Public Policy – Page 4 – Global Power Law & Policy

FERC Commissioner McNamee Will Remain on Commission After Term Ends on June 30th

Jun 18 2020

By: Jennifer B. Abbey and Sandra E. Safro

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.

UPDATED July 6, 2020: The Nation Goes the Way Montana Goes? Nationwide Permit 12 Vacatur and Injunction

Jun 17 2020

By: Ankur K. Tohan, Buck B. Endemann, and Tad J. Macfarlan

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.

Current Status

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.

Keeping “PACE” in Commercial Real Estate Improvements: A Primer on the New Washington Commercial Property Assessed Clean Energy and Resiliency (C-PACER) Program

Jun 17 2020

Authors: Rhys W. Hefta, Craig S. Trueblood, David L. Benson, Kari L. Larson

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.

Treasury Issues Carbon Capture Credit Proposed Regulations

May 28 2020

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.

Treasury Guidance Buoys Solar and Wind in 2020 and Beyond

May 27 2020

By: Elizabeth C. Crouse

This afternoon, the Department of Treasury issued eagerly anticipated guidance extending the continuous construction/efforts test safe harbor to five years for wind, solar, and other tax credit projects that began construction in 2016 and 2017.

The extension applies for purposes of the Code Section 48 investment tax credit and the Code Section 45 production tax credit, and to projects that began construction under either the significant physical work test or the 5% safe harbor. Projects that began construction in 2016 now have through December 31, 2021 to be placed in service without proving continuous construction or continuous efforts. Projects that began construction in 2017 now have through December 31, 2022 to be placed in service for the same purpose. This extension is a boon to the industry, particularly the many wind projects that have experienced disrupted schedules due to the COVID-19 crisis.

Treasury also granted a boon to the solar industry in the same guidance by providing a generally applicable safe harbor for purposes of the 3.5 month test frequently used to safe harbor supplies procured in the last quarter of a calendar year. Specifically, Notice 2020-41 provides that if a taxpayer paid for any services or property paid on or before September 16, 2019 and the services or property are “actually received” by the taxpayer by October 15, 2020, the “taxpayer will be deemed to have had a reasonable expectation” of timely delivery for purposes of the 3.5 month test. This guidance follows months of efforts by participants across the wind and solar industries to obtain assurance that project delays would not negatively impact tax credit availability. By extending these tests, Treasury has provided significant comfort to many investors and ensured the continued advancement of the power industry and the thousands of jobs it provides to Americans across the country.

CLE Presentation: COVID-19: Perspectives for the “Next New Normal” for Renewable and Utility Companies

May 27 2020

Join us on Wednesday, June 10, 2020, for a CLE presentation on “COVID-19: Perspectives for the “Next New Normal” for Renewable and Utility Companies.”

Companies are seeing unprecedented legal and business impacts due to the COVID-19 pandemic. These impacts are bringing about changes in strategy and how many companies approach their day-to-day business operations to adapt to this new business environment. This one-hour session will involve a presentation by the following K&L Gates attorneys sharing their perspectives on what to consider during the “next new normal.”

Moderator:

Michael D. Cuda, Partner, Banking & Asset Finance

Panelists:

April Boyer, Partner, Labor, Employment and Workplace Safety
Jamie Lavergne Bryan, Partner, Oil, Gas & Resources
Elias B. Hinckley, Partner, Power
John M. Sylvester, Partner, Insurance Recovery and Counseling

This presentation will include the evolving legal and business impacts of COVID-19 in connection with:

Contract Issues
Insurance Issues
Potential Work Issues
Litigation Trends

This webinar will contain a chat feature in which you can submit questions so that we may tailor this presentation to address your concerns.

To register, please click here.

FERC Sets Technical Conference to Assess COVID-19 Impacts on Energy Industry

May 21 2020

By: William Keyser, Sandra Safro, Patrick Metz and Abraham Johns

On May 20, 2020, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) announced that it will hold a technical conference to discuss the impact on the energy industry of emergency conditions arising from the COVID-19 pandemic. The conference will take place July 8-9, 2020 from 9 a.m. to 5 p.m.

