In 2019, the Colorado Legislature passed House Bill 19-1261, known as the Climate Action Plan to Reduce Pollution (“Climate Action Plan”), which includes statewide greenhouse gas (“GHG”) pollution emission targets. By 2025 the bill targets 26% reductions in GHG emissions from 2005 levels, 50% by 2030, and 90% by 2050. In an effort to make coordinated progress toward these goals, Governor Jared Polis directed state agencies to develop a Greenhouse Gas Pollution Reduction Roadmap (“Roadmap”). As part of this effort, the State through various executive agencies has preliminarily estimated 2005 baseline GHG emissions to identify the magnitude of emission reductions required to meet the Climate Action Plan goals and the likely sources of those reductions. It is anticipated that the 2005 baseline emissions inventory will be approved by Air Quality Control Commission (“AQCC”) during a September 2021 hearing.

The Roadmap outlines a strategy for how Colorado can reduce GHG emissions over time ito achieve the reductions identified in the Climate Action Plan. Key strategic elements include: (a) a continued shift away from fossil fuel-based generated energy to renewably generated energy; (b) a focus on reducing methane emissions from the oil and gas sector; (c) accelerated transition to electric buses, trucks, and cars; (d) changes to transportation planning and infrastructure to reduce vehicle miles traveled; (e) increased building efficiency and electrification; (f) reduction of methane emissions from agriculture, landfills, and waste water treatment; (g) strategies to enhance carbon sequestration by natural and working lands; and (h) incentivizing adoption of GHG reduction measures in the agricultural sector. These strategic elements are intended to be implemented through various efforts including:

• rulemakings before the AQCC, the Colorado Department of Transportation, and other state agencies;
• coordinated efforts between the State and private parties, particularly with utilities, in an effort to develop clean energy plans;
• a study on how to incentivize updates to local government regulations, particularly to building codes and zoning regulations;
• public investment in electric vehicles and electric vehicle infrastructure; and
• encouragement for participation in carbon reduction efforts such as the Employer Based Trip Reduction Program, Soil Health Partnership, the Agricultural Energy Efficiency Program, and the Advancing Colorado’s Renewable Energy Efficiency Program (ACRE3) Program.

The Roadmap also explicitly takes a sector-based rather than economy-wide approach to cap GHG emissions. This means that specific emission reduction targets will be set for each identified sector. The primary sectors targeted for reductions are transportation, electric generation, oil and gas, and residential, commercial, and industrial energy use. Each sector has a different target for emission reductions from the 2005 baseline. Importantly, the 2005 baseline emissions are estimated differently for oil and gas sources relative to other sectors. The State has updated its methodology to estimate future GHG emissions from non-oil and gas sources to address some of the limitations with the approach used in estimating historical emissions. For oil and gas sources, the Colorado Department of Public Health and Environment (“CDPHE”) indicated that it would use data collected under Colorado Regulation No. 7 to make improvements to current and future emission estimates for the oil and gas industry, which should result in more accurate estimates of emissions from this industry but could also potentially complicate comparisons of future emissions with the baseline.[1]

The draft of the Roadmap was published on September 30, 2020, and community members and other stakeholders were encouraged to provide comment and feedback. The Roadmap was not developed as part of a rulemaking effort, so it was not subject to the procedural requirements associated with more formal efforts. This also means that the written comments provided on the Roadmap are only available via a Colorado Open Records Act request, and the State was not required to explicitly address or respond to community comments. Some concerns have been raised regarding this process, specifically, as subsequent specific rulemakings will be undertaken in reliance upon the Roadmap, the development of the Roadmap should have occurred in a more transparent process.

While the tremendous effort associated with developing the Roadmap to date has been broadly lauded and appreciated, additional concerns have been raised that the draft Roadmap did not provide a cost-benefit analysis for any of the proposed GHG reduction strategies and did not allow for the flexibility to pursue policies to reduce emissions iteratively and in full consideration of a given policy’s total costs and associated benefits. Technical concerns have also been raised with some of the key assumptions and analyses underlying the Roadmap and its associated emission estimates. The final Roadmap, published on January 14, 2021 and available here, did acknowledge that a detailed cost benefit analysis was not provided but indicated that such cost benefit analyses would be addressed as various strategies were implemented through formal rulemakings.

While there were limited substantive changes between the draft and final Roadmap, the final Roadmap added important discussion about the Roadmap’s larger strategic goal of reducing impacts on communities disproportionately impacted by climate change and how the Climate Equity Framework (developed based on statutory guidelines from HB 19-1261) should be used to guide future action. It also addressed Carbon Capture, Utilization, and Storage (“CCUS”) more specifically and indicated that the State would convene a task force on CCUS starting in mid-2021, “which will report to the Governor within a year on recommended framework, including policies and action steps for advancing CCUS in Colorado.”

The Roadmap is an ambitious effort to address GHG emissions in Colorado. How the Roadmap will be implemented and the exact nature of any resulting programs remains uncertain, but significant changes are on the horizon for Colorado.

[1]
See Section 8.5 of CDPHE’s Draft “2021 Greenhouse Gas Inventory Update Including Projections to 2050” found here.

If you have further questions, please contact Shalyn Kettering or Vasco Roma (Managing Consultant, Ramboll).

When faced with significant market challenges, companies in the energy industry often turn to bankruptcy for solutions. This webinar explores the bankruptcy process, its benefits, its limitations, and unique bankruptcy issues that players face across the energy sector, from oil and gas to mining. Presenters will share their experiences in recent chapter 11 cases and discuss practical considerations and strategies that should be evaluated before and during bankruptcy to avoid a chapter 11 free fall.

