No Appeal Filed on RGGI Regulation, Now In Force

Virginia’s participation in the Regional Greenhouse Gas Initiative (RGGI) is now fully authorized under a new state regulation, and the deadline to appeal that regulation has now passed with no appeal filed.  The text of the regulation is here.

Language inserted by General Assembly Republicans into the current state budget merely puts RGGI membership and its related carbon tax on hold.  It did not overturn the regulation, which went into effect June 26. The outcome of the November election will likely determine whether that roadblock remains in place beyond next summer, when the current budget provisions expire.  

The Virginia Manufacturers Association and the Virginia Coal and Energy Alliance had opposed the regulation and filed notices of intent to appeal it to the Richmond Circuit Court. Both groups confirmed Friday and Monday that no appeals would be filed after all. “Ultimately, we believe Congress and the General Assembly should develop statutory guidelines on carbon regulation.  No citizen board should be doing this on its own authority,” said Brett Vassey, president of the manufacturer’s group.

Vassey declined to provide any further explanation of the decision against filing an appeal, allowed at this stage under the state’s Administrative Process Act. Brooks Smith, an attorney at Troutman Sanders and registered lobbyist for the Virginia Coal and Energy Alliance, confirmed no appeal was filed by that group but also declined any further comment.

The citizen board mentioned is the Air Pollution Control Board within the Department of Environmental Quality, which adopted the regulation with the support of governors Terry McAuliffe, who asked for it, and Ralph Northam, who signed it. The drafters of the final version anticipated a delay for some reason and included a provision (set out below) to keep the regulation alive until Virginia can join a future RGGI carbon credit auction.  The auctions are held quarterly.

9VAC5-140-6045. CO2 Budget Trading Program implementation. In the event the allocation of conditional allowances by the department as required by 9VAC5-140-6190 B has not occurred by January 1, 2020, the program will be considered to be operating and effective as of the calendar year following the date on which the department allocates the conditional allowances as it corresponds to the schedule of 9VAC5-140-6190 A. Permitting and compliance dates, including the due date for a permit as required by 9VAC5-140-6150, shall be adjusted to be in force six months after the date the department allocates the conditional allowances. Any excess emissions tonnage identified by the new program implementation date may be addressed through program review and regulatory action as necessary to ensure compliance with the final compliance date. The department will notify the board and each affected CO2 budget source accordingly.

Smith’s coal industry clients are a main target of the regulation, which seeks to rapidly reduce the reliance of Virginia’s electricity generation plants on fossil fuels. Virginia’s participation in RGGI starts with a cap of 28 million tons of CO2 emissions from the covered facilities, to be reduced by 30 percent over ten years.  Vassey’s industrial members are the largest electricity customers and would feel the higher prices which some (but not all) expect RGGI to cause.  The state’s two investor-owned utilities also belong to VMA.

RGGI is an interstate carbon dioxide cap and trade compact of Northeastern states from Maine to Maryland. New Jersey had been a member, dropped out, and is now back in as of June, with its stated goal being 100% carbon-free electricity by 2050.  Here is New Jersey Governor Phil Murphy’s announcement on returning to RGGI last month, decrying all the lost carbon tax revenue since former Governor Chris Christie withdrew from RGGI.

The most recent RGGI auction was held June 5, with a price for CO2 allowances set at $5.62 per ton, up slightly from the previous auction and the highest price since $7.50 at the end of 2012.  Virginia’s regulation calls for the revenue from the purchase of allowances to return to utilities and eventually back to ratepayers, but another new provision in the state budget designates it as state general fund revenue. Most other RGGI states spend the money on various programs, cementing its status as a carbon tax.

The General Assembly votes which inserted and then sustained the RGGI roadblock in the budget were straight party line, as were the votes on two vetoed bills that would have prevented any participation in RGGI without direct legislative approval. Election rhetoric from both sides since indicates no softening of the positions. All 140 seats in the General Assembly are on the ballot in about 100 days.