New Energy and the Intersection of Traditional Environmental Legal Considerations

Background

Over the last decade, the number of renewable and alternative energy projects has increased exponentially. These projects bring the promise of not only mitigating the use of non-renewable resources like coal, oil and gas, but also limiting the methane and VOC emissions often associated with energy production from fossil fuels. Having said that, these projects are typically large industrial facilities, and their development and operation necessarily involves traditional environmental legal considerations. For investors, developers and operators, a thorough understanding of these environmental issues not only mitigates risk, but also allows for more predictable and cost-efficient operations, profit maximisation (including upon divestment), and even, a stronger brand. This article discusses how traditional environmental law intersects with the development and operation of these projects, and then provides examples of how traditional environmental law, including diligence, permitting and compliance, is key to sound development, operation and investment decisions.

In general, project development and operation necessarily implicate many environmental legal considerations. Certain significant considerations are discussed below. A discussion then follows providing examples of how traditional environmental law impacts specific types of alternative/renewable energy projects.

Siting 

Siting involves where and how a project will be situated for operation. Myriad environmental implications exist and, in some instances, are project specific. These apply to industrial development generally.

1. Response “clean-up” obligations 

Obviously, siting involves a careful analysis of legal regimes imposing response or “clean-up” liability. These legal risks are well understood and derive in large part from the federal Comprehensive Environmental Response Compensation and Liability Act (‎42 USC §§ 9601 et seq‎) and analogous state legislation. CERCLA, as it is known, imposes clean-up liability on broad groups of responsible parties for the release of “hazardous substances”. ‎Hazardous substances are defined through a list of lists, generally excluding petroleum products.‎ Some state laws go further and extend responsibility to non-hazardous solid wastes and other substances. Because this liability can extend to current and in many instances, prior facility owners and operators, an analysis of historic and surrounding usage should be an initial focus of the siting inquiry. The inquiry, however, should not end with merely a review of clean-up risk.

2. Protected natural resources 

As with any project, federal and state protected lands such as wetlands, should be analysed. In addition to laws regulating federal wetlands, any number of states have their own laws addressing wetlands or ‎other protected lands. For example, New Jersey enacted its Pineland Protection Act of 1979. ‎Moreover, the presence or habitat of federal or state endangered/threatened or otherwise protected species must also be considered. These statutes typically provide for potentially significant civil and criminal liability, and the failure to consider and address these resources can also lead to project delays, potential injunctive actions, and even loss of development opportunity.

3. Cultural and historic resources 

Like protected natural resources, areas containing cultural and/or historic resources should be reviewed for potential impacts from development. Again, federal and state regimes affect development options and can hinder or preclude development.

4. Other fact and location-specific conditions

There are too many project, location and jurisdiction-specific considerations to list these generally. Accordingly, it is important in any siting analysis to fully evaluate laws and regulations, addressing site-specific issues. For example, coastal impacts, environmental justice, potential impacts to nearby business operations, etc, are examples that may be relevant to some projects.

Stakeholder analysis

Long-term project success and brand value can hinge on community relationships. It is appropriate to understand and cultivate community stakeholders. Prior to site selection, a thoughtful stakeholder analysis should be conducted. Community opposition can affect challenges to environmental permits and/or renewals or modifications to them. Furthermore, any number of relationships can affect the hurdles industrial projects face when operating. Among those stakeholders to consider in any analysis are:

• federal, state and local regulatory authorities (and judges);
• organised community groups and community demographics;
• NGOs;
• elected officials;
• local media outlets;
• business organisations and prominent local businesses that could be impacted;
• labour interests; and
• current or threatened litigation that could affect development or operation (and parties to the litigation).

Obviously, this is an abridged list. Each project will be affected by site-specific stakeholders. Thus, development of the stakeholder roster and the “grading” of risk factors should be considered in any analysis of project sustainability.

Environmental impact analysis

As with any development project, federal and state environmental policy acts should be considered. If applicable, detailed environmental impact analyses may be required, which can potentially impact development options and timing. As of the date of the writing, approximately 20 states have, in addition to the potential applicability of the National Environmental Policy Act (NEPA), individual state NEPA-type requirements where there is a federal nexus to the project. 