The confirmed speakers for this program, which is pending approval for one general Continuing Legal Education credit in the state of Colorado, are as follows:

• Adam Hirsch, Partner, Davis Graham
• Chris Richardson, Partner, Davis Graham

Event Information

Tuesday, March 9

8:00-9:00 AM MST

In this second edition of the Davis Graham Privacy & Data Security Legal Update, we cover Virginia’s Consumer Data Protection Act, which was approved by both legislative chambers, and new bills in Alabama, Florida, Utah, and Washington. On the international front, we cover new guidelines from the European Data Protection Board on breach notification and the latest developments in negotiations over an ePrivacy Regulation.

If you have any comments, questions, or suggestions, please contact the author, Camila Tobón.

U.S. Developments

Virginia set to become second state to enact comprehensive privacy legislation

In early February, both the Virginia House of Delegates and the Virginia Senate passed identical bills for the Virginia Consumer Data Protection Act (HB2307 and SB1392). Governor Ralph Northam is expected to sign the measure, after reconciliation of the two bills. The Act more closely mirrors the Washington Privacy Act (WPA) than the California Consumer Privacy Act (CCPA) and adopts the controller/processor terminology from the GDPR as opposed to the business/service provider/third party terms from the CCPA. It would apply to entities that control or process data of at least 100,000 Virginians, or those that derive at least 50 percent of their revenues from the sale and processing of consumer data of at least 25,000 customers. It includes entity-level exemptions for financial institutions subject to the Gramm-Leach Bliley Act and covered entities under the Health Insurance Portability and Accountability Act, among others, as well as data-level exemptions for personal information covered by other state and federal laws, employee data, and business contact data. Controllers must provide the rights of access, correction, deletion, data portability, and opt-out of targeted advertising, sale, and profiling and develop a mechanism for consumers to appeal a controller’s refusal to act on a request. The Act creates an opt-in regime for the processing of sensitive data (which includes racial or ethnic origin, religious beliefs, mental or physical health diagnosis, sexual orientation, citizenship or immigration status, genetic or biometric data for the purpose of uniquely identifying a natural person, children’s data, and precise geolocation data). It also requires data protection risk assessments for certain types of processing activities, including processing data for targeted advertising or profiling, sale of data, processing of sensitive data, and any other activity presenting a heightened risk to consumers. The state attorney general is the only entity with enforcement authority and enforcement penalties would be capped at $7,500 per violation. No private right of action is provided. The Act would take effect on January 1, 2023 (the same date the California Privacy Rights Act (CPRA) takes effect).

Comprehensive privacy legislation introduced in Alabama, Florida, and Utah

Earlier this month, HB216 was introduced in the Alabama House. The Alabama Consumer Privacy Act is similar to the California Consumer Privacy Act. Consumers are given the rights of access, information, deletion, opt-out of sale, and non-discrimination. There is also a private right of action for breach of nonencrypted or nonredacted personal information resulting from a failure to implement and maintain reasonable security procedures and practices. Unlike the CCPA, the Alabama Act does not provide for statutory damages, instead requiring courts to determine damages according to a set of factors set out in the bill. If enacted, the law would take effect on October 1, 2022.

In Florida, legislators introduced HB969, which is very similar to the CCPA. It requires businesses that collect personal information from consumers to maintain an online privacy policy, to be updated every 12 months. It provides consumers the rights of access, deletion, correction, opt-out of sale or sharing (where “share” is defined as disclosure for advertising), and non-discrimination. The bill includes contractual requirements for disclosures of personal information between a business and a service provider and a business and a third party, including requiring that the service provider or third party pass through any obligations to subcontractors. The bill provides a private right of action for breach like the CCPA, with the same statutory damages of $100-$750 per incident. If enacted, the law would take effect on January 1, 2022.

SB200 was introduced in Utah for a Consumer Privacy Act. Unlike the Alabama and Florida bills, this one mirrors the Washington Privacy Act. Consumer rights include access, correction, deletion, portability, and opt-out of processing for targeted advertising, sale, or profiling in furtherance of decisions regarding educational enrollment, criminal justice, employment opportunities, healthcare services, or access to basic necessities as well as opt-in to processing sensitive data. The bill requires that controllers implement a process for appeals of consumer requests and conduct risk assessments for certain high-risk processing activities. The bill does not provide a private right of action. Enforcement would be by the attorney general with penalties not to exceed $1,000 per consumer per violation. The bill would take effect January 1, 2022.

Competing privacy bill introduced in the Washington state house

In late January, a competing privacy bill was introduced in the Washington state house. HB1433, the People’s Privacy Act, significantly differs from the Washington Privacy Act under consideration in the Senate in several respects. The People’s Privacy Act is an opt-in model, requiring affirmative consent for the collection and use of personal information, which must be renewed annually or deemed withdrawn. Individuals are given the rights of access/data portability, information, refusal of consent, correction, deletion, and freedom from surreptitious surveillance. Covered entities must provide a short and long form privacy policy, with examples to be produced by the Department of Commerce within 6 months of the law’s enactment. The Act would allow a private right of action for any violation with statutory damages of $10,000. In addition, the Attorney General could bring an enforcement action seeking $25,000 per violation or up to 4% of annual revenue, whichever is greater.

