Five Key Takeaways From Saul Ewing Arnstein & Lehr’s Energy & the Environment in the Northeast: Biggest Challenges of 2020 Conference
From the COVID-19 threat, disrupted supply chains and economic fluctuations to the dichotomy in shifting state and federal policies, regulations, ongoing litigation, compliance issues, and cyber threats, the energy and environment industries are grappling with a complex framework of challenges. Energy projects and environmental clean-up projects in the Northeast face extensive scrutiny from the regulators and the public. These themes were discussed at Saul Ewing Arnstein & Lehr’s Sixth Biennial Energy and the Environment in the Northeast: Biggest Challenges of 2020 Conference recently held in Houston and attended by more than 70 energy and environmental industry professionals. The conference was hosted by Saul Ewing Arnstein & Lehr and its supporting sponsors: Ecology and Environment Inc., RES and Dawson & Associates.
Below are five key takeaways from the conference.
1. With state and federal environmental regulations constantly changing and sometimes contrasting, industry participants struggle to make decisions on new projects as they seek to obtain a clear understanding.
Pamela Goodwin of Saul Ewing Arnstein & Lehr (conference co-chair) kicked off the conference and moderated the first panel on "State and Federal Environmental Agency Legal Updates – Pennsylvania, New Jersey and U.S. EPA" with David Apy from the Office of the New Jersey Attorney General’s Division of Law; Neil Bigioni, deputy regional counsel of the U.S. EPA Region III; and Alexandra Chiaruttini, chief counsel at the Pennsylvania Department of Environmental Protection (PADEP).
- In New Jersey, where Governor Murphy recently unveiled the state’s Energy Master Plan setting a goal of 100 percent clean energy by 2050, work is moving forward on a series of executive orders issued by the governor, including New Jersey’s return to the Regional Greenhouse Gas Initiative (RGGI) and the establishment of the Wind Institute to help plan offshore wind facilities with a goal of generating 7,500 megawatts from 625 wind turbines by 2035.
- EPA Region III is focusing on a series of national rulemakings on perfluorooctane sulfonate (PFOS) and perfluorooctanoic acid (PFOA) under the Safe Drinking Water Act standards as well as a number of criminal enforcement matters.
- Pennsylvania has proposed rules for its plans to join RGGI, while continuing to encourage the development of natural gas. Discussion about the issues in Pennsylvania also focused on process. PADEP stresses that in reviewing public comments they are looking at substance not volume.
2. Recent environmental litigation in Pennsylvania and New Jersey showcases the maze of evolving challenges that companies face with regards to their energy and environmental projects — from the Pennsylvania Environmental Rights Amendment to NRD cases in New Jersey.
Patrick Nugent of Saul Ewing Arnstein & Lehr moderated the "Litigation Updates in the Energy and Environmental Landscape" discussion with his Firm colleagues Andrew Bockis, Matthew Haar (conference co-chair), Cristina Stummer and Keith Williams.
- Andy Bockis discussed lessons from recent Pennsylvania Supreme Court cases involving the Pennsylvania Environmental Rights Amendment, such as being more cognizant of the importance of articulating the potential impact of a project and minimizing the impact to the environment.
- Matt Haar discussed a recent Third Circuit case finding that the trial judge abused his discretion by accepting the testimony of the land owner’s expert who lacked reliability and fit requirements to offer a "damaged goods" valuation opinion. Energy and environmental cases often focus on expert testimony, so litigants must be proactive, including being prepared to disqualify an opponent’s expert who relies on "junk science."
- Cristina Stummer addressed Natural Resource Damages (NRD) and their use to advance executive orders on environmental justice. Other timely NRD issues include determining how compensation is calculated and addressing restoration.
- Keith Williams discussed County of Maui v. Hawaii Wildlife Fund involving pollution discharges under the Clean Water Act currently pending before the U.S. Supreme Court, which will likely determine whether pollution from a point of discharge into a groundwater source that has the potential to reach navigable waters is one of the regulated Waters of the U.S. requiring a permit under the Clean Water Act.
3. Renewable energy is on a rapid pace to comprise a large portion of the overall electric generation supply in the U.S. However, FERC’s recent Minimum Offer Price Rule (MOPR) order raises questions about wholesale renewable energy pricing as it relates to state subsidies.
