Joseph Krist

Publisher

CALIFORNIA CLIMATE LITIGATION

The state of California has filed a climate lawsuit against Exxon Mobil, Shell, BP, ConocoPhillips, and Chevron, as well as the domestic oil industry’s trade association, the American Petroleum Institute in San Francisco Superior Court. Like the many other suits filed by governments across the country, the suit cites decades of misinformation, deception and denial. The state further charges that the oil companies continue to deceive the public today about the science and reality of climate change. So far, the oil companies have been unsuccessful in their efforts to move these cases out of the state courts into the federal system.

The lawsuit comes as research released this week showed that much of California experienced cooler than usual temperatures. The Golden State actually enjoyed its coolest summer since 2011. Southern California experienced below-normal temperatures, from low-pressure systems over the region throughout the summer and from the cooling effect of Hurricane Hilary.

At the same time, it is worth noting that this summer ranks as the 34th warmest summer in the past 129 years in California. Eight of the 10 warmest years have occurred in this century.

MTA

New York’s MTA has had a recent run of more favorable news. Daily ridership has finally reached the 4 million rider mark. Fares were recently increased. The plan to levy congestion fees in Manhattan is moving towards an April start. Now it has received a boost in the form of a change in the outlook for its Moody’s rating on its Transportation Revenue Bonds (TRB).

The outlook on MTA’s TRBs has been revised to positive from stable “based on the significant increase in state tax support that will offset the post-COVID ridership losses and structurally balance projected budget gaps.” A significant increase in state tax support is a major factor in the outlook revision. 

TRANSIT GOES BACK TO THE FUTURE

Many do not remember that much of the mass transit system serving the New York metropolitan area was privately owned and operated. This was especially true in the outer boroughs of the City and in the New Jersey suburbs. Over the years, many of the private lines in the City were eventually absorbed into the overall MTA bus system after they ran into financial difficulties in the 1960’s.

New Jersey commuters were served by a number of private bus lines. They were able to maintain their operations financially up until the pandemic. The lockdowns and the shift to remote work decimated demand for the private lines. Long time operators were not immune as aid to these operators was not provided as it was to public transit. The State of NJ got a wake-up call when one operator ceased operations as the result of the pandemic.

Now, demand remains depressed while costs have risen driven by employee and fuel costs. As is the case across the country, transit operator jobs go unfilled leading to service disruptions. The phenomenon has impacted all transit services. Now, some of the private operators are giving notice that they are cutting back or eliminating service.

In New Jersey, this has led to the idea of some form of state assistance being floated. The Governor has suggested that these operators be classified as “public goods operators”. This would ostensibly provide a way to enable the State to provide financial support. The Governor floated the idea that certain service currently offered through privately owned operators could be provided by a public entity with state support.

CARBON CAPTURE

Navigator CO2 Ventures announced that it is postponing some of its “right of way work in certain areas, like South Dakota and some parts of Iowa.” This follows the rejection of the company’s application to build a carbon capture pipeline by South Dakota utility regulators. The company is currently “reevaluating” its permit process in South Dakota. The proposed system was slated to connect to five ethanol plants. Navigator would lose out on tens of millions of dollars in federal tax credits if it chose to abandon its plans in South Dakota. 

One of the more interesting aspects of the pipeline debate is the politics. It would be easy to assume that Republicans in Iowa would support the pipeline. That would be based on the history of support for business and especially, the ethanol industry. It has become clear that party identification is not a driving force behind the stances taken on the pipeline.

The issue driving opinions is the use of eminent domain to obtain pipeline right of way. Two Iowa Republican legislators have recently opposed the use of eminent domain. They join a growing list of current and former political figures in Iowa to stand on the side of private property rights. It is likely that the pipelines could attract support if the developer could obtain the needed right of way through voluntary private transactions.

The issue in Iowa is whether a privately financed pipeline designed to serve certain specified users (primarily ethanol plants) constitutes a public benefit or use. The Iowa Constitution provides that eminent domain authority is reserved for projects that have a clear public use and public benefit. 

The process is playing out as efforts to determine the real benefit of carbon capture are being announced. The Tennessee Valley Authority is launching a study on how to reduce carbon emissions at two natural gas plants it operates in Kentucky and Mississippi. The $1.2 million study will determine the costs, technical challenges, and operational impacts of adding carbon capture technology to its entire fleet of natural gas plants. 

It comes as TVA finds itself under pressure to reduce its carbon footprint. It’s effort to replace coal with natural gas as a generation fuel have been running into opposition. The agency has a lot riding on carbon capture, in line with recent trends in federal policies.

MAINE PUBLIC POWER

Question 3 on the November ballot could lead to creation of nonprofit Pine Tree Power, a proposed public utility in Maine. It would provide for a forced buyout of Central Maine Power and Versant, which provide 97% of the state’s electricity. The initiative comes after several years of increasing customer dissatisfaction with CMP, especially. CMP was purchased by Avingrid, a subsidiary of a Spanish utility, and the public has not been pleased.

