Welcome to The New Interior, a periodic update from Steptoe & Johnson LLP to keep you informed of coming changes at the Department of Interior, and for related matters on Capitol Hill and elsewhere with a new administration taking charge in Washington, DC.  We intend to bring you the very latest on anticipated moves by the Obama Administration and in the 111^th Congress over the next several months, as a new direction takes shape for Interior-related positions and policies.

If you would like to speak with a Steptoe attorney about our Interior practice, please reply to this email or contact Tom Collier (202.429.6242 or tcollier@steptoe.com) or Jody Cummings (202.429.8096 or jcummings@steptoe.com). 

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Interior and FERC Finalize Agreement on OCS Responsibilities

Making good on a joint statement issued in mid-March, Secretary Salazar and Federal Energy Regulatory Commission (FERC) Chairman Jon Wellinghoff have signed a Memorandum of Understanding clarifying the agencies’ jurisdictional responsibilities for leasing and licensing renewable energy projects on the nation’s Outer Continental Shelf (OCS).  The MOU is intended to help accelerate the development of wind, solar, and hydrokinetic (i.e. wave, tidal and ocean current) energy projects, and establishes the process through which Interior’s Minerals Management Service (MMS) and FERC will lease, license and regulate all renewable energy development activities on the OCS.

Key provisions of the MOU include:

• MMS maintains exclusive jurisdiction concerning the production, transportation or transmission of energy from non-hydrokinetic renewable energy projects.  MMS has exclusive jurisdiction to issue leases, easements and rights-of-way regarding OCS lands for hydrokinetic projects.  MMS will conduct any necessary environmental reviews related to those actions.
  
  
• FERC has exclusive jurisdiction to issue licenses and exemptions from licensing for construction and operation of hydrokinetic OCS projects, and will conduct all necessary environmental analyses relating to those actions.
  
  
• To obtain a FERC license or exemption for an OCS hydrokinetic project, an applicant must first obtain a lease, easement or right-of-way from MMS for the site.  FERC will not issue preliminary permits for hydrokinetic OCS projects.  For all leases, easements and rights-of-way for hydrokinetic projects, MMS will require that construction and operation cannot begin without a license or exemption from FERC.
  
  
• FERC and MMS will coordinate on analyses to determine whether hydrokinetic projects meet the public interest.  Both agencies are allowed to inspect authorized hydrokinetic OCS projects to ensure compliance with the terms of an applicable lease, easement, right-of-way or license.
  
  
• Both FERC and MMS retain discretion to be a cooperating agency in the other’s preparation on an environmental analysis for the lease, easement and/or right-of-way for any hydrokinetic OCS project.
  
  
• The agencies will coordinate to ensure that any licenses or exemptions issued by FERC, and all operations regulated by FERC concerning a lease, easement, or right-of-way, are consistent with the OCS Lands Act, the Federal Power Act, and other applicable law.

EU Council Adopts Climate Change Package

The Council of the European Union has adopted a climate-energy legislative package containing measures aimed at fighting climate change and promoting renewable energy. The package is designed to reach the EU’s overall environmental target of a 20% reduction in greenhouse gases and a 20% share of renewable energy in the EU’s total energy consumption by 2020.  The package includes several acts:

• Rules promoting the use of energy from renewable sources – In a directive setting a common EU framework for promoting energy from renewable resources, the Council seeks to achieve by 2020 a 20% share of energy from renewable sources in the EU’s final consumption of energy and a 10% share of energy from renewable sources in each member state’s transport energy consumption.  The mandatory national targets provide certainty for investors and encourage technological development allowing for energy production from all types of renewable sources.  By June 2010, each EU country will adopt a national renewable energy action plan setting out its national targets for the share of energy from renewable sources consumed in transport, electricity, heating and cooling in 2020.
  
  
• Revised EU emissions trading system – The Council adopted a revised Emissions Trading System (ETS) for greenhouse gases.  Starting in 2013, heavy industry will be targeted to reduce by 2020 the GHG emissions reached in 1990 by 20%.  Emissions permits will be auctioned off starting in 2013.  ETS sectors must start by purchasing 20% of their emissions permits at auctions in 2013.  The rate will rise gradually to 70% in 2020 and then to 100% in 2027.  Power producers, however, will be required to obtain all of their emissions allowances at auctions.
  
