Federal Policy Update Presented to Max Williamson June 17, 2010 M-AGG Policy Conference Washington, D.C. 1

2 True Believers

3 Skeptics Remain

4 Carbon Offset Providers Coalition

5 Key Drivers – Public Perception

6 Key Drivers – Big Picture  President Obama - “Seize our destiny.” 6/16/10 Oval Office Speech  Kyoto Protocol expires  Supreme Court: Massachusetts v. EPA, 549 U.S. 497 (April 2007) Carbon dioxide is a pollutant  USEPA Clean Air Act Rulemakings: ANPR “Regulating Greenhouse Gas Emissions under the Clean Air Act.” EPA Endangerment Finding EPA “Tailoring” Rule (25,000 tons per year) EPA Mandatory GHG Reporting Rule (started Jan. 1, 2010)  Litigation and Permit Challenges : Connecticut v. AEP, 582 F.3d 309 (2d Cir. 2009) ; Comer v. Murphy Oil, 585 F.3d 855 (5th Cir. 2009) (greenhouse gas emissions can be public nuisance) Permit challenges (coal plants, landfill NSPS, nitric acid NSPS, infrastructure projects)  Congress: Cap-and-trade bills (Waxman-Markey; Kerry- Lieberman).  States: Regional climate initiatives (RGGI, AB32, WCI, MGGRA).

7 Presidential Candidates on Climate Change

8 Federal Cap-and-Trade Bills (leading) (111 th Congress)  Kerry-Lieberman “American Power Act” (discussion draft May 12, 2010)  S.3464 Lugar-Graham-Murkowski “Practical Energy and Climate Plan Act” (“diverse energy standard”) (introduced June 9, 2010)  S Cantwell-Collins “Carbon Limits and Energy for America’s Renewal” (“cap and dividend”) (introduced Dec. 11, 2009)  S Stabenow “Clean Energy Partnerships Act” (offsets title and carbon conservation program) (introduced Nov. 4, 2009)  S Kerry-Boxer “Clean Energy Jobs and American Power Act” (RES and cap-and-trade) (reported EPW Nov. 5, 2009)  S Bingaman “American Clean Energy Leadership Act” (reported ENR July 16, 2009) (RES and energy)  H.R Waxman-Markey “American Clean Energy and Security Act” (RES and cap-and-trade) (passed by House June 26, 2009)

9 Kerry-Lieberman American Power Act – Ag and Land Use Provisions Domestic Offsets Program (Sec ): Closely follows Stabenow approach (S.2729). USDA jurisdiction over ag and forestry offsets; EPA jurisdiction over program generally. Eligible projects include afforestation/reforestation, IFM, harvested wood products, forest-based manufactured products, domestic REDD, tree crops, GMO trees, agricultural sequestration and management (agriculture, grassland, rangeland), and land use generally. Crediting periods are 5-10 years (30 years for forestry) with extensions. Stacking is expressly permitted. Early action crediting if registered on qualified voluntary program. EPA and USDA and Interior to conduct forest carbon inventory, including study of agriculture land taken out of production due to forest conversion for offset market. Carbon Conservation Fund within USDA (similar to Stabenow title 2) for ag and forestry projects.

10 Kerry-Lieberman American Power Act International Offsets Program (Sec ): Administered by EPA in consultation with State and USAID. No positive project list but EPA must recognize "well-developed methodologies". Credits sector-based reductions, CDM (but no project-based credits after 2016), and REDD. (Note: less detail than Waxman-Markey).

11 Kerry-Lieberman American Power Act Supplemental REDD (Sec. 704, Sec. 5004): Special program for supplemental reductions (outside the cap) thru international REDD in developing countries. (Note: No 5% funding as in Waxman-Markey). Stated goal to fund 720m tons by 2020 and 6b tons by Subnational and national efforts are recognized, which may support project-level reductions and private investment, but detail left to rulemaking and sub-national phased out after 8 years. (Note: Unclear whether project-level reductions can be credited if national baseline is not reduced). Numerous conditions deter private investment, e.g., discounting for technical capacity of host country; use of national rather than project- specific baselining; emphasis on biodiversity co-benefits; treating local communities as "partners"; mandated "equitable sharing of profits and benefits"; and financial disclosures.

12 Climate Legislative Outlook for 2010 June 17 – Senate Democratic Conference and Committee Work July 12 – Aug 9 Path to Senate Floor Vote December – Lame Duck Conference and Passage ?

13 Questions? David M. (“Max”) Williamson, Esq. (202) Andrews Kurth LLP