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New Washington Energy Legislation: Legislature Continues to Wrestle With Questions Raised by Renewables

May 06, 2013 posted by Eric Christensen

Reflecting new Gov. Jay Inslee's strong interest in renewable energy and climate change, these issues were hot topics during this year's legislative session. With the conclusion of the regular session at the end of April, the fate of most energy-related bills has now been decided. Because Gov. Inslee has called an executive session to address unresolved tax and budget issues, the final story has not yet been written. But a number of bills important to electric utilities, renewable energy developers, and others in the energy industry have now become law. As has become routine in recent years, Washington's Renewable Portfolio Standard, Initiative 937 ("I-937") continues to be a flashpoint for controversy. Although comprehensive reforms reflecting a "grand bargain" between environmental and industry interests once again eluded the legislature, three important changes to I-937 were enacted. These are: SB 5400 (signed April 23): This legislation allows a utility subject to I-937 to count wind energy imported from states where the utility has retail customers toward the utility's I-937 compliance obligations. The bill provides a limited waiver from I-937's requirement that renewable power must come from the Pacific Northwest. For reasons we have previously discussed, this provision is, at best, constitutionally suspect. It is also probably counterproductive because California has used similar territorial restrictions to limit access to its renewables marketplace, causing havoc in the Pacific Northwest renewables industry. As a practical matter, the result of the bill is somewhat limited, allowing PacifiCorp to count otherwise-excluded Wyoming wind resources toward its I-937 compliance obligations. HB 1154 (signed May 1): This bill amends I-937's prohibition against double-counting of the environmental benefits of renewable generators so that biomass and biogas producers can sell carbon offsets attributable to the destruction of methane (a powerful greenhouse gas), while still receiving credit for renewable energy production under I-937. This change will allow dairy digesters, landfill gas generators, and similar renewable generators to participate in emerging carbon-offset markets like those in California. These markets promise a potentially substantial revenue stream for operators of biomass and biogas facilities. This legislation may therefore kick-start construction of such facilities in Washington. SB5297 (Governor's signature pending): This bill is follow-up legislation to the complex legislative package passed in 2011 to facilitate the transition of the Centralia Steam Plant from coal to natural gas. Part of the 2011 legislation allowed utilities to purchase long-term "coal transition power" contracts from Centralia to provide the financial assurances necessary for the refueling of the plant. This bill helps facilitate contracts for "coal transition power" by permitting utilities to purchase coal transition power without threatening their eligibility for I-937's "safe harbor" for no-growth utilities. The "safe harbor" provision allows utilities with no load growth to comply with I-937 by spending 1% of their retail revenues on eligible renewable resources, even if that spending does not achieve otherwise-applicable portfolio requirements for renewable resources. Several other pieces of energy and climate legislation not involving I-937 also passed. These include: ESSB 5802 (signed April 2): As we have previously reported, this was the first of Gov. Inslee's legislative requests to pass both houses of the Legislature. It provides for a comprehensive study of strategies for Washington to reduce greenhouse gas emissions, and is intended to provide a springboard for greenhouse gas legislation in the 2014 session. SSB 5369 (Governor's signature pending): This bill provides important clarifications concerning the legal status of and permitting requirements for geothermal resources in Washington. The bill makes three important amendments to Washington's Geothermal Resources Act (RCW Chapter 78.60), which was originally passed in 1974. First, the bill clarifies and broadens the definition of "geothermal resources" to make clear that geothermal resources include heat, hot water, steam, minerals, and other by-products. This change is especially important for the new "Enhanced Geothermal Systems" technologies now on the horizon, because these new technologies can extract geothermal heat, and do not depend on the presence of heated groundwater, as do traditional geothermal systems. The new definition also clarifies that ground-source heat pumps do not use "geothermal resources." The second change made by SB 5369 clarifies that geothermal resources belong to the owner of the surface property above the geothermal deposit unless the resources have been specifically conveyed to another owner. This change eliminates a substantial ambiguity in Washington law concerning title to geothermal rights. Finally, SB 5369 creates a new exemption to the requirement for water users to obtain water rights permits from the Washington Department of Ecology. The legislation provides that no such permit is required for geothermal operators if they reinject any water withdrawn from a geothermal formation. Together, these changes should promote geothermal development by clarifying the legal status and simplifying permit requirements for geothermal operators in Washington. HB 5709 (Governor's signature pending): Enacts a pilot program, to be administered by Washington State University, to test wood pellet heating systems in public schools. SB 5896: This legislation would extend the sales and use tax exemption for purchasers of renewable energy generating equipment. While this bill has not advanced, it is likely to be considered as part of the budget and tax debate that will occupy the upcoming special session. Several other pieces of legislation involving taxation of renewable energy systems may also be taken up. If you have any questions about any of the legislation discussed in this post or about Washington energy or environmental law generally, please contact a member of GTH's Energy, Telecommunications, and Utilities practice group or Environment & Natural Resources practice group. These practice groups are consistently recognized as among the best, both nationally and in the Pacific Northwest. In addition, GTH-Government Affairs offers comprehensive government relations services, including advocacy, research, and strategic advice in both Olympia and Washington, D.C.