Late yesterday, the White House announced that President Trump intended to nominate Mark C. Christie and Allison Clements to be FERC Commissioners. Christie would assume the seat currently occupied by Commissioner Bernard McNamee, whose term expired June 30, 2020, but who is continuing as commissioner until the earlier of when his replacement is confirmed and sworn in or the end of the current congressional session, as permitted by law. Clements would fill a seat left vacant in August 2019 with the departure of former Commissioner Cheryl LaFleur. If the Senate confirms Christie and Clements, FERC would have five Commissioners for the first time since LaFleur left the Commission in August 2019.Read More
On July 16, 2020, the Federal Energy Regulatory Commission (“FERC” or “the Commission”) issued two noteworthy electric power orders: the first is a final rule (“Order No. 872”) that updates regulations implementing the Public Utility Regulatory Policies Act of 1978 (“PURPA”); the second dismisses the New England Ratepayer Association’s (“NERA”) petition for a declaratory order on FERC’s jurisdiction over net energy metering sales.
Final Rule on PURPA Update
In September 2019, FERC issued of a Notice of Proposed Rulemaking (“NOPR”) to significantly change how it implements PURPA, a law that applies to small power producers. In Order No. 872, FERC largely adopted the NOPR’s proposed revisions to the Commission’s regulations implementing PURPA sections 201 and 210. Notable changes to the PURPA regulations include: (1) providing additional flexibility to set “avoided cost” rates for qualifying facilities (“QFs”) sales; (2) modifying the “one-mile rule” to allow for consideration that affiliated QFs more than one mile but less than ten miles apart may be at the same site ; (3) revising procedures to challenge initial QF certification and re-certification; (4) revising the threshold from 20 megawatts (“MW”) to 5 MW at which a utility may petition to terminate its obligation to purchase from certain QFs; and (5) requiring states to develop criteria that must be met for a QF to be entitled to a contract or legally enforceable obligation (“LEO”).
Changes included in Order No. 872 will be effective 120 days from publication in the Federal Register. When effective, Order No. 872 will not affect existing contracts, LEOs, or existing certifications for facilities, but will be prospective, applying to new contracts or LEOs, and certifications or recertifications for facilities filed after the order’s effective date.
Dismissal of NERA Petition for Declaratory Order
On April 14, 2020, NERA filed a petition for declaratory order, seeking FERC’s declaration that FERC holds exclusive jurisdiction over wholesale energy sales from behind-the-meter generation and requiring that the rates for such sales be priced pursuant to the Federal Power Act (“FPA”) or PURPA, when applicable. Specifically, NERA asked FERC to declare jurisdiction over energy sales of rooftop solar and other distributed energy resources on the customer side whenever the output exceeds the customer’s demand, or the energy is meant to bypass customer load. NERA characterized “full net metering,” as “a practice through which an electricity consumer produces electric energy from a generation source (most often solar panels) that is located on the same side of the retail meter as the customer’s load.” Historically, the Commission sees such transactions as retail in nature and regulated by the states. NERA argued, however, that the energy exceeding customer demand or bypassing customer load is sold to a utility for resale to customers, making them wholesale sales, and therefore, subject to FERC’s jurisdiction.
The Commission began its analysis with a reminder: “Declaratory orders to terminate a controversy or remove uncertainty are discretionary.” The Commission then used its discretion not to address the issues presented, as they did not “warrant a generic statement” from FERC. The Commission found that NERA never identified “a specific controversy or harm” to be addressed. Further, the Commission found that to the extent NERA is concerned that certain New England state regulatory authorities are not pricing QF sales in accordance with PURPA, the petition did not meet PURPA’s requirements for enforcement.
 Qualifying Facility Rates and Requirements Implementation Issues Under the Public Utility Regulatory Policies Act of 1978, 172 FERC ¶ 61,041 (2020).
 New England Ratepayers Ass’n, 172 FERC ¶ 61,042 (2020) (“NERA Order”).
 Qualifying Facility Rates and Requirements Implementation Issues Under the Public Utility Regulatory Policies Act of 1978, 168 FERC ¶ 61,184 (2019) (“NOPR”).
 Behind-the-meter generation refers to energy generated from the customer side of the retail meter.
 NERA Order at P 3.
 NERA Order at P 4.
 NERA Order at P 35.
