Mitchell Chadwick LLP Monthly Report February 2018

• Safer Consumer Products. DTSC has proposed listing paint and varnish strippers that contain methylene chloride as a priority product under the safer consumer products program. U.S. EPA recently moved the proposed federal rule addressing certain uses of methylene chloride, TCE and NMP from active to long term action status. Labor groups are urging DTSC to list methylene chloride strippers. Manufacturers are arguing that there are no feasible alternatives to methylene chloride, as the alternatives available do not work as well and take much longer to work, resulting in greater exposure to workers and consumers.
• Climate Change—Negative Emissions Technology. The European Academies Science Advisory Council (“EASAC”) has issued a policy report concerning negative emissions technologies (“NET”). All of the various scenarios described by the UN Intergovernmental Panel on Climate Change (“IPCC”) to achieve the goals of the Paris Agreement rely on NET—large-scale application of technologies that can remove CO₂ from the atmosphere. The EASAC report concludes that NET offers only limited realistic potential to remove carbon from the atmosphere and not at the scale envisaged in IPCC climate scenarios. The EASAC concludes that significantly increased efforts to curb carbon emissions offer the only realistic pathway to achieving the goals of the Paris Agreement.
• Climate Change—Carbon Dioxide Capture. NET Power LLC is about to begin a pilot project near Houston to test the ability of supercritical CO₂ to drive turbines. If the effort is successful, it could lead to the commercialization of power plants using the so-called Allam Cycle. In the Allam Cycle, natural gas is burned in pure oxygen, creating water and CO₂, without generating the pollutants (e.g., NO_x) created when fossil fuels are burned in air. Because the CO₂ generated by the process is at high pressure and temperature (i.e., supercritical), it behaves like a fluid, and could potentially be used to drive a turbine. In the pilot test, the spent CO₂ will be vented to atmosphere. If the process were to be commercialized, the spent CO₂ would be sequestered.
• Climate Change—Zero Emission Vehicles. On January 26, Governor Brown signed an executive order requiring that “all State entities work with the private sector and all appropriate levels of government to put at least 5 million zero-emission vehicles (“ZEVs”) on California roads by 2030.” The goal echoed the State of the State address presented the day before. The new goal expanded a prior executive order that called for 1.5 million ZEVs by 2025. There are currently 350,000 ZEVs on the road in California. About 5 percent of new car sales in California are ZEVs.
• Climate Change—EV Charging Network. On January 17, Pacific Gas & Electric (“PG&E”) launched its PUC-approved charging network project. When complete, the $130 million project will result in the installation of 7,500 chargers throughout PG&E’s service area. It is the largest utility-sponsored charging project in the county. California currently has 6.7 electric vehicles per 1,000 people, and charging infrastructure is seen as the largest impediment to electric vehicle uptake. The PG&E project joins a 3,500-charger project sponsored by San Diego Gas & Electric and a 1,500-charger project sponsored by Southern California Edison.
• Desalination. On January 24, the Department of Water Resources (“DWR”) held a public meeting on draft funding recommendations for its water desalination grant program. DWR proposes making eight grants. The three largest ($10 million each) are for brackish groundwater desalination plants being constructed by the cities of Antioch and Camarillo and for an ocean desalination plant being constructed in southern Orange County. The grants highlight a new trend in desalination—with the exception of the southern Orange County plant, all of the grants are being awarded for brackish groundwater projects. Brackish groundwater contains less salt than ocean water and the costs of purifying it are about half the cost of purifying ocean water.
• New Unreasonable Water Use Regulations. The State Water Board has proposed new regulations to prohibit wasteful water practices, and is making the proposed text available for public comment prior to adoption. These regulations are very similar to those adopted as emergency regulations in response to drought conditions. Changes include modifying the term “reclaimed water” to “recycled water,” adding special frost protection provisions for the Napa River Valley in addition to the Russian River watershed, and defining “turf” and “incidental runoff.” Comments are due by noon on February 14.
• Battery Storage. On January 11, the CPUC approved an order that requires PG&E, the state’s largest utility, to use batteries or other non-fossil fuel resources, to provide power when demand peaks instead of the three natural-gas fired “peaker plants” that it currently uses. With improved technology and declining costs, battery arrays are becoming more viable. Bloomberg reports that the price of lithium-ion battery packs have fallen 80% since 2010. General Electric, the world’s largest maker of gas turbines, has announced that it will cut 12,000 jobs in its power business, as customers turn away from fossil-fuel energy sources.
• Chlorpyrifos. On January 9, an NGO publically released a NOAA biological opinion that finds that three common pesticides—chlorpyrifos, malathion and diazinon—can harm more than 30 endangered species of salmon and other fish, and “is likely to threaten their existence.” NOAA stated that it issued the 3400-page opinion earlier than planned due to a court-imposed deadline and that it needed more time to address a variety of technical and methodological issues. The biological opinion creates tension with EPA’s decision from March 2017, in which EPA denied a petition requesting that it revoke all tolerances for chlorpyrifos.
• Energy—Natural Gas. On January 22, the US Energy Information Administration reported that natural gas remained the primary source of U.S. electrical generation in 2017, for the second straight year. Natural gas accounted for 32% of electrical generation last year, compared to 30% for coal and 20% for nuclear. The short-term outlook predicts gradually increasing shares for natural gas and non-hydro renewables; a steady share for nuclear and hydro; and a declining share for coal. Regional differences remain sharp. Hydro is the second largest electrical source in the West, but is no higher than fourth in any other region of the county. Coal accounts for 50% of electrical generation in the Midwest, but only 10% in the Northeast, which is much more dependent on nuclear power.
• Metal Shredding Facilities. DTSC has issued its report “Evaluation and Analysis of Metal Shredding Facilities and Metal Shredder Wastes.” The report describes the public health and environmental threats posed by metal shredding facilities. DTSC concluded that metal shredding facilities should be required to obtain hazardous waste facility permits. DTSC also concluded that continued disposal of chemically treated metal shredder residue (“shredder fluff”) as non-hazardous waste in municipal landfills (including as daily cover) should be allowed, as the disposal of shredder fluff has not resulted in harm to public health or the environment.
• Cap-and-Trade Amendments. At a January 17 Senate hearing, CARB Chair Mary Nichols previewed several amendments that the agency will be proposing for the cap-and-trade program. The amendments, which will address requirements in AB398, the 2017 legislation that re-authorized cap-and-trade through 2030, include establishing a ceiling on allowance prices, addressing a potential oversupply of credits in the market, determining new price containment points, and setting more stringent limits on the use of offsets in lieu of credits. At the hearing, Nichols downplayed the concerns of environmental groups who argue that a surplus of credits in the program is preventing the emission reductions necessary for the state to meet its climate goals. Nichols indicated that the proposed amendments will limit the credit surplus and that CARB can move quickly to meet any other concerns, as needed.
  