EU Developments

European Data Protection Board issues additional guidance on breach notification under the GDPR

Last month, the European Data Protection Board (EDPB) issued Guidelines 01/2021 on Examples Regarding Data Breach Notification. Public comments will be accepted through March 2, 2021. In the Guidelines, the EDPB provides examples of the most common breach notification cases such as ransomware attacks, data exfiltration attacks, lost or stolen devices and paper documents, misdirected mail, and social engineering. For each type of attack, the guidelines set out guidance and recommendations, including obligations to notify supervisory authorities and affected individuals. The concrete examples provided in the guidelines should greatly assist organizations with conducting their risk assessments following a breach and determining whether notification is required and to whom. The guidelines will be finalized following the public comment period.

The Council of the European Union issues mandate for negotiating the ePrivacy Regulation with the European Parliament and the European Commission

The EU has been working on an overhaul of the 2002 ePrivacy Directive, which governs privacy and electronic communications, for several years. There are two main goals. First, to harmonize rules over electronic communications data in the EU. As a regulation, the ePrivacy Regulation would become immediately binding in all EU member states upon enactment (as opposed to a directive, which must be implemented in each member state’s national law resulting in diverging applications of the rules). Second, to address new technological and market developments, such as the current widespread use of Voice over IP, web-based email and messaging services, and the emergence of new techniques for tracking users’ online behavior. This recent development will kick-start negotiations between the Council of the EU, the European Parliament, and the European Commission over the final text of the ePrivacy Regulation.

On January 28, 2021, and possibly before, members of the Reddit group r/WallStreetBets sent the market (and, apparently Hollywood box office executives) into a frenzy. Rogue day-traders noticed that several institutional investors
were shorting the stock of companies like GameStop, a publicly traded video game retailer. Members of r/WallStreetBets—in an allegedly coordinated effort—began discussing how they, and other retail investors, could “beat” the institutional investors who had shorted (i.e., bet against) GameStop. The group settled on a plan to inflate GameStop’s stock price by going long on GameStop. Undoubtedly, some of these retail investors honestly believed in the fundamentals of the stock and the long-term value of GameStop. Others believed the company’s value was higher than its 2020 price reflected, but really just wanted to drive the stock price up to force institutional investors to cover their short positions at a significant loss—i.e., to engage in a “short squeeze.” This was no secret; these certain investors made their goals known to broad swaths of the investing community.

In 2020, GameStop’s stock price hovered below $20 per share, with a 52-week low of $2.57. The stock price increased drastically
in January 2021 when retail investors began buying the stock and buying long options. It spent most of January under $100 until January 26 when it closed at $146. Then, on January 28, GameStop’s stock price hit an eyepopping high of $483 per share. Retail investors took to the internet to rejoice. During this stock surge, various trading platforms used by retail investors decided to block customers from purchasing additional shares in GameStop (and other companies experiencing similar stock price surges) for part of the day. While many retail investors were effectively prevented from buying more GameStop shares, institutional investors continued to trade, and the stock price fell almost immediately, closing the day at $347.51.

The expansive media coverage, and the Securities and Exchange Commission’s deafening silence, left many people asking: what securities laws and regulations apply to this strikingly odd situation and would the SEC (or worse, the Department of Justice) bring enforcement actions against members of r/WallStreetBets, the online brokerages that facilitated some of the trading, or others?

Frequently, the SEC will charge a so-called “pump and dump” scheme under the antifraud provisions of the ‘33 Act, the ‘34 Act, and/or under SEC Rule 10b-5. However, this situation does not neatly fit into the antifraud box. What were the material misstatements? Were they protected speech? Was there even actual fraud or deceit? Or were the retail investors honestly buying stock to tank the institutional short positions? Two other possibilities:

• Section 9(a)(2) of the ‘34 Act prohibits any seller of stocks from (1) creating actual or apparent active trading in a stock; or (2) raising or depressing the price of a stock, for the purpose of inducing others to purchase or sell that stock.
• Section 17(a) of the ‘33 Act prohibits any seller of stocks from directly or indirectly (1) employing a device, scheme or artifice to defraud another; (2) obtaining money or property by means of a false statement (or omission) of material fact; or (3) engaging in any transaction, practice, or course of business which operates as fraud or deceit upon the purchaser. (Emphasis supplied.)

Like you, we will be watching curiously to see what enforcers do next. This does not look like a clean kill. But can the SEC be still when investors apparently scheme to inflate stock prices based on things other than company fundamentals? We’ll get back to you on this.

If you have further questions, please contact John Elofson, Chad Williams, or Philip Nickerson.

Today, President Biden issued an executive order directing the Department of the Interior to “pause new oil and natural gas leases on public lands or in offshore waters” while the Department completes “a comprehensive review and reconsideration of Federal oil and gas permitting and leasing practices.”

The directed review of federal oil and gas leasing and permitting is broad in scope. The executive order instructs that the review should consider “the Secretary of the Interior’s broad stewardship responsibilities over the public lands and in offshore waters, including potential climate and other impacts associated with oil and gas activities on public lands or in offshore waters.” Furthermore, the executive order directs the Secretary to consider whether to adjust royalties on federal oil and natural gas “to account for corresponding climate costs.”

The executive order does not direct the Department to complete this review within a specified timeframe. Therefore, the “pause” on new oil and natural gas leases is indefinite.

The leasing moratorium is limited to federal public lands and offshore waters only. The moratorium does not apply to Indian leases. It also does not suspend permitting of new oil and natural gas wells on existing federal leases. Separately, however, the Acting Secretary of the Interior has effectively suspended all permitting for 60 days via a Secretarial Order.