Emissions, discharges, waste generation

While alternative/renewable energy projects are often intended to mitigate fossil fuel usage, and accordingly, methane and VOC emissions, it is important to recognise these projects are large industrial projects and, in many instances, will have operations which generate significant air emissions and also wastewater discharges, albeit of a different character than fossil fuel-related projects. The applicability of regulatory regimes is project/technology specific. Programmes to consider include:

1. Air emissions

Generally, under federal and state laws, all emissions (other than those that are de minimis in nature) must be authorised. Depending upon the project and jurisdiction, to authorise emissions, a major or minor source permit may be required or, if emissions do not rise to that level, a permit by rule, exemption, waiver, or similar authorisation may be available and will vary by state. The key is to identify all emissions sources and operating scenarios at the outset so that applications and terms and conditions of authorisations are consistent with current and planned operations, including expansion. These operational scenarios should be taken into account in the permit application and permit drafting process. Naturally, this issue is of more significance regarding bio-energy facility permitting, as opposed to benign projects like a wind farm or solar project.

2. Wastewater/stormwater

Wastewater and potentially stormwater generated from industrial facilities require authorisation, typically where the water has an impact on, or adjacent to, state or federal waters. Regarding stormwater, authorisation for discharge may be required not only during the construction phase, but also during operations. Typically, the requirement for an operational stormwater permit is based on the Standard Industrial Classification (SIC) code or Industrial Activity Code. In those circumstances where the industrial activity is not covered, but discharges would otherwise violate the federal Clean Water Act or state water rules, an individual permit could be required. Thus, stormwater permitting obligations should be considered, depending on site-specific operations and where the facility is sited.

3. Waste generation and disposal 

Most industrial operations give rise to solid or hazardous waste generation. It is well established under environmental laws that the hazardous waste generated must be managed, transported, treated, stored and disposed in accordance with applicable rules. But solid, non-hazardous waste is also regulated both at the federal and state levels. Many states have specific rules addressing solid non-hazardous wastes, especially when generated from an industrial process. Likewise, prescriptive rules also regulate the circumstances by which and how non-hazardous waste may be disposed of (or abandoned) by a regulated entity. These regimes are applicable generally to all regulated entities, including owners and/or operators of alternative/renewable energy facilities and in some instances, represent unique touchstones for risk, as discussed below.

Intersection of traditional environmental legal regimes with alternative energy/renewable projects

It is undeniable that traditional environmental law impacts the development and operation of virtually every industrial project, but in some instances, the impacts on alternative/renewable projects may be underestimated or even unforeseen. Set forth below are examples specific to the alternative/renewable energy industry. Again, these examples are not intended to be exclusive, but are rather intended to heighten focus on how traditional environmental legal principles impact these projects.

Siting concerns

As stated above, facility siting must necessarily incorporate the diligence associated with project development, but in some instances, reasonable planning and diligence should extend further for specific projects. For example, regarding wind farm development, to date there has been only limited state-wide regulation of siting and permitting. Certain trends, however, appear to be developing where states are taking a more active interest in wind farm location, property reclamation, and site decommissioning. At this time, at least four states specifically regulate wind farm siting. These states include Connecticut, Maryland, North Carolina and West Virginia.‎ At least 22 other states have “dual” regulation involving state and local authorities regulating development in some manner. Dual regulation mechanisms require approvals from state and local government regulators. For ‎example, in Colorado, after the state Public Utilities Commission issues a certificate for ‎construction, a project developer will still need to obtain the necessary local permits. If the local ‎government does not issue the requisite permits, then the project developer may seek to appeal ‎that decision to the state PUC.‎

While state siting regulation is nascent, certain trends appear to be developing:

• a more inclusive and detailed permitting process requiring greater public participation and, in some instances, public hearings;
• in some instances, consideration of overall environmental impacts;
• siting approvals requiring consideration of safety, remediation at the end of a project’s lifespan of all facilities, structures and equipment, in some instances including foundations, as well as financial assurance for the foregoing;
• more focused and detailed regulation governing siting, operations and decommissioning; and
• “performance-based regulation” where states (currently about 17 states) seek to align a utility’s operations and to some extent profit from societal goals like decarbonisation and resilience.‎

What this means for developers and landowners is that a greater degree of diligence is required not only in relation to siting issues, but also to contractual relationships. Issues that may reasonably be considered in contractual drafting include the following.

• If development is held up by public participation in permitting decisions, how will the financial implications be handled by either party?
• To the extent that state rules require financial responsibility for decommissioning, when will financial assurance be available? How will the amount be determined? And who will have access to the funding (eg, the landowner or state general fund)?
• If financial responsibility is not required, what site-specific decommissioning and/or land reclamation requirements are contemplated or agreed to by the parties?

