The Massachusetts Environmental Policy Act and the Green Communities Act of 2007 could become a model of energy regulation for other states.

As the U.S. government continues to debate a range of potential solutions to the problems of climate change and energy security, a growing number of states and regional coalitions are racing to find answers on their own. Recently, Massachusetts unveiled two ambitious proposals that are designed to transform how energy is generated, consumed and accounted for in the Bay State.

The first proposal, announced on October 17, 2007, and in effect since November 1, 2007, is a new statement of “policy and protocol” for greenhouse gas emissions under the Massachusetts Environmental Policy Act (MEPA). Under this new policy, many large-scale commercial developers that were formerly exempt from more rigorous environmental review are now required to quantify and to mitigate the greenhouse gas emissions created directly or indirectly by their projects. The second proposal, announced on November 8, 2007, is the Green Communities Act of 2007, an energy bill that builds on the new MEPA policy by setting aggressive goals for conservation and the development of renewable energy resources within the state. Depending on how they are received by stakeholders, these proposals could become a model of environmental and energy regulation for other states to follow.

A Changing Climate for Commercial Development

The new MEPA policy changes who may be subject to formal environmental review and what must be included in that review in order for it to be sufficient. Much like its federal counterpart, MEPA applies to certain new development projects that, because of their scale or type, may “damage the environment.” Accordingly, the first step in any MEPA review is the filing of a relatively brief Environmental Notification Form that outlines the project’s basic parameters and potential environmental impact. If after its initial review the state determines that a project falls below certain thresholds, the developer is allowed to proceed with no further state scrutiny. If, however, the state determines that a project exceeds the applicable “policy and protocol” limits, the developer must complete an Environmental Impact Report (EIR), a more detailed analysis that is almost always a time-consuming and costly process. Accordingly, the new MEPA policy is significant because it greatly increases the number of entities required to complete an EIR and the amount of information that each EIR must contain.

Who Will Be Most Affected by the New MEPA Policy

The new MEPA policy now requires the state to consider, among other things, a project’s greenhouse gas emissions when determining who must complete a formal EIR. Under the new MEPA policy, an EIR is required for any project where one or more of the following is true:

  • The state (or a state agency) is a proponent.
  • The state (or a state agency) is providing financial assistance.
  • An air permit is required from the Department of Environmental Protection (even if the project is privately managed and funded).
  • A Vehicular Access Permit is required (even if the project is privately managed and funded).

The last item is significant because by mandating that any facility required to obtain a Vehicular Access Permit (commonly known as a “curb cut” permit) also complete a formal EIR, the new greenhouse gas emissions policy expands the scope of MEPA’s most rigorous review to include most, if not all, major commercial construction projects, including many new big-box retail stores and similar consumer-focused real estate ventures.

How Environmental Review Under MEPA Policy Will Differ from the Past

The new MEPA policy is also substantively more rigorous because, for the first time, developers that must complete a formal EIR must now also make two specific greenhouse gas emissions related showings. First, a developer must quantify the amount of greenhouse gas emissions that will be generated by the proposed project. These emissions must include direct emissions (including emissions from boilers, heaters and engines at the project) and indirect emissions (including emissions from energy consumption and transportation to and from the project). By requiring developers to account for both the direct and indirect emissions early in the development process, the new MEPA policy may provide a strong incentive for big-box retailers and other affected retailers to more closely consider the practical benefits of energy efficiency and conservation.

Developers must also mitigate the greenhouse gas emissions that will be generated by their proposed projects. Although the new MEPA policy does not specify any particular emissions target, developers must show that they adequately considered a range of possible alternatives as part of the justification for their selected plan. The new policy emphasizes energy efficiency and conservation as potential emissions mitigation techniques, though offsets may be acceptable if their beneficial effects are primarily local.

Call for a Surge in Renewable Energy and Demand Management

The second new Massachusetts proposal, the Green Communities Act, charts a new course for the future of energy generation and consumption in the state that relies heavily on new renewable energy projects, coupled with more efficient use of existing resources through demand-side management. Specifically, the bill calls for the state to reach five noteworthy goals, most before 2020:

  • Meet at least 25 percent of the state’s overall electric load (including energy and capacity) with clean, demand-side resources, such as utility-sponsored energy efficiency programs, real-time demand response or certain types of generation located “behind the meter” at a consumer’s facility
  • Meet at least 20 percent of the state’s overall electric load from new renewable generationReduce fossil fuel consumption in buildings by 10 percent through increased efficiency
  • Reduce fossil fuel consumption in buildings by 10 percent through increased efficiency
  • Reduce overall greenhouse gas emissions by 20 percent from 1990 levels
  • Reduce overall energy consumption in the state by 10 percent by 2017

If the new bill is enacted, consumers will benefit from a range of incentives designed to help the state reach its goals, including tax deductions for hybrid and alternative fuel vehicles, tax credits for certain solar-powered appliances and low-interest loans for energy-efficient home improvements. In contrast, businesses, particularly utilities that fail to properly plan for the new regulatory environment, could be burdened with the high costs of complying with these new requirements. By some estimates, the price of attaining these conservation goals reaches into the hundreds of millions of dollars as utilities in the state are forced to do business with a limited number of eligible renewable energy sources while also funding an array of new efficiency initiatives at the retail level.

Transition Plan for a New Energy Environment

To aid in the transition to the new energy environment called for in the Green Communities Act, the bill proposes several important changes in the form of a series of pilot programs. First, distribution companies will be required to enter into long-term contracts for the purchase of renewable energy. This change would help prospective renewable energy developers access cost-effective financing from the private sector by guaranteeing a project’s revenue over an extended period of time. The bill also calls for targeted “market incentives” to stimulate the construction of new alternative energy generation within the state. In addition to promoting new technologies, such as “clean” Integrated Gasification Combined Cycle coal gasification plants, these incentives also help to address the long-standing issue of inadequate capacity in the New England market.

The Green Communities Act would supplement its demand-side objectives with a pilot program to develop “smart grid” and “smart meter” technology. These two programs would help utilities more efficiently manage their energy resources by giving consumers more accurate information regarding their electricity usage, along with the choice to reduce their energy consumption when demand and costs are highest.

Next Steps

The new MEPA policy is already in effect, and the Green Communities Act is scheduled to be debated in the Massachusetts legislature before the end of 2007. Given the broad political support that the Green Communities Act currently enjoys, some observers believe that it could become law before the end of the year.