U.S. natural gas exports, and how innovative technologies are driving change in the electric industry.
The EPA is working to craft final rules that would regulate the greenhouse gas emissions from future and existing power plants as part of President Obama’s Climate Action Plan. As these regulations are being developed, states are responding through legislation and public comments to ensure the rules will meet their energy needs and resource mixes. Read the latest NCSL web brief to learn more about state legislative action.
As states reach higher levels of renewable energy, challenges can arise because of larger amounts of wind and solar energy on the electric grid. Although power systems have been designed to incorporate the variable and uncertain nature of energy demand, renewable energy can add to this variability. This webinar explores the variety of solutions are available to reduce these impacts, and how states can cost-effectively integrate renewables into the power system. Register here.
The topic of climate change remains contentious in many states, and legislative trends demonstrate that states are taking a range of approaches with climate policy. This state policy update lists legislative activity from 2012 through 2014, including trends such as climate action plans, responses to EPA regulations, cap and trade, CCS and adaptation.
A recording and presentation slides from our April 17 webinar are now available. The webinar explored how the nation’s changing energy mix, the retirement of coal power plants, growth of natural gas, rising renewable energy production and the threat of nuclear plant retirement have created an environment that may pose a risk to a reliable electric grid. Speakers included FERC Commissioner Tony Clark, PJM Interconnection’s Craig Glazer and ISO-New England’s Jeff Turcotte.
In numerous state legislatures and public utility commissions, debates are ongoing regarding the most fair and appropriate way to balance customer demand for distributed generation with the impacts new technologies have on the electric power grid. This webinar featured perspectives from the electric power and solar industries on the deployment of rooftop and utility-scale solar, net metering programs and the value of the electric power grid. View the recording and presentation slides from this May 1 webinar.