Climate change bill advances

By Erin Voegele | August 10, 2009
The American Clean Energy and Security Act of 2009 (ACES) passed the U.S. House of Representatives on June 26 by a vote of 219 to 212 and is now being addressed by the U.S. Senate. The House version of ACES includes a provision regarding international indirect land use change, which could change how the U.S. EPA considers international indirect land use change in its proposed rule for the second stage of the renewable fuel standard.

The provision, spearheaded by House Agriculture Committee Chairman Collin Peterson (D-Minn.), would ensure that widespread scientific agreement linking biofuels to indirect land use change before the EPA could impose a greenhouse gas penalty on biofuels. Under the agreement, an entity such as the National Academy of Sciences would conduct a five-year study to determine a possible link between biofuels and tropical deforestation. In the meantime, the EPA would be prevented from imposing an indirect land use penalty on biofuels. At the end of the study, the EPA, U.S. DOE, and the USDA would need to agree that such a link is present and can be accurately predicted. At that time, Congress would have one year to review the issue before the EPA could move forward.

According to David Crass, a partner at Michael Best & Friedrich LLP, the Senate is expected to address the bill on Sept. 28. However, by mid-July it remained unclear whether the Senate would be able to harmonize the various climate change bills or if legislation would be moved to a conference committee. "I do believe that it is Congress's overall goal to get one omnibus provision sent up to the White House in advance of the climate change conference in Copenhagen in December," Crass said. "I think President Obama has made very clear that in order to have credibility walking into those discussions, he needs something from Congress on this."

Crass noted that initial comments made by Sen. Tom Harkin (D-Iowa) indicate he will make similar political manuevers as Peterson did in the House to ensure that key agriculture and forestry-friendly compromises are secured in the Senate bill.

While the indirect land use change provision of ACES would be beneficial to ethanol producers, cap-and-trade provisions will also affect the industry. "I think unquestionably [ethanol producers] will be a segment of the economy that will be regulated," Crass said. "The key question is how."

Crass is encouraging his clients to take action in four areas. First, he recommends they stay engaged in the debate of this bill via active participation in an industry trade group.

Second, Crass recommends his clients continue to defend the renewable fuel standard (RFS). He said some entities have stated that if the implementation of indirect land use change is postponed, the whole RFS program should be postponed as well. "I don't think that will happen, but it's a dangerous argumentand the industry needs to continue to defend the RFS and push it forward," Crass said.

Third, Crass encourages his clients to pursue opportunities to establish their climate change footprint and explore ways to reduce that carbon footprint. "What I mean by that is taking a look at fuel switching projects and explore opportunities to reduce natural gas use," he said. "A biomass fuel switchmay gain them eligibility for some early action credits that they could sell in an offset market that develops as a result of the bill."

Finally, Crass said many of his clients are looking at opportunities to pursue a cooperative model for the purposes of aggregation and collection of biomass. "That biomass either can be used for market opportunities that will be developed by the bill for selling biomass as a feedstock into the electricity market [or for] their own combined heat and power projects they may be adopting or developing to minimize their carbon footprint."