Saudi Arabia Pursuing Nuclear Energy to Maximize Energy Diversity

By: Bandar Altunisi, Associate

Known as global powerhouse of fossil fuels, Saudi Arabia has focused on diversifying its energy sources in the last 10 years. Saudi Arabia considers solar energy to be a leading alternative energy source with an approximate potential 2,200 thermal kWh of solar radiation (sunshine) per square meter.[1] Furthermore, Saudi Arabia intends to pursue other alternative energy sources like wind power, waste to energy, biomass, and other viable sources of clean energy. King Abdullah City for Atomic and Renewable Energy (KACARE), a government authority charged with promoting development and advancing research in renewable and atomic energy, issued a roadmap with a goal of 54 GW of power produced from renewable energy sources (mostly wind and solar) by 2032.[2]

Recently, Saudi Arabia has contracted with many nuclear countries to begin developing a peaceful nuclear program. In 2011, Saudi Arabia signed agreements with France, Argentina, and South Korea for nuclear research and development and support for building nuclear reactors.[3] In 2012, China and Saudi Arabia agreed that Chinese experts would support the development, maintenance and research on reactors.[4] In 2013, Saudi Arabia singed a contract with Japanese companies to pursue reactor construction contracts deals with KACARE.[5] Saudi Arabia is clearly proactive about developing its nuclear program.

The primary reason why Saudi Arabia is pursuing a nuclear energy program is to meet rising domestic energy demands. “Energy consumption in Saudi Arabia is growing faster than any other country in the Middle East”.[6] Some economist estimates that in 20 years, Saudi Arabia will consume around two thirds of its own daily oil production capacity.[7] Solar and Wind energy cannot meet the energy demands of the Saudi population alone. Therefore, Saudi Arabia plans to have nuclear power provide 15% of Saudi Arabia’s power in 20 years.[8]

What steps should Saudi Arabia take in order to develop an effective and safe nuclear energy program? Firstly, an independent nuclear regulatory agency should be created to overlook the development and regulation of nuclear energy in Saudi Arabia. KACARE has announced its intention to establish Saudi Arabian Atomic Energy Authority (SAARA), a nuclear regulatory authority.[9] Although the specific powers of SAARA have yet to be outlined, it should serve as the primary authority over nuclear development, construction, regulation, maintenance, safety procedures, and waste management. SARAA should coordinate connectivity between nuclear reactors and the relevant grid operates and regulators.

Second, in preparation for building nuclear reactors, Saudi Arabia should anticipate and take into account the most likely natural occurrences and disaster of the specific area of each reactor’s location. For example, the majority of Saudi Araba experiences extremely high levels of heat during many months of the year and the reactor cooling systems must be built to withhold such temperatures, and continue to operate effectively, particularly in the summer.

Third, Saudi Arabia should make preliminary plans on how to deal with nuclear waste. Reprocessing facilities and storage facilities should be built before or in coordination with the nuclear reactors. Alternatively, Saudi Arabia can form agreements with other nations to accept Saudi nuclear waste and store it or reprocess it in foreign facilities. Planning ahead when it comes to nuclear waste management will help Saudi Arabia avoid many problems that current nuclear states face. The U.S., for example, has thousands of tons of nuclear waste with no permanent storage facility to store the waste in.[10]

Finally, Saudi Arabia must ensure the security of nuclear reactors, materials, and technology. Current nuclear powers should ensure that Saudi Arabia does not advance its nuclear program passed peaceful purposes. Saudi Arabia currently has many safeguard agreements in place with the IAEA, but other nations should sign bilateral agreements to ensure oversight over Saudi nuclear activities. Furthermore, Saudi Arabia should provide the highest security internally for its future nuclear facilities. Saudi authorities should provide high levels of facility security as well as ensure that employees are adequately screened to ensure that nuclear materials and technologies do not fall into the hands of extremist elements in the region.

Many countries in the region, like Iran and Israel, as well as the rest of the world are weary of Saudi Arabia’s nuclear ambition. However, the reality is that Saudi Arabian energy consumption is rising rapidly and traditional clean energy sources, like solar, cannot address such rising energy consumption. Nuclear energy can provide an effective long-term base-load for Saudi Arabia that will allow the kingdom to move away from fossil fuels and towards cleaner energy sources.[11]

[1] Electricity & Co-generation Regulatory Authority (hereinafter ECRA), Proposal For National Renewable Energy Plan for Saudi Arabia, available at: http://www.ewh.ieee.org/r8/sa/cms/images/techdins/2010april13/ieee%20-%20nrep%20presentation-13%20apr%202010.pdf

[2] Abdullah M. Al-Shehri, Saudi Arabia’s Renewable Energy Strategy and Solar Energy Deployment Roadmap, KACARE, http://www.irena.org/DocumentDownloads/masdar/Abdulrahman%20Al%20Ghabban%20Presentation.pdf

[3] World Nuclear Association, Nuclear Power in Saudi Arabia, available at: http://www.world-nuclear.org/info/Country-Profiles/Countries-O-S/Saudi-Arabia/

[4] Id.

[5] Id.

[6] James Conca, Saudi Arabia Fast-Tracks Nuclear Power, Forbes, Sept. 8, 2014, available at: http://www.forbes.com/sites/jamesconca/2014/09/08/saudi-arabia-fast-tracks-nuclear-power/

[7] Nasser Al-Tamimi, Will Riyadh Get the Bomb? Saudi Arabia’s Atomic Ambitions, The Middle East Quarterly, Vol. 2, No 2, Spring 2013, available at: http://www.meforum.org/3509/saudi-arabia-nuclear-bomb

[8] Supra note 6.

