Minnesota

Ecosystem Marketplace: ELPC’s Brad Klein Weighs in on Water Quality Trading Programs

Water Quality Trading: What Works? What Doesn’t? And Why Don’t We Know This Already?

By Kelli Barrett

July 22, 2016

Water utilities and NGOs around the world are using market-based mechanisms to clean regional water bodies and restore surrounding watersheds, but critics say the programs are unproven. Proponents counter: yes, they are, and the data exists to prove it!

For years now, North American cities like Denver and New York have been diverting water fees into forest conservation, while Kenyan flower-growers have been voluntarily paying upland farmers to develop terraces that slow runoff. Just this week, legislators in the Peruvian Capital of Lima authorized a program that will divert some of the city’s water fees into the restoration of ancient, pre-Incan canals high in the Andes to capture floodwater for the dry season. In addition to these “investments in watershed services” (IWS) programs, water authorities in the United States, New Zeeland, and Australia are experimenting with something called “water quality trading” (WQT), which aims to keep levels of fertilizer at scientifically acceptable levels by helping farmers implement conservation practices that reduce their agricultural runoff.

Each program is uniquely its own, but they all hinge on the premise that market-based mechanisms deliver better results and more flexibility by focusing on quantifiable, verifiable outcomes – either in terms of water quality or regularity of supply – rather than the rigid edicts of “command-and-control” regulation.

Last autumn, an organization called Food and Water Watch (FWW) challenged that assumption, at least as far as WQT is concerned, in a paper that re-labeled WQT as “pollution trading” and charged that it undermines the Clean Water Act (CWA) and puts US waterways at great risk – a contention that was promptly dismissed by WQT proponents like Brent Fewell and Bobby Cochran.

Fewell, a one-time senior official at the US Environmental Protection Agency (EPA) and founder of the law firm Earth and Water Group, penned a piece entitled “Food & Water Lies – FWW Stands in the Way of Environmental Protection” which derided the organization as being ideologically anti-market and anti-public private partnership, while Cochran, the Executive Director of the Oregon-based nonprofit Willamette Partnership, was a bit more forgiving.

“FWW did not do an independent assessment on water quality trading,” said Cochran, whose organization is active in the WQT space and often acts as an advocate for trading.

However, Cochran adds that proponents of trading aren’t producing objective content either.

And while the pro and con camps continue to argue, reams of hard data from dozens of pilot projects are sitting around just begging for a disinterested, scientific evaluation. Cochran, among other practitioners, suggest a third-party, independent review of this data to settle the debate over whether WQT is effective.

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Brad Klein Talks To Midwest Energy News: Good News For Rural Solar In Minnesota

By Frank Jossi, Midwest Energy News

Minnesota’s rural distributed generation customers won a major victory this week when state regulators halted the practice by cooperatives of applying fixed charges for solar installations.

Regulators ruled June 9 that cooperatives must file requests for small power production tariffs with the Minnesota Public Utilities Commission, which makes the final determination on those fees. The commission ruled those fees must now be suspended until an investigation is completed.

Rural cooperatives lost their argument that the PUC had no jurisdiction in the matter of fixed charges for solar customers. Co-ops believed their boards would be the final arbiters of those charges.

“It’s a victory for good government and for good process,” said Brad Klein, an attorney for the Environmental Policy & Law Center. “This is an unusually strong statement from commissioners who saw that distributed generation customers don’t have a strong voice on the boards of directors of these co-ops.”

Attorney and Minnesota Solar Energy Industries Association development director David Shaffer represented two individuals who had brought complaints against their rural co-ops over the fees. “It was a near perfect decision for us,” he said. “We pretty much got everything we wanted.”

Jim Horan, legal counsel of the Minnesota Rural Electric Association, said the decision “was not unexpected.” MREA had believed ratemaking was more the purview of their boards and not the PUC, but the investigation the commission has ordered will seek to clarity those roles, he said.

The issue of extra fees being added to solar customers’ bills has become common throughout the country and in the Midwest. The rationale has been the fees cover the fixed cost of serving solar customers, but others argue they fail to account for benefits that distributed solar provides for the grid.

“We believe these types of proposals are motivated by a desire to chill and block distributed generation,” Shaffer said.