Dan Skowronski of Saul Ewing Arnstein & Lehr moderated the panel on "Renewable Energy Programs in the Northeast" with Bruce Burcat, executive director of Mid-Atlantic Renewable Energy Coalition; Christopher O’Hara, vice president and general counsel at PJM Interconnection; and Nancy Bagot, a senior vice president at Electric Power Supply Association.
- The slides prepared by the panelists illustrated this very technical, but important issue about how electricity markets work. Maps showed U.S.-installed wind capacity by state and the highest installed solar capacity by state with Texas as the clear leader on wind and California out front by far on solar.
- The panel outlined state policies that encourage renewables, including long-term power purchase agreements (PPAs) for lower and stable pricing, renewable portfolio standards, tax policies, siting policies, and carbon trading policies, such as RGGI.
- A clear trend is that companies and organizations want to be green so they are buying renewable energy at wholesale as a feed-in to their retail supplies and are getting fixed-term pricing for 10, 15 or 20 years.
- Contrasted with the state policies, FERC issued a strict order in December that directed PJM Interconnection to apply MOPR to all state-subsidized capacity resources, which has caused uncertainty and confusion in the wholesale renewable energy market. Parties that sought clarification agreed that FERC’s interpretation and loose definition of subsidies are probably wrapping in areas that should not be included, such as RGGI.
4. With cyberattacks posing real threats in the energy sector — from hydroelectric dams to natural-gas power plants—security measures should encompass people, processes and technology. Cybersecurity is not just an IT problem.
- April highlighted some hypothetical cyberattack scenarios based on real-world events to spotlight how critical cybersecurity is throughout the energy industry. Whether through a spear-phishing campaign, supply chain vulnerability or vendor access, hackers can infiltrate networks and launch a variety of attacks, including ransomware attacks that lock systems and users out of data that can grind operations to a halt.
- Cyber industry statistics each year show that more than half of all cybersecurity incidents originated from an insider through user error, such as clicking on a link in an email that downloads malicious software.
- April said that cybersecurity risk is about the steps that people do or do not take that allow vulnerabilities to be exploited.
- She emphasized the importance of not leaving your cybersecurity program to your IT department. "Take an interdisciplinary approach within your organization that brings together legal, technology, risk management and HR, and examine your people, processes and technology together," she stated. "Identify the processes that can detect, prevent and mitigate vulnerabilities when they happen, and develop a preparedness program that identifies ways to lessen risk, including having an incident response plan and team and conducting table-top exercises and training."
- April suggested focusing on the ways to mitigate risk so that your company and your employees are not the easy mark.
5. Robust compliance and audit programs that include proactive methods for employees to anonymously report potential issues, such as hotlines and annual questionnaires, and coordinated responses to these reports help energy and environmental companies minimize exposure.
Andrew Bockis of Saul Ewing Arnstein & Lehr moderated the ethics CLE panel on conducting internal investigations and environmental compliance audits with his Firm colleague Justin Danilewitz; Christopher Ball, senior environmental vice president at Waste Management; and John Irving, deputy assistant administrator at the U.S. EPA.
- Andrew began the session by addressing how there have been a number of administrative agency investigations as well as state and federal law enforcement agency investigations into environmental issues throughout the Northeast, including a criminal prosecution that occurred recently in Massachusetts related to the over-pressurization of a gas line for lack of written procedures and protocols.
- Justin addressed how the need for an internal investigation can be triggered by a variety of circumstances, such as an external subpoena, a whistleblower calling into a hotline, a competitor’s report, media reports and industry-wide sweeps by regulators.
- Whatever the impetus for conducting an internal investigation, the group discussed some best practices companies can follow, such as developing a comprehensive plan that identifies the leader, scope and intended goal of the investigation and its final form, whether a written or oral report.
- Christopher Ball stressed that from a corporate perspective the key is to have structure, especially with handling input received through hotlines. "Establishing clear lines of communication at the outset is crucial to follow the flow of information," he said. "Follow-up documentation that concludes with the resolution of the investigation is equally key."
- The group also discussed how data from new technologies, such as drones, infrared cameras and satellite imagery, is being used by state and federal environmental agencies and law enforcement generally for enforcement.
- The panelists agreed that industry is headed into a state of constant surveillance, which underscores the central importance of an audit program and an effective and proactive compliance program that includes employees policing themselves on the front-end with environmental protection training and on the back-end with auditing.
If you would like to access supplemental conference materials, click here.