 NERA Order at P 35.
 NERA Order at P 36-37.
Seattle – Global law firm K&L Gates LLP has advised solar energy systems developer Unico Solar Investors on a long-term joint-venture partnership with Excelsior Energy Capital, a leading independent North American renewable energy investor, to build, own, and operate a 250 MW pipeline of commercial and industrial solar projects across North America.
A wholly-owned subsidiary of Unico Investment Group, Unico Solar will develop and manage the portfolio, which will consist of ground-mount, rooftop, and carport solar projects across multiple U.S. states including Arizona, California, Colorado, Hawaii, Massachusetts, Nevada, New Jersey, New York, Oregon, and Washington, among others. The projects will provide clean electricity to a variety of customers, including commercial businesses, property owners, municipalities, educational institutions, utilities, and others, with construction expected to begin later this year.
The K&L Gates team that advised on the partnership was led by Seattle partner David Benson and included Seattle partner Elizabeth Crouse, Houston partner Edmundo de la Fuente, and Portland partner William Holmes, as well as Seattle associates Adam Heyd and Brad Lewis, Orange County associate Lana Le Hir, Houston associate Olivia Mora, and Boston associate Mike O’Neill.
Join us on June 30, 2020 at 4:30pm EDT for a webinar on the Post-COVID-19 Outlook for renewable energy.
Emerging from the first wave of the COVID-19 crisis, the renewables industry has experienced many positive and negative effects, from enormous job loss to valuable cost reductions, innovation in project development, and an uptick in storage contracts. However, there is still significant uncertainty about what a second wave of lock-downs may bring as well as the effect of the macroeconomic climate on investor appetite.
Our expert panel will share with you what they expect to see in the development and power markets worldwide as well as the hot new trends they see as helping the industry emerge from the COVID-19 crisis stronger and more resilient than ever.
- Elizabeth Crouse, Partner, K&L Gates
For more information and to register, please click here.
You may recall that at the beginning of this year, FERC Commissioner McNamee announced that he would not seek another term as a commissioner when his term ended on June 30, 2020. At today’s FERC Open Meeting, Commissioner McNamee announced that he will continue to serve for the foreseeable future. This is permitted by statute pursuant to which a Commissioner may stay past the end of his or her term until the appointment, confirmation, and swearing in of his or her successor, but no later than the end of the session of the Congress in which his or her term expires. As a result, Commissioner McNamee may stay until the current congressional session ends at the end of 2020 or early 2021.Read More
On June 18, 2020, the Federal Energy Regulatory Commission (“FERC”) announced that it will hold two separate technical conferences later this year. First, FERC will hold a Commissioner-led technical conference on September 30, 2020 to discuss issues related to carbon dioxide emission pricing (i.e., “carbon pricing”) as adopted by states in FERC-jurisdictional wholesale electricity markets (“Carbon Pricing in Organized Wholesale Electricity Markets”). Second, FERC staff will hold a technical conference on October 27, 2020 to discuss whether existing frameworks for transmission, interconnection, and merchant transmission facilities can incorporate the growing offshore wind generation efficiently and effectively (“Offshore Wind Integration in RTOs/ISOs”).Read More
On April 15, 2020, the Montana federal district court issued an Order in Northern Plains Resource Council v. U.S. Army Corps of Engineers, No. 4:19-cv-00044-BMM (D. Mont.) (NPRC v. Corps) that may have far reaching implications for energy development projects across the United States.
In a case involving the Keystone XL Pipeline Project, the Montana court vacated the U.S. Army Corps of Engineers’ (Corps) Nationwide Permit (NWP) 12. The Court concluded that because the Corps failed to consult under the Endangered Species Act (ESA) Section 7 when it reissued NWP 12 in 2017, the permit is not valid and the Corps may not authorize work under the terms and conditions of NWP 12.
Background, Key findings, and Order
The Corp’s 2017 Reissuance of NWP 12. When the Corps reissued NWP 12 (along with all other NWPs) in 2017, it determined that ESA consultation with the U.S. Fish and Wildlife Service and National Marine Fisheries Service (the “Services”) was not required because the reissuance of NWPs has “no effect” on ESA-listed species or critical habitat.
