Practice perfect?

Fueled by global warming lawsuits and new policies regulating carbon emissions and renewable energy production, a growing number of law firms are touting their expertise in climate change issues. Attorneys with environmental law, project finance, legislative and corporate governance experience are banding together to form multidisciplinary teams that aim to help clients navigate the risks and opportunities linked to legislative and corporate responses to climate change.

At least a dozen firms around the country have started global warming practices, says Joseph Altonji, a vice president at Hildebrandt International, a legal consulting company in New York City.

“I’m not aware of a single such practice existing two years ago,” Altonji says. “It’s a massive increase.”

The new groups include litigators who are identifying new tools to hold government agencies and industries accountable for greenhouse gas emissions — as well as lawyers who are defending these polluting industries from lawsuits filed by environmental groups. Participating attorneys are also advising companies on strategic planning and financial disclosure issues connected to global warming pollutants.

“This is legitimately a separate practice or industry,” says Ruben Kraiem, a partner at Covington & Burling LLP in New York and co-chair of the firm’s Carbon Markets, Climate Change and Clean Technology team. “That is to say it is not only a marketing classification. There is a need to understand the policy questions, the market issues and the areas where there is uncertainty in this field.”

Over the past year, the policy landscape around global warming has changed dramatically. In April, the U.S. Supreme Court ruled the U.S. Environmental Protection Agency must consider regulating greenhouse gas emissions from motor vehicles under the Clean Air Act. California’s 2006 Global Warming Solutions Act mandates reductions of greenhouse gas emissions to 1990 levels by 2020 and charges the state Air Resources Board with developing regulations for a compliance program. In November, Washington voters passed a measure requiring utilities to source 15 percent of their electricity from renewable energy sources by 2020. And under the Regional Greenhouse Gas Initiative, seven northeast states have established a cap and trade program for carbon emissions from power plants starting in 2009.

“Climate change is the single biggest environmental issue right now,” says Alison Wood, a partner with Hunton & Williams LLP in Washington, D.C. As part of the firm’s Climate Change Law and Policy group, Wood and her colleagues track global warming legislation, and advise companies on strategic planning and the disclosure of climate-related risks as part of their obligations under Securities and Exchange Commission. She also represents the energy industry on numerous global warming lawsuits, including an ongoing “public nuisance” case in Mississippi that aims to force oil companies and coal producers to compensate victims of Hurricane Katrina.

Wood says the industries she represents aim to avoid a patchwork of state laws and believe tort suits are “not the way to handle” emissions regulation. She also says global warming lawsuits “may die off” once federal lawmakers pass comprehensive carbon emissions laws. “Almost all the global warming litigation sponsored by states or environmental groups is designed to get the federal government to act,” Wood says. In the meantime, plaintiff’s attorneys say they are charting new territory by applying existing environmental laws to greenhouse gas emissions — and that the outcome of such litigation will hinge on complex issues of causation.

“There is now consensus on the link between emissions and climate change,” says Geoff Hand, an associate attorney with Shems, Dunkiel, Kassel & Saunders PLLC in Vermont. “But there isn’t consensus in how you attribute responsibility for incremental emissions.” For example, Hand says, since almost all Americans drive, “all of us are responsible for emitting carbon.” Establishing liability for individual emissions will be the “linchpin” of the climate change field, says Hand.

Shems Dunkiel is representing several municipalities and environmental groups in a suit against two federal development agencies charged with financing overseas projects that may contribute to climate change. In April, the firm’s attorneys argued successfully that the National Environmental Policy Act, which requires environmental assessment of projects in the U.S., also applies to government-backed projects overseas.

TXU’s Martin Lake coal-burning power plant burns a low-grade coal known as “brown coal,” which is believed to produce a higher level of carbon dioxide emissions than higher-grade coal.

 Other groups are using the Endangered Species Act as a litigation tool. As a result of a lawsuit filed by the Natural Resources Defense Council and the Center for Biological Diversity, the U.S. Department of the Interior recently proposed listing polar bears as threatened due to impacts of climate change. Because it is illegal to harm threatened species, the proposed listing means that emissions producing industries could fall under the jurisdiction of the Endangered Species Act.

