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Climate State & Regional Climate Strategies

CleanLaw — Behind the Curtain of the Clean Utility Transition

Demystifying the utility business model and identifying market, policy, and technology forces that will drive a cleaner energy system


EELP Director of State and Regional Climate Policies Dale Bryk talks with Jamie Van Nostrand, recent chair of the Massachusetts Department of Public Utilities, the entity that oversees investor-owned electric and gas utilities. Together, they dive into the regulatory frameworks that govern utilities, how those rules drive utility investments, and what that means for consumer energy bills in the transition to clean energy. 

Transcript

Intro:

Hello and welcome to CleanLaw from the Environmental and Energy Law Program at Harvard Law School. In this episode, Dale Bryk, director of State and Regional Climate Policies at EELP talks with Jamie Van Nostrand, recent chair of the Massachusetts Department of Public Utilities, the entity that oversees investor-owned electric and gas utilities. Together they dive into the regulatory frameworks that govern utilities, how those rules drive utility investments, and what that means for consumer energy bills in the transition to clean energy. We hope you enjoy this podcast.

Dale Bryk:

Welcome to CleanLaw. I’m Dale Bryk, the director of State and Regional Policy at the Harvard Environmental and Energy Law Program. Today we’re going to look behind the curtain of the clean energy transition and try to understand what’s going on with our gas and electric utilities. We’re going to try to demystify the arcane world of utility regulatory proceedings, clarify both market and policy drivers for clean energy investments, and explore how a relentless pursuit of safety, affordability, and reliability could actually bring about a much cleaner energy system.

To do that, we are so fortunate to have with us Jamie Van Nostrand, who until recently was the chair of the Department of Public Utilities for the State of Massachusetts since May of 2023. He was also a law professor for 14 years at West Virginia University, the executive director of the Pace Energy and Climate Center, and he had over 20 years of experience in private practice. And I can just say that Commissioner Van Nostrand is one of the leading thinkers on these issues nationally, and his work in Massachusetts is truly at the forefront of the industry, and I’m so happy that we’re going to be able to dig into these issues with him today.

So Jamie, welcome to the podcast. It’s so great to have you.

Jamie Van Nostrand:

Thanks very much Dale, and thank you for that really kind introduction. I hope I can live up to those glowing words.

Dale Bryk:

I’m sure you will. So let’s start with the fundamentals. Can you help us understand just the most basic things about the utility business model? How do utilities make their money now on both the gas and the electric side, and why does that create issues with respect to affordability and transitioning to clean energy?

Jamie Van Nostrand:

Basically, utilities make money for delivering energy, whether it’s on the gas side, the therms of natural gas on the electric side, electrons of electricity, they make their money by delivering it. The cost of the commodity itself is just a flow through. Where they really make their money is all the infrastructure that takes to deliver that gas and electricity. What are the gas distribution companies doing in terms of replacing pipe that are causing delivery costs to go up so rapidly?

On the electric side, we’re looking at a rather substantial clean energy build out. As we decarbonize both the building sector and the transportation sector, we’re looking at moving a lot more electrons around. That means more and more investment in transmission and distribution infrastructure. Those delivery charges on the electric side are probably going to be going up as well. That’s really how they make their money is in that investment in poles and wires on the electric side, on gas distribution, mains on the gas side, that goes into their rate base and they earn a return on that. And that’s pretty much how they generate their profits.

Dale Bryk:

And can you tell us how this has changed over time, the investment that the utilities are making in all those pipes and the system itself, versus just the cost of managing the system and passing through the commodity cost, the actual cost of the gas or the electrons themselves?

Jamie Van Nostrand:

So on the gas side, what we’ve seen particularly in Massachusetts with lots of aging pipe, what’s been referred to as leak prone pipe, lots of investment by the gas companies in replacing that pipe, particularly over the last 10 years. And as a result, the percentage of your bill that consists of delivery charges versus the portion we representing the commodity charges or the gas itself, that’s pretty much flipped. About 10 years ago, 2014, that number was about 70%, 65% of your bill was the commodity, the gas itself, and about 30% was the cost of delivering it to your house.

Most recently, that number is like 70/30. 70% of the cost is delivering it to you. 30% is the gas itself. Now, some of that gas costs have been relatively stable, but the delivery charges have gone up because the gas companies continue to invest vast sums of money frankly, in replacing pipe and just increasing the size of the rate base upon which they earn a return. It’s problematic because we’re seeing throughput go down. The number of molecules going through the pipes as people transition into electric heat pumps. And so the throughput goes down, the costs of operating the system don’t go down. That results in upward pressure on bills.

Dale Bryk:

Right. And we’re going to dig into that more. And when you’re saying throughput, that means the therms and the electrons that are flowing through the system, basically our demand as customers for electricity and the gas side is going down. Because people are both becoming more efficient and transitioning to electric heat pumps. So that’s a big trend that’s happening in the system that we have to manage. And I want to get into that more in a second, but just another minute on this situation that we have where the utilities have a bias in favor of making large capital investments, investing in the infrastructure, the pipes and wires. Even when it might be much cheaper to do something else, to be investing in distributed resources, to be helping their customers invest in energy efficiency or heat pumps.

So when we have that bias, how do the utility regulators address that? You know that that’s happening. So how can you push back on proposals from utilities that are not the most cost-effective investments, and are actually making energy less affordable for their customers?

Jamie Van Nostrand:

That’s a big challenge for the regulators, frankly. On the gas side, what we’ve seen as the measures that the utilities are taking to address the leak-prone pipe or the aging pipes, there’s a bias in favor of replacing the pipes and these pipes last for 50 or 60 years. Whereas in Massachusetts, the Global Warming Solutions Act, we have a net zero by 2050 goal and a Clean Energy Climate plan, which provides sector limits in terms of greenhouse gas reductions that we need to achieve. So we need to stop thinking about the gas system remaining in place in perpetuity, stop thinking about replacing pipes with 50- and 60-year assets, and thinking about can we pursue a lower-cost solution like we relining or repair, which is less profitable for the utility, but it’s an operating expense. And so they don’t own a return on an operating expense, they earn a return on the investments. And so when in doubt, the utilities tend to want to spend money on investments that will add to their rate base and upon which they earn a return.

On the electric side, we have the same issue in terms of, as you mentioned, distributed energy resources, which are batteries, solar panels, the battery in your electric vehicle. Those are all potential resources on the customer side of the meter that represent lower-cost solutions. The utility’s bias is going to be let’s spend more money on reinforcing the grid, more upgraded substations because that’s going to increase their profits. Whereas a lower-cost solution might be taking advantage of that flexibility of those customer-sided resources like using that battery on the customer side of the meter as a resource for the utility. The utility will not have to build as much stuff because they can take advantage of customer-sided resources. And so the challenge of the regulator is being mindful of making sure the utilities are pursuing that lowest-cost path for customers, which in many cases is not the most profitable path for the utilities.

And we try to do that by thinking about incentive mechanisms. Does it make more sense to promote a program that encourages virtual power plants or those batteries on the customer side of the meter versus additional investment in transmission and distribution infrastructure?

Dale Bryk:

So let’s talk more about the pipe replacement issue. That’s where we have the utilities replacing, like you said, leak-prone pipe. It’s very, very expensive. The ostensible reason for that from the gas utilities is for safety that it’s like we just said leak-prone, but it’s not always actually leaking. And the plans for replacing pipe can extend over 30 years. So we’re not talking about an urgent safety matter, but we are still talking about safety. At least that’s the proposal from the gas utilities who are making these investments. So how do you approach that issue, both the cost and the safety issue for the pipe replacement proposals that the utilities are putting forward?

Jamie Van Nostrand:

In Massachusetts, ever since 2014 when the legislature passed what was called the Gas Leaks Act, there’s been a program, the Gas System Enhancement program or GSEP, which pretty much allows the utilities for expedited rate recovery of these investments that they make when they’re addressing leak prone pipe. They’ve been spending up to 3% of their annual revenues on this program. And it’s like I said, there’s been a bias to move towards replacement of those pipes, rather than looking at potential lower cost options like relining or repair, we had a major, what I would call a reset of that in an order that we issued at the DPU back in April, to scale back, the level of that spending, and pointed out that we don’t want to be putting 50 and 60 year assets in the ground when maybe we just need to repair and reline and just extend the lives for a few more years.

Because ultimately we’re going to be decommissioning lots portions of the gas system to achieve net zero by 2050. So move away from thinking that the gas system’s going to remain in place in perpetuity and think about lower cost solutions that are going to merely extend the life of the pipes for a few years and then potentially decommission them. But at the same time, gas is dangerous, it’s explosive, so we have to make sure the system’s going to be operated safely. So as we reduce the level of spending, we had our Gas Pipeline Safety Division, which is incidentally one of the best in the country, get involved in making sure the utilities are more rigorous in their risk assessments.

So as the spending goes down in the GSEP program, we’re making sure that the riskiest pipe is still addressed first. And so more rigorous risk assessment prioritization, then utilities have to show their work. Did you consider relining or repair as an alternative to replacement? Because that is a lower cost option for customers, it’s going to help keep rates down and then it’s going to make sure that we’re not stranding all this investment as we shrink the gas system to meet the greenhouse gas targets that we’re not putting that additional investment in the ground. Which ultimately is going to be paid for by ratepayers in all likelihood.

