Global Power Law & Policy

Legal and Policy Developments Affecting the Global Power Industry.

 

1
EPA Promulgates Final Standards for Cooling Water Intake Structures
2
Hawaiian Electric Company Extends “Intent to Bid” Deadline for O’ahu Energy Storage RFP
3
Australian Government releases draft legislation to implement the Emissions Reduction Fund
4
Senate Action Halted on Tax Legislation
5
FERC Announces Proposed Rule to Reduce Regulatory Burden for Generators that Own Generation Tie-Lines
6
Doing Business in India Webinar – May 21
7
President Obama Announces New Commitments to Drive Solar Development
8
Third Time’s a Charm? Administration Weighs More Guidance on Recent Changes to Renewable Electricity Credits
9
K&L Gates to Attend AWEA WINDPOWER 2014
10
EPA Survives Challenge to Cross Border Air Pollution Rule

EPA Promulgates Final Standards for Cooling Water Intake Structures

Introduction

On May 19, 2014, the Environmental Protection Agency (EPA) released a long-delayed final rulemaking regulating cooling water intake structures at existing facilities under Section 316(b) of the Clean Water Act (CWA). For more than two decades, environmental advocates have pushed EPA to issue a rule under Section 316(b) in order to protect aquatic organisms, such as fish and shellfish, that become pinned against cooling water intake structures (impingement) or are drawn into cooling water systems (entrainment). Previously, EPA issued rules governing cooling water intakes at new facilities. The latest rulemaking addresses intakes at existing facilities. If unchallenged in court, this final rule would conclude what has been more than twenty years of litigation between EPA and environmental organizations.

Section 316(b) requires that the location, design, construction, and capacity of cooling water intake structures for facilities having a National Pollutant Discharge Elimination System (NPDES) permit “reflect the best technology available for minimizing adverse environmental impact.” [1] The final rule seeks to minimize environmental harm associated with cooling water intake structures by identifying the best technology available (BTA) to reduce impingement and entrainment for certain categories of existing facilities and new units at existing facilities. These new requirements will be implemented through NPDES permits under Section 402 of the Clean Water Act. Read More

Hawaiian Electric Company Extends “Intent to Bid” Deadline for O’ahu Energy Storage RFP

As energy storage matures both technologically and commercially, several investor owned and municipal utilities have begun formal processes to procure storage. Recent examples include Southern California Edison’s request for energy storage to satisfy local capacity requirements in the Los Angeles basin, the Imperial Irrigation District’s request for qualifications with respect to 40 MW of energy storage (summary available here), Southern California Public Power Authority’s request for energy storage proposals pursuant to its rolling RFP process (summary available here and here), Long Island Power Authority’s request for proposals for up to 150 MW of energy storage, and the Kauai Island Utility Cooperative’s recent storage RFP.

Hawaiian Electric Company’s solicitation for large-scale energy storage systems is the latest large energy storage RFP and represents another significant step in the ongoing commercialization of the energy storage sector. Hawaiian Electric’s procurement deserves to be watched carefully.

The RFP seeks proposals for one or more large-scale, grid-connected energy storage systems capable of storing 60 to 200 MW for 30 minutes. Although several of the procurements noted above contemplate the use of power purchase agreements (typically structured like gas tolling agreements) to secure access to storage, Hawaiian Electric has asked for a firm lump-sum price proposal to engineer, procure and construct one or more systems to be located on the island of O’ahu. The RFP package includes the utility’s proposed form of engineering, procurement and construction services (EPC) contract.

Hawaiian Electric intends to use energy storage to continue integrating variable renewable energy generation. Renewable energy on O’ahu consists primarily of wind and solar photovoltaic (PV). The utility anticipates that energy storage will provide certain services, such as sub-second frequency response and minute-to-minute load following, that will allow more of O’ahu’s electricity to come from variable resources. The system(s) are expected to be located within Hawaiian Electric substation facilities and properties, and the utility’s goal is to place the system(s) into service in the first quarter of 2017, if not sooner.

Hawaiian Electric recently extended the deadline to submit an “Intent to Bid Form” to 10:00 am Hawaii Standard Time on May 29, 2014. The deadline for the response to the RFP itself is 10:00 am Hawaii Standard Time on July 21, 2014.

The RFP can be found here.