Preregistration for the conference is available at: http://www.ferc.gov/whats-new/registration/07-07-20-form.asp. FERC will issue a supplemental notice that includes the conference agenda in a proceeding opened in Docket No. AD20-17-000.

The Commission plans to use the conference to assess the ongoing impacts that the COVID-19 pandemic is having on parts of the U.S. energy industry. While the Commission already enacted short-term regulatory relief actions for regulated entities, the conference will explore long-term options for safeguarding the nation’s energy markets, electric transmission system, natural gas and oil transportation, and future operation of energy infrastructure.

In addition, FERC intends for the event to serve as a public forum for the Commission and stakeholders to address the recovery of the industry from the COVID-19 pandemic. The event will afford the public an opportunity to receive high-level information about how COVID-19 may change the energy industry moving forward.

Among the topics the Commission plans to cover in panels and discussions are: (1) ongoing and future operational and planning challenges due to COVID-19; (2) operations, planning, and infrastructure development impacts anticipated due to the effect of COVID-19 on electric demand; (3) operations, planning, and infrastructure development impacts anticipated due to the effect of COVID-19 on natural gas and oil demand; and (4) anticipated issues related to access to capital, such as credit, liquidity, and return on equity.

Further information about the event will be posted on the Calendar of Events webpage for the event. K&L Gates will continue to monitor for updates from the Commission about the conference.

Join Us! Energy Storage Association Webinar: Energy Storage, Trade and China

May 13 2020

Please join K&L Gates’ Elizabeth Crouse on the Energy Storage Association’s upcoming webinar, Energy Storage, Trade and China, on Thursday, May 21 from 12:00 PM – 1:00 CDT.

This webinar will explore the key trade and national security policies that currently impact the ESS market in the U.S. and assess their potential impacts on future deployments, including:

• How might regulatory developments under the Executive Order impact storage?
• What might the future hold for tariffs?
• How do these processes play out in an election year?

For more information and to register, please click here.

Treasury to Extend Deadlines for Accessing Wind, Solar Tax Credits

May 07 2020

Author: Elizabeth Crouse

This afternoon, the Office of Legislative Affairs at the Department of Treasury, issued a letter to Charles Grassley, the Chairman of the Senate Committee on Finance, indicating that Treasury intends to issue administrative relief to the solar and wind industries regarding certain investment tax credit (“ITC”) and production tax credit (“PTC”) deadlines. Although the letter does not provide any details as to the nature of this relief, Chairman Grassley’s April 23, 2020 letter to Treasury requested that the four-year safe harbor for the continuous construction and continuous efforts test for the PTC and ITC be extended to a five-year safe harbor period.

Chairman Grassley did not request administrative relief concerning the impact of COVID-19 related measures taken by manufacturers and shipping companies on a customer’s “reasonable expectation” that materials purchased in 2019 would be delivered within 3.5 months after payment. This latter provision is important for purposes for establishing beginning of construction of solar projects in 2019.

Trump Administration To Consider Whether Imports Pose a Threat to the U.S. Energy Infrastructure

May 06 2020

Authors: Stacy J. Ettinger, Steven F. Hill, David L. Benson, William M. Keyser

On May 4, 2020, Commerce Secretary Wilbur Ross announced an investigation into whether imports of certain power distribution transformers and parts threaten to impair U.S. national security. A few days earlier, on May 1, 2020, President Trump issued an Executive Order declaring a national emergency over potential foreign threats to the security of the U.S. bulk power system. Both actions, which are in response to perceived foreign threats to the U.S. electrical power grid, will likely result in the imposition of significant restrictions on the importation of covered equipment. As discussed below, each action will proceed along separate paths.