Dale Bryk:

And just to be clear, stranding the investment is a stranded asset where an investment is made and then it’s not used for its whole useful life, and then we never have the resources to pay it back in just our normal energy bills the way we pay them. And now it’s just a huge debt that’s sitting there, an asset that we’re not using anymore.

Jamie Van Nostrand:

Correct, yes. Otherwise, if your throughput’s going down and your fixed costs are staying the same or even going up as they continue to invest in additional capital investments in the system, then it’s going to just have massive upward pressure on rates, and that’s what we’re trying to prevent.

Dale Bryk:

And can you give a sense of the scale of the cost here? I know in New York the proposed expenditure is $150 billion over many years for replacing the pipe. But what’s the ballpark cost and the savings that you could get from relining? The relining is only a fraction of the cost, correct?

Jamie Van Nostrand:

The numbers in Massachusetts, since the Gas Leaks Act was passed, were probably upwards of $5 billion has been spent. And I think of the utilities under their proposed GSEP plans before we did the reset, we’re probably going to spend another $15 billion over the next 15, 20 years to address all the leak-prone pipe. I think what we’re seeing with relining and repair, frankly there just has not been enough attention devoted to it. Really not enough research and development because there hasn’t been much incentive. A lot of the gas utilities around the country are in the same situation of having these enhanced rate recovery programs to address leak-prone pipe. So there’s just been this default to just replace the pipe.

And what we kept hearing in Massachusetts was relining or repair, that’s only going to delay the ultimate replacement of the pipe. And that’s just not the way we need to be thinking about these things. If we can just extend the life for 10 or 15 years and then think strategically about shrinking the system by maybe electrifying houses, decommission the pipe, rather than spending the additional money to replace the pipe, that’s going to represent a lower-cost solution for customers and it’s going to avoid those stranded costs.

Dale Bryk:

So let’s think more about shrinking the system and what that would look like and the obstacles that are preventing us from doing, for example, in instances where it might be cheaper not just to reline the pipe but actually to decommission the pipe. Because the investment that you would be making in the natural gas distribution system infrastructure is much more expensive than it might be just to electrify the buildings that are at the end of that portion of the system right there. But there are regulatory barriers to doing that. And two of them are what we call the hundred-foot rule. The rule that allows utilities to basically socialize the cost across all customers when they’re going to extend a line to a new customer.

And the obligation to serve, which is a legal obligation in many places in statute that the utility must serve the customers in its service territory with gas. So that creates a huge challenge for doing just what we’re saying, electrifying a slice of the system, downsizing the system when that is the most cost-effective option. And maybe also the best option from a safety and reliability perspective.

Jamie Van Nostrand:

Yeah, there’s a couple of different elements to that. The line extension that’s really… are the gas companies going to provide an allowance if we give a new customer hookup? Let’s just give an example that customer hookup is going to cost $10,000 to extend the pipe to serve a house. The gas utility would typically provide an allowance towards that, maybe $8,000 of the $10,000 based on assumptions about how much gas has been going through the pipe and whether the customer’s going to have a gas furnace for how many years.

And so it’s generally been calculated by the gas companies in a way to generate fairly generous line extension allowances, right? Because they’re encouraging additional hookups. As Dale you mentioned in New York, there’s actually in the statute a hundred-foot rule, the first a hundred feet is free. When the legislature passed a bill to eliminate that, I believe it’s still waiting for the Governor Hochul whether or not to sign that. In Massachusetts in August, we adopted a policy still subject to some further discussion to basically eliminate line extension allowances.

In our mind, it doesn’t make sense when you have aggressive greenhouse gas reduction goals to continue to invest in expansion of the system. It’s merely a way of existing customers having to subsidize the addition of new customers, and just eliminating those allowances would save gas company customers about $160 million a year.

Now the obligation to serve, that comes into play when we’re looking at potential non-gas pipeline alternatives or NPAs, we call them. In the order that we issued in December of 2023 in our Future of Gas docket, we instructed the gas companies you need to consider whether there’s a non-gas pipeline alternative. Is there a cheaper path that doesn’t involve additional investment in infrastructure as a way of fulfilling your obligations to continue providing service? And that example you gave, if you think about a subdivision at the end of the line, maybe you’ve got 30 houses in that subdivision and maybe you’re looking at half a mile of pipe, potentially leak-prone pipe. It may be cheaper to say, let’s decommission that leak-prone pipe and let’s electrify all these houses.

And that way we’re going to save the money by not having to address the leak-prone pipe. And we’re going to instead, electrify and eliminate those costs of operating the system for that half mile of pipe. And what happens with the obligation to serve you’ve got 30 customers, well maybe 28 of the customers. Sure, I’m in on that. I’m ready to electrify, I’m ready to take out my gas first. You got maybe two customers that are potentially are holdouts who say, no, I like my gas. You’re not going to take away my gas. And what the gas companies in Massachusetts are saying now is based on the obligation to serve, it’s all about the customer choice. And if two customers say no, then there will be no decommissioning. And so that’s a serious barrier to actually shrinking the system.

But right now, the LDCs, the gas companies are citing the obligation to serve. Citing it’s a matter of customer choice and that’s preventing achieving any decommissioning of the pipe. So it’s a huge barrier. The DPU, shortly before I left, we issued a hearing officer memorandum in the pending dockets to basically tee up that issue of the obligation to serve. Is it the statute says gas or electric, does that make a difference? What about the public interest? What about achieving greenhouse gas reductions? What about avoiding stranded costs?

Thinking about the customer choices, you’ve got 28 of those 30 customers who want to electrify. Why do the two customers who don’t want to electrify, why can they thwart the choice of the 28 who do want to electrify? So you can’t just say it’s customer choice and those who want their gas can’t have it taken away. It needs to be a broader evaluation of the public interest. So the commission teed all that up and the parties filed some very insightful comments in that, and that’ll be up to the currently constituted commission to figure out what to do with that.

Dale Bryk:

So in Massachusetts, it could be that the obligation to serve is interpreted in a way that it’s the obligation to serve heat. You said it could be gas or electric. As opposed to the obligation is only very specifically to serve therms of gas.

Jamie Van Nostrand:

Correct. And there were some pretty significant changes made to the governing statutes in the 2024 bill that talked about the substitutability of other sources of energy instead of natural gas. That’s part of the consideration. And also talked about non-uniformity of service, that the utilities could basically vary the type and quality of service. So we think there’s an opening based on what the provisions were to the statute that says that utility is providing the essential service of energy or heat. It doesn’t need to be natural gas if electricity is an adequate substitute.

Dale Bryk:

And can you say a bit more, you hinted at this earlier about what are the ramifications if we don’t address the obligation to serve, and we don’t start shrinking the system in an intentional methodical way that is really identifying the most cost-effective path forward. Given not just the state’s clean energy goals, but just what’s happening in the marketplace as customers transition to heat pumps, whether states have incentives for them or not, this is happening nationwide. Then as you say, the throughput is going down, the demand for gas is going down. That’s what the throughput is. So there’s less and less demand, but we still need to maintain the same system. So just tell us more about where we’re headed if we stay on this road.

Jamie Van Nostrand:

Well, the fact that those numbers have flipped from being 70/30 commodity versus delivery to now 70/30 delivery versus commodity, that’s just going to continue because we don’t see much change in the commodity price of gas. It may go up a little bit because of the LNG exports that we’re now doing, but those delivery costs are going to keep going up, and that throughput is going down. I think in Massachusetts over the last five years, we’ve got maybe 90,000 air source heat pumps have been installed. So the point is the transition is underway.

There’s been a lot of technological developments in terms of efficiencies of electric heat pumps and customers are now choosing to go with electric heat pumps. So the demand for gas is going down. The transition is underway. The question is whether it’s going to be a managed transition. A managed transition says we need to shrink the system as the throughput goes down, otherwise the rates are just going to continue to escalate and even more dramatically I think, than they have given the number of decline in demand for gas so far just as people move to electric heat pumps.

Dale Bryk:

And what does a managed transition look like? I’ve heard you a few times say, we’ve got to get the maps out. What does that mean if we have the regulatory framework to drive the smartest investments on behalf of the utilities and customers, what does that look like, and what do we need to do to support that managed transition?

Jamie Van Nostrand:

The big thing that comes out of looking at shrinking the LDC system is what’s called integrated energy planning, where you’ve got the maps in terms of there may be a logical place for a gas system to be reduced by taking out some leak-prone pipe at the end of the line, so to speak. If you’re going to electrify all those houses to be able to decommission that pipe, does the electric system have the capability of taking on that additional load? Because you’re looking at more electric heat pumps. So it needs to be coordinated. But I think managing the transition means you take that longer view that looking at where the leak prone pipe is, looking at opportunities for shrinking the system in terms of the pipes at the end of the line, so to speak.

And maybe you’re not going to do it this year or next year or five years from now, but you’re going to be thinking seven, 10 years from now and you start putting customers on notice. Don’t buy that new gas furnace because seven, eight years from now we’re going to be decommissioning the pipe here and converting and electrifying your home. So it’s basically taking the long view and just looking at opportunities to shrink the gas system to be able to decommission the pipes and avoid those costs of continuing to maintain the pipes, and then make sure the electric companies can take on that additional load. That’s going to be the lowest cost path for customers.

