Energy Research

PACE in Texas: The Future of Contractual Assessment Financing for Conservation Improvements

Twenty-eight states have passed Property Assessed Clean Energy (PACE) enabling legislation but most – including Texas – do not have fully operational PACE programs. In some instances, this failure of PACE law to translate into concrete action may be due to drafting defects or to evolving PACE best practices that have rendered early-adopted laws obsolescent. In other instances, it may stem from the chilling effect of actions by mortgage regulators.

In March 2013, the Ninth Circuit Court of Appeals resolved the last of a series of legal challenges against mortgage regulators, establishing a period of at least temporary regulatory stability. Meanwhile, PACE supporters have continued to trumpet the investment and environmental opportunities in commercial, industrial and multifamily real estate retrofits. Several states have tried to capture these tailwinds by adopting or amending PACE statutes in ways that facilitate non-residential PACE and incorporate lessons learned from pilot programs and recent policy debates.

Texas is such a state. Bills introduced this legislative session – S.B. 385 and H.B. 1094 – would reconfigure PACE statutes first enacted in 2009 by expanding PACE to encompass water conservation and steering financing toward commercial, industrial and multifamily properties. If they pass, the bills could serve as a blueprint for other states that either have not passed PACE legislation or have PACE laws on the books that have yet to spawn actual PACE programs.

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Federalism, Regulatory Lags, and the Political Economy of Energy Production

The production of natural gas from formerly inaccessible shale formations through the use of hydraulic fracturing has expanded domestic energy supplies, lowered prices, and is stimulating the replacement of dirtier fossil fuels with cleaner natural gas.  At the same time, shale gas production has proven controversial, triggering intense opposition in some parts of the United States.  State and local regulators have scrambled to adapt to the boom in natural gas production, raising the question of whether federal regulators should step in to supplant or supplement state regulation.  This article takes a policy-neutral approach to the federalism questions at the center of that inquiry, asking which level of government ought to resolve these policy questions, rather than which level of government is likely to produce a particular favored policy outcome. Consequently, this analysis begins with four economic and political rationales typically used to justify federal regulation. Federal regulation is necessary (1) to address spillover effects that cross state boundaries, (2) to prevent economic forces at the state level from initiating a “race to the bottom” in environmental regulation, (3) to promote business efficiencies through uniform national standards, and (4) to respond to national interests in the development of natural resources through a federal licensing system. Applying these rationales to the regulation of fracking yields several important conclusions discussed here.

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Workers at Risk: Regulatory Dysfunction at OSHA

This white paper explores the causes of the Occupational Safety and Health Administration (OSHA)’s regulatory dysfunctions and describes their negative impacts on OSHA and America’s Workers. With the decreasing power of unions to organize and press employers to implement strong health and safety programs, employees in every occupation rely on OSHA to protect them from occupational hazards. Yet, in the last decade, OSHA has dropped more standards from its regulatory agenda than it has finalized, largely due to insufficient budge authority.  And the agency’s enforcement program has assessed such paltry fines for even fatality-related violations of the law that many employers see no incentive in addressing hazards, much less developing precautionary health and safety programs.

After describing OSHA’s problems in detail, this paper outlines a number of reforms that could enhance the agency’s performance. Although certain aspects of the Occupational Safety and Health Act could use improvement, the recommendations in this paper focus on regulatory reform—administrative actions that OSHA could implement in the short term.

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The Transformation of American Energy Markets and the Problem of Market Power

Traditionally, American energy markets have been regulated using a combination of antitrust law and public utility law: the former has predominated in oil markets and the latter in markets for natural gas and electricity. Over time, energy markets have grown increasingly complex and competitive, due partly to changing market conditions (for example, in oil markets) and partly to regulation (in natural gas and electricity markets). Increasingly competitive energy markets meant increased risk for energy companies; those companies turned to energy derivatives as a way to hedge that risk. High energy prices and charges of manipulation in twenty-first century energy markets have led regulators to a new approach, one that borrows from securities regulation and focuses attention on “manipulation and deceit” by energy market participants. The securities model may be a bad fit for energy markets, however, because reliance on this new approach exposes consumers to price risks associated with the exercise of market power by sellers, risks to which buyers were not subject under traditional approaches to regulation. In this article, the authors explore the origins of these “bad fit” problems, and examine their implications for the future of American energy markets.