Court’s Key Findings. The court held that the Corps’ “no effect determination and resulting decision to forego programmatic consultation proves arbitrary and capricious in violation of the Corps’ obligations under the ESA.” The court concluded that the Corps cannot circumvent ESA Section 7(a)(2) consultation requirements by relying on project-level review (e.g., by non-federal entities) under NWP General Condition 18’s preconstruction notification (PCN) requirement. The court reasoned that (1) General Condition 18’s PCN requirement fails to ensure that the Corps fulfills its obligations under ESA Section 7(a)(2) because it delegates the Corps’ initial effect determination to non-federal permittees.
Court’s Order. Based on the court’s findings, the Order (1) vacated NWP 12; (2) remanded NWP 12 to the Corps to initiate consultation now; and (3) enjoined the Corps from authorizing work under NWP 12 until consultation is completed.
Potential Implications if a Motion for Reconsideration or Stay is not Granted
Immediate Impact on Projects with NWP 12 Authorization. The Order creates immediate uncertainty for project proponents needing NWP 12 authorization. If the Order is not stayed or appealed, the Corps could reopen programmatic consultation with the Services, which could take several months or longer to complete and, once completed, may be subject to further litigation. In addition, the Order could be leveraged by other plaintiffs targeting the Corps’ other NWPs that rely on General Condition 18. Given the uncertainty, developers will need to consider their current permitting options, which may include other NWPs, individual 404 permits (which trigger NEPA, NHPA, and ESA), or project redesign to avoid impacts to regulated waters.
On April 27, 2020, the Corps filed motions for expedited briefing and consideration for a partial stay of the Order pending an appeal. The Corps’ motion asks the Court to stay “those portions of its April 15, 2020, Order that vacate NWP 12 and broadly enjoin the Corps from authorizing any dredge or fill activities under the permit”; or at “the very least, the Court should stay its vacatur and injunction as they relate to anything other than the Keystone XL pipeline.”
**UPDATE**: On April 28, 2020, U.S. District Court Judge Brian Morris denied the Corps’ motion for a temporary administrative stay of the court’s vacatur, injunction, and remand orders. Judge Morris ordered Plaintiffs and the Corps to complete briefing on an expedited basis by May 8, however, on the Corps’ broader request for a stay pending appeal, which should give permit-seekers and holders additional insight into the immediate future of NWP 12.
**UPDATE May 7, 2020**: On May 7, 2020, Plaintiffs filed their opposition to the Corps’ Motion for Partial Stay Pending Appeal. Significantly, Plaintiffs agree with the Corps to ask the Court to revise the remedy that the was ordered on April 15, 2020. Specifically, Plaintiffs propose that the Court modify these remedies as follows.
(1) narrowing the vacatur of NWP 12 to a partial vacatur that applies to the construction of new oil and gas pipelines, thereby keeping NWP 12 in place during remand insofar as it authorizes non-pipeline construction activities as well as routine maintenance, inspection, and repair activities on existing NWP 12 projects; and
(2) narrowing the injunction to enjoin the Corps from authorizing any dredge or fill activities for Keystone XL under NWP 12. This relief would afford appropriate protection for endangered and threatened species and their critical habitats while minimizing any potential disruption claimed by Defendants.
**UPDATE May 12, 2020**: On May 11, 2020, the Montana District Court issued its ruling on the Corps’ motion to stay the court’s original Order issued on April 15, 2020.
The Court denied the motion to stay Order pending an appeal to the 9th Circuit. However, the Court adopted Plaintiffs’ proposal that the Court revise the scope of remedy in the original Order to apply only to new and gas construction projects. The Court narrowed the scope vacatur and injunction as follows:
- NWP 12 is vacated as it relates to the construction of new oil and gas pipelines pending completion of the consultation process and compliance with all environmental statutes and regulations. NWP 12 remains in place during remand insofar as it authorizes non-pipeline construction activities and routine maintenance, inspection, and repair activities on existing NWP 12 projects.
- The Corps is enjoined from authoring any dredge or fill activities for the construction of new oil and gas pipelines under NWP 12 pending completion of the consultation process and compliance with all environmental statutes and regulations. The Corps remains able to authorize dredge or fill activities for nonpipeline construction activities and routine maintenance, inspection, and repair activities on existing NWP 12 projects.
**UPDATE June 17, 2020**: On June 15, 2020, the US Solicitor General, on behalf of the US Army Corps of Engineers, filed an application for a stay with the US Supreme Court.