You really can’t afford to maintain both systems. The transition’s clearly underway, and we need to provide the cost-effective solution for customers, and that’s primarily through decarbonization, electrification.

Dale Bryk:

So that’s a great segue way to talking about how we do more integrated gas and electric planning. You said that word yourself, but I think that’s a foreign term to many. And historically we’ve had quite separate planning for the gas side and the electric side. And I think on the electric side, we do have a long history of long-term planning, not so much on the gas side. For many years it’s sort of like, how are you going to keep the heat on this winter? And it’s really just an annual look versus the long-term planning that you’re talking about. And to have some utilities are gas and electric combined, others are separated even when they’re combined. The service territories don’t overlap entirely. So it’s not without challenge. But it hasn’t even really been attempted in a lot of places.

So you’re highlighting the need that if we’re going to have this transition, more and more customers are switching to electric heat pumps for space heating and for water heating. How do we ensure that balance and equilibrium across the two systems as one is declining and one is increasing and they don’t have a long history of doing that planning together and you have sort of uncertainties on both sides?

Jamie Van Nostrand:

Well, the fact is those utilities, even when you have utilities that provides both gas and electric, oftentimes those divisions don’t really coordinate or talk to each other. So it’s completely different planning model. So just within a utility that operates both gas and electric, being able to combine those operations. And I think we’re seeing those developments at National Grid and Eversource in Massachusetts. You’re seeing folks who are now taking on the role of integrated energy planning where you’re going to get those divisions talking to each other. I think the more challenging situation is where you have a customer who might be getting their electricity from Eversource and their natural gas from National Grid. That’s a much more complicated situation. Or we have in Massachusetts, we have a couple of standalone gas companies, Berkshire and Liberty, all they do is provide gas. They don’t have an electric division.

So it’s very complicated in terms of maintaining the financial viability of those gas companies, making sure the system continues to operate in a safe manner. But one of the things that the DPU did in that December 2023 order in the Future of Gas docket was require the LDCs, the gas companies to come in with electrification demonstration projects by March of next year. Show us where you’re going to decommission part of your service territory, and you have to bring in your electric distribution company with you because we’ve got to make sure that electric company can take on that additional load.

So we’re starting down that path and National Grid filed last December an electrification demonstration project for Leominster and Winthrop that looks at 118 customers on 14 segments and basically looking at potential for decarbonization by electrifying those homes and then decommissioning the pipe. And National Grid highlighting the obligation to serve, as you said. And if we can’t find any one of those 14 segments where all the customers agree, then we won’t be decommissioning any of those pipes. Highlighting the fact that in order to decommission any of those segments, there has to be 100% agreement by all the customers served by that segment. And so we’ll see how that plays out, but it really highlights the fact that if we can’t address the obligation to serve issue and the substitutability of electric for gas, it’s going to be very difficult to achieve when you’re decommissioning.

Dale Bryk:

Yeah, it’s interesting that you’re seeing everything that we’re talking about is being reflected in real life, in real time in the plans that some of the utilities are putting forward. How do you think about the utility business model and how that has to change over time, and even is maybe starting to change in some places now? This is a 25-year transition, it’s not happening tomorrow. We do need to maintain, of course, the integrity of the system, safe, affordable, reliable energy all the time, but what is the future for the gas utilities? You can imagine that if you are a gas and electric combined, you’re kind of eating your own lunch. And even if they’re distinct companies with distinct leadership, that’s a less challenging situation than for the standalone gas utilities.

What is the future of their business model? Are they manufacturers of rotary phones that are just not going to be needed anymore? Or is there a future business that they can sort of segue way into as they go down this road over the next decades?

Jamie Van Nostrand:

One of the exciting things in Massachusetts is the ability of a gas company to transform itself into a thermal utility. And Eversource has a really interesting project in Framingham, about a 135, 140 homes on a couple mile loop that are now served by network geothermal. I’ve toured that project and basically you’ve got lines running down the middle of the street and laterals out to houses, much like what gas companies do, except instead of natural gas going through the lines, it’s geothermal fluid basically. And then the ground source heat pumps then within each individual house. And instead of having a pipeline delivering gas, you’ve got boreholes to be able to access this constant temperature ground at 600 feet down and you have a pump house to be able to move that geothermal fluid around. So there are opportunities, and Eversource has filed a proposal for network geothermal for new construction.

So a new subdivision going in rather than having a gas pipeline delivered to it, let’s look at whether we can have ground source heat pumps with a geothermal loop within that subdivision. So there are opportunities to transform into a thermal network company. And the good news about that is it’s great opportunities in terms of workforce transition. When you look at job opportunities for existing gas company employees, it’s a good transition because the work is very much the same. It’s just different products being delivered to the homes. But it is very challenging in terms of, as you say, for a combination utility that has both gas and electric, you’re going to sell more electric and less gas. And the overall profitability, you can probably figure out ways of maintaining that overall profitability.

For the standalone LDCs, it’s going to be more of a challenge and you need to be looking at those opportunities to think about getting into the thermal network business. But thinking more generally about you’re providing the business of energy of heat and not just one fuel versus another.

Dale Bryk:

Right. So if they think of themselves more as a heat utility then they have a lot more business opportunities in front of them.

Jamie Van Nostrand:

Yeah. And the governor’s affordability bill in Massachusetts contains some measures to really try to address those upfront costs of network geothermal and give opportunities for potentially reducing the cost of financing that infrastructure. But just to try to open up the opportunities for competitors to come in and frankly, for gas companies to think about becoming thermal network companies.

Dale Bryk:

Great. Let’s shift over and talk more about the electric side of the equation. And we talked in the beginning about the bias that all utilities have in favor of capital expenditures, investing in infrastructure, and I want to understand how that plays out on the electric side where the context is completely different, right? We’re looking at a place of dramatic growth and we should talk about how dramatic and the drivers of that growth. But how do you see that bias playing out? Are there the same challenges with respect to affordability for customers and transitioning to cleaner resources, or is it completely different for electric utilities?

Jamie Van Nostrand:

The challenges are very similar. I mean, we’re basically expanding this additional investment in the system to be able to deliver more electrons. Because we’re talking about decarbonization of both the building sector. So you’re taking out the gas furnaces, you’re replacing with electric heat pumps, whether it’s ground source or air source. And then you’re talking about decarbonizing the transportation system, which means electric vehicles and car chargers. So it’s just a matter of scaling up the distribution system, being able to deliver more electrons.

Dale Bryk:

And we should add the rise of the data centers and the demand that is projected, which we should talk about from them as well. So it’s at least those three things, right? Electrification of buildings, electrification of transportation, and data centers. Three big drivers needing more electricity.

Jamie Van Nostrand:

Yes. And in Massachusetts, the legislature in 2022 required the utilities to file electric sector modernization plans. So that’s basically what the electric companies are planning to spend over the next five, 10 years. How many additional substations is that going to require? How many upgraded substations? What does that investment look like? And then our job as regulators is to make sure that the utilities are not over investing, right? Is there a lower cost solution for delivering that additional energy? And that’s where the virtual power plants, which is pretty much anything on the customer side of the meter, whether it’s solar panels, whether it’s a battery on the customer side of the meter. Whether it’s the vehicle to grid if you have an electric vehicle, having that resource available for the utility to call upon.

Are there lower cost solutions by encouraging virtual power plants? They’re also generally known as non-wires alternatives. In other words, it’s anything other than the default solution is, well, let’s just build more poles and wires, let’s have more substations. And that’s additional investment that goes into the rate base and the utility earns a return on it. That’s pretty much the default path. The job as regulators is making sure that they’re not building any more transmission distribution infrastructure then is absolutely necessary. Taking advantage of non-wires alternative solutions, and if there’s a lower cost path for customers pursuing that path. So I think one of the things the commission will be looking at this fall and into next year is trying to align the incentives for the utilities to pursue that lower cost path for customers, and address that capex bias.

So the default isn’t simply to build more transmission and distribution infrastructure, but to look at non-wires alternative solutions to take advantage of technology. And I think one of the metrics the commission’s going to be looking at is it’s kind of wonky, but it’s asset utilization ratios. If you’re building something and it’s only being used 10% of the time, maybe there was a non-wires alternative that could have been used that would’ve made that transmission and distribution infrastructure investment unnecessary.

So just starting to track those metrics because that’s a good way of making sure there’s not overbuilding going on, and that utilities are taking advantage of technology to pursue the lower cost path of a non-wires alternative. Drawing upon that customer sided battery, drawing upon the vehicle to grid if the customer has an electric vehicle to be able to take advantage of that. And solar panels, it’s all basically using all those resources in a cost-effective demand to hold rates down for customers.

Dale Bryk:

So asset utilization rates, can you give us an example of an asset, something that a utility would invest in that then wasn’t really used that much and turned out not to be the smartest thing to invest in? And is there any way of figuring out that in advance, or you need to sort of learn by doing and say, “Hey, you just built one of those and now we can see it wasn’t really used that much, so why is this one going to be a better deal for customers?”