  
• Low Carbon Fuel Standard. At its April meeting, CARB plans to discuss amendments to its Low Carbon Fuel Standard (“LCFS”), including a proposal to set the requirement for an 18 percent reduction in the carbon intensity of fuels by 2030. Fuel suppliers in the state meet the LCFS by blending bio-fuels such as ethanol and biodiesel into the fuel supply or through purchasing credits for out-of-state biofuels. CARB staff is proposing to freeze the 2020 mandate of 10 percent reduction in place through 2022, and then increase it by 1 percent per year through 2030. Fuel suppliers have warned that it is unlikely the state will meet the 2020 mandate let alone any further proposed reductions.
  
  
• Landfill Methane Rules. On January 11, U.S. EPA announced it had withdrawn two proposals that would have stayed key portions of the rules regulating methane emissions from new and existing landfills. Industry observers believe EPA dropped the plan after a federal court ruled that a similar stay enacted for oil and gas methane rules was unlawful. Nevertheless, U.S. EPA does not appear to be prioritizing implementation of the rules, stating that it does not plan to prioritize review of submitted state implementation plans and it has not issued a federal implementation plan.
  
  
• SCAQMD RECLAIM Program.   The South Coast Air Quality Management District (“SCAQMD”) has begun discussing the process for winding down its RECLAIM emissions trading program. Under the RECLAIM program, started in 1994, facilities must surrender sufficient NO_x and SO_x credits each year to cover the previous year’s emissions. The credits were initially issued to each facility based on current emissions and have been cut over the years to reduce basin-wide emissions. As the SCAQMD phases out RECLAIM and returns to a traditional “command and control” permitting program, facilities are concerned that adequate Emission Reduction Credits (“ERCs”) will be available to allow for installation of new facilities and expansion of existing facilities. Industry is arguing that the ERCs, which were surrendered upon initiation of RECLAIM, should be returned to the facilities.
  
