Pennsylvania Legacies #185: Policy Preview 2023

John Walliser:

Morning, Josh.

Josh Raulerson:

It’s been quite a year. I guess it’s probably been close to a year since you’ve been on the podcast, and a lot has happened starting with an election last fall and fallout that is continuing to materialize from that. So, where should we begin? What’s on PEC’s agenda, policy-wise, for 2023?

John Walliser (01:50):

So, big surprise, we have a new governor. We also have a significant turnover in the General Assembly close to one sixth, I think of the, the General Assembly now has new legislators, so exciting times. We’re also at an interesting moment where the two major federal investment laws, the Infrastructure Investment and Jobs Act and the Inflation Reduction Act, long time coming from the standpoint of we saw these pass in Congress. The federal agencies — Environmental Protection Agency, Department of Energy — began doing their inquiries about how they get this money on the streets and working to help reduce emissions and, and invest in clean energy businesses. That’s starting to come to fruition. So we now need to think about how we orient policies in Pennsylvania to take advantage of that.

Josh Raulerson (02:39):

So when is that going to be really noticeable for, you know, regular people? Like, when are we going to really start to see the effects of that and what might it look like?

John Walliser:

I think 2023 is going to be the year it really hits the streets, so to speak. We’ve already seen a lot of requests for information from these agencies. They’re trying to build out all the different aspects of these programs. Everything from what are the most efficient invest investments to, we’re concerned about frontline communities and how do we properly engage communities and make sure that benefits are flowing back to those communities. That guidance is now starting to roll out. They are starting to accept the formal applications for those dollars, and we do expect that to start rolling out starting this year.

Josh Raulerson:

And what role is PEC playing in that conversation?

John Walliser:

Well, we’ve been engaged a little bit in feedback to those agencies, but really at this point, it’s been more about, you know, what are the types of policies that Pennsylvania itself can implement at the state level to really position our state to best take advantage of those dollars.

Josh Raulerson (03:42):

Well, let’s zero in on some of those policies then. Some of these will be familiar acronyms to our audience. Let’s start with CES, Clean Energy Standard.

John Walliser:

Yeah. Clean Energy Standard. So this is a concept we’ve been working on for a while now. Back in 2004, the state enacted a law that was called the Alternative Energy Portfolio Standard, which set the requirement that a certain percentage of energy procurement in the state come from select types of resources, including renewables. When it came out in 2004, it was pretty innovative. Since then, Pennsylvania’s been leapfrogged by other states, and in fact, our, our law has now plateaued. So it’s time to revisit that and reinvigorate that law. So we’re really looking at two aspects. Number one, we really want to increase the requirement that energy is procured from renewable sources. That’s something that new Governor Shapiro has committed to. It’s something there’s a lot of interest, bipartisan interest in the General Assembly to do. So that’s part one of that increase, the requirements that a certain percentage of electricity comes from renewable sources. So wind, solar, low impact hybrid, and

Josh Raulerson:

And all this federal money has gotta… it doesn’t hurt, right?

John Walliser:

It doesn’t hurt. But the other thing we’d like to see happen is you know, when this law was enacted in 2004, it was broadly written. It included energy sources that still emit carbon dioxide. And it also didn’t value non emitting sources of generation like nuclear. So we would like to see sort of a reformation of this law not only increase the renewable requirement, but also take a hard look and say, Hey, we need to value nuclear. We need to even value fossil generation with effective and verified carbon capture. And probably remove those sources that are in there now that emit you know, unless they install carbon capture technology or something else to, to ward off those emissions, you know, they’re already receiving other types of incentives under different state programs. Maybe it’s time to back those out. So that’s why we’re calling it a clean energy standard, because you’re really focusing in on the emissions side, the clean energy technology.

Josh Raulerson:

So the standard is no carbon or very, very, very little carbon. 

John Walliser:

Correct. 

Josh Raulerson:

And how is that different from other models that other states have have taken? 

