Norman Bay tapped as next FERC chairman

Friday, January 31, 2014

In a move that portends continued intense enforcement of federal energy laws, President Obama has nominated Norman Bay to serve as the next chairman of the Federal Energy Regulatory Commission. Currently the Director of the Commission's Office of Enforcement, since 2009 Mr. Bay has led that office through a series of high-profile investigations and enforcement actions, culminating in record fines for alleged violations of federal energy law -- over $440 million in 2013, plus hundreds of millions more in penalties levied but not yet collected due to legal challenges. His nomination for chairman illustrates the growing importance within the Commission of enforcement, and suggests enforcement would continue to remain aggressive if he is confirmed.

The Federal Energy Regulatory Commission, or FERC, is an independent federal agency charged with regulating the interstate transmission of electricity, natural gas, and oil. The Commission also licenses hydropower projects and reviews proposals to build liquefied natural gas (LNG) terminals and interstate natural gas pipelines. The Commission is composed of up to five commissioners appointed by the President with the advice and consent of the Senate, each of whom serve five-year terms.

While the Commission has enforced federal energy laws since its inception, enforcement has become a higher priority for the Commission in recent years.  The Energy Policy Act of 2005 increased the Commission's enforcement powers, giving it the authority to levy fines of up to $1,000,000 per day for some violations. Following that law's enactment and a restructuring of the Commission's Office of Enforcement, the Commission has ramped up its enforcement activities. For example, in its 2012 fiscal year the Commission ordered penalties for over 904 possible or confirmed violations, including over $5.8 million in refunds, over $148 million in civil penalties and disgorgement of over $119 million in unjust profits.  Activity increased in 2013, with the Commission assessing over $304 million in civil penalties and ordering disgorgement of almost $141 million in unjust profits

Last year also brought record-high individual penalties.  Charged with market manipulation, a J.P. Morgan subsidiary agreed to pay a civil penalty of $285 million and to disgorge $125 million in unjust profits.  In another case, the Commission assessed its largest civil penalty ever: finding that Barclays Bank PLC and four traders violated the Commission’s rule against market manipulation, the Commission imposed civil penalties of $435 million against Barclays and $18 million against the traders, and disgorgement of $34.9 million plus interest in unjust profits. Barclays has challenged the order, and the case is now before the U.S. District Court for the Eastern District of California.

Mr. Bay led the Office of Enforcement through this escalation in enforcement activity.  An alumnus of Dartmouth College and Harvard Law School, prior to joining the Commission he served as a U.S. Attorney and as a law professor.  He now faces confirmation by the U.S. Senate. While some confirmation hearings move quickly, the confirmation process for President Obama's last nominee to replace former Commissioner Jon Wellinghoff -- Ron Binz -- became controversial, leading the President to withdraw his nomination last year.

Mr. Bay may be viewed as less controversial than the previous nominee, but the outcome of the confirmation process remains uncertain.  Whether Mr. Bay becomes a Commissioner -- and if so, how he leads the Commission -- will play out over the coming months and is likely to provoke further discussion on the role of enforcement in U.S. energy policy.

Energy and the 2014 State of the Union

Wednesday, January 29, 2014

Last night, President Obama delivered his 2014 State of the Union address.  As in his previous four annual addresses, energy and environmental issues featured prominently in this year's remarks.  Here's a closer look at some of the highlights from the transcript of his remarks as prepared for delivery:

The U.S. Capitol, site of the President's annual State of the Union address.

Energy development as economic development: As in previous years, President Obama promoted an "all-of-the-above" energy strategy as a foundational element of the nation's economy.