In addition to these contractual issues, in light of the potential for heightened public participation, greater emphasis should be placed on stakeholder analyses in siting decisions, as follows.

• What industries will be most affected, to what extent are they organised, and to what extent can potential concerns be mitigated?
• To what extent will local environmental conditions, eg, shallow water table versus deeper water table, affect or be perceived to affect local industries/residents dependent on water services?
• To what extent might placement affect access to emergency medical facilities, eg, by air, etc?

Consideration of stakeholder concerns such as these and others will become increasingly important as public participation requirements increase and become more transparent through publicly available databases, typically integrated with permit issuance. While the example discussed above relates to wind farm siting, different but equally important considerations affect other projects. What is important is that the development team recognises that siting projects for effective long-term operation involves environmental and societal considerations that will be project and jurisdiction-specific and will require careful thought and analysis.

Air emissions and wastewater discharges

1. Air emissions

While air emission authorisation issues do not arise in a material way with wind or solar projects, they could play a significant role in the development of other alternative energy projects. Regarding air emissions of alternative energy facilities, while the character of pollutants emitted may differ from those associated with fossil fuel facilities, depending on the project, impacts, and receptor analyses may arise, as would be the case with fossil fuel projects. For example, regarding a wood-burning “woody” biomass power plant, the types of air emission sources may include:

• fuel (wood) delivery, preparation, staging and handling (eg, storage and dust piles, conveyors, etc);
• boilers;
• ash handling and management;
• emergency generators and fire pump engines;
• silos; and
• cooling towers. 

Air pollutants at issue in these projects often include particulate matter, carbon monoxide (CO), nitrogen oxide (NOx) and sulphur dioxide (SO₂), as well as volatile organic compounds (VOCs), among others. Interestingly, even a small 100 MW woody biomass facility could require a Title V major source permit including for hazardous air pollutants (HAPs). Emissions such as metals and other hazardous air pollutants are sometimes not a primary focus with “woody” plants, but can arise from paint and other coatings on recycled wood used as feedstock. Thoughtful and experienced drafting of permit applications and insightful review of draft permits should take issues like this into account. In addition to stringent permit limitations, an operator should be prepared to address specific Clean Air Act (CAA) requirements, including continuous emissions monitoring requirements, performance tests (stack testing), as well as rigorous Natural Emission Standards for Hazardous Air Pollutants (NESHAPs) compliance for industrial, commercial and industrial boilers, and New Source Performance Standards applicable to electric utility stream generating units. Such a permit for a woody plant may also impose stringent monitoring, record-keeping and reporting obligations.

Air permitting will necessarily be project and jurisdiction specific. In some instances, facilities may be authorised by minor source permits or by permits-by-rule or similar waivers or exemptions depending upon the jurisdiction. Thus, while fuel sources other than fossil fuels may allow for emissions of a different character, under traditional CAA provisions (and/or state analogues), significant attention must be paid to air emissions permitting and the sophistication needed to consider permitting various operating scenarios for these facilities. Given that emissions modelling and receptor impacts will likely be at issue in permitting decisions, a thorough stakeholder analysis takes on even greater importance with certain of these plants. It is not unusual for public perception (and even that of new developers and communities) to expect benign impacts from non-fossil fuel power plants, only to later understand the complexities, which can give rise to similar, but in some ways different environmental legal concerns.

2. Stormwater and wastewater discharges

Typically, stormwater permitting will be required for the project construction phase, depending upon the proposed facility’s acreage/footprint. Regarding operations, in certain instances, stormwater permits will be required, typically under a multi-sector general permit based on the SIC code. Covered facilities typically include: biofuel manufacturing (SIC Code 2869), biodiesel (SIC Code 2911), electricity generation (SIC Code 4911), animal fats and oils (SIC Code 2077), oils not elsewhere classified (SIC Code 2079), chemicals and allied products (SIC Code 2800), among others. Wastewater discharges also require permitting. Examples of wastewater streams associated with bioenergy facilities include residuals of glycerin, ‎methanol, soaps, residual catalysts, ion exchange resins, used oil sediment, ‎and others.‎ Waste streams may also contain magnesium silicate, lime, alum, iron, and other compounds, depending on the associated energy generation process. ‎Regarding biodiesel, as much as one gallon of wastewater can be generated ‎per gallon of biodiesel produced.‎