John Walliser:

Actually it’s quite similar to what other states have done. In fact, most recently the types of laws that have been enacted by states have really focused in on that sort of decarbonization net zero goal.

Josh Raulerson (06:10):

You mentioned carbon capture as being really integral to this vision of, I guess, natural gas still having a place in Pennsylvania’s energy portfolio under a clean energy standard or something like it. How about a refresher? What is carbon capture utilization and storage? Why does it matter? Where does it fit in in this picture?

John Walliser:

Absolutely. So carbon capture is where you’re taking those emissions that are coming either from a, a source, like a generational electric generation source, whether that’s coal or natural gas, or you’re looking at industrial or chemical types of processes cement making, steel making, and you’re capturing it in either utilizing it in a subsequent process or you are injecting it underground for long term, hopefully permanent storage. It’s something that is also being incented by the federal government. There’s a number of different programs both from a tax incentive as well as sort of an r and d investment approach. So states that are interested in pursuing this type of activity need to bring their own state programs up to speed. It’s really a huge suite of policies. Everything from, you know, looking at who owns that poor space underground that you want to inject this CO2 into, you know, what, what rights do surface owners have, you have competing subsurface interests, people who are doing mining, people who are doing drilling. How does that potentially affect the integrity of long-term storage?

You also have issues in states like Pennsylvania, where they have a long history of resource extraction. We have a number of abandoned and active wells that are already out there a lot of which we don’t know where they are. So those are very serious risks for integrity of storage and for public safety. So there’s going to have to be a couple of different pieces of legislation or policy that move this forward dealing, dealing with those private landowner issues, those ownership issues. We’re also going to need legislation that looks at how do our resource agencies, like the Department of Environmental Protection, the Department of Conservation and Natural Resources, how do they ramp up their staff and their capacity to be able to deal with these issues? Everything from siding and managing the injection wells that put the CO2 underground, the associated infrastructure, the pipelines and how do you deal with the issues of things like long-term responsibility for that co2, who monitors it? How do you make sure there’s enough financial assurance in place that if something does go wrong, the state has the means to deal with those if the private operator can’t. And as we mentioned a little bit earlier with what they’re doing at the federal level with the federal investment, how do you make sure frontline communities aren’t adversely impacted?

One of the things that is included in the federal investment for both carbon capture and for hydrogen hub development are very firm requirements that projects do community engagement and enter into community benefit agreements. Right now, Pennsylvania really doesn’t have any sort of set procedure in place to deal with those types of issues. You know, for example, the Department of Environmental Protection has an Office of Environmental Justice, but it’s advisory only. There’s no statutory authority backing that up. So we need to get that in place. We need to get that procedure and those guidelines and those criteria in place to make sure there is follow through on the community engagement benefit

Josh Raulerson:

And, and that’s needed in its own right. But also as a condition for federal or other support.

John Walliser:

Yeah, that’s right. It’s not just an ideal. I mean, it’s something we should be doing anyway, but it’s going to be a requirement for the federal dollars. And frankly, it’s also going to be a requirement for those states that want to enact their own policies and get what’s known as primacy for things like the Injection wells, the Environmental Protection Agency, when they’re reviewing state programs and trying to make that determination as to whether they should grant state the primary responsibility for running those programs. Those are the sorts of things they’re looking at.

Josh Raulerson (10:22):

A moment ago, you mentioned the problem with orphan or abandoned wells all over Pennsylvania. We, I think last heard that there was some help on the way in, in the form of, again, federal funding perhaps, but you also alluded to chronic staffing problems with DEP that makes it really hard to, you know, actually make a, make a dent. Where do we stand with that? What’s happening next with the effort to both identify and ultimately get these orphan abandoned wells plugged?