Jamie Van Nostrand:

It’s really just looking at load factors by circuits. And the default solution would be, well, this load factor is growing, we need to make some additional investment to reinforce that circuit. Well, maybe there are things on the customer side of the meter by taking advantage of a battery storage at a customer’s house, or distributed energy resources in the terms of solar panels, to avoid that additional investment. You just watch that load factor, and if that load factor is going down, then that means that that investment’s being used less and perhaps that was unnecessary. Maybe there was a non-wires alternative.

So in order to keep costs down, we got to be seeing those asset utilization rates going up. Because just because we’re delivering more electrons doesn’t mean rates need to go up. We need to use the system smarter. And frankly, time varying rates, when those come into effect, you know, in Massachusetts, we’re in the process of rolling out Advanced Metering Infrastructure or AMI, that’s going to allow smart meters to be installed. So we’re going to be starting to roll out time varying rates. So customers will have an incentive to use electricity during off-peak times. Like the middle of the night you come home and you plug your car in and then have with time varying rates, have a smart meter to be able to charge that car in the middle of the night when power prices are low.

To be able to move that load around. But that means you’re using more electrons. But if you’re not having to build more T&D infrastructure to move those electrons around, then that has a downward pressure on rates. You’re just using your existing investment more efficiently.

Dale Bryk:

So you’re talking about truly smart meters that are not like I’m just getting a time of use rate that tells me in my bill that I should use my appliances at this time, versus that time. But more something, I mean, I think people are familiar with your phone battery, your phone battery learns how to charge in a way that’s good for your phone. So it’s like charging at a certain time. You just leave it plugged in, you’re not paying attention, you’re going to sleep or making dinner or whatever.

And if we had a truly smart meter system, it would enable orchestration by a grid manager who’s taking advantage of the battery that’s in your car, the solar panel that’s at your house, the intentional orchestration of resources on the grid manager side, which could be the utility or could be somebody else. Which is not what we’re doing now where people have batteries in their cars, they’re not being used to support the grid.

Jamie Van Nostrand:

Yeah, you’ve talked about a couple of different levels there. But yeah, in terms of the grid operator being able to take advantage and just sort of managing the load on a circuit, knowing which homes have electric vehicles, which homes have heat pumps. Making sure those cars are charged, not at the same time, you can rotate that. But you can manage the demand on the system in a way that’s going to minimize having to build additional T&D infrastructure.

And then within the home, I think there’s a role for artificial intelligence, that interface. We’re going to be with the rolling out of time varying rates, we’re going to be focused on sending price signals to customers and expecting the customers are going to respond to those price signals by managing their peaks. And I think a lot of customers are going to say, I really don’t want to screw around with that. I want to plug my car in when I get home and not have to worry about it. Well, I think with an AI interface, a lot of these things will be going on seamlessly. The customer won’t even be aware of it.

You plug your car in when you come home and then the interface will tell you, okay, we’re going to charge your car at two o’clock in the morning when power prices are lowest. You don’t know that that’s going on. You don’t know that it’s adjusting the thermostat on your heat pump and various things that can do in your house. But it’s basically taking advantage of the price signals, lowering the customer’s bill and reducing the peaks on the grid, so that we don’t have to build as much stuff.

So there’s a lot of things that technology is going to enable, and as we roll out this AMI, the Advanced Metering Infrastructure and the smart meters, making sure that all this works together and that’s digitalization, it’s interoperability. Those are the terms that come into play, but just making sure that those AI interfaces that a customer might have to manage all these things in his home, work together with that smart meter that the utility is going to be installing. Because these are additional investments that ratepayers are going to be paying for to upgrade the grid, and the benefits need to exceed the costs, otherwise those investments are not necessary.

And so in order for the benefits to exceed the costs, all this stuff needs to work together and customers need to be able to respond to the price signals that we’re sending them. And if they don’t feel like making the effort themselves, that it’s really happening on their behalf through technology.

Dale Bryk:

Well that sounds like a future that we could all look forward to. And thank you so much for helping us understand what’s going on behind the scenes in the world of utility regulation that could really help drive the utilities to do their part, to create that system for us. I don’t want to leave without you telling us what you’re going to be up to in your next adventure, now that the citizens of Massachusetts aren’t going to have you at the helm of this enormous undertaking.

Jamie Van Nostrand:

Oh, I’m glad you asked Dale. So actually as of Monday, I became the policy director for the Future of Heat Initiative, which is an organization, it’s only been in existence for about a year, but we’re working very much on that natural gas transition. I think the work that we did at the DPU over the last two and a half years that I was there, I think we’ve established Massachusetts is probably the number one state in the country in terms of the natural gas transition. But a lot of other states are working at it. And obviously as we talked about, the trends that we’ve seen in terms of delivery costs going up, that’s happening nationwide.

That flip in terms of delivery versus commodity is happening throughout the country and the transition of people going to electrification is happening. And so it’s basically helping regulators and their staffs recognize that this is an issue that urgently needs to be dealt with. If we’re looking at affordability, we’ve got to start tackling these issues. So I’m excited to be working with the folks at the Future of Heat Initiative and working with other commissions around the country.

Dale Bryk:

Well, I know your fellow commissioners have been relying on you for advice and guidance and lessons learned during your entire tenure here. So it’s great to know that now it’ll be your full-time job to help them tackle all these amazing opportunities as well.

Jamie, thanks. And hopefully we’ll have you on again and we’ll hear how your progress goes in that work ahead.

Jamie Van Nostrand:

Thanks, I look forward to it. Thanks, Dale.

 

 


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Environmental Justice

CleanLaw — Cumulative Impacts and the ‘Holy Grail’ of EJ Policy

Hannah Perls speaks with Charles Lee and Sean Moriarty


EELP’s Hannah Perls speaks with environmental justice pioneer Charles Lee, former director of EPA’s Office of Environmental Justice and principal author of the landmark 1987 report, Toxic Wastes and Race in the United States, and now a visiting scholar at Howard University School of Law, and Sean Moriarty, former deputy commissioner with the New Jersey Department of Environmental Protection. They discuss the growing field of cumulative impacts analysis and how states are increasingly using this tool in permitting and other programs to advance meaningful protections for overburdened communities across the country.

Mentioned

Toxic Wastes and Race in the United States

New Jersey Department of Environmental Protection’s Environmental Justice Archives

EELP’s EJ Tracker page on EPA’s cumulative impacts efforts

National Academies of Sciences, Engineering, and Medicine’s State-of-the-Science and the Future of Cumulative Impact Assessment report

The New School Tishman Environment and Design Center’s Cumulative Impacts Dashboard map of EJ laws

Transcript

Hannah Perls:

Welcome to CleanLaw from the Environmental and Energy Law Program at Harvard Law School. I’m Hannah Perls, and in this episode I speak with environmental justice pioneer Charles Lee, former director of EPA’s Environmental Justice Office and principal author of the landmark 1987 report, Toxic Wastes and Race in the United States, and now a visiting scholar at Howard University School of Law. We’re also joined by Sean Moriarty, former deputy commissioner with the New Jersey Department of Environmental Protection.

We discuss the growing field of cumulative impacts analysis and how states are increasingly using this tool in permitting and other programs to advance meaningful protections for overburdened communities across the country. And we should note both Sean and Charles are speaking in their personal capacity and their opinions and views in no way represent the views of their respective institutions. Well, Charles, Sean, thank you both so much for being on CleanLaw.

So a lot of our recent episodes have focused on these big changes to federal environmental law and policy, but today we’re going to shift gears and talk about what I think are some really exciting developments happening at the state level to protect public health and the environment by incorporating cumulative impacts’ analysis into government decision-making and in particular permitting. Now, before we dive in just two to three sentences, what is cumulative impacts analysis and why does it matter? Maybe Charles, we can start with you.

Charles Lee:

First of all, thank you for having me on the podcast. Cumulative impacts speak to the interaction between multiple environmental health and social stressors and their effects on human health, welfare, and quality of life. Cumulative impacts is really about the concentration of environmental and social burdens in certain areas. So places like the Ironbound community in Newark, New Jersey or the South Side of Chicago or Cancer Alley in Louisiana. And it is something that while many communities that are overburdened aren’t familiar with the term, they really know all the issues involved because this really reflects their lived reality.

Hannah Perls:

Sean, is there anything you would add?

Sean Moriarty:

Sure, I would love to add to that, just love adding anything to what Charles says. It’s an extreme pleasure in my life to work with this man. I think the only thing I would add, is that when you’re looking at cumulative impacts from the regulatory perspective, and certainly the way that I come to this, having spent time at New Jersey Department of Environmental Protection. I think what cumulative impacts attempts to do is really to account for impacts that are missed when you look at things through traditional media-based permitting approaches. So those media-based approaches, which is, for example, air or water, they’re more narrowly crafted and they look at specific impacts that any given facility has, but they don’t really consider the context in which those facilities exist.

So when Charles mentions the Ironbound community in Newark or the South Side of Chicago or these places, our traditional approach to permitting doesn’t consider the proximity of these facilities necessarily to vulnerable populations and particularly kind of their abundance or concentration in certain areas during permitting. And what cumulative impacts attempts to do is to take a broader view of these things and I think a more complete view of the impacts that facilities have and try to, through some of the various statutory and regulatory approaches that we’re seeing across the country, to try to remedy or remediate some of those disproportionate impacts.