The application seeks a stay of the April 15, 2020, order issued by the United States District Court for the District of Montana (as amended May 11), pending an appeal of that order to the Ninth Circuit Court of Appeals and, if necessary, pending a future appeal to the US Supreme Court.
The Solicitor states that the district court “had no warrant to set aside NWP 12 with respect to Keystone XL, let alone for the construction of all new oil and gas pipelines anywhere in the country.”
The Solicitor points to the fact that when plaintiffs brought the original lawsuit to challenge the Corps’ alleged use of NWP 12, they limited their claims and relief to the use of NWP 12 to authorize construction of the Keystone XL pipeline. According to the filing, plaintiffs expressly disclaimed any request for vacatur of NWP 12, or an injunction, extending beyond Keystone XL itself; and made no “meaningful effort to establish Article III standing to challenge the potential application of NWP 12 to crossings by any other specific proposed pipelines.” Despite these facts, the Solicitor argues, the district court first vacated NWP 12 on a nationwide basis, and then in an amended order narrowed the scope of vacatur to all new oil and gas projects.
The Solicitor argues that a stay is appropriate because the district court order went well beyond what the plaintiffs original sought, is inconsistent with Article III and traditional principles of notice and equity, and was wrongly decided on ESA grounds. The Solicitor argues that the “Corps reasonably determined that merely re-issuing NWP 12 would have no effect on listed species or critical habitat — and therefore did not trigger any consultation requirement under the ESA — because the regulatory scheme and conditions in NWP 12 ensure that any necessary consultation occurs on an activity-specific basis.”
The US Supreme Court is evaluating the application.
**UPDATE July 6, 2020**: On July 6, 2020, the U.S. Supreme Court ruled that the Montana District Court Order (as amended on May 11) is stayed, except with regard to the Keystone XL pipeline. Until the Ninth Circuit issues a ruling on the appeal — and any subsequent appeal to the U.S. Supreme Court — of the District Court Order by the U.S. Army Corps of Engineers, the order remains in effect for Keystone XL but does not apply to other entities or parties.
Commercial property owners in the state of Washington may soon have access to a new source of funding for energy efficiency, renewable energy, and resiliency improvements to their buildings. Washington’s C-PACER legislation (House Bill 2405), passed by the legislature during the 2020 regular session, went into effect 11 June 2020. The C-PACER program aims to address the significant needs for property owners to finance energy efficiency upgrades, renewable energy improvements, stormwater management, water conservation, and resiliency retrofits to address vulnerabilities to earthquakes and other natural disasters.
The state and many local governments across the country are imposing new requirements on the owners of existing buildings to reduce water and energy consumption, control stormwater runoff, minimize damage from earthquakes, and convert to renewable sources of energy. These types of building improvements often have high up-front capital costs and long cost-recovery periods. This combination has inhibited investment by property owners who may not plan on holding an asset long enough to see the benefit of these improvements.
With the enactment of the C-PACER program, Washington joins 36 other states that have enacted some form of property assessed clean energy legislation (20 of which have current active programs). Washington’s C-PACER program, like some other states, relies on private rather than public financing. Unlike traditional private financing models, C-PACER loans are not personal debt obligations. Rather, the C-PACER loan is repaid through a voluntary assessment on the improved property that runs with the land and is secured by a super-priority lien. Accordingly, the obligation to repay the C-PACER loan remains with the property regardless of any transfer of ownership. Because of this unique structure, C-PACER loans can allow for a much longer repayment period than traditional financing options. In addition, the super-priority of the lien allows for lower interest rates. In theory, the longer term and beneficial rate will improve the ability of the owner to repay the C-PACER loan, as the owner actually accrues the benefit of savings on utility bills, lower insurance premiums, and other operating cost reductions from the improvements.
The following is a brief summary of the key information to know about the C-PACER program.
Is the C-PACER Program Available Statewide?
The C-PACER program is a voluntary program that is to be managed on a statewide basis by the Washington Department of Commerce (though a C-PACER program guidebook is not expected this year as a result of COVID-19). Once established, each county must opt into the program on a voluntary basis. However, counties are not required to wait for the statewide program. Each county is empowered to establish its own program in compliance with the requirements of the state legislation. Accordingly, availability will vary by jurisdiction. No counties have yet adopted a program.