[9] KACARE, Atomic, available at: http://www.kacare.gov.sa/en/?page_id=86

[10] Jonathan Fahey & Ray Henry, U.S. Nuclear Waste Increasing With No Permanent Storage Available, Huffington Post, March 23, 2011, available at: http://www.huffingtonpost.com/2011/03/23/us-nuclear-waste-radioactive-storage_n_839438.html

[11] Supra note 6

Is the Smart Grid Better Protected?: Nine Months After NIST Releases Cybersecurity Framework

By: Sandra Zegarra, Associate

            As the United States’ power infrastructure transitions from the current electric grid to the Smart Grid, an assortment of new security and reliability concerns, notably in the cyber security arena, have been introduced.[1] Although the objective of the Smart Grid includes heightened security, the implementation of supplementary technologies such as smart meters, sensors, and advanced networks present new vulnerabilities.[2]

In order to address these cyber security concerns, in February 2014 the Obama administration released voluntary cybersecurity guidelines for the nation’s critical infrastructure systems, framing them as a standardized foundation that companies and organizations can implement in an effort to secure their networks against online intrusions and other cyber threats.[3] The framework originates from President Obama’s Executive Order 13636 – Improving Critical Infrastructure Cybersecurity – issued in 2013, which directed the National Institute of Standards and Technology (NIST) to work with the private sector, which owns and operates over 85 percent of the nation’s critical infrastructure, to develop a set of guidelines and best practices to reduce cyber risks.[4] The guidelines lay out processes and procedures that companies can take to improve security, such as investing in protective technology for their networks, however, they don’t include incentives to participate.[5] Although the guidelines are voluntary, the administration had hoped that companies would sign on to them out of self-interest.[6]

In August 2014, NIST requested feedback from the private sector owners and operators of critical infrastructure to gain understanding of organizations’ awareness and experiences with the framework, as well as how officials might improve the voluntary guidelines in future versions.[7] Although the vast majority of responses came from tech companies and industry associations, there were several government agencies and energy companies among the organizations that provided feedback on the framework.[8] Sempra Energy, a gas and electric utilities, which includes San Diego Gas and Electric (SDG&E) and Southern California Gas Company (SoCalGas), said it was already held to more stringent standards elsewhere (DOE, FERC, and NERC) and that it collaborates with private sector experts and government entities to ensure that it meets or exceeds industry expectations.[9] In its response, the Department of Energy stated that it would continue to reach out to state and local regulators and policymakers to increase their awareness of the Cybersecurity Framework and the current public and private efforts to develop sector-specific guidelines for the Framework’s use.[10]

Overall, most of the organizations said the framework had been influential and useful in raising awareness of best practices in cybersecurity risk management. [11] So it seems that the Executive Order for Improving Critical Infrastructure Cybersecurity has been beneficial, even if only in raising awareness.

[1] Charles Ebinger and Kevin Massy, Software and Hard Targets: Enhancing Smart Grid Cyber Security in the Age of Information Warfare 1 (Brookings Energy Security Initiative, Feb. 2011), http://www.brookings.edu/~/media/research/files/papers/2011/2/smart%20grid%20ebinger/02_smart_grid_ebinger.pdf. The cyber security of the Smart Grid refers to the exploitation of vulnerabilities in the grid through the internet for the purpose of disrupting the normal operation of the power delivery system. Id. at 5.

[2] U.S. D.O.E. Office of Electricity Delivery and Energy Reliability, Study of Security Attributes of Smart Grid Systems—Current Cyber Security Issues 12 (National SCADA Test Bed, Apr. 2009), http://www.inl.gov/scada/publications/d/securing_the_smart_grid_current_issues.pdf.

[3] National Institute of Standards and Technology, Framework for Improving Critical Infrastructure Cybersecurity (Version 1.0, Feb. 2014).

[4] Improving Critical Infrastructure Cybersecurity, Exec. Order No. 13636, 78 Fed. Reg. 33 (Feb. 12, 2013); Dan Verton, Tech Firms, Associations Lead Response to Cybersecurity Framework, FedScoop (Oct. 14, 2014, 5:23 PM), http://fedscoop.com/tech-firms-associations-lead-response-to-cybersecurity-framework/.

[5] See Framework for Improving Critical Infrastructure Cybersecurity, supra note 1.

[6] Gautham Nagesh & Danny Yadron, Obama Administration Releases Voluntary Cybersecurity Rules for Critical Infrastructure, Wall St. J., Feb. 12, 2014, available at http://online.wsj.com/news/articles/SB10001424052702304888404579379033086677294?mod=_newsreel_2.

[7] National Institute of Standards and Technology, NIST Seeks Info on User Experiences with Cybersecurity Framework (Aug. 22, 2014), http://www.nist.gov/itl/csd/20140822_framework.cfm.

[8] National Institute of Standards and Technology, RFI- Framework for Reducing Cyber Risks to Critical Infrastructure, Comments Received in Response To: Federal Register Notice Developing a Framework To Improve Critical Infrastructure Cybersecurity (Oct. 16, 2014), http://csrc.nist.gov/cyberframework/rfi_comments_10_2014.html.

[9] Sempra Energy, Sempra Energy Utilities Response NIST RIF- Experience With the Framework For Improving Critical Infrastructure Cybersecurity 1-2 (Oct. 9, 2014), http://csrc.nist.gov/cyberframework/rfi_comment_october_2014/20141009_sempraenergy_chavez.pdf.

[10] Department of Energy, Response to National Institute of Standards and Technology Request for Information “Experience with the Framework for Improving Critical Infrastructure Cybersecurity” 5 (Oct. 10, 2014), http://csrc.nist.gov/cyberframework/rfi_comment_october_2014/20141008_doe.pdf.

[11] RFI- Framework for Reducing Cyber Risks to Critical Infrastructure, supra note 8.