Charles Lee:

So there’s a term that’s always used when people talk about cumulative impacts, which is talking about total burden. And so I think this is what Sean is speaking to. The idea here is to the extent that we can, we want to take into account all those burdens, particularly those that we normally don’t capture, either because of the regulations or because of the way that we currently do the analysis.

Hannah Perls:

I really appreciate that, and I think for a lot of our listeners, they’ll be familiar with the federal frameworks, which often think about pollutants either on a source by source basis or even a pollutant by pollutant basis. And what I hear you both talking about, and I think the way that we all experience pollution in our daily lives where this is sort of intuitive and common sense. We don’t experience just particulate matter and just lead in the water or in lead paint. We experience all of those things collectively. And then the impact will depend on who we are. It might depend on how much money we have. It might depend on our pre-existing vulnerabilities. So this is about taking that holistic view that better represents people’s reality.

And I wanted to pull out something you both said, which is you have the analysis itself that gives you that sense of what people are living in, in terms of the pollution or the background stressors, which we will get into. But then there’s also how you operationalize it. And I think, Charles, this is something that you’ve said that this research must go beyond merely proving existence of disproportionality. So I think a real focus of this conversation is once you have that assessment, how do you operationalize it? And in particular, how do you do that through legal frameworks? And in particular, permitting, which is the real example we have out of New Jersey.

And I do want to just tell our listeners a bit more about who you both are because I am extremely excited to have you both on the podcast given your expertise and experience. Charles, I want to start with you. So you of course are recognized as one of the foremost national experts on this cumulative impacts issue and a longtime participant and leader in the environmental justice movement in the United States. And just for listeners who might not be familiar with your work, you left EPA this year after 26 years with the agency to join the Environmental and Climate Justice Center at Howard University School of Law as a visiting scholar.

And of course, before joining EPA, you worked as an advocate and a researcher, notably as the principal author of Toxic Wastes and Race in the United States, this landmark 1987 report. And you helped organize the First National People of Color Environmental Leadership Summit in 1991. And this is an abbreviated biography. Charles, I’m just very, very grateful to you for being on this podcast and sharing your expertise with us. I wanted to ask you, as your decades of work show, this is not a new idea. The concept and assessment of cumulative impacts is ingrained in many of our federal environmental statutes. But I want to know how you started working on this issue and then if there’s anything that you’re seeing now in this moment that feels new.

Charles Lee:

Thanks for the question. I think this issue of cumulative impacts has always been part of the environmental justice conversation. It’s very natural because when we talk about environmental justice, we’re really talking about the lived reality or the lived experience of communities. And so as we said before, we don’t experience pollution one at a time. We experience it holistically. We live with all these pollution and other factors all at the same time. So this is really part of that conversation. So I think at the very beginning of when environmental justice emerged as an issue of national concern, this issue of cumulative impacts just kind of naturally grew up along with it.

For example, the National Environmental Justice Advisory Council, which is EPA’s formal advisory council on environmental justice, had its very first meeting in 1993, the issue got raised. And now virtually in every meeting since then, the issue gets raised over and over again. And just the way that people understand this issue and the ways to deal with the issue has evolved over the several decades that environmental justice has been on the national stage. It is not true that cumulative impacts that we’re just beginning to address this in government decision making. It’s been part of the conversation on that level for many years.

And in fact, going back to around 2010, 2012, California developed a cumulative impact mapping tool that now is used for allocating resources to the areas which are most overburdened. And that’s something that has been done in other states like New York and Illinois and during the Biden administration, that is what the Justice40 Initiative is all about, which calls for 40% of the benefits of a class of environmental and health programs that must go to benefit overburdened communities.

Hannah Perls:

Charles, one thing that you mentioned, I just want to pull out a little bit, is you talked about a lot of different ways that cumulative impacts analysis has been operationalized in state and federal programs. And I think there’s a helpful three-part framework that the Tishman Center at the New School offers, which is they group them into sort of three buckets and you touched on all three buckets, but just to sort of make that clear for listeners. One is this analytical function, just understanding how these disproportionate burdens map out. And so that is sort of what you were talking about with CalEnviroScreen, that mapping tool. Another is this redistributive mechanism, right?

We’re going to use this information to better understand how we can equitably allocate public resources to make sure people who are most impacted get the resources and investments they need. And that would be Justice40. And then I think, Sean, this is a great segue to your expertise. That third bucket is this regulatory operationalizing function where you actually integrate this analysis into how agencies make decisions. And of course, Sean, this is your expertise with the New Jersey Department of Environmental Protection. So I’m going to provide you a brief introduction so our listeners have a sense of who you are and the expertise that you bring.

You, of course, come to this as a former state regulatory lawyer, which is a very specific type of lawyering.

Sean Moriarty:

Yes, it is.

Hannah Perls:

And I think our listeners would also love to hear a bit more about what does that mean to be a regulatory lawyer? But in particular, I think what’s really exciting about your expertise is you were one of the lead attorneys at the New Jersey Department of Environmental Protection when the agency was tasked with implementing New Jersey’s landmark 2020 environmental justice law, which included a very explicit and complex cumulative impacts mandate that needed to be integrated into the state’s permitting program. So can you share just a little bit as we flagged, what does it mean to be a regulatory lawyer and then a little bit about that work in particular implementing the EJ law?

Sean Moriarty:

Sure. So first of all, putting my bio up next to Charles’ is kind of insane, right? Charles is going to do a whole book talking about where he comes from, and I can do my entire origin story in about two minutes. So I’m going to do that. So I worked for the state and I would say truly the best thing that ever happened to me in terms of changing kind of a professional trajectory to something that I think is really much more meaningful than what I might’ve otherwise been able to do. So I’d worked for the state for a good decade or so, and I was very fortunate to work my way up through the DEP to become the deputy commissioner and general counsel. And that’s like dream job scenario for me for any kind of regulatory lawyer.

You think that that’s unattainable in your little space and then you get a couple of lucky breaks and you find yourself in a position of great privilege honestly. So early in my tenure in that job as deputy commissioner, I was asked to take part in this meeting with community members from the Ironbound Community Corp on an issue. It was related to environmental compliance reviews for facilities eligible for renewable energy credits. At the time, did not think it was that big of a deal, to be honest with you. So met with staff, we prepared our fairly standard response, which if you’ve ever dealt with government, it’s probably not going to be all that fulfilling when you hear it.

And went to the meeting thinking that this would be kind of my typical interaction with advocates who’ve dealt with people repeatedly over the years and felt like I had a sense of what to expect. Very quickly realized that was not the case. So after giving kind of the department’s response, one of the community members, I’m not going to name her, but she’s very well known and a very powerful voice in this space, immediately and forcefully told me that I should be fired. And if you’ve never thought you were doing your job and thought you were doing it well, and then were told very directly that you did not deserve to sit in that position, I would recommend it because it really pushes you back and it makes you have to reconsider why you’re there.

So while that wasn’t the first time, and definitely not the last time I’d been yelled at as a state worker, this was different, right? There was an urgency and kind of, I don’t even know what the right word is, a power behind those words.

Hannah Perls:

That sort of moral imperative.

Sean Moriarty:

I wasn’t prepared for that, and I hadn’t felt that in these meetings before. So perhaps initially just out of self-preservation, we regrouped, we changed our tune, and went back to the drawing board on this. And over the next several months we worked to find what I felt was a better solution. But ultimately we were much more transparent, much more open about what our constraints were, what we could do, what we couldn’t do. And I think we found better common ground on the issue. And luckily for me, I kept my job. So what I took from that were really two lessons. First, that the department can and should do better in these spaces.

And secondly, that in my position, instead of just getting the information and delivering it, I had the ability to influence better outcomes. So while I’ve never confirmed that this is the case, I’m pretty certain that my handling of that issue was at least part of why our then commissioner, Catherine McCabe, came to me and said, “I think you need to be the person to handle this rule making process.” When the state environmental justice law was passed. So with those lessons, we began this process of engagement, and a big part of that process was a continuous and direct conversation with the community members and advocates who had championed the bill. This was their law.

They had worked they decades to get it passed. And I think that’s part of thinking about how we can do things better and how we can do things differently, was to talk to them directly every two weeks for the entirety of our rulemaking process. And in our first meeting, which was fun times during the height of COVID, so all this is happening on the computer. I just went in and just openly admitted that I am probably somebody who looks a lot like the people you interacted before that you felt let you down. And what I would never do in that situation is I would never ask them to trust me because that would not work. So what we committed to, I specifically and the rest of our team, is that we would work to earn their trust through this process.

And to make this slightly long story, slightly shorter, we got the rules done and the person who wanted me fired some five years later, we now count each other as friends, and we’re still trying to find ways to collaborate together. And to me, if you’re a regulatory lawyer in this space or any other space, I think the lessons there are at least pretty clear to me that you’re going to get a lot farther by being transparent, by being genuine, by being real with folks, letting them know what you can and can’t do, and ultimately working to earn that trust as opposed to just sitting there and being a bureaucrat. And I think that type of approach that we adopted as a department is really what helped us to be able to be successful in putting this rule together, in getting it adopted, and ultimately working on the implementation.