Immediately after the President signed the executive order, Western Energy Alliance filed a lawsuit
in the United States District Court for the District of Wyoming challenging the leasing moratorium. At the time of this alert, Western Energy Alliance had not sought preliminary or temporary relief.

The “pause” on federal oil and gas leasing is only one component of this sweeping executive order. The executive order establishes a national policy that “climate considerations shall be an essential element of United States foreign policy and national security” and sets a national goal of net-zero emissions by 2050. It directs federal agencies throughout the United States government to undertake studies and reviews, establish councils and working groups, and promote initiatives. For energy developers on public lands, the executive order most notably:

• Establishes a White House Office of Domestic Climate Policy;
• Establishes a National Climate Task Force comprised of the heads of multiple federal agencies, including the Secretaries of Interior and Agriculture and the Chair of the Council on Environmental Quality;
• Establishes a goal of “conserving at least 30 percent of our lands and waters by 2030” and directs the Secretary of the Interior to submit a report to the National Climate Task Force by April 26, 2021 with recommended steps to achieve this goal;
• Directs the Secretary of the Interior to review siting and permitting processes on public lands and in offshore waters to identify steps to increase renewable energy production on these lands and waters;
• Sets a goal of doubling the amount of offshore wind by 2030;
• Directs the heads of federal agencies to take steps to ensure that federal funding is not directly subsidizing fossil fuels to the extent consistent with law;
• Establishes a goal of achieving a carbon pollution-free electricity sector by 2035; and
• Establishes a working group to provide support for coal and power plant communities.

Given the breadth of the executive order, and the number of actions it directs, we expect to see guidance and reports from federal agencies in the coming months regarding its implementation. Please contact Katie Schroder or Courtney Shephard with questions about the executive order.

On January 13, 2021, during the final week of the Trump administration, the U.S. Army Corps of Engineers (“Corps”) published a new rule (“Rule”) that revises 12 existing 404 Nationwide Permits (“NWPs”) and issued four new ones. NWPs are “general” permits that authorize on a streamlined basis, under Section 404 of the Clean Water Act (“CWA 404”) and Section 10 of the Rivers and Harbors Act of 1899, certain specified activities that have only a minimal adverse effect on the aquatic environment. The vast majority of activities regulated under CWA 404 have historically been authorized under NWPs. The other 40 existing NWPs are not changed or impacted by this new Rule. The Rule is scheduled to take effect on March 15, 2021.

A. Revised NWP 12 Applies Exclusively to Oil and Natural Gas Pipeline Activities

One of the twelve existing NWPs revised and replaced by the Rule was NWP 12, which historically applied to all utility line activities. In this Rule, the former NWP 12 was divided into three separate new NWPs: revised NWP 12 (solely for Oil or Natural Gas Pipeline Activities); new NWP 57 (Electric Utility Line and Telecommunications Activities); and new NWP 58 (Utility Line Activities for Water and Other Substances). This separation was based in part on the ongoing judicial challenges to NWP 12 as previously used to authorize the Keystone XL Pipeline and other oil and gas-related pipelines, is designed to address the differences in how disparate types of utility line projects are constructed and the substances they convey, and was intended to help ensure the covered activities are sufficiently similar within each NWP.

The new revised NWP 12 now covers only activities required for the construction, maintenance, repair, and removal of an “oil and natural gas pipeline” and “associated activities.” It broadly defines “oil or natural gas pipeline’’ to account for the wide variety of products that may be derived from oil or natural gas and transported by pipeline. Specifically, that definition includes “any pipe or pipeline for the transportation of any form of oil or natural gas, including products derived from oil or natural gas, such as gasoline, jet fuel, diesel fuel. heating oil, petrochemical feedstocks, waxes, lubricating oils, and asphalt.” “Associated facilities” covered by revised NWP 12 include pipeline substations and access roads in non-tidal waters. As under the previous NWP 12, the covered work may not permanently fill or destroy more than half an acre of regulated waters or wetlands, but where there are multiple crossings of the same waterbody, or crossings of multiple waterbodies by the same utility line, each crossing is still considered a “separate and complete project” for purposes of this limit and the PCN triggers noted below.

Under the former NWP 12, there were eight conditions that triggered a “pre-construction notification” (“PCN”) requirement. When a PCN is triggered, an applicant must submit prescribed details about the proposed NWP-covered activities to the Corps, which must then evaluate the proposed activities on a case-specific basis, to ensure the activities have only a minimal adverse effect. The revised NWP 12 removes five of the previous PCN triggers and adds a new one. The revised PCN triggers under the replacement NWP 12 are oil and gas pipeline-related activities that: (1) require authorization under Section 10 of the Rivers and Harbors Act of 1899 (because they cross larger “traditionally navigable” waters); (2) will result in a loss of greater than 1/10-acre of waters of the United States; (3) are associated with an overall project that is greater than 250 miles in length and the project purpose is to install a new pipeline (vs. conducting repair or maintenance activities) along most of the length of the project; (4) will adversely affect federally-listed endangered or threatened species; or (5) will adversely affect historic properties. The Rule preamble clarifies, however, that additional PCN requirements may be added by the Corps through regional conditions applicable to a specific state or area.