Not So-Sweet Tea: A Legal Fix for Managing the Organoleptic Effects of Lake Hartwell’s Drinking Water

By: Adam Shaw, Associate

Planktonic or “blue-green” algae are single-celled bacteria that are normally “a beneficial component of the food chain.”[i] In warm, nutrient-rich environments, however, they can produce dense blooms that result in toxic substances known to cause sickness in livestock, wildlife and humans.[ii] In the summer of 2014, Lake Hartwell, located between Georgia and South Carolina at the northern segment of the Savannah River, experienced just such a dense algal bloom. What caused it? The “dramatic end of long-term drought.”[iii]

 

Most of the South Carolina Upstate, consisting of the ten northwesternmost counties in the state’s Appalachian Piedmont region, had been under moderate or severe drought conditions since late 2011.[iv] Then, in spring and summer of 2013, the sky opened during one of the wettest seasons on record taking the lake from a drought to flood stage in a matter of weeks.[v] As the lake’s shores expanded to cover areas that had grown over during the drought, decaying vegetation and algae “brewed” in the summer heat, resulting in a “tea” of dissolved organics and lake water.[vi] This resulted in adverse changes to the water’s “organoleptic effects”—that is, its taste and smell[vii]—ranging from “earthy” to “foul”.[viii] Because organoleptic effects can dramatically impact water quality and, in turn, the economy and everyday living, the South Carolina legislature should mandate faster responses to the problems caused by algal blooms.

 

In September 2014, several months after the adverse taste and smell were first noted in Lake Hartwell, the Anderson [County] Regional Joint Water System (“ARJWS”) finally announced that it would partner with Clemson University and Upstate-based science and engineering firm SynTerra to treat up to 160 acres of the lake to improve the water’s taste and smell.[ix] The partnership determined that a “well-planned and precise application of algaecides” would be the best near-term solution.[x] The treatments occurred in early September, and an Interim Progress Report was released soon thereafter. The Report reflected optimism that improvement in taste would happen “soon.”[xi]

 

Lake Hartwell provides drinking water to about 200,000 South Carolina residents, and the ARJWS treats about 48 millions gallons per day.[xii] I got a personal taste of how an algal bloom can affect day-to-day living when I visited my hometown of Anderson on the Fourth of July, and I could not help wondering—is there a potential legal solution to this environmental problem? Although the ARJWS treats organoleptic effects as “secondary water quality standards,”[xiii] do folks really need to endure months of foul-smelling, dirty-tasting water?

 

The South Carolina Department of Health & Environmental Control (“DHEC”) is required by law to adopt water quality standards,[xiv] but DHEC gives wide latitude for “natural conditions” granted that existing water quality is maintained.[xv] (Focus here on safety, not taste and smell.) Assuming that the water is safe for consumption this latitude may be seen as a simple prioritization of resources, but from the perspective of the daily consumer, taste and smell issues are far from secondary, having unavoidable implications for local businesses that depend on quality drinking water.[xvi] (Algal bloom sweet tea, anyone?)

 

Under South Carolina law, a duly formed Joint Water System (“JWS”) “is authorized to purchase, construct, acquire, own, operate, maintain, repair, and improve any and all works, improvements, facilities, plants, equipment, transportation lines, pump stations, sewage treatment plants, apparatus, and appliances incidental, helpful, or necessary to its members upon request and approval of its members in accordance with the bylaws of the joint system.”[xvii] But despite this broad authority, accompanied by a seemingly exhaustive list of powers,[xviii] what appears to be lacking is a legal mandate for JWSs to respond quickly to “secondary” water quality issues.

 

In short, South Carolina law overlooks taste and odor issues once DHEC says the water is safe for human consumption. The recent Lake Hartwell treatments show, however, that these issues can be resolved quickly and effectively. In 2014, the impetus came in the form of a sustained public outcry. Before the next drought, the South Carolina legislature should revisit this problem and provide the legal impetus to respond immediately using presently available treatment methods. This improved focus would prevent a replay of the 2014 Lake Harwell problem and show the state’s willingness to address and respond to far-reaching environmental phenomena like the algal bloom.

[i] South Carolina Department of Natural Resources, Common Aquatic Plant Management Problems, Planktonic Algae, http://www.dnr.sc.gov/water/aquaff/plankalgae.html (last visited Sept. 28, 2014).

[ii] Id. See also Illinois Environmental Protection Agency, BLUE-GREEN ALGAE and ALGAL TOXINS, available at http://www.epa.state.il.us/water/surface-water/blue-green-algae.pdf.

[iii] Scott Willett, Anderson Regional Joint Water System, WHAT’S HAPPENED TO OUR TAP WATER (Jan. 28, 2014), http://www.lakehartwellassociation.org/AboutLHA/LatestNews/tabid/68/articleType/ArticleView/articleId/209/WHATS-HAPPENED-TO-OUR-TAP-WATER-by-Scott-Willett-Executive-Director-Anderson-Regional-Joint-Water-System.aspx (last visited Aug. 24, 2014).

[iv] See South Carolina State Climatology Office, South Carolina Current Drought Status (Apr. 24, 2013), http://www.dnr.sc.gov/climate/sco/Drought/drought_current_info.php (last visited Sept. 28, 2014).

[v] John Erdman, Drought to Flood: Southeast Rain Shift Swamps Lakes, The Weather Channel (Jul. 12, 2013), http://www.weather.com/news/southeast-flood-drought-lake-hartwell-lanier-20130711.

[vi] Willett, supra note 4.

[vii] S.C. Code Ann. Regs. 61-68, Sec. B.47. (2014).

[viii] See, e.g., Garielle Komorowski, Neighbors Complain Water Smells, Tastes Bad, WYFF4 Greenville (June 16, 2014), http://www.wyff4.com/news/neighbors-complain-water-smells-tastes-bad/26515960. One anonymous commenter asks, “Who went pee in the water?”