John Walliser:

So the Department of Environmental Protection has been going out and as fast as they can with the resources they have trying to identify where these orphaned wells are located and providing that information to the Environmental Protection Agency to make us available for those federal dollars. They are also putting out contracts opportunities for plugging. So we’re, we’re based here in western Pennsylvania. Several contracts have already been awarded for a number of wells in the region, and we’re starting to see that being replicated throughout the commonwealth. That’s going to be an ongoing process. DP is going to be continuing to try to identify those, and then once the federal money does come in, putting people out to work to plug those wells.

Josh Raulerson:

So, and again, all the more reason why agency funding, agency staffing is, is so critical in all these things, right?

John Walliser:

And that’s one of the things we’re hopeful that Governor Shapiro, when he gives his budget address in March that’s going to be identified as a top need. One of the other things that Governor Shapiro has already announced is an executive order to try to improve permitting and permitting efficiency among other things, other agency efficiencies. So that’s going to require investment investment in our resource agencies.

Josh Raulerson (12:03):

Diving back into the alphabet soup regional greenhouse Gas initiative, you know it, you love it. RGGI. <laugh>. Where does RGGI stand right now? Legal challenges was the last I heard…

John Walliser:

We’re still there. 2023 is echoing 2022. So it is still in the courts, there has been no implementation of the rule yet. We’re expecting that is likely going to continue for at least the first part of 2023, if not through the rest of the year. So pivoting to what we should be focusing on in that sort of stasis period, really looking at how can we best when Pennsylvania does go into RGGI, how can we best invest those dollars that will come back to the state for participating in the trading mechanism right now under current law if the money were to come in, the uses that would be authorized for that money are pretty broad, but there has to be a very tight nexus to emissions reductions. What we’d like to see is not only that, but expanded a little bit. And that’s going to require legislative authorization to look at things like consumer assistance, job training help to communities who are going through the energy transitioning process. We saw legislation introduced in the last legislative session. We anticipate it’s going to be introduced again. But really if, if, if the rule is on hold, now’s the time to get that framework in place and think about those federal dollars again. How do we get Pennsylvania to, to catch up with what other states are doing?

Josh Raulerson (13:40):

Well, the big story at the federal level for the immediate foreseeable future is methane. Talk about the federal methane rule where it stands right now, where we expect it to go.

John Walliser:

Yeah. So last year the US Environmental Protection Agency announced a draft rule to deal with methane from the oil and gas sector. They made changes to that rule based on input from the regulated community and from the public and from professionals. They made some changes to the rule late in 2022 that is now out for public comment and input. And they’ve made some significant improvements to the rule, which we’re happy about because methane is obviously a big problem nationally and a big problem in Pennsylvania. And frankly, we also see it as an economic opportunity because you’re preventing the waste of a usable resource. Right. So the two things that are really important in the changes to the rule that EPA made the first is that they switched the threshold for how they were going to deal with leak detection and repair.

Under the older draft of the rule, it was based on production levels. You know, the higher the production at a well site, the more stringent the leak detection and repair requirements were going to be. Rightfully, they’ve now switched that to looking at the types of equipment that are on site. We, you know, research has consistently shown that there really is no correlation between what fugitive emissions might be happening onsite, you know, compared to production. So this is now saying, okay, what kind of equipment do you have onsite based on that, that’s what we’re going to,

Josh Raulerson:

I mean, I had the sense that the, the correlation was actually inverse in that the lowest producing wells are the biggest problems in terms of emissions. Is that right?

John Walliser:

Yeah. Research shows that they, the lower producing wells account for about half of all the methane emissions nationally, even though they only make up about, you know, 6% of the production levels. So it’s a huge issue. The other thing that the rule does now that we are very happy about is it takes steps to make sure that abandoned wells, those wells where production has or soon will cease, are properly managed. And so there are two parts to that. The first is that operators will be required to monitor and report on those well sites until they are properly plugged. So this includes ensuring that steps are taken to properly plug them and that the plugging process actually is meeting the projections in terms of stopping the emissions. The other, and again, this is also important for Pennsylvania, where we’re seeing a lot of this happen is that operators are going to have to report any transfer of ownership of those wells. So the regulatory agencies can keep track of who the res responsible parties are in making sure that they’re following up on their obligations.