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The Limits of Liability in Promoting Safe Geologic Sequestration of CO2

Deployment of new technologies is vital to climate change policy, but it invariably poses difficult tradeoffs.  Carbon capture and storage (“CCS”), which involves the capture and permanent burial of CO2 emissions, exemplifies this problem. This article provides an overview of CCS in Part I, focusing on geologic sequestration, and analyzes the scientific work on the potential for releases of CO2 and brine from sequestrian reservoirs. Part II evaluates the comparative advantages of government regulation and common law liability. Part III examines the relative efficiencies of different doctrines of common law liability when applied to likely releases from sequestrian sites.  The authors propose a hybrid legal framework in Part IV that combines a traditional regulatory regime with a novel two-tiered system of liability that is calibrated to objective site characteristics.

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Corporate Social Responsibility in the Oil and Gas Industry: The Importance of Reputational Risk

David B. Spence discusses the magnitude of risks assumed by actors engaged in and affected by oil and gas development.  Oil and gas companies face environmental risks, health and safety risks, liability risks, and reputational risks, the management of which is central to the companies’ long-term success.  Part I of this article examines the origins of corporate social responsibility (CSR), its rationale, and its growth in the business world.  Part II explores some of the dimensions of reputational risk facing modern oil and gas companies, using several high profile examples.  Part III explains some of the ways in which oil and gas companies use CSR initiatives to manage the reputational risk.

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Regulation, “Republican Moments,” and Energy Policy Reform

During the last half decade, energy policy reform has made its way to the top of the American policymaking agenda, driven by a groundswell of concern over environmental issues (primarily climate change), energy security issues, and the desire for a more efficient and reliable energy delivery system.  This groundswell has produced some recent policy changes, but have not been enough to satisfy proponents of reform, who remain frustrated with the unwillingness of Congress to pass legislation aimed at fundamentally changing the way Americans produce and consume energy.  This article examines the reasons why fundamental energy policy reform has been so challenging.

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Electricity Transmission in the U.S. – Legal Issues and Trends

The U.S. electricity transmission infrastructure is undergoing historic change; a short, upfront look at current and projected investment activity provides a sense of the scale and impact. Under the auspice of the American Reinvestment and Recovery Act, the Department of Energy is authorized to award nearly $38 billion in grants – and make or guarantee $127 billion in loans – over the next few years to modernize the United States’ energy infrastructure and pursue a more independent national energy policy. Roughly 14% of the authorized grant money, or $4.5 billion, is specifically directed towards Electricity Delivery and Energy Reliability, a category focused on upgrading the U.S. electricity transmission grid. In practice, many of those grants are to be matched, dollar for dollar, by private investment. Similar priorities are reflected in the regular budget process as illustrated by the 2011 fiscal budget which features a 6.8 percent increase for the Department of Energy’s budget, to $28.4 billion, and a 5 percent increase for the Office of Energy Efficiency and Renewable Energy, to $2.36 billion.

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Fifty FDAs: An Argument for Federal Preemption of State Tort Law that is Less than Meets the Eye

A white paper whose purpose is to try to put to rest the “unhelpful and disingenuous”  “50 FDAs” argument that proponents of federal regulatory preemption have supported for the last few decades.  First, this paper examines the “50 FDAs” argument in greater detail, with an eye toward understanding the concerns that have motivate manufacturers of drugs and medical devices to adopt this argument.  Second, it explains why the “50 FDAs” argument should be rejected.  Third, it argues that preemption of state tort law would ultimately be counterproductive, since the displacement of a vibrant state tort law system would greatly undermine the valuable role that state tort law plays in U.S. governance.

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Winds of Change: The Creation of Wind Law

This article discusses the beginnings of wind law and national development in judiciary and state law. Identifying it as the state standing at the forefront of wind law, the authors review the development of wind law in Texas.  A review of wind-related statutes provides insight into how those statutes (and the lack of others) lead to growth in the wind industry.  This article also discusses select wind cases and statutes from other states to further explore how wind law is developing, and it examines areas where case law is lacking, but likely to appear soon.

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