Last year the Minnesota legislature passed a law allowing co-ops to charge fees for distributed generation customers as long as they were “reasonable” and based on a cost-of-service study.

Since then 14 co-ops have added monthly fees ranging from $13 to $83. “That has chilled the market in coop territories,” he said.

The current case involved complaints about fixed charge fees by customers of Meeker Cooperative Light and Power Association and Minnesota Valley Cooperative Light & Power Association.

The ELPC and Fresh Energy, publisher of Midwest Energy News, filed a separate complaint that, in essence, argued that fixed fees were not appropriately filed and that co-ops shouldn’t be allowed to charge them.

The co-ops were represented by the MREA. The organization had instructed members to use a cost-of-service study approach which emphasized income lost from a solar customer rather than the actual cost of having distributed generation on the grid, Shaffer said.

The methodology used is more like “a lost revenue model,” he said. “It’s not how expensive it is to facilitate someone getting on the grid.”

The co-ops took no benefits of solar into account in their cost-of-service studies, he said. The PUC has accepted a “value of solar” study  by the Department of Commerce which reveals solar has a net benefit, and therefore distributed generation customers should pay little or nothing to utilities, Shaffer said.

Before the state law passed last year, co-ops charged solar customers anywhere from $2.65 to $5 a month. The state’s investor owned utilities charge from $5 to $10 a month, Shaffer said.

The PUC opened a docket to look at the fees charged by 14 co-ops, and allowed other co-ops to join in. The commission will look at the fixed charge methodology being used and compare it to the statute, which calls for “fixed costs” to be front and center.

“There’s no inherent right of a utility to collect a certain amount of revenue from a customer,” he said. “We certainly believe customers should pay their fair share of the cost of connecting to the grid.”

Co-ops will have to submit data and allow for people to review it, Klein noted. The benefits of solar will have to be included, too, he said.

MREA’s Horan argues co-ops are “at cost providers” without a revenue component that goes to investors. If the cost of service is $45 a month, that’s what the co-op needs to collect from all customers, not just those with solar, he said.

When MREA developed the methodology, clean energy advocates were consulted, he said. “We didn’t get a lot of specific feedback,” Horan said. “We’d be open to suggestions on other ways to do this.”

The benefit of solar is different for distribution co-ops. The value at this point is no higher than what the coops pay now for energy, Horan said, and because their grids cover great distances and have little density even small amounts of distributed energy can be impactful.

One part of the case remains unclear. Meeker Cooperative argued that the complaint brought by Keith Weber over fixed charges was in “bad faith” and “frivolous.” Had the commission ruled against him, he would have had to pay the utility’s attorney fees.

“We were concerned more broadly that if this was how co-ops would respond to customer complaints they would be afraid to come forward and contest these fees,” Klein said.

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Des Moines Register: ELPC’s Mandelbaum Says Iowa Needs Funding & Accountability to Reduce Nutrients in Water

Does Minnesota have the solution to better water quality?
by Donnelle Eller

8:08 a.m. CDT May 22, 2016

In the Land of 10,000 Lakes, where water recreation is a $10 billion-a-year industry, Minnesotans have seen many of their waterways slowly and inexorably become choked and polluted.

The state’s Pollution Control Agency released a report last year that found that at least half of Minnesota’s lakes in watersheds with heavy farming and urban activity weren’t swimmable because of harmful algae outbreaks fueled by excess phosphorus. And high bacteria levels made more than half the streams in those areas unswimmable.

The findings drove home what Minnesota and other surrounding farm states, including Iowa, already knew — they had to figure out ways to significantly reduce nutrient runoff that jeopardized their lakes and rivers.

Minnesota’s approach, fueled with about $100 million annually in dedicated funding, has resulted in perhaps the Midwest’s most comprehensive water quality program — with buffers required on public waterways and ditches, comprehensive testing and monitoring, a watershed strategy designed to cut runoff from rural and urban areas, and established water quality goals.

It’s a more aggressive strategy than Iowa employs, even though both states rely on the voluntary cooperation of farmers.

But Minnesota faces a mountain of uncertainty over its prospects for success. And state leaders say widespread conservation adoption is years away.