Waste generation and disposal

It should come as no surprise that certain alternative/renewable facilities generate traditional waste streams, such as those associated with biomass or biofuel facilities. For example, waste streams associated with these types of facilities may include fly ash containing lead, cadmium and a litany of other chemicals or air emissions containing particulate matter, CO, CO₂, NOx and other pollutants. Essentially, all bioconversion processes generate some sort of waste residues that may not have ‎immediate value. For example, most plant nutrients remain following bio-conversion or thermo-‎chemical conversion. These nutrients may, however, be in different forms than customarily found ‎in the original bio-energy feedstock. Future challenges will likely involve finding processes, uses, ‎and markets for these co-products. ‎

In some instances, however, renewable/alternative energy facilities can give rise to less common waste streams. While wind and solar facilities do not give rise to complex air, water or stormwater issues, they may ultimately present long-term waste disposal or recycling issues warranting consideration.

For example, regarding solar panels, end-of-life management and disposal warrants current consideration. The US Environmental Protection Agency (EPA) estimates that by 2030 the United States may generate about one million tons of solar panel waste and by 2050 that number could reach 10 million tons. By comparison, in 2018 the United States generated about 292 million tons of municipal solid waste (eg, household waste). The disposal options are complicated by the fact that the most prevalent of solar panels sold (silicon solar), often contain small amounts of metals, such as silver and copper. Other metals potentially integrated in the manufacturing process may include lead and cadmium. As a result of the presence of these metals, caution will need to be taken in managing and/or disposing of the outdated panels, which could potentially be deemed hazardous waste, based on the presence of, for example, lead and cadmium and how these metals could react to toxicity testing. It is also possible panels could be recycled under certain federal and state rules to avert potential hazardous waste status, but even under these exclusions, a legal framework must be followed to stay within regulatory boundaries. This raises important issues for developers, landowners and investors. It should be expected that this issue could become more acute in the future. Developers and investors should consistently take disposal costs into account throughout a project’s life cycle to better determine value, including the collateral value lenders could ascribe to a project. To the extent these costs have been defined and addressed in projections, communities and landowners may no doubt feel more comfortable accepting these projects as “good neighbours”.

The wind industry also faces certain waste disposal challenges. Firstly, wind turbine blades will ultimately require disposal and at this time, there is limited landfill space for this waste stream. Secondly, wind turbine foundations are often left in the ground at the end of a facility’s active life, which could raise issues of abandonment and disposal. Regarding wind turbine blades, some commentators suggest that as turbines come off line, more than 720,000 tons of wind turbine waste will be generated, requiring disposal. As these blades are often made of fibreglass and composite, significant challenges exist in recycling these and, at least at this time, only limited facilities nationwide accept these blades for disposal. Like the challenges posed by solar panel disposal, to the extent that the cost and logistics of blade disposal can be assessed and be deemed reasonable to achieve, the projects will be more attractive to investors, prospective buyers, and lenders. Another issue that could evolve with wind farm development is disposition of turbine foundations. These large foundations are typically 9–20’ below ground surface and can weigh over 1,000 tons each. That these foundations are or could be left in place potentially raises novel waste disposal and liability issues. That is, if the foundations are ultimately considered abandoned and hence waste, under certain state statutory regimes, a cause of action to require removal/clean-up may exist in favour of landowners or the state – even for non-hazardous solid waste. While this legal theory does not appear to have ever been tested, it again raises an issue that would be best addressed early on and contractually between a developer and landowner, that is, how will this risk be allocated and if it is considered waste, who would be the generator and bear responsibility?

These are merely examples of waste generation issues that may become important. And, as is the case with any industrial development project, planning for sustainable operations, including waste management, can only increase a project’s value and acceptance within a community. Again, these types of issues will be project and jurisdiction specific.

Conclusion

Renewable and alternative energy projects represent significant pathways to energy production. These projects bring the promise of mitigating methane and VOC emissions as well as mitigating the use of finite resources, such as coal, oil and gas. However, to maximise the value of these projects to their owners, investors and communities, traditional environmental legal issues remain very important. A vital key for the sustainable success of these projects and the businesses that own them is to be sure that a well-versed environmental team is available to evaluate issues related to multiple operating scenarios and ongoing long-term risk mitigation. This approach will help ensure sound investment decisions are consistently made and strong energy brands are developed and maintained.