Despite the proliferation of lawsuits, most legal experts predict emissions reduction management will quickly become the centerpiece of global warming legal practice — especially as states prepare to implement the new renewable energy and carbon emissions standards. “The cases where people are taking adversarial positions — ‘no climate change, or climate change belongs here’ — will be kind of the exceptions,” says Kraiem. “The heart of it is going to be in the development of the system and transactions.”

Kraiem cites an example from his own practice: the stunning transformation of a major polluter following the recent $45 billion acquisition of Dallas-based utility TXU by two private equity firms, Kohlberg Kravis Robert and Texas Pacific Group. As part of a deal brokered by Kraiem and the climate practice, TXU dropped eight out of 11 originally proposed coal-fired plants, expanded the company’s renewable energy portfolio and endorsed a cap and trade plan for carbon emissions.

“Our assignment was to work with the people who intend to buy TXU in designing a series of undertakings that they could make to steer the company in a new direction that would still be consistent with a viable business plan but would earn the endorsement of environmental community,” says Kraiem. “And this was done.” Another major growth area is carbon finance. In this area, lawyers verify and broker transactions in which companies receive credits for carbon offset projects and then trade those credits on the market.

Designing an economy-wide cap and trade system is a complex undertaking, says Peter Mostow, an environmental permitting attorney for renewable energy projects who works in the San Francisco office of Wilson Sonsini Goodrich & Rosati. “There are a lot of legal issues about what is an offset and how do you market and trade an offset in a way that keeps integrity of system viable,” says Mostow, who is tracking the California emissions law for several clients interested in how the new system will provide incentives for renewable energy. He adds that this kind of verification and transaction work will be a natural fit for attorneys who have previously worked on power purchase agreements and green tags. (Green tags are legal units that represent the environmental benefits of generating electricity from new renewable sources.)

By definition, global warming attorneys represent a variety of political positions connected to climate change. In fact, many of the climate change practice groups are springing up in firms that have a historic client base in the oil and gas industries — as well as a legacy of defending these industries in lawsuits filed by environmental groups. The potential disconnect between a global warming practice and a sustainability practice depends on the firm and generally reflects the larger debate surrounding technology and policy solutions to climate change. “General service firms need to understand whether they can both represent oil companies and utilities and also say they have a climate change practice and take the green side of things,” says Mostow.

Representing fossil fuel clients is not inconsistent with CO2 mitigation goals, counters Peter Wycoff in the Washington, D.C., office of Pillsbury Winthrop Shaw Pittman LLP. Last fall, the firm launched a Climate Change and Sustainability Practice Group to advise clients on litigation, regulatory compliance, carbon finance, lobbying and public policy.

“I can picture tremendous opportunities amongst our clients for synergy in creating massive projects that help to reduce greenhouse gas emissions,” says Wycoff, who has defended oil and gas industries against Environmental Protection Agency enforcement actions under the Clean Air Act. One example Wycoff cites is carbon sequestration, an early-stage technology that would inject captured carbon into geologic formations now drained of oil and gas.

Lawyers familiar with the existing sulfur dioxide emissions trading program under the Clean Air Act are also well-equipped to handle issues associated with new carbon trading systems, says Wycoff. He says mitigation technologies still in the demonstration phase, such as carbon sequestration, will also provide opportunities for environmental permitting, corporate finance and legislative attorneys. “Carbon sequestration will have a permanent lifetime, and developers will not want to held liable for 10,000 years,” he says.

For now, lawyers continue to reassess their skills and regroup. “A lot of the work in climate change is done by lawyers who wear other hats and are just adding another arrow in their quiver,” Mostow says. But there are plenty of new challenges ahead. “How do you make a cap and trade system run effectively, and what are the pitfalls? These are new and exciting policy issues for lawyers,” he says. “We love that stuff.”