“It’s definitely too soon to expect to see major changes on the landscape and in the water from this effort,” said Glenn Skuta, a leader at the Minnesota Pollution Control Agency, pointing to the state’s Clean Water, Land and Legacy fund, approved in 2008, which partially benefits water quality.

“At the end of 25 years, we can expect to see improvement, but at the same time, it’s not like all the water will suddenly be clean,” he said.

Some environmentalists say traditional farm states, including Iowa, Minnesota and Illinois, will never make significant clean-water gains without federal regulations that force farmers to adopt conservation practices.

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ELPC’s Dexter in Duluth News Tribune: NLX Rail Line Good for Economy, Environment

As published in the Duluth News Tribune on Wednesday, April 27, 2016.

This is a great time for Minnesotans to contact state legislators in support of the Northern Lights Express (NLX) rail project that’s expected to result in about $1.4 billion in benefits to the state over 40 years. That’s a handsome return on an estimated total construction cost of about$500 million. The Legislature has the opportunity this session to make a down payment on that investment, yielding important dividends in years to come.

My Environmental Law & Policy Center advocates for projects that are good for the economy and environment. The NLX rail line is a great example.

An estimated 3,100 jobs would be created during construction, plus permanent jobs later. About $355 million in state and local tax revenue would be generated over 40 years of increased economic activity. Tourism revenue would grow by $378 million, and wages related to new tourism would jump by $233 million over 40 years. Trains are safer than cars, and using the NLX would be a relief to travelers during harsh Minnesota winters. Finally, an estimated 750,000 people would ride the train each year, and that’s projected to increase to 1 million by 2040. That’s a lot of cars off the road, resulting in a dramatic decrease in carbon dioxide emissions that are harmful to the planet.

This is an important project for Duluth and is among those that could receive funding before May 23 when the legislative session ends. The project already is on the long-term work plan for the Minnesota Department of Transportation. In addition to Duluth, NLX stops are planned in Superior, Hinckley, Cambridge, Coon Rapids and Minneapolis.

Let’s tell elected officials we want this high-speed rail line so we can grow Minnesota’s economy, improve travel safety, and reduce harmful emissions.

If we build it, they will come.

Learner Op-Ed in Duluth News Tribune on Falling Oil Prices and Controversial Pipelines

Regional View: Falling Oil Prices A Game Changer for Midwestern Pipelines

By Howard A. Learner

February 29, 2016

Bakken shale oil and Canadian oil sands market prices are low, and oil production is falling. Enbridge Energy Partners just announced it is further delaying construction of both the controversial proposed new Sandpiper oil pipeline and the Line 3 replacement oil pipeline for two more years until 2019. Enbridge blamed the Minnesota Court of Appeals’ decision requiring an Environmental Impact Statement process be completed.

However, that’s likely only part of the story.

Pipeline companies are biting the bullet and deferring new projects because of oil price and production uncertainties. Before Enbridge Energy and its partners spend $2.6 billion to $3 billion on each of the Sandpiper and Line 3 replacement oil pipelines through northern Minnesota, they might pause and see whether oil prices stay low and production declines. Markets matter.

The market price for benchmark West Texas Intermediate crude oil is low at around $33 per barrel, having fallen from the $100 per barrel range in 2011 through mid-2014. JP Morgan forecasts West Texas Intermediate crude oil to average $31.50 per barrel in 2016, and Goldman Sachs pro-jects $40 per barrel. Analyst projections for 2017 through 2018 vary considerably. Low oil prices mean fewer rigs, less oil production, and less need for new pipelines.

Bakken shale oil’s break-even prices are around $40 to $45 per barrel, well above the current market price. Production costs vary depending on how rich the particular oil well is, the efficiency of the company’s operations, financing costs, and how close the rig is to infrastructure. Bakken shale oil must be transported by pipeline or rail to distant Midwestern or Texas refineries.

The number of active drilling rigs in North Dakota is the lowest since July 2009. There are now only 38 active rigs in the Bakken area, down from 204 rigs in February 2012.

According to North Dakota Department of Mineral Resources Director Lynn Helms, Bakken output fell to 1.15 million barrels a day in December 2015, down 6 percent below the all-time high in December 2014. Helms stated that oil production could fall to 1 million barrels per day by late 2016. Oil production and service companies are planning more layoffs, and there could be additional bankruptcies in June 2016 when banks often recalculate their debt limits for oil companies.