[ix] Nikie Mayo, Water treatment plan targets 160 acres in Hartwell Lake, Anderson Independent Mail (Sept. 4, 2014), http://www.independentmail.com/news/new-water-treatment-plan-will-continue-for-several-days_79327415.

[x] ARJWS, Press Release (Sept. 2, 2014), available at http://www.arjwater.com/documents/PressReleaseTasteandOdormitigation9-2-2014.pdf.

[xi] ARJWS, Interim Progress Report, Reduction of Taste and Odor in Source Water of the [ARJWS] (Sept. 17, 2014), available at http://www.arjwater.com/documents/ARJWS_InterimReport_091714.pdf.

[xii] Nikie Mayo, Water system will work with Clemson University to combat algae, Anderson Independent Mail (Sept. 2, 2014, updated Sept. 3, 2014), available at http://www.independentmail.com/news/local-news/water-system-will-work-with-clemson-university-to-combat-algae_05282589.

[xiii] Willett, supra.

[xiv] S.C. Code Ann. § 48-1-60 (2014).

[xv] S.C. Code Ann. Regs. 61-68, Sec. C.9. (2014). “Natural conditions” means “water quality conditions unaffected by anthropogenic sources of pollution,” i.e., pollution caused by human activity. S.C. Code Ann. Regs. 61-68, Sec. B.43. (2014).

[xvi] See, e.g., Bill Poovey, Algae reeks havoc on Hartwell Lake, GSA Business (Sept. 23, 2014), http://www.gsabusiness.com/news/52537-algae-reeks-havoc-on-hartwell-lake (“For some restaurant owners, the economic impact includes buying expensive filters and pouring out iced tea that gets handed back.”); Dirt taste in Hartwell water costing some restaurants, GSA Business (Sept. 9, 2014), http://gsabusiness.com/news/52406-dirty-taste-in-hartwell-water-costing-some-businesses-money.

[xvii] S.C. Code Ann. § 6-25-25 (2014) (emphasis added).

[xviii] S.C. Code Ann. § 6-25-100 (2014).

Commercial Nuclear Reactor Licensing Hurdles — New York v. NRC

By: Scott Farnin, Associate

More than two years ago, the D.C. Circuit vacated and remanded the Nuclear Regulatory Commission’s (“NRC”) Waste Confidence rule in New York v. NRC.[1] As a result of that decision, the NRC suspended all licensing issuances for commercial nuclear power plants until the court’s remand was appropriately redressed.[2] On September 19th, 2014 the NRC issued its Final Rule on Waste Confidence, addressing the concerns of D.C. Circuit. Now, licensing issuances are set to start up again after a two-year hiatus.

As of December 2013, there are an estimated 72,000 metric tons of commercial spent fuel in storage at commercial nuclear power plants.[3] Spent fuel from commercial reactors is currently held on-site at nuclear power plants in 34 states.[4] Originally, the fuel was meant to be held on-site temporarily, while the federal government was going to build a permanent, geological repository for the spent fuel at Yucca Mountain. However, after decades of political roadblocks, the repository at Yucca has yet to open, resulting in spent fuel accumulating on-site at commercial nuclear power plants.

In 1984, the NRC concluded a generic rulemaking proceeding, known as the Waste Confidence Rule, which allowed the NRC to proceed with environmental reviews of commercial reactor licenses without considering the site-specific effects of on-site spent fuel in its environmental analysis.[5] The NRC reached this conclusion because they felt there was a reasonable assurance that a geological repository for spent fuel would be available by 2007-2009 and that the spent fuel from decommissioned plants would be stored there, limiting its environmental impact.[6] After decades of producing and storing radioactive spent fuel on-site, the D.C. Circuit forced the NRC to look at the environmental impacts of on-site storage of spent fuel with the possibility that there would never be a geologic repository built.[7]

In New York v. NRC, the D.C. Circuit held that the rulemaking for the 2010 update to NRC’s Waste Confidence Rule required either an environmental impact statement or a finding of no significant environmental impact under the National Environmental Policy Act.[8] The court felt that the Commission’s evaluation of the risks of spent nuclear fuel stored on-site was deficient.[9] The Court held that the Commission’s conclusion that permanent storage will be available “when necessary” ignored the possibility that a permanent geological repository for spent nuclear fuel would ever become a reality.[10] The Court also determined that the Commission failed to properly examine future dangers and consequences of storing spent nuclear fuel on-site at nuclear plants for sixty years after the expiration of a plant’s license.[11]

As a result of the D.C. Circuit’s decision, the NRC suspended all license issuances, pending completion of the remanded waste confidence proceedings.[12] The suspension of licensing issuances lasted from August 2012 until October 2014, after the Final Rule on Continued Storage of Spent Nuclear Fuel was published.[13] The Final Rule addressed the issues the court raised in New York v. NRC and cleared the way for licensing issuances to resume at the NRC after a two-year halt.[14]

 The significance of the new rule lies with the licensing implications. Nuclear reactors seeking renewal of their leases may now be issued licenses to extend their life cycle by an additional 30 years. It also brings some stability in licensing proceedings at a time when energy utilities are facing business decisions with regard to whether they should apply for license renewal or even subsequent license renewal for their commercial reactors.

The fight over Waste Confidence and continued storage of highly radioactive spent fuel is far from over, however, even after the issuance of this rule. Environmental groups have promised legal action against the NRC if it resumes licensing activity because they claim that without a geological repository, nuclear waste can never be safely disposed of.[15] Even with the risk of litigation hanging over the Final Rule, commercial nuclear reactor licensing has hurdled the obstacle that stopped it in its tracks more than two years ago.

 

[1] New York v. Nuclear Regulatory Comm’n, 681 F.3d 471 (D.C. Cir. 2012).

