Posts Tagged ‘RGGI’

Indeck's Compact Clause Challenge

Written by Mike Pisauro on April 25th, 2009 in Clean Air, Federal, Global Warming, legislation | No Comments »

As I wrote recently, Indeck Corinth, L.P. has filed suit against the Governor of New York, the NY Department of Environmental Conservation and other agencies, challenging that state’s participation in the Regional Greenhouse Gas Initiative (RGGI). According to the complaint Indeck, a power generating company, alleges the state’s participation in RGGI is illegal for multiple reasons. The most interesting of these claims is that RGGI, itself, is “unconstitutional.” Indeck alleges that RGGI is an interstate compact that, under the Unites States Constitution, requires the consent and approval of Congress. Specifically under Art. 1, §10 Cl. 3 of the Constitution provides:

No State shall, without the Consent of Congress, lay any Duty of Tonnage, keep Troops, or Ships of War in time of Peace, enter into any Agreement or Compact with another State, or with a Foreign Power, or engage in War, unless actually invaded, or in such imminent Danger as will not admit of delay.

Indeck alleges RGGI is an interstate agreement or company but which has not been approved by Congress , is, in fact, illegal. The complaint also provides that:

Congress has the power to regulate emissions and establish interstate emission limits, which it has expressly chosen not to do. RGGI’s supplemental regulations are stricter than Federal regulations promulgated by the United States Environmental Protection Agency and thus, impermissibly encroach on Federal supremacy and interfere with the Federal interest in climate policy and Federal interest in regulating a national and international pollutant.”

One would think that after 200 plus years of having a constitution, one of the earliest portions of that constitution would have a clear and easy answer to this question. As with many things in law, however, there is no easy answer. Having said that, a review of the case law and commentary would seem to suggest that RGGI can operate legally – without obtaining Congress’ approval. In the last 100 years, caselaw dealing with this issue clearly demonstrates that that there are interstate compacts that require congressional approval and there are those that do not. The question seems to hinge on whether the interstate compact could/would have the potential to increase the political power of the states over the federal government.

The leading case in this area of the law is: United States Steel Corp. v. Multistate Tax Commission, 434 U.S. 452 (1978). In Multistate Tax Commission the Court indicated that, if read literally, the Compact clause would prevent any grouping of states from entering into any kind of agreement no matter how trivial and short in duration. The Court did not believe that this was the result the constitutional framers would have desired. The Court then reaffirmed the “test” from an earlier case that limited the need for Congressional approval to “formation of any combination tending to the increase of political power in the States, which may encroach upon or interfere with the just supremacy of the United States.” The Court also looked to see how the compact acted against these four questions:

· did the compact give the states or the multistate agency powers it did not already have?

· did the States delegate their sovereign power to the agency?

· did the state’s have the freedom to reject or accept the model rules and?

· could the States withdraw if they wanted?

In Multistate Tax Commission, the plaintiffs were challenging the creation of a multistate agency by several states to deal with the taxation of businesses with locations in multiple member states. The Court ultimately rejected the challenge by United States Steel under the compact clause. One of the reasons the Court gave was that, by joining together, the States were not doing anything that they could not have done on their own. Therefore, the answer to the first question is “no,” The multistate compact did not give the States power they did not already have.

The situation with RGGI is very similar to Multistate Tax Commission. Each State has the power to regulate air pollution independently of one another (note that GHGs are considered air pollution and can be regulated under the Clean Air Act – but that is a topic for another post.) It is conceivable that each State could independently regulate GHG emissions and create their own auctions for allowances. Each power generator in each state would then have to buy allowances from that state. Multistate generators would have to buy allowances in each state in which they had power plants. The multistate generators would not be able to transfer a NJ allowance to NY if they need to emit additional GHGs in NY. This system would be inefficient and might even cause more leakage than what is already occurring. RGGI is only improving the efficiency of a cap and trade system - it is not increasing the state power or RGGI’s power and, therefore, should pass muster on this requirement.

As to the second question, the Memorandum of Understanding signed by the RGGI explicitly states that RGGI has no regulatory or enforcement authority and that authority is reserved to the States. Therefore, the answer to that question is clearly “no.”The States did not give up any of their sovereign authority to RGGI.

As to the third question, there is nothing in the MOU that explicitly requires a State to adopt all portions of the Model Rule. Also, if I recall correctly, the model rule provides for various options that the State could adopt.

Lastly, in regards to the fourth question, the MOU also provides that any State can withdraw from RGGI with 30 days notice.

Based on the Court’s test RGGI will likely prevail against Indeck’s challenge under the Compact Clause. There may be other constitutional challenges, for example under the Commerce Clause, which may be of concern. Also, proposed Federal law would supplant RGGI for several years. But for now RGGI will be with us.


RGGI's 3rd Auction adds to NJ coffers

Written by Mike Pisauro on April 5th, 2009 in Clean Air, Global Warming, Renewable Energy | No Comments »

On March 18th RGGI had its third auction of CO2 allowances. Overall the auction brought in $117,248,629.80. The auction sold not only 2009 allowances at $3.51 per ton and also sold some 2012 allowances at $3.05 per ton. Of the total proceeds, NJ will receive $15,909,991.11 for the 2009 allowances and 864,058.90 for the 2012 allowances.

How will the $16,774,050.01 be spent in NJ? NJ enacted the Global Warming Solutions Fund (2007 c. 340) back in the very beginning of 2008. The statute provides on how the funds received from the RGGI auction will be allocated.

Sixty percent of the receipts will be sent to the NJ Economic Development Authority. The EDA is to provide grants or other financial assistance to commercial, institutional and industrial groups’ implementation of energy efficiency projects and installation of efficient electric generation facilities which could, but does not have to include renewable energy systems.

Twenty percent of the funds are to be dedicated to the reduction of electricity demand or costs of electricity for low and moderate income residential customers.

Ten percent goes to DEP for support of local government’s efforts to reduce greenhouse gas emissions. These efforts can include energy efficiency, renewable energy and land use programs.

Lastly the remaining ten percent is to be used by the DEP for forest and tidal marsh stewardship and restoration programs.

Hopefully, NJ takes these funds and uses them to truly achieve maximum results of reducing energy consumption through effective energy efficiency programs and the promotion of renewable energy. The next auctions are scheduled for June 17th and Sept. 9th. Beyond that may be an issue as a recent lawsuit by Indeck Energy is challenging NY’s RGGI program. Are other companies going to follow? In a future post I will take a look at the Indeck suit.


RGGI's first sale

Written by Mike Pisauro on September 30th, 2008 in Global Warming | No Comments »

On Thursday, Sept. 25th, the Regional Greenhouse Gas Initiative (RGGI) held their first sale of allowances.  RGGI is an interstate compact comprised of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont.  RGGI is a cap and trade system for greenhouse gases.  Overtime, the amount of allowances available for purchase will be reduced so that ultimately start reducing emissions from certain power plants by 2.5 percent between 2014 to 2018.

On Thursday, 12,565,387 allowances (or tons of CO2) were sold at a price of $3.07 per ton.  Interestingly there were was demand for more allowances than there were allowances available.    There will be a second auction in December.  Also of interest was that New Jersey was not part of the auction.  I hope to explain those reasons in a later post.


Welcome to NJ Environmental Blog

Written by Mike Pisauro on January 7th, 2008 in Uncategorized | No Comments »

Welecome to my first blog. With this blog I will look at environmental issues affecting New Jersey. In upcoming entries I will be talking about global warming, RGGI, renewable energy, and coastal issues. If there is a topic you would like to read about, please let me know at Mike@fplegal.com

-Mike Pisauro