Now, one of the biggest factors in bringing more jobs back is our commitment to American energy. The all-of-the-above energy strategy I announced a few years ago is working, and today, America is closer to energy independence than we've been in decades.
Natural gas revolution: President Obama highlighted the economic value of increased domestic natural gas production.  Calling natural gas the "bridge fuel" to reduced carbon emissions, he pledged to expedite the development of factories and transportation fueling stations reliant on domestic natural gas, while continuing to demonstrate environmental stewardship:
One of the reasons why is natural gas – if extracted safely, it's the bridge fuel that can power our economy with less of the carbon pollution that causes climate change. Businesses plan to invest almost $100 billion in new factories that use natural gas. I'll cut red tape to help states get those factories built, and this Congress can help by putting people to work building fueling stations that shift more cars and trucks from foreign oil to American natural gas. My administration will keep working with the industry to sustain production and job growth while strengthening protection of our air, our water, and our communities. And while we're at it, I'll use my authority to protect more of our pristine federal lands for future generations.

Renewable energy: Solar power is among the nation's fastest-growing energy resources.  President Obama called for reformed tax policies to level the playing field for solar and other renewable energy technologies:
It's not just oil and natural gas production that's booming; we're becoming a global leader in solar, too. Every four minutes, another American home or business goes solar; every panel pounded into place by a worker whose job can't be outsourced. Let's continue that progress with a smarter tax policy that stops giving $4 billion a year to fossil fuel industries that don't need it, so that we can invest more in fuels of the future that do.

Energy efficiency: As in previous speeches, President Obama touted his administration's efforts to improve the nation's energy efficiency.  In particular, he focused on tighter fuel efficiency standards for the transportation sector:
And even as we've increased energy production, we've partnered with businesses, builders, and local communities to reduce the energy we consume. When we rescued our automakers, for example, we worked with them to set higher fuel efficiency standards for our cars. In the coming months, I'll build on that success by setting new standards for our trucks, so we can keep driving down oil imports and what we pay at the pump.

Climate change: President Obama reiterated his belief that climate change driven by carbon dioxide emissions is not only a threat but is a present harm.  With Congress apparently unwilling to act, President Obama pointed to his administration's proposed new standards on power plant emissions of carbon:
Taken together, our energy policy is creating jobs and leading to a cleaner, safer planet. Over the past eight years, the United States has reduced our total carbon pollution more than any other nation on Earth. But we have to act with more urgency – because a changing climate is already harming western communities struggling with drought, and coastal cities dealing with floods. That's why I directed my administration to work with states, utilities, and others to set new standards on the amount of carbon pollution our power plants are allowed to dump into the air. The shift to a cleaner energy economy won't happen overnight, and it will require tough choices along the way. But the debate is settled. Climate change is a fact. And when our children's children look us in the eye and ask if we did all we could to leave them a safer, more stable world, with new sources of energy, I want us to be able to say yes, we did.
While the positions and initiatives announced last night may not be new, President Obama's renewed commitment to these energy policies signals his continued approach to growing the American economy through improved use of our nation's energy resources, all while addressing environmental challenges.  Consistent with last year's State of the Union address, President Obama appears to acknowledge a lack of congressional consensus around energy policy, and the corresponding need for executive action.  Over the course of 2014, expect his administration to pursue goals like facilitating the production and use of domestic natural gas and renewable energy, improving energy efficiency, and addressing climate change.  Exactly how these initiatives take shape -- and whether they succeed -- will play out over the coming year.

Electricity and Super Bowl XLVIII: Will the lights stay on?

Friday, January 24, 2014

Fans will soon pack MetLife Stadium for Super Bowl XLVII.  The National Football League's 2013-2014 season championship game will be held on February 2 at 6:30 PM (Eastern). Following the power outage during last year's Super Bowl, organizers of this year's event are taking extra precautions to avoid disruptions to the East Rutherford, New Jersey stadium's electricity supply.  At the same time, organizers are promoting the environmental aspects of the power supply for this year's game.

During Super Bowl XLVII at the Mercedes-Benz Superdome in New Orleans, Louisiana, a power outage moments after the beginning of the second half of play caused many of the stadium lights and systems to go dark.  Between restoring power supply, rebooting computer systems, and letting stadium lighting cool and return to full power, it took 34 minutes for play to resume.  Subsequent investigation revealed that the outage occurred when load-monitoring equipment had opened a breaker after detecting an abnormality in the system.