[2] U.S. Nuclear Regulatory Commission, Memorandum and Order, CLI-12-16 at 4 (Aug. 7 2012).

[3] U.S. Nuclear Regulatory Commission, “2014-2015 Information Digest,” NUREG-1350, Vol. 26, at 87, June 2014.

[4] Id.

[5] Id. at 93.

[6] Waste Confidence Decision, 49 Fed. Reg. 34,658 (Aug. 31, 1984).

[7] See New York, 681 F.3d 478-79.

[8] Id. at 473.

[9] Id.

[10] Id.

[11] Id.

[12] See CLI-12-16 (Aug. 7 2012); NRC Staff’s Answer to Petition to Suspend Final Decisions in all Pending Reactor Licensing Proceedings Pending Completion of Remanded Waste Confidence Proceedings at 4, (June 25, 2012) (“the Staff agrees that no final decision to grant a combined license (“COL”), operating license, or renewed operating license should be made in the captioned proceedings until the NRC has appropriately dispositioned the issued remanded by the court”).

[13] Continued Storage of Spent Nuclear Fuel, 79 Fed. Reg. 56,238 (Sept. 19, 2014) (to be codified at 10 C.F.R. pt. 51).

[14] See Id.

[15] Timonthy Cama, Green groups threaten lawsuit over nuke waste rules, The Hill, Sept. 29, 2014.

The U.S. Supreme Court Passes on Chance to Weigh in on California’s Climate Change Initiative

By: Christina Tabacco, Associate

On June 30th the Supreme Court of the United States declined to grant the petition for certiorari by plaintiff-appellees in the case Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070 (9th Cir. 2013), cert. den’d 134 S.Ct. 2875 (June 30, 2014) . The plaintiffs sought to strike down a major component of California’s climate change initiative (AB 32),[1] arguing that certain regulations violated the dormant Commerce Clause. The question at the heart of the lawsuit was whether California could regulate greenhouse gas (GHG) emissions based on regulators’ unique accounting method called “lifecycle analysis.”

Lifecycle analysis, colloquially deemed, “well to wheel accounting” allows regulators to tally the total amount of GHG emissions from sources of automotive fuel (i.e. crude oil and various types of corn and sugar cane ethanol blended gasoline) by including emissions generated during production, refinement and transportation. The law creates declining caps regulating the total amount of GHGs that may be emitted from sources sold in California under the state’s Low Carbon Fuel Standard (LCFS).

The lifecycle analysis calculates the net GHGs emitted in the life of a fuel including those during production and refinement, transportation, and combustion, and offsets where carbon may actually be absorbed in a growing phase (like corn-ethanol). The program allows for regulated parties—farmers, producers, refiners and sellers of automotive fuels such as crude oil and corn-ethanol that sell—to trade emissions or pay fines if they exceed the emissions allowed for a given fuel source under the lifecycle analysis. The Rocky Mountain Farmer’s Union (RMFU) and other plaintiffs representing “big oil and big ethanol”[2] filed suit against CARB seeking injunctive relief from the LCFS regulations, alleging they were a violation of the dormant Commerce Clause. RMFU alleged that because the LCFS regulations increased the cost of doing business in California (by either forcing out of state producers to pay fines or changing production methods to decrease GHG emissions in compliance with the law), the LCFS impermissibly disadvantaged out-of-state sellers who emitted more emissions than in-state sellers, because of their production model or because of emissions generated during transportation of the fuel to California.

The District Court agreed with the plaintiffs, finding that the LCFS did facially discriminate against out of state commerce.[3] However, in an outspoken but divided decision, the Ninth Circuit reversed the California District Court’s decision, neither finding that the LCFS are facially discriminatory nor an impermissible extraterritorial regulation. The plaintiffs’ petitioned for rehearing en banc, but their request was denied, accompanied by a scathing dissent from Ninth Circuit Judge Smith who wrote that the LCFS threatens “to balkanize our national economy.”[4]

The Supreme Court passed on a chance to clarify the application of the dormant Commerce Clause to climate change laws, an emerging area of regulation. One question that remains is whether certain climate change laws may fall outside traditional categories of dormant Commerce Clause analysis. To explain: emissions are diffuse, and once generated, it matters not from where they came, but only that they contribute to a mass of gases trapping heat in the earth’s atmosphere leading to climate change across the globe. Traditionally, the dormant Commerce Clause allows states to regulate commerce on the bases of traditional police power (health, safety, morals, and welfare) such as the regulation of traffic laws, smoking regulations, speed limits, and so on. Because climate change is not a problem that is confined to state borders, it transcends classification of ordinary exercises of state police power. While the law’s purpose is to stem climate change in California, the benefit is not limited to California. Thus, one can argue that state boundaries should play no part in state efforts to combat climate change.

While the Ninth Circuit emphasized the importance of reacting to climate change and stemming problems it has and will cause, it analyzed the legal question here with a traditional focus. So for now, the application of the dormant Commerce Clause doctrine to emissions regulations falls in line with traditional understanding.

The outcome of the case may have ripple effects across the country. With at least some indication that LCFS will survive dormant Commerce Clause and extraterritorial legal challenges, other states are adopting similar standards. Presently 11 states in the northeast and mid-Atlantic are adopting LCFS, as well as Oregon and Washington.[5] New research on California’s LCFS shows that the regulation is working as intended: to reduce emissions, save consumers money, and diversify the energy market.[6] California’s LCFS is “reducing carbon pollution and will save consumers $837 million per year by 2020 as a result of increased diversification and competition of fuel suppliers, according to a study published this week.”[7]

[1] Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070 (9th Cir. 2013), cert. den’d, 134 S.Ct. 2875 (June 30, 2014).