And I think that was a big deal for me. It really kind of changed the way that I approached all of this, and then I quit DEP and then Charles came calling and said, “Hey, let’s do some more of this work together.” And I said, “Yeah.” And I made a bunch of changes and now we’re here doing this podcast. So it’s all pretty cool.

Hannah Perls:

I think that’s another good universal rule. If Charles Lee asks you to do something, you do it.

Sean Moriarty:

Yes. The answer is always yes.

Hannah Perls:

The answer is always yes.

Charles Lee:

Can I add something to that?

Hannah Perls:

Absolutely.

Charles Lee:

So as part of the process that Sean led was a stakeholder engagement process that was, I think, in my mind, not just excellent, but really educational. And so they did a number of stakeholder meetings, which are recorded, and on the New Jersey DEP website, there’s a whole encyclopedia of all the recordings and you hear the advocates. And these were not just advocates, but the communities and other stakeholders all engaging with Sean and other members of New Jersey DEP over really substantive issues. And what you listen to if you listen carefully, is how these issues are worked through, not just in terms of what’s important to the communities involved, but what is practicable under the kind of laws and regulations that DEP has to work with.

So it is really an educational thing. And what I think I would draw from that is this has been this conversation in the environmental justice space about how environmental justice is not just a procedural matter, it has been to a large extent, still happening in many cases, is that government agencies would just hold a meeting and then they would check the box. There’s this is Fourth Circuit opinion about the Atlantic Coast Pipeline, where it basically says environmental justice is not a check-the-box exercise. And so moving beyond that to addressing these issues substantively is I think the heart of what the New Jersey DEP process is all about.

And I think that stands as a real hallmark as far as something that’s truly valuable that this whole process brings to good governance and to transparency and meaningful involvement.

Sean Moriarty:

Thank you for highlighting that, Charles. So I would always tell people, if you’re a glutton for punishment, you can watch all those videos because it’s a full day’s worth. I’m not joking, 24 hours of just my bald floating head talking about environmental justice stuff. But in all seriousness, I think that comes back to this idea that in doing this work, it’s okay to approach things differently, that it deserves a better approach. It deserves more because we’re trying to correct longstanding historical inequities. And that you can’t do that by just using the same approach and the same modus operandi that you always use. It has to be different. It has to be focused. If we’re going to talk that talk, we had to walk the walk.

So we did eight months of stakeholdering with everybody. We broke it down piece by piece, every single decision that we made there. And it didn’t mean that we were going to just do what everybody told us to do, but what we were going to do is sit there and take the time to explain exactly why we felt we wanted to move in a different direction, get feedback on that, present proposals. So before the rule was ever proposed, before things were finalized, everyone involved in that process had a really, really clear and strong understanding of what the rule was going to say. There were no surprises when the thing came out.

Charles Lee:

One thing maybe to add to that is that what I found really helpful for me was the idea that those conversations were really problem-solving conversations. That the whole way that the development of those regulations was approached was that it was a trying to solve problems and not just solve problems alone, but collectively.

Hannah Perls:

We’ve just been saying and using the words disproportionality, burden, stressors. And one thing this law is really trying to get at is the historical legacy of often governmental choices that decided where polluting facilities would be sited or decided where we would invest public dollars to build out sewer or wastewater infrastructure. And each state has its unique context, not just in terms of its current industrial mix, but also the particular communities that were excluded from democratic processes or excluded from the benefits of environmental decision making.

And so Charles, obviously, as one of the people who first documented this in that 1987 report, I was wondering if you could just talk a bit about how you understand disproportionality and why it’s so important that we not just understand it, but operationalize it in the way we make decisions now.

Charles Lee:

Thanks for that. I mean, I think one of the things that 1987 Toxic Wastes and Race report did was to really bring evidence to bear about this idea that environmental burdens and benefits, that there’s a distributional aspect to that. And this has been built upon in the 40, 50 years since then with a whole explosion of research. I mean, there’s probably thousands of peer reviewed journal articles in all aspects related to environment, health, sustainability, climate and transportation, healthcare, green space. And as you pointed out, it also offers us a way to understand not just what is, but how it got there.

So a great example of this would be the issue of redlining in the 1930s and all the research that’s being done ever since the University of Richmond digitized the redlining maps in the 1930s and the research that began to correlate our current environmental and health conditions with what grade you were in terms of the 1930s HOLC Maps, H-O-L-C, redlining maps.

Hannah Perls:

That was the Home Owners Loan Corporation, H-O-L-C?

Charles Lee:

That’s right. Home Owners Loan Corporation. And so it’s really remarkable to see that areas which were deemed the worst or the least desirable areas that ended up being areas where we disinvested in are the places that have the highest asthma rates or the greatest temperature rise. There’s heat islands and lack of tree cover, and these relationships really help to explain why current environmental conditions are the way they are today. And I think that the larger question behind all this is that in our environmental analysis and decision making process, we really need to think more about the distribution of environmental benefits and burdens.

Hannah Perls:

So I want to get to what that final product is because now we sort of built up and built up and built up all the anticipation.

Sean Moriarty:

Excitement is off the charts.

Hannah Perls:

This is a very extended movie trailer for the New Jersey DEP rules. And I want to start to dig into the complexity of the really concrete decision points that the regulators made as part of this engagement process. And I should say that, Sean, you and I and another one of our colleagues, Sarah Hart-Curren, we are working on a forthcoming legal guide that will just lay out the legal considerations for integrating cumulative impacts analysis into state permitting. So we’re not going to get into sort of the science and methodology of cumulative impacts analysis. There are a ton of really amazing resources. A lot of this is Charles’s work and his colleagues like Paul Mohai and others.

I want to talk about the legal framework. So if you’re a regulator and you’re starting from the authorizing statutory language, right? The New Jersey legislature says to New Jersey DEP, “Do this thing.” Sean, can you talk a little bit about what you saw as sort of the crucial decision points in designing this program and how you as a regulator look at statutory language and come out with a rulemaking process that as you said isn’t just process for process’s sake? It’s going to deliver concrete protections consistent with what the legislature demanded.

Sean Moriarty:

Sure. That sounds great. What the law kind of requires is it requires the department to consider how certain specific facilities operating in what we call overburdened communities, and those are set by specific demographic criteria, are going to contribute to environmental public health stressors in a way that is, as we term it, disproportionate when compared to what I would say is its neighbors, right? So what you’re doing is you’re looking at environmental conditions in specifically identified communities and trying to figure out if they are worse essentially than other communities. And what it allows you to do is consider those impacts on a facility-wide basis as opposed to the kind of more narrow way you would look at it.

If you’re looking at it from an air pollution perspective, you’re looking at stack emissions, or if you’re looking at it from water pollution perspective, you’re looking at a point source emission. This allows the department to consider things much more broadly on a facility-wide basis. And that lets you get at things that you can’t otherwise get at through traditional environmental permitting structures, particularly trying to address mobile sources and their impacts on PM2.5, diesel particulate matter. Some of these things that really affect quality of life in overburdened communities that we didn’t have the tools to really address previously. So when you ask what the big decision points are, the statute gives us some guidance.

It tells us what facilities to look at, largely solid waste facilities, major air sources. It tells us what communities to consider. We need to figure out, “Well, first and foremost, how do you do that in comparison?” And we do so by defining specific environmental and public health stressors. So we had a list from the statute that includes concentrated areas of pollution, mobile sources, sites, and then other things that may cause, being a critical term “may cause,” public health impacts, including asthma, cancer, elevated above levels, a bunch of things, right? We needed to be able to plot those out with data for the entirety of the state. So we had to look at a bunch of different data sources.

We started with 60, we ended with about 26. 26 pieces of data that would inform those statutory categories, those statutory stressor categories. Our goal in doing so was to use as much publicly available and kind of reliable data as possible, feeling that that would give us a more objective baseline upon which to begin to evaluate facility contributions. And setting that baseline is really, really important to ultimately determining whether just proportionality exists. So we created through that process the Environmental Justice, Mapping, Assessment, and Protection Tool or EJMAP.

And what that does is ultimately plots out the relative stressor levels for all of the communities in the state of New Jersey, the overburdened communities and non-overburdened communities, and then allows us to do a comparative analysis of those stressors between communities. And then for any of those individual stressors where the presence in an overburdened community is higher than it would otherwise be in a non-overburdened community, those are considered “adverse.” We’re able to sum those up through what we call the matrix method. So you could take each of the individual stressors, you can make a determination about whether they are higher than what you would see in non-overburdened communities.

And then you add those up and that gives us kind of an overall assessment of disproportionality across all of those communities. That’s the biggest and most crucial decision point. From there, what we really ask of facilities is to simply address their contributions to those stressors, particularly where they’re disproportionate. So through that process, you have a baseline assessment, you have an assessment of disproportionality, the department does all that work, makes that available, and then a facility comes in, and they have to make decisions about what they are or not going to be able to do to address their contributions.

In that way, I think it takes a fairly complex concept and makes it pretty simple and something that based on a chart that you can pull down from EJMAP, you can really understand exactly what the environmental conditions are in a particular community. And as a facility or as a community member, then you can start to make decisions on how you can work to lessen those areas of disproportionality or adversity. I think it’s a really, really powerful way to look at it and data being really the backbone and the critical component to that. That really unlocks a lot of the other aspects of the law that ultimately can work to lessen those impacts.