  
• Cooperative effort to reduce carbon emissions – The Council adopted an “effort-sharing” decision to set binding GHG emissions targets for EU member states in sectors not subject to the EU’s ETS, including transportation, agriculture and housing.  By 2020, GHGs from these sectors are to descrease10% lower than 2005 levels.  In this cooperative arrangement, EU states with low GDP and strong prospects for economic growth may increase their carbon emissions by up to 20% while those with high national income must cut GHG pollution by up to 20%.
  
  
• Rules for cleaner cars – The Council adopted a regulation setting standards for CO₂ emissions from new passenger cars, which will apply in 2012.  The emissions standard for new cars will be 120 g of CO₂ per km.  This includes a reduction to 130 g/km through engine technology, and an additional 10 g/km cut through more efficient vehicle features (e.g. air conditioning, tires).  The Council has set phased-in requirements for the fleets of car manufacturers: by 2012, 65% of a fleet must meet the target; by 2013, 75% must meet the target; by 2014, 80% must meet the target; and in 2015, a manufacturer’s entire fleet must comply with the CO₂ objective.
  
  
• Environmental quality standards for fuels and biofuel – The Council issued a directive that introduces a reduction target for GHGs arising from fuels.  By 2020, fuel suppliers must decrease by 6% climate-harming emissions over the entire life-cycle of their products.  The Council indicates that this goal can be reached by adding biofuels to gasoline and diesel fuel as well as by improving production technology in refineries.  In addition, member states may require an additional 4% reduction fro fuel companies, achieved through the supply of energy for electric vehicles or other clean technologies. Starting in 2011, gas may contain up to 10% ethanol.  To avoid damage to old cars, fuel with 5% ethanol will continue to be available until 2013.
  
  
• Regulatory framework for carbon capture and storage – The Council adopted a directive setting up a regulatory framework for geological storage of CO₂.  Whether to use carbon capture or storage is still a matter for independent decision by each member state.  For EU states that chose to do so, the directive provides conditions for assessment of storage sites, for authorization procedures and for closure of sites.  Member states may submit draft storage permits and draft decisions before their final approval. 

Allocations Announced for First of Interior’s Stimulus Projects

Over the last week, Secretary Salazar has announced the first of various Department projects to be funded under the American Recovery and Reinvestment Act of 2009:

• $140 million that will fund 308 U.S. Geological Survey (USGS) projects.  The funds will be used generally for repair, construction and restoration of facilities, equipment replacement and upgrades, national map activities, and critical deferred maintenance and improvement projects.  Specific expenditures include: $15.2 million to modernize equipment in the National Volcano Early Warning System at all USGS volcano observatories; $14.6 million to upgrade to high-data radio technology and upgrade streamgages with new technologies for streamflow measurement; $14.6 million for remediation to remove streamgages, cableways, and ground-water wells that are no longer in use; $29.4 million for projects that address health and safety issues and functional needs, make facilities more energy efficient, and incorporate sustainable design criteria in project implementation; $29.4 million to modernize the Advanced National Seismic System (ANSS) by doubling the number of ANSS-quality stations and upgrading seismic networks nationwide; $17.8 million for construction of wildlife and environmental research facilities in Maryland, Missouri, and Wisconsin; $14.6 million to improve mapping data; and nearly $500,000 to digitize and make publicly available via the Internet bird banding records, which are useful for disease research.
  
  
• $260 million for California water projects, including: $40 million for immediate emergency drought relief; $109.8 million to build a screened pumping plant at the Red Bluff Diversion Dam; $22.3 million to address dam safety concerns at the Folsom Dam; $8.5 million to repair water-related infrastructure at Folsom Dam; $20 million for the Contra Costa Canal to protect water supplies and to build fish screens for Chinook salmon and Delta smelt; $4.5 million to restore the Trinity River; $26 million for Battle Creek Salmon/Steelhead Restoration project; $4 million to the Bay Delta Conservation Plan; $4 million to broaden scientific knowledge of Klamath River sedimentation; and $20.7 million in smaller water infrastructure and related projects.
  
  
• $50 million for the Central Utah Project, which delivers water from the Colorado River to users in Central Utah.  This funding will include: $41 million to construct portions of the Utah Lake System pipelines for use in conveying an additional 60,000 acre-feet of water to Utah and Salt Lake Counties; and $9 million for construction of a Ute Tribal fish hatchery and other fish and wildlife projects.
  