[2] David Pettit, The Ninth Circuit Decides the California Low Carbon Fuel Standard Case, David Pettit’s Blog, Switchboard, National Resources Defense Council Blog, (Sept. 18, 2013), http://switchboard.nrdc.org/blogs/dpettit/the_ninth_circuit_decides_the.html.

[3] Rocky Mountain Farmers Union v. Goldstene, 843 F. Supp. 2d 1071 (E.D. Cal. 2011).

[4] Rocky Mountain Farmers Union v. Corey, 740 F.3d 507 (9th Cir. 2014) (denying reh’g en banc) (Smith J., dissenting).

[5] Center for Climate and Energy Solutions, Low Carbon Fuel Standard, last accessed July 24, 2014, available at: http://www.c2es.org/us-states-regions/policy-maps/low-carbon-fuel-standard

[6] Simon Mui, National Resources Defense Council, New Study: Overlooked Low-Carbon Fuel Standard Benefits Put Money in Californians’ Pockets, April 1, 2014, available at: http://switchboard.nrdc.org/blogs/smui/new_study_overlooked_low-carbo.html

[7] Id.

Subcontractor Coverage Under the Christian Doctrine

By: John Kashuba, Associate

 

Problem: Recent litigation has produced ambiguity as to whether subcontractors are covered under the Christian doctrine. If this is indeed the case, practitioners advising clients bidding or negotiating for procurement work containing clauses espousing requirements as to the kinds of materials that must be used, or other clauses containing compliance mandates with environmental laws and regulations are strongly encouraged to be hyper-vigilant as to the wording, text, form, and structure of the contract. Any omissions or oversights by agency personnel or contractor must be carefully scrutinized and investigated to avoid problems further down the road.

 

Background: The Christian doctrine has become an indelible and enduring part of procurement jurisprudence, such that many in the field will need little introduction to its basic tenets. As a refresher, the doctrine is a reflection of two major principles. First, the government should not be bound by the unauthorized actions of its agents. Second, the laws and policies governing government procurement enacted by Congress should be respected and followed by all parties. As such, under Christian, required clauses that are omitted from a government contract, intentionally or inadvertently, are read into the contract by operation of law. Over the last 50 years, scholars, practitioners, courts, and administrative boards have struggled to decide what clauses should be covered under this doctrine, and which contractors should be covered.

 

A.    THE LEGAL TEST FOR DETERMINING WHETHER A CLAUSE SHOULD BE COVERED:

 

 

The current Christian doctrine standard guiding most contracts in government procurement comes from the Federal Circuit Court of Appeals. The Court laid out a revised three-step blueprint/two-prong test the missing clause in question must pass in order to be read into a government contract by operation of law.[1] The first prong, similar to the Court of Claims in Christian, is that the missing clause must be mandatory in the contract in question.[2] Thus, the presence of the missing clause must be derived from regulations that carry the force of law or a statute mandating its usage for the particular contract. This step is merely a reaffirmation of Christian.[3]

However, the Court radically departed from the status quo of normal Christian jurisprudence, creating two new second steps (essentially II-A and II-B). Under step II-A, it must be discerned if the missing clause in question expresses a “significant or deeply ingrained strand of public procurement policy.”[4] The Court stunned conventional procurement even further when it announced that, even if a clause does not meet the first two criteria enumerated, it may still be read into the contract (step II-B) if the clause is not written “to benefit or protect the party seeking incorporation.”[5]

 

B.    BACKGROUND–WHO SHOULD BE COVERED?

 

Whether subcontractors are covered under the Christian Doctrine is mired in mystery. Undoubtedly, prime contractors who transact directly with the Federal government are covered. The unique facts of Christian itself beg this question.

In January 1957, discussions arose between G.L. Christian and H.B. Zachry Co. about the formation of a joint venture to complete the later disputed contract.[6] Zachry declined to enter into a joint venture with G.L. Christian, but offered to buy out the rights to the contract for $250,000.[7] This transaction was approved by G.L., and the rights and duties of the contract were assigned to Zachry.[8] Shortly thereafter, Zachry and Centex Construction Company, Inc. formed a joint partnership in which Centex agreed to be the managing member of the venture and in charge of construction.[9] The joint venture was approved by the Corp, on the condition that it take the form of a subcontract from the original contractor, G.L. Christian. Centex-Zachry and Christian signed an “Agreement to Sub-Contract with Irrevocable Power of Attorney Attached” which gave Centex-Zachry power of attorney, and purported to hold Centex-Zachry responsible for “any and all claims, suits, actions, debts, damages, costs, charges and expenses” associated with the contract.[10] The Court went to great lengths to lay out the facts, but, notably, did not comment as to whether the outcome would’ve been different if Centex-Zachry had subcontracted the job to another actor, or whether the Christian doctrine had any limitations or application to subcontractors. While the facts of Christian beg these questions, the Court of Claims, despite the prominent role of Centex-Zachry, declined to answer them. The silence was deafening.

 

C.    DISCUSSION:

 

Policymakers have taken a renewed interest in ensuring that the purchasing habits of the nation’s largest consumer, the Federal government, comply with the goals of mitigating and reducing impacts on a myriad of environment problems and concerns.[11] As such, the Federal government has implemented a number of Affirmative Procurement Programs (APPs) designed to encourage (and require, in some instances) the use of environmentally-friendly materials and supplies. [12] The sustainable procurement purchasing requirements along with instructions applying them to procurement situations are found in Part 23 of the Federal Acquisition Regulations (FAR).[13] The standardized texts of the corresponding clauses referenced in Part 23 are located in Part 52 of the FAR.[14]

As stated above, it is well-settled that prime contractors are covered by Christian. In 2013, the Department of Labor Administrative Review Board and the United States District Court for the District of Columbia issued a pair of rulings that will usher in a new era of contracts litigation.[15] The controversy underlying both cases centered on a subcontract awarded to a number of hospitals by the University of Pittsburgh Medical Center (UPMC), the prime contractor, to provide medical products and services to government employees.[16] The health maintenance subcontract in question omitted Equal Opportunity clauses required to be in every government contract by Executive Order 11246, the Rehabilitation Act, and the Vietnam Era Veterans’ Readjustment Act.[17] The Office of Personnel Management argued that, even though the subcontractors were not directly dealing with the Federal government, the applicable regulations and laws required the inclusion of the clauses into every contract including transactions involving subcontractors. The District Court found that the Equal Opportunity requirements were to be read into the subcontract by operation of law.

