Tel: 804.864.1100

Tel: 804.864.1100

Department of Environmental Quality

Virginia Moves Forward with Carbon Cap and Trade Plan

But some uncertainties remain.

coal-fired plant in VirginiaOn Thursday, November 16, the Virginia State Air Pollution Control Board unanimously approved a draft rule designed to reduce carbon emissions from fossil generating facilities operating in the Commonwealth. The highly complex regulation, if implemented, would require Virginia generating facilities to participate in the Regional Greenhouse Gas Initiative (“RGGI”) trading system. The regulation will be administered by the Air Board and the Virginia Department of Environmental Quality (“DEQ”).

Following the publication of the rule, which is expected to occur in December or early January, 2018, there is a 60-day period in which the public and interested parties may provide comment on the rule. Following this public comment period, the Air Board would vote on the final rule in 2018.

The proposed rule would establish an initial statewide carbon cap of either 33 or 34 million tons, which represents the amount of carbon dioxide forecasted to be emitted in the Commonwealth in 2020. The carbon rule does not require generators to purchase emissions allowances from the Commonwealth in an auction, thus avoiding a state requirement that all revenue-raising measures must be approved by the General Assembly. Instead, generators will be freely allocated allowances, which they will thereafter consign to the RGGI auction.

Allowances purchased at the RGGI auction would no longer be conditional – meaning that generators will surrender these RGGI allowances to DEQ in order to cover their emissions. For each conditional allowance consigned to the auction, the generator will receive the clearing price of the auction. This allows generators to consign all of their conditional allowances but only purchase what they need.

Under the rule, therefore, utilities and other power plant operators would have an incentive to reduce emissions to avoid having to purchase additional allowances. Any unneeded emissions allowances must be sold in the RGGI trading system, with the proceeds credited to Virginia utility customers. However, the rule does not specify precisely how such proceeds would flow back to consumers.

The regulation would only apply to generation facilities that are 25 MW or larger in capacity. There are approximately 32 such facilities in Virginia that will be subject to the rule.

Between 2020 and 2030, the statewide carbon cap would be reduced by 3 percent each year, meaning that generating facilities would either need to reduce emissions or purchase additional emissions allowances.

The draft regulation represents the first time Virginia has attempted to regulate the amount of carbon that may be emitted by existing power plants. DEQ has regulated carbon emissions from new power plants since 2011.

Attorney General Mark Herring, in an official opinion issued in May, 2017, found that a carbon cap and trade program would be lawful. The Attorney General found that the Virginia State Air Pollution Control Board, under existing law, is “authorized to regulate ‘air pollution’” and to promulgate regulations “abating, controlling and prohibition air pollution.” Under Virginia law, “air pollution includes “substances which are or may be harmful or injurious to human health, welfare or safety, or to property.” The Attorney General also stated that “it is well settled that [greenhouse gases] fall within this definition.”

Virginia’s regulation will take the place of the federal Clean Power Plan, which is in the process of being repealed by the Environmental Protection Agency. Please contact one of our regulatory attorneys should you have questions about this draft rule.

Virginia Governor Directs State to Regulate Carbon Emissions

McAuliffe’s Directive Requires State Regulation of Carbon Emissions from Power Plants

coal-fired plant in VirginiaOn May 16, 2017, Virginia Governor Terry McAuliffe issued an executive action directing the Virginia Department of Environmental Quality (“DEQ”) to draft a regulation restricting the emission of carbon dioxide from electric generating facilities. Executive Directive 11 orders DEQ to draft a regulation pursuant to Va. Code §§ 10.1-1300, et seq. that will “abate, control, or limit carbon dioxide emissions from electric power facilities.” The directive states that DEQ must propose a regulation that is “trading ready” and will allow for the exchange of carbon emissions allowances with other states.

This type of action would be a first in Virginia. While the state Air Pollution Control Board has previously enforced greenhouse gas rules promulgated under the federal law – including the Clean Air Act’s new source permitting provisions – the Commonwealth has never before attempted to promulgate carbon rules based solely on state law.

On May 12, 2017, in response to a legislative request, Attorney General Mark Herring issued an advisory opinion stating that carbon emissions constitute an “air pollutant” and thus are subject to regulation under state law. The Attorney General’s opinion noted that “the overwhelming body of scientific literature demonstrates a growing consensus among scientists” that carbon emissions “contribute to elevated global temperatures and may be harmful to the welfare of people, animals, and property.”

The Governor’s directive comes as the federal Clean Power Plan, a greenhouse gas regulation promulgated by the EPA during the Obama administration, is under legal challenge and subject to a stay by the U.S. Supreme Court. The Trump administration has also indicated that it will attempt to suspend or repeal the Clean Power Plan.

The Governor directed that the draft regulation should be presented to the State Air Pollution Control Board for consideration no later than December 31, 2017. After the regulation is proposed, it will be subject the notice and comment procedures established by Virginia’s Administrative Process Act. Executive Directive 11 followed a report and recommendation issued by a workgroup chaired by the Secretary of Natural Resources.

Please contact one of our renewable energy lawyers or regulatory attorneys should you have questions about this matter.

Summary of DEQ’s Solar Permit By Rule (PBR) Requirement Small Solar Exemptions

We’ve examined in detail the Virginia Department of Environmental Quality (“DEQ”) changes to implement Virginia’s 2009 “Small Renewable Energy Projects” legislation (VA Code 10.1-1197.6). The statute moved authority from the State Corporation Commission (“SCC”) to DEQ over protection of natural resources (specifically wildlife and historic resources) with respect to renewable energy projects. Pursuant to the statute, DEQ has jurisdiction to approve PBR applications for solar projects with a rated capacity of 100 megawatts or less, while the SCC retains jurisdiction for projects with a rated capacity over 100 megawatts. DEQ’s regulations are set forth in 9 VAC 15-60 of the Virginia Administrative Code. The details are on our post here.