Organizers hope this year's championship is free from such disruption.  MetLife Stadium and the rest of the Meadowlands Sports Complex is served by utility Public Service Electric & Gas Co. or PSE&G.  Two power lines feed into the substation serving the complex, and on-site generators add additional capacity.  PSE&G has been reported as expecting the game to draw as much as 20 megawatts of power, and the utility, NFL, and stadium owner have collaborated on measures and testing to ensure continuity of service during the big game.

Meanwhile, PSE&G's parent PSEG has partnered with the NFL Environmental Program to source renewable energy for the game.  PSEG has agreed to purchase and retire a renewable energy credit, or REC, for every megawatt-hour of electricity used at the stadium, the AFC and NFC team hotels, and Super Bowl in Times Square.  240 solar RECs are slated to come from PSE&G's nearby 3-megawatt Kearny solar farm, as well as 5,700 additional RECs from the 7.5-megawatt Jersey Atlantic Wind Farm near Atlantic City.

Beyond electricity, event organizers have committed that all the waste oil generated from food production during the game will be processed into biodiesel fuel by Tri-State Biodiesel, and that all other food waste will be composted.

Presumably, most fans' attention will be focused on the game.  Will the organizers' measures prevent power outages in an environmentally friendly manner?

Previewing energy issues in Obama's 2014 State of the Union

Thursday, January 23, 2014

President Obama will deliver his 2014 State of the Union address on January 28, at 9 PM (Eastern).  His audience -- Congress, as well as millions of people in the United States and elsewhere -- will listen closely for indications of the President's upcoming policy initiatives.  In past years, issues related to energy and climate change have featured prominently in these addresses.  What energy- and climate-related issues will he address in his fifth State of the Union remarks?

Likely themes include:

  • Climate change.  Last year, President Obama urged Congress to pursue a bipartisan, market-based solution to climate change.  When Congress did not act, the Obama administration proposed new limits on carbon emissions from new and existing power plants.  While the regulations implementing these limits remain on the U.S. Environmental Protection Agency's drawing board, next week's speech may shed new light on the Obama administration's climate change plans.

  • Renewable energy.  The Obama administration has pushed for increases in the production and consumption of renewable energy in the U.S.  On the production side, the Department of the Interior has highlighted the development of renewable energy resources on federal lands and waters as a regulatory priority for 2014.  The Bureau of Ocean Energy Management held the first competitive auctions for leases for offshore wind project sites last year, with additional auctions expected in 2014.  On the consumption side, in December President Obama ordered the federal government to use renewable sources for 20 percent of its electricity by 2020

  • Natural gas.  The production of natural gas from unconventional resources such as shale plays has revolutionized the U.S. energy economy.  Compared to other fossil fuels, natural gas is widely considered to be more environmentally benign.  Readily dispatchable natural gas-fired power plants can be a powerful complement to renewable resources, balancing out variations in power production from intermittent resources like wind.  At the same time, the low cost of producing natural gas domestically is driving interest in exporting gas through pipelines and liquefied natural gas or LNG export terminals.  

  • Oil.  As with natural gas, unconventional oil resources have similarly revolutionized the U.S. energy economy.  In recent years, the U.S. has become a net exporter of oil, gasoline, and other petroleum fuels.  Meanwhile, the proposed Keystone XL pipeline would increase shipments of Canadian oil to U.S. refineries, but the project relies on federal approvals that remain pending.

  • Energy efficiency.  President Obama has supported increases in energy efficiency in homes, industry, and transportation.  In his 2013 State of the Union, he proposed to cut in half the energy wasted by our homes and businesses over the next twenty years.  Energy efficiency continues to be a popular theme.

The 2014 State of the Union will be streamed at