Josh Raulerson (16:31):

Let’s turn to the General Assembly and kind of the meta stuff. The fact that we are in, you know, we’re into February now, typically this will be a time of year when, especially with a new administration, a lot of agendas being set, appointments, hearings, all that good stuff is kind of on hold for the immediate future, for complicated political reasons. One of the things we’ve been looking at that I, I’m curious about the status of is the several constitutional amendments that had been proposed. PEC has got concerns. Can you talk about that?

John Walliser:

Yeah. So there have been a number of constitutional amendments, like you said, that have been proposed carrying over from last session. Again some of them obviously are, are not in our wheelhouse, but one we are very concerned about is change to how rule makings can be nullified by the General Assembly. So under current law the General Assembly has the right to review any proposed regulation. They can enact legislation to abrogate that rulemaking, and in fact, they can do that at any time just through separate legislation, what the constitutional amendment that’s been proposed would do, would allow them to shortcut that process by just adopting what’s known as a concurrent resolution. So a simple majority enacted by both chambers without review or the ability to veto by the governor. So this would upend you know, several decades worth of established process in the rulemaking process. And we’re concerned because this would allow nullification of rulemaking without the need for public hearings, without the opportunity for public comment

Josh Raulerson:

And without an expectation that you would propose an alternative.

John Walliser:

That’s right. And, you know, regulations are only enacted when they’re required. So you can’t just you can’t just do a rulemaking. You have to be authorized by state or federal law to do so. So we also have that concern, and we saw this with the state level implementation of methane rules last year, where if we fail to do certain types of rule makings, we could actually come under sanction from the federal government for not doing what we’re supposed to be doing.

Josh Raulerson (18:38):

Looking at the makeup of the General Assembly at the moment and where it’s, I guess, expected to be a month or two from now, and recognizing that, you know, you’ve played a role in the transition team for Governor Shapiro, and so that means you can’t speak freely about everything that went on behind those closed doors. But considering both of those factors, what do you expect, broadly speaking in terms of the issues that we’ve been talking about, other ones that are important to PEC and our partners? Where’s this all going? What is, what’s your sort of prediction for 2023?

John Walliser:

Oh, wow, <laugh>. Well, I, I think it’s, it’s going to be interesting. We already, as we mentioned before, we’ve already seen the executive order from Governor Shapiro on improving agency performance and responsiveness. I do think there is going to be a very firm commitment on the clean energy transition and taking advantage of both the emissions reductions and the economic and business opportunities from that. I think that’s going to be a coming attraction because, you know, the administration’s just come in, they’re still filling seats, still getting to know the office space, and we have a lot of new legislators and we have a divided General Assembly. The, you know, one party controls one chamber, one party is likely going to control the other, which creates a very interesting dynamic. You know, we’ve been talking about nothing but energy. But I think the other thing the PEC’s really going to be focused in on, and we’ve gotten good response so far from both the administration and the general assemblies.

How do we look at some of the other opportunities that are out there, including recreation, which is a big part of our DNA. There’s going to be legislation reintroduce this session that will expand liability protections to volunteers and volunteer based organizations to promote recreation, to maintain recreational infrastructure. We are excited about that. We’d like to see that get across the finish line. We also think that this administration is going to continue the commitment to try to increase interagency coordination. You know, the Department of Conservation and Natural Resources is out there doing great things, but that also requires partnership with the Department of Community and Economic Development. The Pennsylvania Department of Transportation last year, DCNR, the Department of Conservation and Natural Resources hired someone to direct outdoor recreation, outreach and, and growth. So we’re hopeful that that’s going to continue to build through 2023.

Josh Raulerson:

John Walliser is PEC’s Senior Vice President for Legal and Government Affairs, and a frequent contributor to the PEC podcast. Thanks again for coming by. 

John Walliser:

Thank you, Josh.