  
• $12.5 million for New Mexico water infrastructure projects, including: $7 million to complete portions of the Navajo Nation Municipal Pipeline; and $5.5 million for smaller infrastructure reliability and safety projects along the Rio Grande and power plant improvement efforts at Elephant Butte Dam.

The Department of the Interior will manage $3 billion in investments as part of the stimulus package.  About one-third of that total will be invested in water infrastructure projects.  That funding will be allocated across several project areas, including those listed above: meeting future water supply needs ($450 million); improving infrastructure reliability and safety ($165 million); environmental and ecosystem restoration ($235 million); water conservation challenge grants ($40 million); green buildings ($14 million); Central Utah Project Completion Act ($50 million); and emergency drought relief in the west ($40 million).

A Closer Look at Major NEPA Issues Facing Interior

Expediting NEPA Review of Stimulus Projects

As with many Federal agencies, the Department is currently making decisions on how to spend its share of the federal stimulus money.  DOI was allocated approximately $3 billion under the Act, much of which will go to water infrastructure, USGS, and federal land management projects.  One of the issues the Department is grappling with is how to ensure the stimulus-funded projects do not get bogged down in lengthy NEPA reviews.  Section 1609 of the Stimulus Act provides that NEPA reviews will be expedited and resources will be devoted to facilitate such expedited reviews.  The Council on Environmental Quality (CEQ) is currently developing guidance to federal agencies on how to conduct such expedited reviews.  At a D.C. Bar event on April 16, CEQ General Counsel Ted Boling noted that CEQ is working to get the Stimulus Act guidance out, but did not specify any schedule for doing so.  Mr. Boling noted that expedited NEPA reviews can sometimes be achieved through effective scoping of the project, as well as the hiring of highly qualified technical consultants and lawyers who can help to ensure that the EA/EIS is legally sufficient through the draft and final stages.  It remains to be seen how effective DOI agencies will be in expediting the NEPA process, which often takes years to complete even before any legal challenges are filed.

DOI Agencies Grapple with How to Address Climate Change under NEPA

Over the past few years, more than a dozen lawsuits have challenged NEPA decision documents for ignoring climate change under NEPA.  The requirement to consider climate change impacts extends beyond energy development projects to projects that have less obvious climate impacts.  For example, the National Indian Gaming Commission considered climate change in their recent NEPA review of a new casino.  See NIGC Final EIS for Federated Indians of Graton Rancheria and SC Sonoma Management, LLC casino/hotel resort in Sonoma County, California (Feb. 2009).

At this time, there is little guidance as to how agencies should consider climate change under NEPA.  In March, 2008, the Natural Resources Defense Council (NRDC) and others filed a petition with the CEQ seeking regulations on climate change analyses in NEPA documents. Rather than continue to address this on a piecemeal case by case basis, the petition asks CEQ to create systematic review of climate change in NEPA documents.  CEQ is currently working on developing climate change guidance in response to the petition, but has not provided a schedule for when the guidance may be available.

While guidance on considering climate change under NEPA is being developed, DOI agencies continue to confront complicated issues as to when and how climate change must be considered under NEPA. The issues include:

• what are “significant” impacts in the context of a global phenomenon like climate change;
  
  
• whether to include emissions from electricity or fuel used by the project, emissions from construction materials/equipment, and indirect emissions, such as from end-use of oil or gas produced by a project;
  
  
• best practices to mitigate emissions; and
  
  
• the scope of potential climate change impacts to consider, such as carbon releases (timber harvests), carbon sinks, alternative energy sources, and albedo effects (reflectivity).

In addition to considering a project’s potential to impact climate change, DOI decision-makers must also consider the impact of climate change on the project itself.  For example, climate change could impact the following:

• sea level;
  
  
• species health and habitat;
  
  
• water supply;
  
  
• forest or rangeland health

• fire risks; and
  
  
• invasive species.

These and other climate change issues will continue to be a focus of DOI agency NEPA reviews, as the agencies attempt to reduce their vulnerability to legal challenge under NEPA on climate change issues.