Hannah Perls:

Sean, I just want to emphasize one more part of the New Jersey program, there’s really crucial clear statutory language in the New Jersey law that requires New Jersey DEP to deny a permit if certain thresholds are met. So if you could imagine a community where you have an elementary school and there’s a facility that’s already there and it wants to expand and expanding that facility would mean that that community bears a much higher disproportionate pollution load cumulatively. New Jersey under the law, the DEP now has very concrete mandates about what to do in that situation. So I was wondering if you could briefly explain how that works.

And then Charles, I’m going to ask you why we don’t just copy and paste the New Jersey law for all the other 49 states.

Sean Moriarty:

So I think one of the aspects of the law that is important to understand is the difference in authorities with regard to denials. So the original version of the bill, and this is probably one of the reasons why you don’t just cut and paste it because you maybe could do a little bit better. But the original version of the bill would’ve had mandatory denials when you are causing a disproportionate impact. So impacting a community in a way that is going to make it have disproportionate burdens or is going to further exacerbate existing and disproportionate burdens. That was changed.

And the way that the law works now is that the department only has the authority and in fact has the mandate to deny permits for new facilities that are going to cause disproportionate impact unless they will meet the compelling public interest standard. So for those facilities, if you are seeking to site a new facility in the community you described, that’s already subject to significant adverse burdens, unless the facility can completely avoid contributions to those adverse burdens, it is denied unless it meets compelling public interest standard and that’s drawn narrowly. It focuses on really kind of critical public health or environmental needs of the community.

And I think when you’re thinking about critical statutory terminology when, in the definition of compelling public interest, it specifically uses the words “in the overburdened community.” I think that we highlighted that, we underlined it, we put it in different color every time we did a presentation because when you’re scoping out what that looks like, centering the needs of the community is absolutely critical to avoid continued kind of exacerbation of historic inequities.

Hannah Perls:

I think we’ve been using a lot of big terms, but I think this is fundamentally a public health bill. And when we talk about denying new facilities, it is a recognition that that contribution would dramatically impede people’s public health. Is that accurate?

Sean Moriarty:

Without question. We talk about reality, we talk about lived experience, all that stuff. It’s like what is it like to go outside your house? If you live in some of these communities that are considered overburdened that we’ve kind of mapped out and have not only meet specific demographic criteria but also have increased environmental and public health burdens. You might be walking outside of your house and you might see diesel trucks going to the nearby solid waste facility the entire day and how that impacts your quality of life.

They might technically raise particular levels of a particular pollutant, but at the end of the day, it’s like what does that feel like to live there and can we do better to make it so when people walk outside the air that they breathe is cleaner and that the water that they find around the corner in the stream is not incredibly dirty and all of the things that some of us are fortunate enough to take it for advantage. So you deny those facilities when it’s going to further impact the quality of life. For existing facilities, and one of the changes to the bill is that the department can only condition those permits.

So if an existing facility or that facility that is next to the elementary school that’s expanding, they effectively under the law have a right to expand. The department in turn has a right to impose additional conditions on that expansion that are intended to, and we set this out in the regulations. We set a hierarchy of avoidance, minimization, and in certain situations, net environmental benefit that requires a facility to go through and assess its impacts to those stressors and look at all feasible ways that they can avoid those impacts. And if they can’t avoid them, then they need to minimize them.

And if you’re expanding, then you need to do something else for the community to try to address the fact that an expansion that increases contributions to public health stressors, we are accepting that that is going to increase a level of disproportionality. So in that situation, what the rules ask is that if we’re going to accept that and we are going to agree that you can do that, then we’re going to ask you to do something else to try to reduce elsewhere because we can’t get around the fact that you’re adding. And to us, and to me, that was critical because you got to think about what the goals of the law ultimately are.

Preventing new facilities is a good and laudable goal, but how you deal with those existing facilities to me is just as critical because if you’re going to improve conditions over the long term, you’re ultimately going to need to reduce the contributions from those facilities. And that’s what we really sought to do through the regulatory process, is to drive those down at each renewal iteration or each expansion to try to minimize as best we could what those impacts would be. And hopefully over the long term see significant lessening of that documented disproportionality.

Hannah Perls:

I should say, it’s not prevent all new facilities, it’s preventing facilities that have negative public health consequences in areas that already are experiencing significant public health burdens and making sure that we don’t make it even worse, if that is fair.

Sean Moriarty:

That is very fair.

Charles Lee:

When I was at EPA and we would bring Sean over to present under New Jersey DEP’s regulations and methodology, and all the attorneys at EPA would say, one thing about this that really stands out in my mind. They called it, it was an approach that was elegantly simple, that it was really easy to see and to implement. To me one of the things that… It doesn’t have to be that complex. That you could do it in a way that’s legally and scientifically defensible and be very straightforward. So I think that’s one thing that we take away, lessons from what happened in New Jersey, that would be one of them in terms of what kind of tool or what kind of analysis method that we’re striving for that it’d be elegantly simple.

Sean Moriarty:

And I think on that point, so this is a cumulative impacts titled podcast. When Charles describes what that means, he talks about interactions of chemicals and how that affects inherent or population-based vulnerabilities. I think it’s important to distinguish what we did in New Jersey in our now called matrix approach from a true cumulative impacts analysis. It is not that. It does not attempt to account for the interactions of those chemicals in the air or in the water. It does not attempt to necessarily account for how those specific mixtures of chemicals will affect folks based on their vulnerabilities.

All it does is attempt to look at, we talked about this earlier, what is the reality of environmental and public health conditions in a particular community? And then it works to try to address those. So one of the big points of pushback in earlier department efforts to try to address cumulative impacts and ultimately was hanging over the idea of actually passing a bill in 2020, was whether you could actually do this. Because at that time, and things have advanced, and there’s reports coming out even yesterday showing how it kind of a true cumulative impacts analysis that work is advancing. At the time, now five years ago, there were people who could credibly say, “You actually can’t do this.”

And if you can’t do it, then what’s the point of passing a law that says you should? And what we were able to do, and I’ll give a lot of credit to folks like Steve Anderson, Sherry Driver who worked at the department for years and years and years on this work, quietly behind the scenes in their extra time. When we were negotiating the bill, they were able to show proof of concept on these things. They were able to say, “We know where all these facilities are and can plot them out based on this demographic criteria. We can show you that most of your major air facilities are concentrated in very specific places.”

And I think that the work that you do to carefully consider the data, carefully consider how you want to quantify these things, is really important in how it will ultimately be translated into regulation, into operation.

 

Hannah Perls:

You mentioned a report that came out yesterday. So we’re going to link to the report that just came out from the National Academies on cumulative impacts analysis, which we should say Charles played a part in. Charles, we’ve been talking about a lot of concepts that you’ve pioneered and I want to lift those up. So one piece I think as we look at other states that have adopted cumulative impacts programs or have bills moving through their legislature, and there’s a significant number. We have I think eight states that have cumulative impact requirements in their permitting program specifically, and then an additional 10 states that have bills moving that would adopt a similar framework.

And I think a common question is, well, why don’t we just copy and paste the New Jersey bill? And the response is this “fit for purpose” framework that you’ve pioneered. And so I just want to have you explain that a little bit. What does that mean and what are the different decision contexts that people should think about when they’re trying to apply this framework to their particular situation?

Charles Lee:

Thanks for that. I’ll try to do a good job on this.

Hannah Perls:

And I will say, to your research, I’m asking you to explain a lifetime of work in five minutes.

Charles Lee:

Well, first of all, I mean this idea of fit for purpose, I think it has been in the public health environmental analysis literature, it’s been in the risk assessment literature. And I came across it when I was thinking about how the environmental justice analysis has come about and evolved. And so I guess you can define this as that different types of decisions may require, probably will require different types of analysis, different types of data, different combinations of quantitative and qualitative analysis, different degrees of quantification to inform them. And what we want to do is not just to do an analysis for its own sake, but to inform decisions. So the analysis should be tailored to the decisions that we’re trying to make.

And so in the environmental justice space, when we first started to develop EJ mapping tools like CalEnviroScreen and US EPA’s EJSCREEN, we did this with the idea of just trying to identify places where you can go to do more outreach or analysis, and we never thought of it as something that can be used for any purpose other than that. And then what happened in California was that a law was passed as Senate Bill 535, that called for 25% of the proceeds of the greenhouse gas reduction fund in the state to benefit what they call disadvantaged communities. And CalEPA decided to use CalEnviroScreen to make those determinations.

And for me what that meant was that some of these tools that we originally developed that we didn’t know could be used for these type of purposes, it turned out that these tools can in fact be used for making very impactful decisions like where you allocate resources. And in California that has amounted to billions of dollars that goes into the communities where they are most in need, the most overburdened, and underserved communities. And that of course has been replicated in other states and became the approach behind the Justice40 Initiative during the Biden administration. But the kind of tools that are going to be necessary for a more regulatory context like permits or rules are probably going to be different.

And we’re seeing these emerge now with New Jersey DEP’s approach in terms of its cumulative impacts and methodology. Again, in the context of your question, different states are going to have different kind of statutory language, and out of that, you’re going to have to develop methods and regulations to suit those statutory goals. I think it’s fair to say that in Massachusetts the approach is somewhat different. It’s much more of a threshold-based, risk-based approach that’s based on health endpoints. And so we don’t need to get into all of that, but that is just to say that there are different approaches emerging even in the permit space.