 

Australian Government releases draft legislation to implement the Emissions Reduction Fund

The Australian Government recently released draft legislation to implement the Emissions Reduction Fund (Fund), which is the cornerstone of the Government’s Direct Action Plan climate change policy.  The Direct Action Plan centres around the purchase of greenhouse gas emissions reductions by the Government (via the Fund).

The release of the draft Carbon Credits (Carbon Farming Initiative) Amendment Bill 2014 (Cth) (Bill) follows issuance of an Emissions Reduction Fund Green Paper late last year and a subsequent White Paper in April 2014, both regarding the design of the Fund.

The Bill will amend the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) (CFI Act) and build on the existing Carbon Farming Initiative (CFI) under that Act by providing for the purchase of greenhouse gas emission reductions credits by the Government.  The Bill also makes minor amendments to associated Commonwealth legislation.

Read More

Senate Action Halted on Tax Legislation

Senate consideration of legislation to reinstate 55 expired incentives ground to a halt on May 15. The Senate fell 7 votes short of ending a Republican filibuster. While many Republicans support the underlying package, they are opposed to efforts by Senate Majority Leader Reid to limit amendments.

The bill includes a dozen energy-related measures such as the renewable electricity production tax credit and biofuels credits.

Negotiations between key Democrats and Republicans will resume the week of May 19 in hopes of reaching an agreement to end the filibuster and allow the tax package to come up for votes. If the two sides remain at a standoff, the bill may not come up for a vote until after the November election.

 

FERC Announces Proposed Rule to Reduce Regulatory Burden for Generators that Own Generation Tie-Lines

In a Noticed of Proposed Rulemaking announced on May 16, the Federal Energy Regulatory Commission (FERC) proposed the following three reforms to reduce regulatory burdens for generators that own generation tie-lines (also known as Interconnection Customer’s Interconnection Facilities or “ICIF”) and to promote the development of generation resources, while still ensuring open access to those seeking transmission service over the ICIF:

Blanket Waiver of Certain Open Access Rules: A public utility (1) that is subject to open access transmission tariff (OATT) requirements, open access posting requirements, and FERC’s standard of conduct rules solely because it owns, controls, or operates ICIF and (2) that sells electric energy from its Generating Facility would be granted a waiver from the requirement to file an OATT and from related open access posting requirements and standard of conduct rules. Also, unlike under the current policy under which a third-party request for transmission service automatically revokes a generator’s OATT waiver, the proposed blanket waiver would not be revoked if transmission service over the ICIF is requested by a third party.

Federal Power Act (FPA) Sections 210 and 211 Apply to Third-Party Requests for Service: For a third party to obtain interconnection and transmission services on ICIF, the third-party must submit an application to FERC under Federal Power Act (FPA) sections 210 and 211, 16 U.S.C. §§ 824i-j. Sections 210 and 211 grant FERC the authority to require, respectively, the physical interconnection of a third-party’s facilities and the provision of transmission service to a third party if FERC determines that doing so is in the public interest.

Five-Year Safe Harbor Preserving Priority Transmission Rights: ICIF owners that are eligible for the proposed blanket waiver would be entitled to a rebuttable presumption that (1) they have definitive plans to use the capacity on the ICIF and (2) they should not be required to expand their facilities. The rebuttable presumption would last for a period of five years following the ICIF’s energization. However, the ICIF owner would need to make an informational filing to FERC reporting that its five-year safe harbor period had begun. The safe harbor period is intended to preserve eligible ICIF owners’ priority use, which is particularly important to generation projects that will be developed in phases.

The proposed reforms would replace FERC’s current policy of granting priority transmission rights and waivers of OATT and related open access requirements to ICIF owners on a case-by-case basis. FERC found that its current case-by-case approach has created undue risk, burden, and uncertainty for generation developers. The proposed reforms are intended to mitigate these problems while still ensuring open, non-discriminatory access to the transmission grid.

FERC’s announcement seeks comments from the industry on ways to implement and refine the proposed rule, including comments on: (1) the circumstances under which the proposed blanket waiver should not apply or might be revoked, (2) whether planned future use by an affiliate of an ICIF owner is an appropriate factor for the Commission to consider when making a priority rights determination in a Section 210 or 211 proceeding, and (3) whether the structure and length of the proposed safe harbor period is appropriate. Comments on the proposed rule will be due 60 days after the notice of the proposed rule is published in the Federal Register.