Unless and until West Texas Intermediate oil prices reach around $45 per barrel, the rig count and oil production will continue to decline in the Bakken shale oil region, meaning less demand for oil pipelines such as Sandpiper and crude shipping by rail. For example, Whiting Petroleum just announced that it will suspend its Bakken shale oil drilling projects due to low oil prices.

Canadian oil sands’ break-even prices for new production are around $80 per barrel for the “best of the best,” $90 to $100 per barrel for the “rest of the best,” and $100-plus per barrel for the “rest of the rest.” Canadian oil production likely will stagnate until global oil prices reach at least $80 per barrel. Some existing oil sands production operations have enormous sunk costs and might continue to operate as a long-term play as producers wait and hope for higher oil prices.  However, expect production to decline and no new oil sands production to start.

Less oil production means less need for new pipelines. Financing for new North American oil pipelines is drying up until bankers and other investors see oil prices rise, leading to more production. That’s the market situation facing Enbridge for its costly new Sandpiper and Line 3 replacement oil pipelines.

Oil prices have dropped dramatically over the past 15 months. That changed reality has unavoidable market consequences for both oil production and the controversial pipelines.

Howard A. Learner of Chicago is executive director of the Environmental Law & Policy Center, an advocacy organization for environmental and economic development with offices in Chicago, Duluth and other Midwestern cities.

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Press Release: Wisconsin Electric Co-Op Sets Standard for Rural Solar

FOR IMMEDIATE RELEASE
February 24, 2016

Contact:
David Jakubiak

Solar Shines for Rural Electric Co-Ops
Announcement Nearly Doubling Wisconsin Solar Sets Roadmap for Midwest Co-Ops

Wisconsin’s Dairyland Power Cooperative and its member cooperatives announced a historic investment in solar energy on Wednesday unveiling plans to build more than 15 megawatts of new solar energy at 12 locations across Wisconsin.

The announced projects will nearly the double the amount of solar power installed in Wisconsin, which now has about 25 megawatts of installed solar. The projects will be built by solar developers SoCore Energy, based in Chicago and groSolar based in White River Junction, Vermont. Together the installations will create enough electricity for more than 2500 homes.

“Wisconsin’s electric cooperatives are now national and state leaders for solar energy,” said Andy Olsen, Senior Policy Advocate of the Environmental Law & Policy Center in Madison. “Dairyland was clear that this effort grew out of support for solar from their members, commitment to diversifying their generation and stabilizing costs , which are goals of cooperatives across the region.”

Brad Klein, Senior Attorney at the Environmental Law & Policy Center, said the Dairyland announcement sends a strong signal to rural electric cooperatives across the Midwest. “The enormous potential for solar energy in states like Wisconsin, Minnesota, Iowa and Illinois is just now beginning to be realized, and rural electric cooperatives, which have strong relationships with their members, have an opportunity to lead the way.”

To learn more about the Dairyland Power announcement visit:

http://www.dairynet.com/dcontent/article/SolarResourcesannouncementSoCoregroSolar.pdf

Greenwire: ELPC Files Brief Urging EPA to Require Nutrient Standards Along Mississippi River

A coalition of environmental groups yesterday submitted their latest legal arguments in their fight against U.S. EPA’s refusal to require standards for nutrient pollution in the Mississippi River Basin.

In a brief filed yesterday in the U.S. District Court for the Eastern District of Louisiana, 11 green groups say EPA should require states along the Mississippi River to adopt water quality standards for nitrogen and phosphorus, nutrients that can lead to algae blooms that rob waters of dissolved oxygen and kill aquatic life.

These blooms have led to a nearly 6,500-square-mile “dead zone” in the Gulf of Mexico, according to the National Oceanic and Atmospheric Administration.

“That dead zone has been growing and growing over time,” said Brad Klein, senior attorney with the Environmental Law & Policy Center, one of the environmental groups suing EPA. “We’ve been really missing deadlines to try to get that under control.”

The brief is the latest move in a fight dating back to 2008 to force EPA to implement standards to stem the flow of nutrients to the Gulf of Mexico. That year, groups petitioned the agency to begin adopting standards for states that refused to create their own.