BLM EIS Upheld for National Petroleum Reserve-Alaska (NPRA)

A BLM EIS regarding the National Petroleum Reserve-Alaska (NPRA) was recently upheld by the D.C. District Court.  Wilderness Soc'y v. Salazar, Civil Action No. 98-2395, U.S. Dist. LEXIS 24821 (D.D.C., March 25, 2009).  In 1998, the Wilderness Society and other plaintiffs challenged the 1998 EIS/ROD for the NE NPRA Planning Area, which made approximately 4 million acres in the NE Planning Area available for oil and gas leasing.  Although briefing on the matter concluded in 2001, a decision was not issued until last month.  Judge Richard W. Roberts held that BLM’s EIS adequately considered the impacts of the action under NEPA, including cumulative impacts and impacts to wetlands.  Steptoe represented two parties (intervenors) in the case, as well as during the NEPA process.

While the NE NPRA case was pending in the D.C. District Court, BLM has continued to move forward with leasing decisions in the NE NPRA, and has amended and supplemented the NE NPRA EIS.  The Final SEIS/ROD for the NE NPRA was issued in July 2008, making nearly 4.4 million acres available for oil and gas leasing. BLM has held five lease sales in the NPR-A (Northeast - 1999 and 2002; Northwest - 2004 and 2006; and in 2008 tracts in both the NE and NW were offered) and currently administers more than 300 federal oil and gas leases.

Recent Administration Activity on Climate Change Issues

• Responding to correspondence from House Energy and Commerce Committee Ranking Member Joe Barton (R-TX) and several other House Republicans concerning the linkage between the federal government’s efforts to address climate change and its international trade policies and obligations, U.S. Trade Representative Ron Kirk wrote this week that the Administration thinks the best approach to address “carbon leakage” concerns is to negotiate a new international climate change agreement in the UN that ensures that all major emitters take long term action to reduce GHGs.  Kirk indicated that the Administration is carefully weighing design and implementation of a domestic policy that is compatible with U.S. international trade obligations and minimizes incentives for trading partners to pursue counter measures that could negatively impact U.S. exports.  Kirk’s letter also countered Energy Secretary Stephen Chu’s recent suggestion that the United States may need to impose a border tax on Chinese goods.  He stated that the Administration does not support any specific measures at this time, including border measures, to address trade-related concerns in the climate bill.
  
  
• Look next week for key Administration officials to provide testimony before the House Energy and Commerce Committee on climate change legislation.  EPA Administrator Lisa Jackson, Transportation Secretary Ray LaHood and Energy Secretary Steven Chu are tentatively scheduled to appear before the Committee on April 22. They are expected to provide the Administration's most detailed response yet on the draft Waxman-Markey climate change bill that we analyzed in our last newsletter.
  
  
• On April 17, EPA issued a proposed finding that combined emissions of carbon dioxide, methane, nitrous oxide, and hydrofluorocarbons from motor vehicles are endangering public health and welfare under section 202(a) of the Clean Air Act (CAA).  While this finding relates specifically to motor vehicles, it is EPA's first acknowledgement of their authority to regulate greenhouse gas emissions (GHG) under the CAA, and is likely to have broad implications for all projects that require a CAA permit.

Appointments Buzz

• Ned Farquhar was named Deputy Assistant Secretary for Land and Minerals Management by Secretary Salazar last week.  Farquhar was most recently senior advocate for Mountain West Energy/Climate with the Natural Resources Defense Council in Albuquerque, New Mexico. From 2003 to 2006, he was the senior advisor to New Mexico Gov. Bill Richardson on energy and the environment.  Farquhar will advise and assist the Assistant Secretary for Land and Minerals Management in overseeing the Bureau of Land Management, Minerals Management Service, and the Office of Surface Mining Reclamation and Enforcement.  That Assistant Secretary slot is one of the few that remains open.  However, as our last newsletter reported, we expect Wilma Lewis (a one-time Steptoe attorney) to be nominated soon.
  
  
• Deanna A. Archuleta has been appointed Deputy Assistant Secretary for Water and Science.  Most recently, Archuleta has been board chair of the Bernalillo County (Albuquerque), New Mexico Water Utility.  She is also a former Bernalillo County Commissioner. Archuleta will advise and assist the Assistant Secretary for Water and Science who oversees the Bureau of Reclamation, the U.S. Geological Survey and the Central Utah Project Completion Act Office.  As previously reported, Denver lawyer Anne Castle is President Obama’s nominee for that Assistant Secretary position.
  
  
• Ending months of speculation about his nomination, BYU law professor Larry EchoHawk was officially announced late last week as President Obama’s nominee for Assistant Secretary for Indian Affairs.  EchoHawk is a member of the Pawnee Nation.