B. 15 Other New or Revised NWPs

The other eleven replacement NWPs are:

• NWP 21: Surface coal mining activities
• NWP 29: Residential developments
• NWP 39: Commercial and institutional developments
• NWP 40: Agricultural activities
• NWP 42: Recreational activities
• NWP 43: Stormwater management activities
• NWP 44: Mining activities
• NWP 48: Commercial shellfish and mariculture activities
• NWP 50: Underground coal mining activities
• NWP 51: Land-based renewable energy generation facilities
• NWP 52: Water-based renewable energy generation pilot projects

For ten of these revised NWPs, the Corps removed the limits of 300 linear feet of stream bed disturbance and also made some other individual NWP revisions, usually to make the NWP less restrictive. Operators should carefully review these replacement NWPs prior to using or relying on them, to ensure their projects meet the new NWP qualifications, conditions, and requirements.

The four new NWPs are:

• NWP 55: Seaweed mariculture activities
• NWP 56: Finfish mariculture activities
• NWP 57: Electric utility line and telecommunication activities
• NWP 58: Utility line activities for water and other substances

C. The Rule Creates Additional Complexities and May Face an Uncertain Future

The Rule covers only 16 of the now 56 total NWPs. This means moving forward, unless the Rule is revised, rescinded, or replaced, there will be two separate five-year cycles for expiration and reissuance of NWPs. The 16 NWPs covered in this new Rule will expire in March 2026, but the other 40 NWPs will continue to expire in March 2022. The Rule also adopted or made some changes to the General Conditions and related Definitions in the Corps’ NWP rules that are applicable only to the 16 new or revised NWPs. But the other 40 pre-existing NWPs remain subject to the General Conditions and Definitions set out in the previous, January 6, 2017 final NWP rule (82 FR 1860). States and Corps District offices in the coming year also could adopt state or area-specific conditions on the 16 new or revised NWPs that differ from those for in place for the other NWPs issued in 2017. As a result, entities seeking to use NWPs must now more carefully identify which expiration dates, definitions, and general and area-specific conditions apply to a given NWP.

The Rule preamble notes that these changes are partly in response to the recent court decision in Northern Plains Resource Council, et al., v. U.S. Army Corps of Engineers, et al., (Case No. CV 19–44–GF–BMM), in which the federal District Court in Montana ruled that the former NWP 12 as used to authorize stream crossings for the Keystone XL Pipeline failed to comply with the Endangered Species Act (“ESA”). In issuing the new Rule, however, the Corps does not further consult under or otherwise change the NWP program’s approach to ESA compliance. Rather, the preamble simply states that issuance of the NWPs has “no effect on listed threatened and endangered species and designated critical habitat” and does not require ESA Section 7 consultation. Given the prior legal challenges to NWPs related to the ESA, this position may prompt other ESA-related litigation regarding the new Rule.

While the Rule technically is subject to review and rescission by Congress under the Congressional Review Act (“CRA”), it is unlikely the Biden Administration and Congress will go that route. The CRA allows Congress to overturn some rules issued by federal agencies, but if Congress chooses to do so, the CRA prevents Congress from issuing another rule in “substantially the same form” unless specifically authorized by a subsequent law. Given the broad historic use and programmatic nature of the NWP program, the CRA would not seem to provide a practical tool for Congress to address any technical concerns with the Rule.

The Rule is, however, subject to the January 20, 2021 “regulatory freeze” memorandum issued by Ronald A. Klain, President Biden’s Chief of Staff (“Klain Memo”). The Klain Memo applies to agency actions, like this Rule, that have been published in the Federal Register but have not yet taken effect. For these rules, the Klain Memo directs agencies to “consider postponing the rules’ effective dates” for 60 days, until March 21, 2021. If an agency postpones a rule’s effective date, the Klain Memo directs the agency, during this 60-day period, to:

• “[C]onsider opening a 30-day comment period to allow interested parties to provide comments about issues of fact, law, and policy raised by those rules”;
• “[C]onsider pending petitions for reconsideration involving such rules”; and
• “[C]onsider further delaying, or publishing for notice and comment proposed rules further delaying, such rules beyond the 60-day period” (i.e., March 21).

The Klain Memo directs that, after March 21, agencies need not take any action “for those rules that raise no substantial questions of fact, law, or policy.” For rules that do raise “substantial questions of fact, law, or policy,” the next step is unclear; the Klain Memo simply directs agencies to “notify the [Office of Management and Budget] Director and take further appropriate action in consultation with the OMB Director.” As a result, because the Corps’ Rule is subject to the Klain Memo, if the Rule is considered to raise “substantial questions,” the new Administration and the Corps will have the option to open the Rule for further comments, reconsider the Rule (if petitions are received to do so), or further delay the effective date of the Rule.

Any potential NWP users should closely monitor the fate of this Rule and carefully comply with the new or revised qualifications, definitions, and general and area-specific conditions applicable to the affected Nationwide Permits, if and as they are left in place by the Biden Administration.

If you have further questions, please contact Shalyn Kettering, Zach Miller, and Katie Schroder.

Oil’s price collapse and the election of a new administration in Washington are accelerating investment in carbon neutral energy sources. Although solar and wind receive the most attention, geothermal is picking up steam due to its baseload power potential and unique ability to leverage the intellectual capital of the oil and gas industry.

Geothermal Resources

Broadly speaking, geothermal energy utilizes the natural heat from the earth. That heat can be used for many types of applications from direct use heating systems to electricity generation to industrial processes like milk pasteurization. Utilizing heat from within the earth is far from a new concept. Ancient cultures took advantage of hot springs for heating purposes. Even utility-scale electricity generation applications existed in the United States since the 1950s.