Governor Janet Mills formally has announced her opposition to the question. She doubts that service will improve and has cited a purchase cost based on the existing utilities estimates. They have put out an estimate of $13.5 billion total financing cost of a buyout. Federal Energy Regulatory Commission filings show CMP’s and Versant’s net assets were about $5.4 billion in 2022. The Maine Public Advocate’s office has said it cannot guarantee that rates would go down.

Unsurprisingly, advocates of the initiative have their own study confirming their view. Their numbers say that an average monthly saving of $30 would be realized by customers. It is important to note that the ballot question followed the passage of legislation in 2021 to achieve the same goal – Pine Tree Power. That legislation was vetoed by Governor Mills. At least she is consistent.

PORT OF L.A.

The resolution of labor issues between the International Longshore and Warehouse Union and the Pacific Maritime Association has combined with natural phenomenon to speed the recovery of traffic volumes at West Coast ports especially the Los Angeles/Long Beach port complex. The Port of Los Angeles moved 828,016 Twenty-Foot Equivalent Units (TEUs) in August, a 3% increase compared to the same period last year. It was the Port’s first monthly year-over-year increase in 13 months.

The resolution of the labor issues has coincided with a drought in the upper Midwest. The impact on the Mississippi River has been significant as water levels have become too low for many barges which would travel the river, especially those carrying grain for export through the Port of New Orleans. This has reduced the volume of cargo that can move through that route. At the same time, low water conditions at the Panama Canal have reduced volumes and slowed transit times to East Coast ports.

August 2023 loaded imports landed at 433,224 TEUs, an increase of 7% compared to the previous year. Loaded exports came in at 124,988 TEUs, an increase of 22% compared to 2022. Empty containers totaled 269,804 TEUs, a 10% year-over-year decline. Combined, August volumes were 828,016TEUs, a 3% increase compared to last August. Eight months into 2023, the Port has processed 5,649,686 TEUs, 21% less than the same period last year. 

The combined effect has been to make the West Coast ports more economically attractive. At the same time, Midwestern farmers are facing higher shipping costs and lower incomes as impacts of natural restrictions impacting trade.

CAP AND TRADE REALITIES

“Cap and Trade” policies allow polluters to purchase “offsets”. These credits come from projects around the country that follow the state’s rules, like forests that store extra carbon or dairy farms that capture methane from manure. Offset projects are supposed to deliver climate benefits that are “additional,” meaning the climate-friendly activity was unlikely to occur without the carbon payments. 

This week a study from UC Berkely may put a crimp in plans by states to employ carbon offsets. Whether it be cap and trade, funding to preserve land by states, or designation of certain things like seaweed as carbon sinks, these policies have relied on assumptions about the ability of these projects to actually offset carbon emissions. The results of the study do not help to make the case that natural carbon sinks achieve their goals.

These natural carbon sink projects are known as “improved forest management.” The idea (IFM) is that this is supposed to create healthier forests that soak up more carbon by strategies such as reducing or delaying timber harvests. Thus far, they’ve accounted for more than 80% of the offsets issued under California’s program.

The research showed that IFM projects appear to cause the storage of little extra carbon. Using satellite data regarding land use, the study compared the pattern of changes on these lands to what occurred in similar forests not enrolled for carbon payments. The results mirrored patterns found in another study in 2022. Researchers at the University of California at Irvine examined 37 IFM projects in the state’s cap-and-trade program and concluded offsets weren’t impacting the amount of carbon stored in the forests.

ESG WARS

A Biden administration rule allows employee retirement plans to consider environmental, social and governance issues in investment decisions. Unsurprisingly, the partisan effort to fight ESG at the state level was extended when 26 states challenged the rule in the federal courts. The states in the lawsuit sought in May for a summary judgment in their favor. The U.S. Labor Department then made a motion for its own summary judgment, which the judge granted on Thursday.

The ruling was made by the favorite federal judge of the anti- ESG movement. That district court has been a go to entity for many challenges to rules and regulations developed and imposed by the federal government. In this case, the ruling comes after legislation passed in Congress to achieve the goal of the litigating states in March. That bill was vetoed.

AUTONOMOUS VEHICLES

So far much if not all of the focus on the debate over the utilization of current state of the art autonomous vehicles has been on San Francisco. The approval by a state agency over the objections of city agencies put many more of these vehicles on the streets of San Francisco. It quickly resulted in a partial reduction of the number of permitted vehicles after operating problems became apparent. It was preemption at work.

While that experiment continues, it seems that another tech center isn’t sure how its autonomous vehicle test is working out. There have been numerous incidents in Austin, TX observed and documented reflecting many of the same issues which plagued the vehicles in San Francisco. Cruise is the operator of the fleets in both of the cities.

The City of Austin finds itself in a similar situation as do regulators in S.F. The ability of the city to regulate in this area is limited under state law. The City would need an act of the State Legislature authorizing it to regulate AV use on public roads. It’s a form of passive preemption.

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