Category: Smart grid

1
Keeping “PACE” in Commercial Real Estate Improvements: A Primer on the New Washington Commercial Property Assessed Clean Energy and Resiliency (C-PACER) Program
2
CLE Presentation: COVID-19: Perspectives for the “Next New Normal” for Renewable and Utility Companies
3
FERC Sets Technical Conference to Assess COVID-19 Impacts on Energy Industry
4
Join Us! Energy Storage Association Webinar: Energy Storage, Trade and China
5
Treasury to Extend Deadlines for Accessing Wind, Solar Tax Credits
6
Trump Administration To Consider Whether Imports Pose a Threat to the U.S. Energy Infrastructure
7
RENEWABLE ENERGY BUYERS’ SUMMIT
8
California Energy Storage Update – What’s In the Latest Procurement Plans?
9
Event: Blockchain in Energy Forum 2018
10
ITC Commissioners Recommend Tariffs and Quotas on Imports of Solar Cells and Modules; President May Announce Final Remedy Decision before End of 2017

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

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.

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

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: 

Panelists:

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

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

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

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

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/

RENEWABLE ENERGY BUYERS’ SUMMIT

January 9-11, 2019

K&L Gates is proud to sponsor the 2019 Infocast Renewable Energy Buyers’ Summit (REBA). REBA is an invitation-only event where renewable energy buyers gather to discuss renewable energy procurement best practices with their fellow corporate buyers, as well as get valuable insights from leading renewable energy experts.

Teresa Hill will be moderating a panel on Latest Trends in PPA Terms and Structuring, and Bill Holmes will be moderating two panels, Assessing the Potential of Green Tariffs as a Renewable Sourcing Option, where attendees will assess the potential of green tariffs to provide a viable sourcing solution for renewable buyers, and Distributed Energy Solutions to Meet Corporate Goals, which will focus on on-site solar and energy storage.

Please let us know if you will be in attendance!

California Energy Storage Update – What’s In the Latest Procurement Plans?

By Buck B. Endemann and  Kristen A. Berry

Just as Prometheus hid fire in a fennel stalk to gift it to the unaware ancients, the pioneers of energy storage technology seek to harness and store energy in increasingly novel ways. Transforming captured energy into storable and consumable power stands at the forefront of this century’s revolution in green energy technology. In 2017, the United States deployed 431 MWh of energy storage capability, largely spurred by state-specific energy storage mandates.[1] California’s state legislature has continued to lead the nation and spread Prometheus’s “secret spring of fire.”

While the concept of storing energy is centuries-old, new battery technologies promise to mitigate California’s infamous duck curve and provide the low carbon, flexible ramping resources necessary to accommodate the state’s increasing penetration of solar power. The Union of Concerned Scientists estimates the United States’ total current storage capacity at 23 gigawatts (GW), which approximates the capacity of 28 coal plants.[2] Ninety-six percent of this capacity, however, derives from pumped hydroelectric storage, most of which was built in the 1960s and 1970s and is increasingly vulnerable to drought and other environmental risks. More recently, energy storage developers have focused their efforts on battery technologies, with lithium-ion batteries in particular making great strides in terms of duration and cost-effectiveness. Market watchers have projected that by 2020 the price of battery storage could decline to $200 kWh, compared to today’s market price of approximately $340/kWh.[3]

As detailed in the K&L Gates Energy Storage Handbook (Version 2.0), California’s two landmark energy storage bills require California’s Investor-Owned Utilities (IOUs) to procure and install nearly 2 GW of storage by 2024.[4]  Under AB 2514, the California Public Utility Commission (CPUC) required California’s IOUs to procure by 2020 1,325 MW of storage capacity split among the transmission, distribution, and customer domains.  In AB 2868, the legislature set an additional procurement target of 500 MW for distributed-connected energy storage systems, with individual 166 MW goals established for Southern California Edison (SCE), Pacific Gas & Electric (PG&E), and San Diego Gas & Electric (SD&E). Under both laws, California’s IOUs must submit periodic procurement plans to show progress toward each law’s targets.  In February and March 2018, SCE, PG&E, and SDG&E submitted their 2018 energy storage procurement plans, which lay out each IOU’s strategy to meet its energy storage goals in its respective service territory.

SCE proposes to procure a total of 60 MW of energy storage by 2018 in two separate procurements of 20 MW and 40 MW.  The 20 MW of procurement would respond to an additional legislative directive, SB 801, under which SCE is required to deploy energy storage in response to the natural gas shortages caused by the Aliso Canyon gas storage facility’s well failure.  For the remaining 40 MW, SCE plans to launch programs and investments to solicit utility-owned storage, as mandated under AB 2868. SCE’s procurement plan also seeks CPUC approval to allocate $9.8 million to install energy storage at low-income, multi-family dwellings.

PG&E’s procurement plan focuses on the 166 MW of energy storage under AB 2514 that it is required to procure in the 2018-2019 procurement period.  To meet that target, PG&E proposes an energy storage request-for-offers framework. To achieve its AB 2868 target, PG&E outlined its four categories of distribution-connected storage investments: (1) researching the role of distributed energy storage in wildfire safety, particularly within the context of the North Bay Wildfire rebuilding efforts, (2) launching a behind-the-meter storage program for up to 5 MW of thermal storage, (3) identifying and seeking immediate CPUC approval (via a Tier 3 advice letter) for storage investments up to 166 MW, and (4) requesting authorization for additional investments beyond the categories identified in the 2018 application.