Currently, the United States produces more geothermal electricity than any other country. However, there is plenty of room for further development, especially in the western states where heat resources are easily accessible. Electricity generation from geothermal resources made up only 0.5% of the country’s utility-scale generation in 2019. U.S. Energy Information Administration, Electricity explained, https://www.eia.gov/energyexpl… (last visited Jan. 19, 2021). The Department of Energy projects that geothermal resources could account for 8.5% by 2050. Department of Energy, Office of Energy Efficiency & Renewable Energy, GeoVision, https://www.energy.gov/eere/ge… (last visited Jan. 19, 2021).

Understanding the Rules of the Game

Ownership and the related regulatory schemes are among the more substantial issues affecting a potential geothermal project. As with any extractive resource, the foundational question is: “Who owns the resource and the right to extract it?” Ownership classification provides the project developer (and its financers) with certainty to manage the asset. Without such certainty, a developer may not know with which parties he or she should enter into a lease or conveyance. The ownership classification will also determine which rules and regulatory schemes apply to the developer’s activities.

On account of its blend of water, heat, and other materials sourced underground, geothermal resource ownership can be complicated. The federal government classifies the geothermal resource as part of the mineral estate. The Geothermal Steam Act of 1970, as updated by the Energy Policy Act of 2005, and accompanying regulations set forth the procedures governing geothermal leasing on federal lands. However, only a few courts interpreted homesteading act reservations, leaving many reservations and jurisdictions open to further interpretation as to whether the patent included or reserved geothermal resources. See, e.g., Rosette, Inc. v. United States, 277 F.3d 1222 (10th Cir. 2002), cert denied 537 U.S. 878 (2002).

Some states take different positions pertaining to fee and state lands within their jurisdiction. Colorado views geothermal resources as water rights that are administered by the State Engineer and water courts. Colo. Rev. Stat. § 37-90.5-101. In Idaho, geothermal resources are neither water rights nor part of the mineral estate. See Idaho Code § 42-4002. Although a water right under Nevada law, depending on whether water produced from geothermal wells is reinjected, the project may or may not be subject to appropriation. Nev. Rev. Stat. Ann. § 534A.040.

Based on the applicable classification of a geothermal resource, there could be surface access issues in the event the geothermal development is not considered part of the dominant mineral estate. Ownership distinctions may also determine joint development mechanics. For instance, state agencies may have the right to force-pool adjacent owners to ensure efficient development of the resource. See, e.g., Utah Code Ann. § 73-22-7. Further, because geothermal resources were not as popular in the past, issues may arise interpreting the instruments creating split estates. Did the geothermal rights stay with the surface owner, or were they reserved with the mineral estate?

Generally, even in situations where the law appears to be clear, there is relatively little caselaw specifically addressing geothermal resources compared to other industries like oil and gas. It is important to have a guide to help navigate the unanswered questions before embarking on a geothermal development project.

If you have further questions, please contact Brian Annes.

On January 13, 2021, the Bureau of Land Management (BLM) released draft amendments to the Desert Renewable Energy Conservation Plan (DRECP) and a draft environmental impact statement analyzing the draft amendments. BLM intends the draft amendments will streamline siting of renewable energy development, including solar, wind, and geothermal projects in the Mojave and Colorado/Sonoran regions of southern California.

Approved by BLM in 2016, the DRECP was heralded as a model of landscape-level land use planning. It covers 22.5 million acres, of which more than 10 million are federally managed. BLM developed the plan together with the U.S. Fish and Wildlife Service, California Energy Commission, and California Department of Fish and Wildlife. These agencies intended that the DRECP would facilitate streamlined permitting of renewable energy projects while meeting the requirements of the federal Endangered Species Act (ESA), its state equivalent, and federal and state land use planning requirements.

The DRECP designated geographic areas for different management, including Areas of Critical Environmental Concern (ACECs), Special Recreation Management Areas (SRMAs), and general public lands. It also identified lands as California Desert National Conservation Lands to be managed for conservation as components of the National Landscape Conservation System. Further, it established Conservation and Management Actions (CMAs), which are a set of avoidance, minimization, and compensation measures, and allowable and non-allowable actions for renewable energy projects, on BLM-managed lands.

BLM cited President Trump’s Executive Order No. Executive Order 13783, Promoting Energy Independence and Economic Growth, as well as concerns by local governments and renewable energy associations, as reasons for the amendments. Under its preferred alternative, BLM proposes a variety of changes, including to:

• Modify or eliminate certain ACECs, particularly where they overlap with other management such as wilderness or wilderness study areas;
• Modify or eliminate surface disturbance caps in ACECs and allow caps to be exceeded when mitigation is available;
• Redefine California Desert National Conservation Lands and eliminate a one-percent disturbance cap;
• Increase the areas managed as general public lands and available for renewable energy development;
• Modify management of SRMAs to allow renewable energy development where SRMA is the only land use allocation; and
• Eliminate or modify certain CMAs.

Whether BLM finalizes the amendments, and in what form, remains to be seen. Conservation groups and the California Energy Commissioner have publicly opposed the amendments. BLM must engage in further public process before it may finalize the amendments; BLM must publish a proposed land use plan and final environmental impact statement, which is subject to a 30-day public protest process and 60-day governor’s consistency review.

BLM is accepting public comment on the plan until April 15, 2021. Instructions on how to comment are available here.

If you have further questions, please contact Katie Schroder.

Welcome to the first edition of the Davis Graham Privacy & Data Security Legal Update! The goal is to keep you apprised of the latest developments in privacy and data security law. If you have any comments, questions, suggestions, or feedback, please reach out to the author, Camila Tobón.