The key implication from UPMC, at this juncture, is in understanding that the floodgates have opened for the government to use the Christian doctrine to successfully have missing FAR flowdown clauses read into subcontracts where the government lacks contractual privity. As one practitioner has noted, this is the first time the Federal government has been able to successfully litigate such an outcome.[18] As such, construction and service subcontractors who perform contracts that contain FAR Part 23 environmental clauses should be on high alert; acutely aware of the federal contract requirements while focusing on possible missing clauses. A mistake in performance can result in a costly termination for convenience or default for the prime contractor, leading to severe repercussions, both for the reputation and financial health, of the responsible subcontractor.

One scholar has aptly noted that, in the context of the Christian doctrine, for contacting officers and lawyers, an ounce of prevention is worth a pound of cure.[19] This axiom seems all the more appropriate for practitioners advising subcontractors in the aftermath of UPMC. It is important, as the green procurement landscape continues to take shape, for all parties to read the requirements of a solicitation carefully, deciphering its wording and clauses to ensure that prevention, rather than cure, is what rules the day.

 

[1]    General Eng’g & Mach. Works v. O’Keefe, 991 F.2d 775, 779 (Fed. Cir. 1993).

[2]    General Eng’g, 991 F.2d at 779 (“Thus, under the Christian Doctrine a court may insert a clause into a government contract by operation of law if that clause is required under applicable federal administrative regulations”).

[3]    G.L. Christian & Assocs. V. U.S., 312 F.2d 418, 424 (Ct. Cl. 1963).

[4]    General Eng’g, 991 F.2d at 779 (“However, the Christian Doctrine does not permit the automatic incorporation of every required contract clause…the Christian Doctrine applies to mandatory contract clauses which express a significant or deeply ingrained strand of public procurement policy”).

[5]    Id. (Citing Chris Berg, Inc. v. United States, 426 F.2d 314, 317 (Ct. Cl. 1970)).

[6]    Id.

[7]    Id.

[8]    Id.

[9]    Christian, 312 F.2d at 422-23.

[10]   Id.

[11]   Ian Urbina, The Shopping List as Policy Tool, The New York Times (Jan. 25, 2014), http://www.nytimes.com/2014/01/26/sunday-review/the-shopping-list-as-policy-tool.html.

[12]   For a complete description of the green procurement programs operated by the Federal government and the legal framework, See: Manuel, Kate, “Environmental Considerations in Federal Procurement: An Overview of the Legal Authorities and Their Implementation”, Congressional Research Service (January 7, 2013).

[13]   48 C.F.R. § 23.000 (2013).

[14]   48 C.F.R. § 52.000 (2013).

[15]   Univ. of Pittsburgh Med. Ctr. Braddock v. Harris, 934 F. Supp. 2d 238 (D.D.C. 2013).

[16]   Id.

[17]   Id.

[18]   Darst, Brian, “The Christian Doctrine at 50: Unraveling the Federal Procurement System’s Gordian Knot” (October 2013).

[19]   Wyatt, John B., “The Christian Doctrine Born Again, But Sinfully Confusing,” 33 Cont. Mgmt. 22, 65 (Nov. 1993).

 

Solving the Goldilocks Problem: A Market Based Proposal for a More Efficient Feed-in Tariff in Japan

By: Caleb Rosenberg, Article Editor 

During the midday hours of May 25, 2012, Germany accomplished an impossible task: nearly fifty-percent of the energy generated in the country came from solar power.[1] Humming along at twenty-two gigawatts, Germany’s solar power plants pumped out electricity with the force of twenty nuclear power stations.[2] Germany’s stunning achievement came with unsustainably high, incentive-based costs. Just over one month later, on June 28, 2012, the German legislature approved cuts to their solar incentives program to prevent costs from spiraling out of control.[3]

Germany maintained an incentive program known as a feed-in tariff through which utilities pay energy producers certain published prices, called tariff rates, for energy.[4] The feed-in tariff incentivized development of solar generating capacity by providing solar producers a special tariff rate (price per kilowatt-hour) above the prevailing electricity market rate.[5] The higher tariff rates guaranteed the solar developer a profit.[6] Utilities that bought electricity at the higher rate recouped the additional expense by passing on the cost in higher electricity bills to ratepayers: the homeowners, businesses, and governments that use the electricity.[7]

Setting an appropriate tariff rate is a critical decision. Incentives that are too low result in minimal solar development, and incentives that are too high heavily burden the ratepayer by driving up their costs[8] and risk creating a bubble.[9] In essence, this is a Goldilocks problem: the incentives cannot be either too high, or too low; they must be just right. To prevent the risk of setting prices too high, the German legislature changed the law to lower these payments and safeguard the program’s sustainability.[10] The legislature’s reaction to the emerging problem succeeded, and Germany currently maintains a robust solar incentive program.[11] As a result, Germany continues to be a global leader in solar energy development in terms of total installed capacity and annual installations.[12]