Three years later, EPA declined to make a decision on the petition, saying, among other things, that it was seeking partnerships with states to create voluntary programs to address nutrient runoff, rather than writing federal regulations.

The environmental organizations sued the agency in district court in 2012. The court sided with greens. EPA appealed to the 5th U.S. Circuit Court of Appeals, who affirmed the lower court’s decision on the question of courts’ jurisdiction to hear the matter at all, but remanded the case to the Louisiana district court to settle a limited question on whether EPA had based response to the petition on the text of the Clean Water Act.

“We’re looking at that little narrow question that they sent back on the substance,” said Ann Alexander, legal advocacy director for the Natural Resources Defense Council’s Midwest Program. “It’s a critically important question, but it’s a narrow question.”

EPA reasoned that it would “be impractical, inefficient, and counterproductive to devote its limited resources to the mammoth task of determining whether numeric nutrient criteria are required for multiple pollutants in numerous water bodies” in states around the country, the agency’s legal team wrote the court in November 2015.

Klein disagreed with that assessment.

“Voluntary and nonregulatory efforts alone are, we don’t feel are ever going to solve the problem,” he said. “We need actual targets and standards for what we’re going to accomplish.”

Greens are relying in part on the landmark 2007 Supreme Court case Massachusetts v. EPA, in which the high court ruled the agency was required to make a determination as to whether carbon dioxide needed to be regulated based on the requirements of the Clean Air Act, rather than bringing in considerations not pertinent to the act.

But EPA disagreed that the Massachusetts ruling required that the agency make a decision on the current case.

“EPA has broad discretion to consider resource constraints, to balance competing statutory considerations, and to otherwise determine the ‘manner, timing, content, and coordination of its regulations,'” the agency wrote in its November brief.

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Howard Joins WBEZ’s Worldview to Discuss Paris Climate Agreement

Monday afternoon, Howard Learner joined Jerome McDonnell on WBEZ’s global affairs program Worldview to discuss what the COP21 agreement reached in Paris means to efforts to address climate change. You can listen to the broadcast below.

ELPC Defends Third-Party Solar Financing in Wisconsin & Minnesota

In October, ELPC published an in-depth legal analysis of the following question: Should third-party owners of small clean energy projects – such as rooftop solar – be considered “public utilities” under existing state law in Minnesota and Wisconsin? ELPC’s legal conclusion was clear: They should not.

Here’s why: Third-party financing allows residents or organizations to buy power from a company that operates solar panels on their property, thereby making local solar energy more affordable and attractive to those who couldn’t otherwise afford the upfront investment. This arrangement is widely available in many states and has led to strong solar market growth. But utilities in Wisconsin and Minnesota are calling on regulators to treat small-scale solar system owners just like large monopolies.  That designation would effectively prohibit third-party solar financing and place extreme limitations on solar market growth.

ELPC has shared our legal analysis with clean energy colleagues throughout the country and expect it to inform legislative and regulatory discussions that are increasingly “hot topics.” Stay tuned.

LEARN MORE About ELPC’s Defense of Third-Party Solar Installments

Midwest Energy News: ELPC Defends Clean Energy by Emphasizing Legality of Third-Party Solar in Wisconsin, Minnesota

Wisconsin has become known nationally as a state hostile to distributed solar energy, with a Public Service Commission that has supported utility policies making rooftop solar installations difficult to finance and develop.

Minnesota, meanwhile, is generally known as a state where policies and officials are friendly to solar energy.

But in both states, a lack of clarity around the legality of third-party ownership, an important solar financing arrangement, has jeopardized or slowed the prospects for solar development, industry backers say.

Third-party ownership is a way that schools, government agencies and other non-profit organizations can finance solar installations and ensure that they can take advantage of tax credits.

In response to the situation, the Environmental Law & Policy Center has recently released legal memos making the case that in both states, statutes and case law clearly indicate such arrangements are fully legal (the ELPC is a member of RE-AMP, which publishes Midwest Energy News).

The Wisconsin memo, released in mid-October, is meant to help change the prospects for distributed solar in the state and jump-start a local solar industry that has been on hold because of what backers call hostile decisions and actions from utilities and regulators. In Minnesota, the memo released today is meant to bolster and protect a generally vibrant distributed solar outlook.

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