What Properties Qualify?
Under the C-PACER program, owners of agricultural, commercial, and industrial properties are eligible to obtain financing for qualifying projects. The C-PACER program also applies to owners of multifamily residential properties with five or more dwelling units. Eligible property may be owned by any type of business, corporation, individual, or nonprofit organization permitted by state law. However, as noted above, individual counties have broad discretion to establish their own program within the parameters of the state legislation and could limit the types of properties that qualify.
What Projects Qualify?
C-PACER financing is available both for qualifying improvements to existing commercial buildings and new construction. Qualified improvements include, among others, solar panels, high-efficiency heating and cooling systems, insulation and other improvements that address safe drinking water, or those that decrease energy or water consumption or demand through efficiency technologies, products, or activities. Improvements that support the production of clean, renewable energy, including a product, device, or interacting group of products or devices on the customer’s side of the meter that generates electricity, provides thermal energy, or regulates temperature, would also be deemed qualifying improvements. Likewise, improvements that increase resilience are also qualified improvements. Examples of resilience improvements include seismic retrofits, flood mitigation, stormwater management, wildfire and wind resistance, energy storage, and microgrids. The inclusion of resiliency improvements is a feature of the Washington legislation that is not found in other jurisdictions and may be of particular interest for owners of unreinforced masonry buildings and other properties in need of seismic improvements.
How Is the C-PACER Loan Repaid?
As discussed above, C-PACER loans are repaid by a voluntary assessment on the improved property, secured by a lien in favor of the county, which is then immediately assigned to the C-PACER lender. The lien is second only in priority to the lien for unpaid taxes. Once a C-PACER loan is advanced, the administration of the C-PACER loan (including enforcement) is done by the private lender. After the adoption of a C-PACER program, a county’s role is limited to the approval of an assessment and recordation of a C-PACER lien, as well as to the administration of the C-PACER program (which may be contracted out to a private third party).
Who Makes the C-PACER Loans?
Subject to compliance with generally applicable licensing requirements, any private entity can make a C-PACER loan.
What Is the Impact for Holders of Mortgages on the Property?
Because the lien of a C-PACER loan is superior to all other debt obligations other than unpaid taxes, written consent of any existing mortgagee or other holder of a security interest in the real property is required before an owner can obtain a C-PACER loan. Note that the super-priority nature of C-PACER loans may be objectionable to mortgage lenders (and, in fact, some lenders expressly prohibit borrowers from obtaining any such loans).
How Is the C-PACER Lien Enforced?
The private lender is responsible for collection and enforcement of delinquent C-PACER liens or C-PACER loan installment payments. The C-PACER lien is enforced by the lender in the same manner that the collection of delinquent real property taxes is enforced by the county under chapter 84.64 RCW, including the provisions of RCW 84.64.040, with minor exceptions.
A biweekly update on blockchain technology applications, distributed energy resources, and other innovative technologies in the energy sector.
There is a lot of buzz around blockchain technology, distributed energy resources (“DERs”), microgrids, and other technological innovations in the energy industry. As these innovations develop, energy markets will undergo substantial changes to which consumer and industry participants alike will need to adapt and leverage. Every other week, K&L Gates’ The Energizer will highlight emerging issues or stories relating to the use of blockchain technology, DERs, and other innovations driving the energy industry forward. To subscribe to The Energizer newsletter, please click here.
IN THIS ISSUE:
- Hawaiian Electric Companies Select Plus Power to Build Grid-Scale Battery Project
- UK’s Largest Solar Farm is on the Horizon
- The IRS Issues Proposed Rules for Earned Carbon Capture Tax Credit
- MIT Study Analyzes Use of Spent EV Batteries for Utility-Scale Storage
- Vodafone and Energy Web Partner to Identify and Secure Distributed Energy Assets
To view more information on these topics in Volume 67 of The Energizer, CLICK HERE.
Author: Elizabeth C. Crouse
Treasury is having a busy week! This afternoon, the U.S. Department of Treasury released proposed regulations under Code Section 45Q. Code Section 45Q provides for a U.S. federal income tax credit of 10% or 20% for carbon oxide sequestration and disposal in secure geologic storage, used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and then disposed of in secure geologic storage, or utilized algal or bacterial disposition, chemical conversion processes, or other methods, as provided in regulations.Read More