In this month’s edition we cover amendments to the California Consumer Privacy Act, privacy bills in Minnesota, New York, Oklahoma, Virginia, and Washington, and updates to the standard contractual clauses for personal data transfers from the European Union to third countries.

U.S. Developments

California voters approve amendments to the California Consumer Privacy Act

On November 3, 2020, California voters approved Proposition 24, the California Privacy Rights Act (CPRA). The CPRA amends and will replace the CCPA when it takes effect on January 1, 2023. Significant changes in the CPRA include:

Extended exemptions for business contact and employee data until January 1, 2023. This is a welcome development for businesses and means that the full suite of privacy rights will not be required for employee and business contact data until 2023 (or later if the exemptions are further extended).

New consumer right to correct personal data held by a business. Consumers will have the right to request that a business correct inaccurate personal information (PI). This requires updates to privacy right disclosures in the privacy policy and procedures for responding to consumer requests.

Expanded opt-out right covering not only “sale” but “sharing.” Recall that sale is defined as disclosure of PI by a business to a third party for monetary or other valuable consideration. Sharing is now defined as a disclosure to a third party for purposes of cross-contextual behavioral advertising, whether or not for monetary or other valuable consideration. This change removes any doubt as to whether the right to opt out applies to online behavioral advertising cookies on websites. Companies must prepare to provide the opt-out right to consumers for online tracking.

New subcategory of “Sensitive Personal Information” (SPI) and the right to limit use and disclosures of SPI. SPI includes SSN, state ID, or passport number; account login, financial account, debit card, or credit card number in combination with any required security or access code, password, or credentials allowing access to an account; precise geolocation; racial or ethnic origin, religious or philosophical beliefs, or union membership; contents of mail, email and text messages (unless business is intended recipient of communication); genetic data; biometric information for the purpose of uniquely identifying a consumer; PI collected and analyzed concerning a consumer’s health; and PI collected and analyzed concerning a consumer’s sex life or sexual orientation. Consumers may request limitation on the use and disclosure of SPI to those that are: (i) necessary for the good or service requested; (ii) for purposes of ensure security and integrity; (iii) short-term, transient uses; (iv) performing services on behalf of the business; and (v) activities intended to verify or maintain the quality or safety of goods or services. Businesses will need to identify whether they process and disclose SPI and if so, why, in order to determine whether a consumer will have a right to limit the use and disclosure of that SPI.

Extended right of access to PI beyond a 12-month period, provided the PI was collected on or after January 1, 2022. Under the CCPA, the disclosure of required information following an access request must cover the 12-month period preceding the request. The CPRA allows the consumer to request information beyond that period and the business is required to provide it unless doing so proves impossible or would involve disproportionate effort. Businesses must be prepared to track, compile, and produce consumer PI collected on or after January 1, 2022.

New comprehensive privacy legislation introduced in Minnesota, New York, Oklahoma, Virginia, and Washington

Legislators in Minnesota introduced HF 36, a bill giving consumers various rights regarding personal data, imposing transparency obligations on businesses, and creating a private right of action. Consumer rights include access, deletion, and opt-out of sale. Transparency obligations include notice by a business to the consumer at or before the point of collection about the collection, use, disclosure, and sale of PI, including third parties to whom PI may be disclosed and/or sold. The bill provides a private right of action for any violation of the law, with statutory damages between $100-$750 allowed per consumer, per violation, and allows suit by the state attorney general to enforce.

In New York, several privacy bills were introduced when the 2021 legislative session opened. Two are notable. The New York Privacy Act (AB 680) was re-introduced after having failed last year to make it out of committee. This bill requires consent for the use, processing, or transfer of PI to a third party; imposes a fiduciary duty of care with respect to PI; provides consumers GDPR-like rights; and grants a private right of action under the state’s unfair and deceptive practices statute for actual damages. A new bill introduced for the first time this year, SB 567, is very similar to the CCPA. It provides consumers rights over their PI and imposes transparency obligations on businesses. But unlike the CCPA, it grants a private right of action for any violation of the law with statutory damages between $1,000-$3,000, depending on the nature of the violation.

HB 1130 in Oklahoma focuses on transparency obligations. It requires businesses and website operators that collect a consumer’s personal digital information to provide notice of the categories of PI collected and the purposes of use. Information about PI sale and disclosure must also be provided, and sale is defined as disclosure to a third party for monetary or other valuable consideration (like the CCPA). Unlike the other bills, HB 1130 does not provide consumer rights or allow for a private right of action to enforce.

Legislators in Virginia
introduced SB 1392, the Consumer Data Protection Act, which is similar to the Washington Privacy Act. The Virginia bill would provide consumers the rights of access, correction, deletion, data portability, and opt-out of targeted advertising, sale, and profiling. The bill imposes transparency obligations on controllers, defines the responsibilities of controllers and processors according to their role, and requires data protection risk assessments for certain types of processing activities. The state attorney general is the only entity with enforcement authority and enforcement penalties would be capped at $7,500 per violation. No private right of action is provided.

In Washington, the Washington Privacy Act (SB 5062) has been introduced for the third time. Last year, the bill passed the Senate but died after the Senate failed to ratify amendments by the House, which included the addition of a private right of action. The latest version of this bill gives consumers the rights of access, correction, deletion, data portability, and opt-out of targeted advertising, sale, or profiling. It imposes specific obligations on controllers and processors and would require data protection risk assessments for certain processing activities. The bill does not include a private right of action. New provisions added to this third version in response to the pandemic include those relating to processing data for public health emergencies and automated contact tracing.