And I think when we get to national rules, the kind of analysis, the scaled analysis, and the kind of data that’s going to be necessary, and the kind of questions you’re going to have to answer are going to be different. So it’s important to note that cumulative impact analysis is not just one thing, and the key to understanding how to make it so that it is practicable is to understand the decision context and to understand that you can tailor your analysis to suit those decision contexts. So there is a conversation that took place when EPA went to the Science Advisory Board, and I think this is back in 2021, 2022.

When around the recommendations, the Office of Research and Development’s recommendations around cumulative impacts research, and the members of the SAB all said, “This is a really laudable exercise.” But that it was nearly impossible except for one person, Dr. Kristi Pullen Fedinick who said, “It may seem that way, but actually if you start to understand the idea that you have decision context and you can tailor analysis to various decision contexts, then it becomes something you can get your hands around.”

Sean Moriarty:

I’m in love with Charles’s fit for purpose approach. When you think through the different implications of practicality, defensibility, all those things, and how different approaches, single score method out of California, or matrix method out of New Jersey, or risk-based thresholds out of Massachusetts, all of those are valid ways to do this. They all come with different risks, different practicalities, and you can kind of see when you plot them out on that fit for purpose continuum, you can see how they fit together and how they can be used to advance different but at times maybe concurrent priorities.

The other thing about… joke, of course, everybody’s should copy New Jersey because I’m from New Jersey, but I think it’s just important to know every state has communities that have specific needs and specific concerns. So there may be some broad validity to the idea that the approach we took in New Jersey can be kind of operationalized and used other places. But at the end of the day, what this requires, if we’re going to really address cumulative impacts, and we’re going to address these quality of life issues that we’re talking about, is you need to understand the specific types of stressors that are of concern in the communities within your given state, municipality, wherever.

And you need to understand what the types of facilities that are most of concern. So I wouldn’t cut and paste our list of facilities to everywhere else because I don’t think that would be valid, but I do think there are parts to this. There are principles at play that can be useful, but ultimately those things got to be crafted, I think, to meet the needs of the communities. And I think that will have better outcomes, but we can offer perspective and understanding of the tools that are available to folks to try to get at those outcomes.

Hannah Perls:

There’s a menu and you can sort of lay out what’s on the menu and then folks can sort of pick a la carte, what makes the most sense for them in their state.

Charles Lee:

Because the whole point of all this is not just to do the analysis, but it is to utilize them in terms of better decisions.

Sean Moriarty:

And on that menu, how those things interplay is important too. You might not want to select pineapple on pizza because that’s disgusting.

Hannah Perls:

Wow, hard take.

Sean Moriarty:

But those things might be great in other contexts, just maybe not combined all the time.

Hannah Perls:

It’s a very specific take. We might get our first hate mail from people who love Hawaiian pizza. So thanks for that, Sean. As we flagged this is a really exciting and sort of quickly moving tool in terms of seeing states in particular operationalize cumulative impacts analysis in their permitting programs. And so the last question I want to ask you both is if someone is coming to you saying, “We’re really excited about this idea. I’m living in X State, where do I start?” Or they’re coming to you to say, “I’ve looked at New Jersey’s program, I understand it, but I’m trying to figure out what am I not seeing? What am I missing?”

Are there any resources or people or ideas that you would want to make sure you point them towards as they go about this process?

Sean Moriarty:

I think some of the work that Charles has been doing, and I’ve been fortunate to work in collaboration with him on, it’s like trying to build a community of practice around this work and bringing together people with the experience and the perspectives and the understanding and how you define these issues, how you advocate for these issues, and ultimately how you operationalize permitting solutions in the long term. I think that approach is really, really critical to anybody who’s interested in this. If somebody came to me the first thing, I would want to make sure that either they were from the impacted communities or we’re speaking with them. I think that’s the first part.

This has to be driven by folks in those communities. You got to first start there, identify the concerns, and talk to folks and have them drive the bus on this. But I think the work that we’re doing now is to try to create a support system for folks who are on that bus and who want to see these things in their state. And I think you look at the work we did in New Jersey, you look at the work they did in Massachusetts, or look at the ongoing work in New York, Minnesota, Connecticut, you can see how these things are playing out. Everybody’s in different stages. Everybody has slightly different statute, slightly different approach, but all kind of aimed at the same goal of reducing these disproportionalities.

I think by engaging with those folks, by talking to them, by understanding what’s happening in other states and taking advantage of the resources, I think that can help to provide folks with the tools that they need to engage in this conversation, to answer the pushback that they’re going to get, to understand where folks are going to be uncomfortable, and try to figure out ways in which you can craft something that for your communities and in your particular political environment will be workable and move forward. I’ve started to believe that at least personally, having data is really, really critical to being able to identify and demonstrate this issue.

Folks have said, “Well, how do you get the agency to understand?” I would say, “Go for a walk, go out and walk around communities and understand what you’re actually regulating.” That’s one piece. But beyond that, I think having data available, having mapping in some case might be really useful as a first step to be able to demonstrate to folks that there actually is a problem. And then you have the tools available through these other approaches to begin to really address that.

Hannah Perls:

The Tishman Center just released a new dashboard that has a map where you can actually scroll through all the different state laws, rules, and then the bills that are moving. So we’ll make sure to link to that dashboard as well because it’s a really fantastic and easy to use resource. But Charles, I want you to have the last word.

Charles Lee:

I just wanted to build off of what Sean said. It is really important to be in touch with communities around an issue like this. I mean, I found that the interest in this issue, as communities become more aware and more developed in terms of their thinking about how to address these environmental justice and environmental injustice concerns, that cumulative impacts is really rising to the fore. And so it’s important to keep in touch with that. In that context, Sean said it, you can say it in another way. Communities have to be in the lead of the conversation and that we have to really tailor what we do based upon what they think are important, what their aspirations are, and how they want to see these types of issues become addressed.

In that context, we’re seeing this is no longer an area where there’s just a lot of activities. We’re beginning to see scholarship begin to emerge. There’s enough practice now to say that we can begin to understand the contours of what the solutions may look like. And so examples of that are you mentioned the New School’s Tishman Center, has developed a database that catalogs all the new policy on the state level and is a database that’s being added to on a daily basis. So that’s a great resource. Professor Paul Mohai, Megan Cunningham, who was a former deputy commissioner for the Chicago Department of Public Health, and I are co-editing a special issue of the Environmental Justice Journal on cumulative impacts and government decision-making.

That is going to be published in December, and it has 17 articles in it. So we could see that there’s a wide amount of, not just interest, but emerging scholarship and of course yesterday’s release of the National Academies of Science, Engineering, and Medicine report on the state of the science and future of cumulative impact assessment.

Hannah Perls:

There’s a lot of resources, a lot of homework for folks. But I think, Sean, just to bring back that community of practice idea, and I think Charles, to your point about the emerging scholarship, it’s not just that people are publishing these things in a bubble. There is a real collaborative community of folks who want to get this right. And so I’m just very grateful to you both for including me in that community, frankly. But I think also just for being willing to have this conversation and share this work, and hopefully this can be a resource for folks as well. So most importantly, thank you for all your work, but also thank you for being on CleanLaw today.

Charles Lee:

Thank you.

Sean Moriarty:

Thank you, Hannah. And thank you to all the folks at DEP who helped me get to this position where I get to have these really fun conversations with folks like you.

Hannah Perls:

Bless them.


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Deregulatory Resources Methane Emissions Power Sector

EPA Proposes to End Greenhouse Gas Reporting


On September 12, 2025, EPA proposed to eliminate GHG reporting requirements for all source categories and suspend requirements until reporting year 2034 for oil and natural gas sources that are currently subject to Subpart W, despite the program’s role in providing data to EPA and a range of other federal, state, and industry efforts. Well-designed and effective regulations require accurate and transparent data. The Greenhouse Gas Reporting Program (GHGRP), established by EPA in 2009 consistent with congressional direction, forms the bedrock of greenhouse gas reporting from industrial sources in the US.  

The GHGRP elicits comprehensive, transparent, and comparable GHG emissions data, with companies in a sector reporting the same way using industry-standard methodology rather than a piecemeal voluntary system. If EPA finalizes the proposal and ends GHG data collection, it will undercut the expertise and decision-making ability of EPA and hamper emissions reporting, tracking, and mitigation efforts by states and the private sector. That result would be consistent with the Trump administration’s effort to undermine and eliminate key sources of data that allow regulators and communities to make informed decisions.

In this paper, we review the fundamental uses of GHGRP data and evaluate EPA’s response to those uses. We then turn to EPA’s legal justification for ending the program, which relies on a novel, narrow interpretation of EPA’s data collection authority under Clean Air Act section 114.


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FERC expected to take modest approach to Trump’s sunset order, observers say

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Third CLG meeting of 2025 features discussion of affordability and accountability; video available

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The Costs of the Cloud

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Trump to coal plants: Thou shalt not close

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DOE climate report could create problems for EPA

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Trump Energy Department eyes new must-run orders for power plants

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