On 1 June 2023, the US Department of the Treasury (Treasury) and Internal Revenue Service (IRS) issued a notice of proposed rulemaking (NOPR) regarding the Low-Income Communities Bonus Credit Program (Program) established under Section 48(e) of the Internal Revenue Code (Code), pursuant to the Inflation Reduction Act of 2022 (IRA).1 The Program provides for increases in the amount of energy investment credits available under Code Section 48(a) (Section 48(e) Increase) to certain applicants by allocating environmental justice solar and wind capacity limitation (Capacity Limitation) to qualified facilities.Read More
On 22 May 2023, the Federal Energy Regulatory Commission (FERC) issued two orders approving stipulation and consent agreements that resolve enforcement investigations by FERC’s Office of Enforcement (FERC Enforcement) of two demand response providers, Leapfrog Power, Inc. (Leapfrog) and OhmConnect, Inc. (OhmConnect), regarding their participation in the California Independent System Operator (CAISO) market.1 FERC Enforcement’s focus in both cases concerned whether the companies violated a provision of the CAISO tariff requiring market participants to have a reasonable expectation that they could fulfill the bids they submitted.Read More
A Supplement to The H2 Handbook, United States
Risk in the hydrogen industry spans multiple areas, from feedstock and power supply to offtake and transportation. Understanding the regulatory, tax, and practical considerations of hydrogen projects, particularly green hydrogen, is essential for formulating an investment strategy for renewable hydrogen.Read More
Hydrogen production technology, according to the joint EPO-IEA report summarizing patent trends in the hydrogen economy (summarized here), accounts for the largest percentage of patenting activity since 2011 among the three primary stages of the hydrogen value chain (i.e., (i) production, (ii) storage, distribution, and transformation, and (iii) end-use industrial applications). Trends show a shift in hydrogen production from carbon-intensive methods to technologies that do not rely on fossil fuels. The bulk of recent increased patent activity is directed to electrolysis development, while patent activity related to production from biomass and waste has decreased.Read More
The European Patent Office (EPO) and the International Energy Agency (IEA) recently published a joint report summarizing innovation and patent trends within the hydrogen economy.1 The report is based on global patent activity since 20012 and is intended to help governments and businesses understand which parts of the hydrogen value chain appear to be making progress and which parts may be lagging behind.3 The report dives deep into specific technologies, lists the most active applicants in select technologies, and attempts to identify the impact of different governmental programs in specific sectors, with a goal of trying to help focus future innovation efforts.Read More
In August Congress passed the Inflation Reduction Act, a landmark climate and clean energy bill. Six months later, we’re asking: where are we now?Read More
Originally published in the Oil, Gas & Energy Resources Law Section Report – Volume 47, Number 1 / January 2023.
Reactive power provides synchronous and non-synchronous generators, as well as other forms of non-generation resources capable of providing reactive power, with a potential additional revenue stream. The provision of voltage support to the grid is an ancillary service, compensated in various ways in the various wholesale electricity markets. Renewable developers should familiarize themselves with the opportunities provided by reactive power compensation, even as some of the compensation models may be shifting.Read More
U.S. Energy, Infrastructure, and Resources Alert
The US Treasury Department released a preliminary draft of Notice 2022-61 (the Notice) on 29 November 2022 and the final on 30 November 2022. Taxpayers now have 59 days to begin construction on qualified projects without causing those projects to be subject to the new prevailing wage and apprenticeship requirements. The U.S. Department of Labor also released companion FAQs on the prevailing wage and apprenticeship rules 29 November 2022. The Notice generally applies to credits under Code Sections 30C (alternative fuel infrastructure), 45Y (post-2024 electricity PTC), 48E (post-2024 electricity ITC), 45V (hydrogen PTC), 45 (current electricity PTC), 48 (current electricity ITC), 45Q (carbon capture), 45L (energy efficient homes), 45U (zero-emission nuclear power), 48C (advanced energy manufacturing facilities), and 179D (energy efficient commercial buildings), but the beginning of construction rules apply more narrowly.
On August 31, 2022—the last day of the 2022 legislative session—California legislators passed a package of climate bills aimed at reducing statewide emissions, stimulating the carbon capture industry, and implementing buffers between communities and oil and gas developments. The bills include $54 billion in climate-related spending and come on the heels of other state and federal efforts to reduce carbon emissions across many sectors of the economy.
The package contains the following bills:
- AB 1279, which codifies California’s existing goal of carbon neutrality by 2045.
- AB 1757, which requires the state Natural Resources Agency to establish targets for natural carbon sequestration and nature-based climate solutions.