A similar incentive program in Spain did not fare as well. Although the Spanish incentive scheme also led to a rapid boom in solar development, policymakers failed to respond to the incredible increase in solar generation.[13] The increase in solar generation was unaffordable and economically unsustainable.[14] The government responded by not only limiting the program in the future, but also by retroactively reducing tariff rates that had been promised to solar developers in binding contracts.[15] A bust quickly followed the boom.[16]

Japan is now following in the footsteps of Germany and Spain. Following the meltdown at Fukushima, Japan sought to diversify its energy sources without relying too heavily on fossil fuel imports.[17] To accomplish a transition away from nuclear power while maintaining a desirable import-export balance, Japan’s legislature created a solar feed-in tariff to spur solar development.[18] The tariff succeeded in sparking a large quantity of solar development, but the law does not self-regulate costs.[19] This means that much like in Spain, and in Germany’s initial laws, Japan’s tariff does not automatically respond to market forces by reducing the subsidy amount as the solar market grows. [20] Although the law permits for a tariff adjustment, this adjustment depends on action from the Ministry of Economy, Trade and Industry, rather than automatically reducing based on the occurrence of an event like reaching certain benchmarks for capacity installed.[21] The current process is unpredictable for the market and risks causing a boom-bust cycle similar to what occurred in Spain. Instead, Japan should alter the law to automatically reduce the tariff as certain benchmarks are met. These benchmarks could move either up or down as installations wax and wane with the changes in market conditions. This responsive policy has the potential to achieve Japan’s goals of increased solar energy development more efficiently.


[1] Erik Kirschbaum, CORRECTED – German Solar Power Output up 60 pct in 2011, Reuters, (Dec. 29, 2011 9:45 AM), http://www.reuters.com/article/2012/05/26/us-climate-germany-solar-idUSBRE84P0F.
[2] Id.
[3] Scott Burger, Big Changes in German Solar Subsidy Policy Approved Today Feed-in tariff lowered in an effort to stabilize the market, Green Tech Media, (June 29, 2012), http://www.greentechmedia.com/articles/read/Big-Changes-in-German-Solar-Subsidy-Policy-Approved-Today.
[4] Volkmar Lauber & Lutz Mez, Three Decades of Renewable Electricity Policies in Germany, Energy & Environment, vol. 15 no. 4 599, 611 (2004).
[5] Id.; Christoph H. Stefes, The German Solution: Feed-In Tariff, New York Times – Room for Debate (Sept. 21, 2011, 5:42 PM), http://www.nytimes.com/roomfordebate/2011/09/20/why-isnt-the-us-a-leader-in-green-technology/us-should-emulate-germanys-renewable-energy-model.
[6] Lauber et al., supra note 4 at 610; Stefes, supra note 5.
[7] Wilson Rickerson and Robert Grace, The Debate Over Fixed Price Incentives for Renewable Electricity in Europe and the United States: Fallout and Future Directions, The Heinrich Boll Foundation Feb. 2007 at 13; Lauber et al., supra note 4 at 611.
[8]See Real Clear Energy Editors, Solar Subsidies Raise Electric Prices in Germany, Real Clear Energy, Aug. 6, 2012, available at http://www.realclearenergy.org/charticles/2012/08/06/solar_subsidies_raise_prices_106641.html.
[9] Eric Wesoff, Romania Is Not The Next Big Solar Growth Market, Green Tech Media Apr. 3, 2013 available at http://www.greentechmedia.com/articles/read/Romania-Is-Not-The-Next-Big-Solar-Growth-Market (discussing successful programs that “jump start vibrant and efficient solar markets” in comparison to “poorly administered” programs that “result in overheated markets followed by a bust and a panicked retreat from the subsidy”).
[10] Burger, supra note 3.
[11] Matthias Lang & U. Mutschler, BNetz A Announces 2.5% Degression of Solar Feed-in Tariffs for November and January, German Energy Blog, Oct. 31, 2012 available at http://www.germanenergyblog.de/?p=10767.
[12] Eric Wesoff, Germany Added 1 GW of PV in September, 6 GW So Far in 2012, GreenTechMedia, Nov. 5, 2012 available at http://www.greentechmedia.com/articles/read/Germany-Added-1-GW-of-PV-in-September-6-GW-So-Far-in-2012.
[13] Toby D. Couture, Spain’s Renewable Energy Odyssey: Booms, Busts, and Retroactive Cuts, GreenTechMedia, Feb. 23, 2011, available at http://www.greentechmedia.com/articles/read/spains-renewable-energy-odyssey; Paul Voosen, Spain’s Solar Market Crash Offers a Cautionary Tale About Feed-in Tariffs, New York Times August 18, 2009, as available http://www.nytimes.com/gwire/2009/08/18/18greenwire-spains-solar-market-crash-offers-a-cautionary-88308.html?pagewanted=all.
[14] Id.
[15] Andres Cala, Drive Toward Low-Carbon Future Stalls, New York Times Oct. 25, 2011.
[16] Ucilia Wang, Solar a Bust in Spain, Green Tech Media, Dec. 2, 2008 available at http://www.greentechmedia.com/articles/read/solar-a-bust-in-spain-5297.
[17] Chico Harlan, In Japan, New Policy Spurs Solar Power Boom, Washington Post, June 4,2013 available at http://articles.washingtonpost.com/2013-06-04/world/39723876_1_feed-in-tariff-nuclear-power-solar-power.
[18] Id.
[19] Adam James, Smoke, Mirrors, and the Japanese PV Market, GreenTechMedia, November 26, 2013, available at http://www.greentechmedia.com/articles/read/smoke-mirrors-and-the-japanese-pv-market.
[20] Kaoru Umino and Junko Dochi, Japan Launches The Feed-in Tariff System for Renewable Energy, Mondaq, July 16, 2012, available at http://www.mondaq.com/x/187200/Renewables/Japan+Launches+The+FeedIn+Tariff+System+For+Renewable+Energy.
[21] Id.