Stay tuned for more alerts from K&L Gates with more in-depth analysis of the proposed rule. If you would like to sign up to receive K&L Gates energy alerts, you can do so here.

 

Doing Business in India Webinar – May 21

Is your company planning on or already doing business in India? If so, you need to familiarize yourself with the latest business, political, and regulatory issues affecting your business and your employees when entering this promising but challenging and diverse market.  In this complimentary webinar, a panel of K&L Gates partners with vast experience working with companies who are doing business in India, will address a range of legal issues to give you a comprehensive grasp on the business operating environment in India.  The purpose of this webinar is to provide international legal and business context. The information in this webinar should not be considered legal advice on Indian law or otherwise. Like all non-Indian law firms, K&L Gates does not practice Indian law and we work with a network of counsel in India on Indian law issues as necessary in any given situation.

To learn more and to RSVP for log-in instructions, visit the event page here.

President Obama Announces New Commitments to Drive Solar Development

On Friday, President Obama announced private sector goals and commitments for solar installation, applauded those private financial institutions which are “leading the way” on solar and renewable investments, and announced a series of “executive actions” which the Administration is taking to stimulate the use of energy efficiency and renewable energy technologies.  Read the White House Fact Sheet here.

The President’s announcement came in the middle of Senate debate on the Shaheen-Portman energy efficiency bill which has been stalled for years in the US Senate.  And again this week, because of issues unrelated to energy efficiency, it appears that the bill will not advance.  The Administration has clearly decided – as they have on other energy and environment issues – to take steps which do not need Congressional action in order to advance the President’s energy agenda.  Read More

Third Time’s a Charm? Administration Weighs More Guidance on Recent Changes to Renewable Electricity Credits

The Treasury Department and the Internal Revenue Service (IRS) are considering whether to release a third round of guidance on the production tax credit (PTC) for renewable electricity under Section 45 of the Tax Code and the investment tax credit (ITC) in lieu of the PTC under Section 48. The intent of the guidance would be to further clarify the changes in the PTC/ITC enacted as part of the American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. No. 112-240). Read More

K&L Gates to Attend AWEA WINDPOWER 2014

A team of K&L Gates attorneys will attend the AWEA WINDPOWER 2014 conference and exhibition in Las Vegas from May 5 to 8. This premier industry event brings together a diverse group of professionals with interest in wind power – project developers, suppliers, technicians, power purchasers, service providers, and others – to discuss trends, to hear from innovators and specialists, and to network and collaborate with colleagues. Our attorneys look forward to contributing to the conversation at the K&L Gates exhibit booth (no. 2977). Please be sure to stop by and say hello.

Additionally, K&L Gates attorneys Sam Hines and Lindsey Greer will present on the importance of worker status in the offshore wind environment during the poster presentations on Wednesday, May 6 from 4:30pm to 6:00pm in Bayside Hall D. Please join Sam and Lindsey to discuss the various legal statuses offshore workers hold under U.S. maritime law and the potential liabilities offshore employers can face in the event of a worker injury.

We look forward to seeing you at AWEA.

To learn more about the K&L Gates attorneys attending the event, please click on the names listed below:

David Benson

David Hattery

Teresa Hill

Julius “Sam” Hines

Bill Holmes

Will Keyser

Paul Lacourciere

Andrew Young

Christian Lucky

Lindsey Greer

Ankur Tohan

EPA Survives Challenge to Cross Border Air Pollution Rule

Yesterday the U.S. Supreme Court upheld the U.S. Environmental Protection Agency’s (“EPA”) regulation of cross border air pollution.  In a 6-2 ruling,[1] the Supreme Court reversed the D.C. Circuit, holding that EPA’s cross border air pollution rule (the “Transport Rule”)[2] did not violate the Clean Air Act (“CAA”) by establishing a new federal scheme for regulating upwind emissions that drift over state lines.  The decision likely will impact those power plants in “upwind states” that contribute to cross border air pollution by imposing more stringent air emissions limits for those facilities.  However, the decision may also spur an increase in development of renewable energy and lower emission natural gas fired plants.