Other states are expected to follow suit with proposed privacy legislation. In addition, there appears to be momentum at the federal level to pass comprehensive privacy legislation. We will continue to monitor and report on developments.

EU Developments

European Commission issues new draft Standard Contractual Clauses for data transfers from the European Economic Area

On November 12, 2020, the European Commission (EC) issued draft standard contractual clauses (SCCs) for data transfers from the European Economic Area (EEA) to third countries. These draft SCCs are meant to replace the existing SCCs, which were adopted in the 2000s while the GDPR’s predecessor, the 1995 Directive, was in effect. The new SCCs are designed to cover a broader set of data transfers out of the EEA between controller-controller, controller-processor, processor-processor, and processor-controller (the existing SCCs work only for controller-controller and controller-processor transfers). The revised SCCs also address the Court of Justice of the European Union’s (CJEU) decision in the Schrems II case. (For more on the CJEU’s decision in Schrems II, see our previous client alert). Specifically, the SCCs include provisions for the data exporter’s analysis of the receiving country’s laws to determine whether they are “essentially equivalent” to EU law and provisions addressing the data importer’s obligations in the case of government access requests.

The consultation period for the new SCCs closed in December. Revisions are anticipated before the SCCs are finalized. Once finalized, companies will have one year from finalization to update existing contracts.

On December 22, 2020, the U.S. Fish and Wildlife Service (“FWS”) published
the application of Manzana Wind, LLC (“Manzana”) for an incidental take permit (“ITP”) under Section 10 of the Endangered Species Act (“ESA”). The permit would authorize the incidental take of two endangered California condors over the course of 30 years from the operation of Manzana’s wind power facility. Manzana’s facility, which consists of 126 1.5-megawatt turbines, began commercial operations in 2012 in the Antelope Valley region of Kern County, California. It is part of the Tehachapi Wind Resource Area, which produces more than half of California’s wind energy. The draft conservation plan associated with the permit application took five years to develop and estimates the cost to Manzana at $10 million. The FWS is accepting comments on the proposed ITP and draft conservation plan until February 5, 2021.

The condor’s story demonstrates how the ESA not only impacts projects proposed where endangered species are known to exist but also where a species’ population increases and expands into existing developments. Conflicts between wind development and threatened and endangered species may increase as populations grow and as wind turbines expand into new areas throughout the country. President-elect Joseph Biden will take office with a pledge
to build an energy grid that relies solely on clean electricity by the year 2035. The pledge includes a goal to install 60,000 onshore and offshore wind turbines. The lack of flexibility in locating wind projects, which are strategically sited to maximize wind resources, may also contribute to wildlife conflicts.

California condors were once abundant across North America. Due to primarily human-caused factors, such as shooting, poisoning, egg collecting, predator control, and lead poisoning from ammunition, the bird’s population by 1950 had decreased to 150. This number continued to decline to 50-60 by the late 1960s, and in 1967, the species was listed as endangered. By 1978, a mere 25 condors existed in the wild and, by 1987, the only remaining condors were in captivity. A successful captive breeding program rebounded the population to 337 in the wild and 181 in captivity by the end of 2019, making it one of the ESA’s most iconic success stories.

The ESA provides a framework for addressing threats to threatened and endangered species, such as the condor. Section 9 of the ESA, enforced by the FWS, prohibits the unauthorized take of endangered wildlife species, and the FWS has extended this prohibition to threatened species by regulation. The ESA defines
“take” as “to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct.” “Harm” is defined as “an act which actually kills or injures wildlife. Such acts may include significant habitat modifications or degradation where it actually kills or injures wildlife . . . .” The consequences of violating the ESA are severe: Civil penalties can exceed $50,000 per violation, while criminal penalties can reach $50,000 and up to one year in prison per violation.

However, when a private developer anticipates a risk of taking a threatened or endangered species, it may obtain an ITP, allowing take under the conditions of the permit. The process for obtaining an ITP is extensive and includes submitting a proposed habitat conservation plan (“HCP”) with the ITP application. Depending on the size and complexity of the project and the species at issue, the timeframe for approval can range from months to years. The FWS will issue an ITP if it finds that the proposed taking will be incidental, meaning it is not the purpose of the project, that the applicant will adequately fund the conservation plan, that the plan will not appreciably reduce the likelihood of the survival and recovery of the species, and that the plan will minimize and mitigate the impact of the taking to the maximum extent practicable.

Manzana’s draft conservation plan is the first to address potential take of condors from wind development in southern California. As populations of the condor and other endangered bird and bat populations increase, Manzana’s plan may inform future efforts to develop wind energy while minimizing impacts to such species. Key aspects of the plan to minimize threats and mitigate potential losses include:

• Tracking GPS-tagged condors in the area and immediately shutting down turbines if a condor enters a defined area. Approximately 81% of southern California’s condor population is tagged with a GPS tracker. Monitoring is required for the entire 30 years of the ITP’s term at an estimated to cost $8.5 million.
• Monitoring the wind project and removing or covering carcasses of wild animals and livestock.
• Funding condor breeding programs at the Oregon Zoo that would result in the release of six captive-raised condors. The cost of such funding is estimated at $500,000.

The purpose of the ESA is to conserve imperiled species. Efforts have proven successful in certain cases, evidenced by increasing condor populations. Wind energy developers must understand how to navigate the ESA, especially if constructing turbines remotely near an endangered population. The successful expansion of certain species and the growing demand for renewable energy could make engagement with the law inevitable.

If you have further questions, please contact Hayden Weaver.