- SB 846, which authorizes the Diablo Canyon nuclear power plant to continue operations until December 31, 2030, and provides Pacific Gas & Electric Company (“PG&E,” the plant’s operator) with a $1.4 billion loan to help facilitate those operations. While Diablo Canyon was originally going to be retired by 2025, many saw Diablo Canyon’s 2,256 MW as critical for providing carbon-free power during the afternoon and evening ramp.
- SB 905, which directs the California Air Resources Board (“CARB”) to establish a program to evaluate the efficacy, safety, and viability of carbon capture, utilization, or storage (“CCUS”) and carbon removal technologies. The bill also requires CARB to adopt various regulations governing CCUS and carbon removal projects, including a unified permit application for such projects and measures to minimize leakage from carbon storage reservoirs.
- SB 1020, which sets interim targets regarding retail sales of electricity. Current law requires 100 percent of all energy sales to California end-use customers to be supplied by eligible renewable energy sources or zero-carbon resources by 2045. SB 1020 sets interim targets of 90 percent by 2035 and 95 percent by 2040. SB 1020 also requires state agencies to source 100 percent of their energy from eligible renewable or zero-carbon resources by 2035—ten years earlier than the current target.
- SB 1137, which establishes 3,200-foot buffer zones between oil and gas facilities or wells with a wellhead and facilities that qualify as “sensitive receptors,” including private homes, schools, community centers, nursing homes, hospitals, and prisons.
Legislators failed to pass AB 2133, which would have made stricter California’s emissions reduction goals (raising from 40 percent to 55 percent the reduction below the state’s 1990 emissions levels that California would have to meet by 2030).
Each bill now goes to Governor Gavin Newsom to sign by September 30, 2022, which he is expected to do after publicly advocating for them earlier in August. The California legislature’s actions come several days after CARB announced a new rule that would require by 2035 all new cars, trucks, and SUVs sold in the state to be greenhouse gas emission-free. These state-level efforts complement recent federal efforts to catalyze and develop a low-emissions energy economy, notably the Infrastructure Investment and Jobs Act of 2021 (“IIJA,” or Bipartisan Infrastructure Law, which included $47.2 billion for improving climate resilience) and the Inflation Reduction Act of 2022 (“IRA,” which included $369 billion in climate-related spending, tax credits, and incentives). These initiatives represent a concerted effort on both the federal and state level to rapidly shift the economy towards low-emissions energy sources, and consequently provide ample opportunities for new investment opportunities, financing structures, and stakeholders.
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On 27 July, Senators Manchin and Schumer announced a deal on the successor to the Build Back Better Act, which is expected to pass in the Senate on Saturday (6 August 2022) and the House the following Friday. This new legislation, called the Inflation Reduction Act of 2022, includes US$370 billion in programs and tax credits to boost renewable energy production in the United States.
That said, page 644 of the draft includes language that ties federal solar, wind and offshore wind development to federal lease sales for oil and gas.
The section of the bill titled “Ensuring Energy Security” prohibits the Bureau of Land Management (BLM) from issuing rights-of-way (ROW) for wind or solar development on federal land unless an onshore oil and gas lease sale has occurred within 120 days before the wind or solar lease issuance. In addition, these wind and solar ROWs would not be allowed unless, in the previous year, BLM completed onshore oil and gas lease sales covering 2,000,000 acres or 50% of the acreage in which interested parties have expressed interest, whichever is lower. (Note: Wind and solar projects that impact federal land are authorized by ROWs.)
Offshore wind (OSW) is similarly impacted by this provision, as it prohibits the Bureau of Ocean Energy Management (BOEM) from issuing an OSW lease unless an oil and gas offshore lease sale of at least 60 million acres is held during the year before the OSW lease issuance.
This section of the agreement is intended to force the Biden Administration to restart the regularly scheduled oil and gas lease sales that it has been cancelling since 2021, while at the same time allowing the Biden Administration to conduct fewer annual oil and gas lease sales than currently required.
The Mineral Leasing Act requires four onshore oil and gas leases per year; the language in this bill requires three onshore oil and gas leases per year, as a prerequisite to solar and wind development on federal land. BOEM offshore oil and gas five-year leasing programs require two offshore oil and gas lease sales in most years; this bill requires one sale per year, in order to allow solar and wind development on federal land.
Furthermore, the acreage requirements for oil and gas sales outlined in the bill are in line with previous sales. And for the onshore oil and gas lease sales, just in case BLM falls shore of the 2,000,000 acre requirement, they can sell leases for 50% of the acreage that parties are interested in.
This Inflation Reduction Act of 2022 is a compromise forged by Senate Democrats with the slimmest of majorities. The Ensuring Energy Security section is Energy and Natural Resources Committee Chair Joe Manchin’s way of requiring an all of the above energy policy for the country.