The Transport Rule establishes good neighbor obligations among 28 states for three primary pollutants: NOX, SO2, and ozone, and EPA has established National Ambient Air Quality Standards (“NAAQS”) for each of these pollutants.[3]  Any state whose ambient air quality exceeds the NAAQS is considered in “non-attainment.”  The CAA requires that upwind states, whose emissions cause or contribute to exceedances of NAAQS standards in downwind states, control their emissions to the extent required to avoid such contribution.  The Transport Rule is made up of two basic components: it quantifies each state’s emissions reduction levels under the good neighbor provision and imposes Federal Implementation Plans (“FIPs”) to implement those reductions at the state level.

EPA calculated the necessary emissions reductions in a two stage approach.  The first stage screens from its requirements all upwind states that contribute less than 1% of any downwind state’s nonattainment.[4]  The second stage applies a multi-factor assessment to set reductions in those upwind states on a cost-per-ton reduction basis (which relied on the costs to install pollution reduction technology) that was distributed across all power plants in the upwind states.[5]  Finally, the Transport Rule proposed to achieve cost-per-ton reductions over multiple years, beginning in 2012 and relying on a maximum budget for each pollutant that a state’s power plants may collectively emit through 2014.[6]  Since EPA found that many State Implementation Plans (“SIPs”) did not properly provide for these emissions budgets, EPA invalidated those SIPs and instead required those states to comply with new state-specific FIPs.  It did so without giving the states an opportunity to correct their SIPs based upon EPA’s objections, and (at least according to some) without giving the states guidance on how to address those objections.

The Supreme Court reviewed the D.C. Circuit Court’s conclusion that the Transport Rule exceeded EPA’s statutory authority to impose more stringent air quality requirements through the good neighbor provisions of the CAA.  First, the D.C. Circuit Court determined that the Transport Rule exceeded CAA authority because the good neighbor provision could impose emissions reductions on upwind states that could go beyond those states’ significant contribution to downwind air pollution in other states.  Second, the D.C. Circuit concluded that the Transport Rule failed to provide states with the first opportunity to implement the good neighbor reductions through their own SIPs.  Instead, EPA quantified the states’ good neighbor reductions and simultaneously set forth EPA-designed FIPs to implement those obligations at the state level without first providing the states an opportunity to correct their SIPs.

The Supreme Court overturned the D.C. Circuit Court decision, concluding that EPA reasonably interpreted the good neighbor provision and that the CAA did not required EPA to give states  a grace period to file revised SIPs.

It is still uncertain how the Supreme Court’s decision will ultimately affect the implementation of and reductions required under the Transport Rule.  Significant issues lie ahead for EPA related to regulatory impacts and the legal implications for the Transport Rule.  For example, since EPA is already several years behind the start date for the rule—January 1, 2012—the agency will likely have to issue new regulations to modify implementation dates.  Likewise, EPA may need to adjust the Transport Rule to address revisions and updates to air quality standards for ozone and particulate matter.  And finally, EPA may face further litigation that was stayed since the D.C. Circuit decision, or litigation related to technical revisions to the Transport Rule during the stay.[7]

Despite these issues, the Supreme Court decision presents two significant implications. First, by agreeing that EPA may foreclose a state’s ability to determine how emission reductions are to be achieved and allocated among sources, the decision may have changed the fundamental federal/state regulatory relationship under the CAA.  Second, the decision demonstrates the broad deference to EPA on substantive and technical issues, and reaffirms the Court’s view that when reasonable minds differ on technical issues, EPA’s interpretation will prevail as long as it is rational and supported by the record. Both points support EPA’s continuing efforts to impose greater regulation on the fossil fuel industry, which may accelerate the adoption of new pollution control technologies or the replacement of fossil fuel energy production with alternatives that do not emit, or emit less of, these criteria pollutants.

For additional information on the decision underlying the Supreme Court’s decision, see:


[1] Justice Alito did not participate.  Justices Scalia and Thomas joined in dissent.

[2] Federal Implementation Plans: Interstate Transport of Fine Particulate Matter and Ozone and Correction of SIP Approvals, 76 Fed. Reg. 48,208 (Aug. 8, 2011).

[3] For additional details on the regulated pollutants, see 76 Fed. Reg. 48,208.

[4] EME Homer City Generation LP v. EPA, 696 F.3d 7, 11 (D.C. Cir. Aug. 21, 2012).

[5] Id. at 11-12.

[6] Id. at 12.

[7] Utility Air Regulatory Group v. EPA, D.C. Cir., No. 12-1346, 9/27/12; Wisconsin Public Service Corp. v. EPA, D.C. Cir., No. 12-1163, 4/6/12.

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