Go green, go now
by Jane Pribek
“The more familiarity that in-house counsel can have with just the basic concepts, the easier it will be for them and their clients to digest it, and understand where the opportunities are, once the framework is passed with some sort of concrete legislation.”
— Sanne H. Knudsen, an associate with Faegre & Benson law firm in Minneapolis
Don’t wait for Congress to act on environmental legislation, lawyers say; the green movement has already arrived and counsel should be readying plans for sustainability
— Sanne H. Knudsen, an associate with Faegre & Benson law firm in Minneapolis
There’s a famous scene in the classic film “The Graduate” where young Benjamin Braddock is told the key to the future: “plastics.”
Now imagine you’re Benjamin, and the man in your ear is an environmental lawyer. The word being whispered today is “sustainability.”
In other words, going green is one of the latest trends in the business world. Moreover, several laws are in the works to head off climate change, decrease dependency on oil and promote conservation.
Environmental lawyers say smart businesses want to be ahead of the curve by voluntarily taking steps in this direction. And if legal counsel isn’t proficient in the basics of environmental law — or with terms like “cap-and-trade program” — now is the time to start learning.
“I don’t say this cavalierly, but in my opinion it doesn’t matter whether you believe in the science of global warming or not. ... We as a nation need to transition away from oil and petroleum,” said attorney Brian H. Davis, president of Environmental Advantage Law in St. Paul.
“To me, people who say we have to choose between a clean environment or a strong economy have no credibility, because even corporate executives need to breathe clean air and drink clean water,” he said.
What makes Ecomagination remarkable, Davis said, is that it also places a greater emphasis on marketing GE’s green products. Plus, the program has withstood criticism from shareholders who’ve expressed concern that it doesn’t maximize profits in the short-run.
Likewise, Minneapolis attorney Joseph G. Maternowski points to a recent investor rebellion at Exxon Mobil over its hard-line approach to global warming, and its refusal to follow rival oil companies in committing large-scale capital investment to environmentally friendly technology.
“The green movement has gone from years ago being on the fringe, to now where it’s definitely in the mainstream,” said Maternowski, a shareholder with Moss & Barnett law firm.
Minneapolis-based Piper Jaffray announced the appointment last August of Lois Quam as managing director of alternative investments, a position that matches investors with green businesses in need of capital. More recently, Maternowski said Great River Energy in April opened its new LEED-certified green headquarters in Maple Grove while simultaneously announcing a new loan fund for other energy-efficient buildings.
Lieberman-Warner bill
Right now, laws designed to fight climate change are sparse — but that could quickly change.
On a national level, the environmental law community is closely watching debate on the so-called Lieberman-Warner bill, formerly known as America’s Climate Security Act.
Introduced last October by Sens. Joseph Lieberman and John Warner, the bill directs the Environmental Protection Agency to establish a program to reduce greenhouse gas emissions. Specifically, electric utilities, major industrial manufacturers and petroleum refiners and importers would be required to limit their emissions to 2005 levels beginning in 2012. Those companies must then cut greenhouse gases 10 percent by 2020, with an end target of a 70 percent reduction in 2050. The bill would also create a cap-and-trade system for reducing emissions, and a national registry to oversee it.
Cap-and-trade creates a financial incentive for reducing emissions by assigning a cost to polluting, said environmental lawyer Sanne H. Knudsen. In these programs, a regulator sets a “cap” on emissions and issues permits based on allowable limits. Companies are then free to buy and sell permits from others — based on their emission levels — in order to continue operating in the most profitable manner.
“For all the criticisms leveled against the marketplace, it is an efficient system and I think that cap-and-trade affords businesses the most creativity,” said Knudsen, an associate with Faegre & Benson law firm in Minneapolis. “So long as the cap is set appropriately and the initial allocation of credits is done properly, it’s a system that could meet the goal of efficiently reducing climate change.”
The full Senate is expected to begin debating Lieberman-Warner early this month, but its chances of passage will be heavily influenced by the presidential election, said William P. Hefner, an attorney with the Environmental Law Group in Minneapolis.
Since debate will inevitably involve the presidential candidates, they may be pressed to take a position, Hefner said. Then again, lawmakers might not take any action until after the election. That, in combination with the current economy, might delay or kill the legislation.
“There’s going to be a hefty price tag that comes with any sort of greenhouse gas regulations,” Hefner said. “The question is, Will our politicians have the sort of intestinal fortitude it will take to take on this millennial challenge, when the country’s already struggling with an economic downturn?”
While some businesses will certainly oppose Lieberman-Warner, Davis said the bill would level the playing field for those currently implementing sustainable measures. “Many businesses are already voluntarily focusing on sustainability, but they don’t want to do that forever — they don’t want to forever be doing the right thing while their competitors are cutting corners,” he said.
Local initiatives
In Minnesota, Gov. Tim Pawlenty last year signed the Next Generation Energy Act that calls for, among many other goals, statewide greenhouse gas reductions of 15 percent by 2015, 30 percent by 2025 and 80 percent by 2050. The legislation also requires utilities to provide 25 percent of their electricity from renewable sources by 2025.
In addition 10 governors, including Pawlenty, recently signed the Midwestern Regional Greenhouse Gas Reduction Accord in Milwaukee. The agreement will develop a market-based and multisector cap-and-trade mechanism to help achieve greenhouse gas reduction targets.
Pawlenty last year also appointed a Minnesota Climate Change Advisory Group charged with developing a comprehensive plan for reducing the state’s greenhouse gas emissions. The group released a report on April 11 with recommendations that could go before state lawmakers in the not-too-distant future.
There are pros and cons to a regional approach for tackling global warming versus a unified, national approach. Knudsen said it’s very difficult for national or international businesses to tailor their operations to multiple states or regions. On the other hand, Davis said that state efforts and regional accords can serve as experiments for lawmakers to study until the best approach can be found.
Advice for counsel
Hefner has this advice for in-house counsel: “Stay tuned.” Sustainability has caused some anxiety in the business world because it’s hard for companies to engage in long-term strategic planning, he said. You can’t erase that anxiety entirely, but you can ease some minds by staying on top of the issue.
That means tackling the science, too, and there’s definitely a learning curve, Knudsen said. “The more familiarity that in-house counsel can have with just the basic concepts, the easier it will be for them and their clients to digest it, and understand where the opportunities are, once the framework is passed with some sort of concrete legislation,” she said.
Maternowski said virtually everyone could be affected by environmental laws, from power plants to any building with a boiler, such as schools and hospitals. “I think in-house would be wise to be seeking advice from outside counsel potentially, because it’s such a tricky area. There’s so little predictability, and people need to assess their risks,” he said.
“But also, there are opportunities for businesses that are looking at the need to regulate greenhouse gases and carbon emissions as an opportunity for new growth and expansion,” Maternowski said.
For the time being, in-house counsel should document their company’s current sustainability efforts, Davis said, and determine how to communicate those efforts to shareholders.
Sustainability reports typically start out brief, but companies then build on them every year, Davis said. And a great benefit to such reporting is that it sparks creative thought. When a report contains a success story from one plant, others learn from that and are challenged to try their own innovations to reduce costs, and improve processes, while conserving natural resources, Davis said.
Jane Pribek is a regular contributor to Minnesota Lawyer.