  
• Climate Change—2017 Temperatures. NASA and NOAA are both reporting that 17 of the 18 hottest years have occurred since 2001. NASA counts 2017 as the second hottest year on record (after only 2016). Using a different methodology, NOAA counts 2017 as the third hottest year on record (after only 2016 and 2015). In 2017, average global temperatures were 1.51 ºF above the 20th Century average. 2017 was also the 41st consecutive year of above average temperatures.
• WOTUS Rule. On January 31, U.S. EPA and the Army Corps approved a regulation for publication in the Federal Register which will add an applicability date to the so-called WOTUS (Waters of the United States) Rule, which itself was promulgated in 2015. The WOTUS Rule expanded the definition of what constituted a “water of the United States” for Clean Water Act regulatory purposes. The new regulation makes the WOTUS Rule effective two years after formal publication of the new regulation in the Federal Register (i.e., February 2020). In the interim, EPA and the Army Corps are expected to develop a new definition of “water of the United States” that will rollback aspects of the current definition.
• Industrial General Storm Water Permit. On December 15, the State Water Board staff proposed amendments to the Industrial General Storm Water Permit to incorporate proposed Total Maximum Daily Load (“TMDL”) implementation language and to provide new on-site and off-site compliance options. The deadline for comments was originally January 31, but has been extended to noon on February 14.
• Delta Tunnels. On January 12, DWR sent a memo to contract bidders and engineering firms that it is considering building the Delta Tunnels “in phases,” with the first phase consisting of “one main tunnel instead of two.” The Brown Administration has reportedly been sending signals since October 2017 that it was considering downsizing the tunnels following funding setbacks. Commentators indicate the writing was on the wall when the Santa Clara Water District—the only northern California water district supporting the project—made its funding contingent on a downsized project. Tunnel proponents believe DWR is close to making a decision on downsizing the project. Environmental groups remain opposed to either version of the project.
• Agricultural Deliveries. The Bureau of Reclamation has announced it will conduct an environmental analysis of potential modifications to the Central Valley Project (“CVP”) in order to maximize water deliveries. Reclamation indicates that various state and federal regulatory actions have significantly reduced the water available for delivery south of the Delta, and further indicates that it will evaluate alternatives to restore water supply in consideration of all of the authorized purposes of the CVP. Reclamation is seeking comments by February 1 that will be used to develop alternatives to the proposed action. In late December, the California Department of Fish & Wildlife announced that its fall survey of Delta waters counted the fewest number of delta smelt in the 50-year history of the survey.
• Onsite Wastewater Treatment System Policy. The State Water Board is proposing amendments to its Onsite Wastewater Treatment Systems (“OWTS”) Policy, which established a statewide, risk-based, tiered approach for the regulation and management of OWTS installations and replacements, and established the expected level of performance for such systems. OWTS Policy requires actions for specifically identified water bodies where OWTS contribute to water quality impairment that adversely affects beneficial uses. The OWTS Policy authorizes subsurface disposal of domestic strength, and in limited instances high strength, wastewater. The Policy also conditionally waives the requirement for owners of OWTS to apply for and receive waste discharge requirements (“WDRs”) in order to operate their systems when they meet the conditions set forth in the Policy. The current process reviews and renews the conditional waiver, and updates TMDL-related requirements. Comments are due by April 6 at noon.
• Organic Waste Methane Emission Reductions. On March 21 in Sacramento and March 22 in Oakland, CalRecycle will hold informal public workshops regarding the organic waste methane emission reduction program under the Short-Lived Climate Pollutant program. Topics will include a preview and discussion of the second round of draft SB 1383 regulations that will require a 50 percent reduction in disposal of organics by 2020 and a 75 percent reduction by 2025.
• Recycling and Disposal Reporting System Regulations. On January 26, CalRecycle published proposed regulations to implement the AB 901 Recycling and Disposal Reporting System. CalRecycle states that the proposed regulations aim to streamline and improve how organics, recyclable material, and solid waste are reported and tracked. Publishing the regulations on January 26 starts the formal 45-day public comment period. A public hearing will be held on March 14.
• Solar Regulations. On January 11, the CPUC announced the approval of funding for fifteen pilot electric vehicle projects. The approval of $41 million dollars, which will be funded by the investor owned utilities in the state and recovered through electricity rates, include electrification of school buses, delivery trucks, airport and seaport equipment, truck stops, and commuter locations. The initiative is mandated by SB 350, a 2015 law that set California’s renewable portfolio standard at 50 percent renewable energy and also directed the CPUC to launch programs to electrify the state’s transportation sector.
• Renewable Energy—Solar Panel Tariffs. On January 22, the White House announced that it was placing a 30% tariff on imported solar panels. The tariffs kick in each year after enough panels are imported to generate 2.5 gigawatts of electricity. Last year, new solar panel installation totaled 8 gigawatts in generation capacity. The tariff lasts four years and decreases by 5% per year. The tariff is expected to create a slow-down in solar panel installation, as the costs of the panels rises. The tariff was opposed by most of the solar industry, environmentalists and conservative think tanks who argued that the tariff will slow solar installations and cost jobs in exchange for very small gains in domestic manufacturing.

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