SDG&E’s filing proposes seven utility-owned micro-grid projects, all of which would exist at the distribution circuit level. These projects would provide services to entities that contribute to public safety, like police stations and firehouses, by providing storage capabilities separate from the main grid.  SDG&E argues that these distributed storage systems will provide a wide-range of benefits, including grid resiliency, wholesale market revenues, and reduced dependency on non-renewable energy sources by minimizing the need for back-up generators.  SDG&E also plans to contribute $2 million toward a pilot energy storage incentive program for non-profit facilities, such as nursing homes.

Each of these utilities will roll out its initiatives over the remainder of 2018 and beyond.  K&L Gates will continue to monitor energy storage developments and provide updates.

[1] GTM Research / ESA, U.S. Energy Storage Monitor, https://www.greentechmedia.com/research/subscription/u-s-energy-storage-monitor#gs.KZIlnzQ (2017).

[2] Union of Concerned Scientists, How Energy Storage Works, https://www.ucsusa.org/clean-energy/how-energy-storage-works#.WtAsTq2otD8 (2013).

[3] McKinsey & Company, The New Economics of Energy Storage, https://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/the-new-economics-of-energy-storage (August 2016). Energy Storage Report, Study: Flow Batteries Beat Lithium Ion, http://energystoragereport.info/study-flow-batteries-beat-lithium-ion/#sthash.c07jCAVv.gXdjY17t.dpbs (July 2017).

[4] K&L Gates, Energy Storage Handbook, http://www.klgates.com/epubs/Energy-Storage-Handbook-Vol2/ (April 2018).

Event: Blockchain in Energy Forum 2018

We invite you to join us for GTM Squared’s Blockchain in Energy Forum on March 7, 2018 live in New York City and available to stream online. Washington, D.C. associate and co-author of The Blockchain Energizer, Benjamin Tejblum, will be presenting on the implementation of blockchain and how to best navigate regulations and new business models. Additional topics to be covered will include a discussion on distributed ledger technologies, re-envisioning the future, enabling a transactive grid, and optimizing operations and identifying new opportunities.

Please note you must be a member of GTM Squared to participate.

ITC Commissioners Recommend Tariffs and Quotas on Imports of Solar Cells and Modules; President May Announce Final Remedy Decision before End of 2017

By: Stacy J. Ettinger, Elias B. Hinckley, and James R. Wrathall

As we previously reported, on September 22, 2017, the U.S. International Trade Commission (“ITC”) found that increased imports of crystalline silicon photovoltaic (“CSPV”) cells and modules have seriously injured (economically harmed) U.S. solar manufacturers. The four ITC Commissioners have now announced their separate recommendations for how to alleviate or “remedy” that economic injury. Remedies, such as tariffs or quotas, normally can be imposed for a maximum of four years.

The President will have the final say on whether to impose a remedy, and if so, the form, amount, and duration of the remedy. There is speculation in Washington that the President’s remedy decision could be announced in December.

The stakes are high. Industry experts believe that tariffs at the levels originally requested by Suniva could massively impede the economic health and growth of U.S. downstream users and consuming industries, more than doubling the costs of some solar projects and putting tens of thousands of jobs at risk. Industry experts believe that imposition of tariffs at the levels recommended by the Commissioners could potentially have less of a draconian impact. Public comments on remedy issues for the President’s consideration may be submitted before November 20, 2017.

As described below, the Commissioners’ recommendations range from 10-35 percent tariffs on cell and module imports to defined quotas on imports of CSPV products. As a result of the ITC’s earlier injury findings, imports from free trade agreement (“FTA”) countries Mexico and Korea would be subject to imposition of remedies while imports from other FTA countries, including Canada, would not.

Chair Rhonda Schmidtlein recommends an in-quota tariff rate of 10 percent and an in-quota volume level of 0.5 gigawatts for imports of cells. Imports of cells that that exceed the in-quota 0.5 gigawatt volume level would be subject to a 30 percent tariff. Commissioner Schmidtlein also recommends a 35 percent tariffs on CSPV modules, to be reduced in each subsequent year.

Vice Chair David Johanson and Commissioner Irving Williamson recommend a 30 percent tariff on CSPV cell imports in excess of 1 gigawatt. In each subsequent year, the tariff rate would decrease and the in-quota amount would increase. For imports of CSPV modules, Commissioners Johanson and Williamson recommend a 30 percent tariff, to be reduced in each subsequent year.

Commissioner Meredith Broadbent recommends a quantitative restriction (quota) on imports of CSPV products into the United States, including cells and modules. The first year import quota would be set at 8.9 gigawatts, to be increased by 1.4 gigawatts in each subsequent year.

Commissioner Broadbent also recommends the President administer these quantitative restrictions through the sale of import licenses at public auction at a minimum price of one cent per watt. The revenue generated by the sale of import licenses would be used to assist domestic CSPV product manufacturers, including for purchase of production equipment, hiring of production workers, and R&D.

The ITC will send its final report to the President, including the Commissioners’ remedy recommendations, by November 13, 2017. The President has up to 60 days – and complete discretion – to determine the form, amount, and duration of the remedy.

The Commissioners’ remedy recommendations, if adopted by the President, would likely result in less impact on final module pricing than Suniva had originally requested. For example, the initial pricing impact of a 30 percent tariff would likely be in the range of 10 to 15 cents per watt on CSPV modules. This amount would likely decline as the price of modules drops and the tariff rate is reduced over time. Additionally, some CSPV manufacturing might shift to free trade agreement countries not included in the injury finding, which could further pull prices lower over time.

Public comments on remedy issues for the President’s consideration are due to the Office of the United States Trade Representative (“USTR”) on November 20, 2017. Rebuttal comments are due November 29, 2017. USTR will hold a public hearing on December 6, 2017.

For more information on the solar proceeding, including information on filing comments on remedy issues, contact Stacy Ettinger, Elias Hinckley, or Jim Wrathall of K&L Gates.

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