Commerce Section 232 National Security Investigation

On May 4, 2020, Commerce Secretary Wilbur Ross announced that the agency intends to initiate an investigation under Section 232 of the Trade Expansion Act of 1962[1] into whether imports of certain power distribution transformers and parts threaten to impair U.S. national security. Secretary Ross indicated the investigation will focus on “laminations for stacked cores for incorporation into transformers, stacked and wound cores for incorporation into transformers, electrical transformers, and transformer regulators.”

Once initiated, the investigation must be completed within 270 days. Commerce will then provide its report and recommendations to the President, at which point the President has 90 days to determine the nature and duration of action to “adjust” imports.

The law gives the President complete discretion (“in the judgment of the President”) to choose the nature or duration of any action to adjust imports “so that such imports will not threaten to impair the national security.” Previous Section 232 actions included imposition of import tariffs, fees, and quotas, as well as complete embargo of subject imports. For example, in March 2018 President Trump imposed tariffs on steel and aluminum imports as a result of similar Section 232 investigations launched in April 2017. The President also has the option of negotiating agreements with trading partners to limit subject imports, the option embraced by President Trump in the context of the Section 232 investigation launched in May 2018 with respect to imports of automobiles.

Executive Order to Secure U.S. Bulk-Power System from Foreign Adversary Threats

On May 1, 2020, President Trump issued an Executive Order[2] declaring a national emergency over potential foreign threats to the U.S. bulk-power system from foreign adversaries that may seek to commit malicious acts against the United States and its population including malicious cyber activities. The Order empowers the U.S. government to block imports of certain equipment that could endanger the security of U.S. power plants.

As a practical matter, the new Order does not ban anything, but rather instructs the Department of Energy to issue regulations within 150 days. These regulations are expected to set forth procedures whereby specifically identified bulk power equipment may be prohibited from importation, acquisition, transfer, or installation. (This process will likely be similar to that laid out in Commerce Department regulations implementing a 2019 Executive Order declaring a national emergency with respect to the information and communications technology and services supply chain concerns.[3] Please see our prior alert for an explanation of those Commerce regulations.[4])

The May 1st Order provides authorization to target any acquisition, importation, transfer, or installation (transaction) of to-be-identified bulk-power system electric equipment designed, developed, manufactured, or supplied by persons owned/controlled by/subject to the jurisdiction or direction of a foreign adversary, where the transaction—

poses an undue risk of sabotage to or subversion of the design, integrity, manufacturing, production, distribution, installation, operation, or maintenance of the bulk-power system in the United States;

poses an undue risk of catastrophic effects on the security or resiliency of United States critical infrastructure or the economy of the United States; or

otherwise poses an unacceptable risk to the national security of the United States or the security and safety of United States persons.

The Order provides a somewhat generic definition of the term “foreign adversary” as “any foreign government or foreign non-government person engaged in a long-term pattern or serious instances of conduct significantly adverse to the national security of the United States or its allies or the security and safety of United States persons.” The Commerce regulations (referenced above) include this same definition which gives the agency discretion to identify foreign adversaries as needed.

Implications

Trump Administration actions in response to perceived foreign threats to the U.S. electrical power grid could include sweeping import restrictions with a significant impact on both the renewable and conventional power industries. Until the Department of Energy issues regulations to implement the Executive Order, the order will not directly impact any power plant project or transaction.

[1] 19 U.S.C. 1862 (2018); https://www.govinfo.gov/content/pkg/USCODE-2018-title19/html/USCODE-2018-title19-chap7-subchapII-partIV-sec1862.htm.

[2] https://www.federalregister.gov/documents/2020/05/04/2020-09695/securing-the-united-states-bulk-power-system.

[3] https://www.federalregister.gov/documents/2019/05/17/2019-10538/securing-the-information-and-communications-technology-and-services-supply-chain.

[4] http://www.klgates.com/commerce-proposes-process-to-evaluate-transactions-involving-information-and-communications-technology-and-services-for-national-security-concerns-12-03-2019/

Catagory:Public Policy