Join us for a RETECH Side Event - February 4, 2010
2010 may be a cataclysmic year for the tax system. Virtually all the important tax cuts enacted in the Bush Administration expire at the end of this year. In addition, the pending health care reform legislation contains several significant revenue provisions. How will Congress deal with this fundamental shift? Further, the 1603 grant program will expire at the end of the year, except for projects for which construction began in 2009 or 2010. How will Treasury implement the standard for when construction begins, including the 5 percent safe harbor contained in the Treasury Guidance? Will Congress extend the grant program beyond 2010?
Stoel Rives LLP, a full-service U.S. law firm and recognized leader in the renewable energy industry, will host a panel discussion at RETECH 2010 with two key policymakers discussing changes coming for the tax system. Please plan to join Stoel Rives Partner Gregory F. Jenner, former Assistant Secretary of the Treasury for Tax Policy, as he moderates a discussion on these important upcoming developments. Greg will be joined by:
- Mark Prater, Chief Tax Counsel (R) of the Senate Finance Committee
- Victoria McDowell, Deputy Administrator of Treasury’s Tax and Trade Bureau
Mark has been involved in tax legislation for 20 years and Victoria has been assigned since early 2009 to head the Treasury 1603 grant program.
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When: |
Thursday, February 4, 2010 |
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Where: |
Washington D.C. Convention Center |
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Cost: |
Complimentary |
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RSVP: |
Please register by February 1, 2010. Register Here. |
As a proud sponsor of RETECH 2010, Stoel Rives will be providing complimentary copies of our “Law of ...” books at booth #811. Please stop by and visit us. Books will be available while supplies last. Click here to find our booth location.
To save $50 on an exhibit pass to RETECH 2010, enter VIP Promotional Code “ExpoPass” in the secure online form at http://www.retech2010.com/make-plans/register.
We look forward to seeing you!
SEC Issues Interpretive Guidance on Greenhouse Gases
My partner Tom Wood circulated this preliminary alert this afternoon:
"Earlier today the U.S. Securities & Exchange Commission (SEC) approved interpretive guidance intended to inform public companies how climate change must be taken into account when applying existing disclosure requirements. Specifically, the SEC's interpretative guidance highlights the following areas as examples of where climate change must be considered in crafting disclosures:
· The direct effects of existing and pending environmental regulation, legislation and international accords and treaties on the company’s business, its operations, risk factors and in Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A);
· The indirect effects of climate change legislation and regulation on a company’s business—this could include new opportunities or risks posed by legal, technological, political and scientific developments related to climate change; and
· The actual and potential effect on a company’s business and operations resulting from physical changes to the planet resulting from climate change.
"The interpretive guidance specifies that public companies must have adequate knowledge of their greenhouse gas emissions—a requirement that is consistent with recent EPA regulations requiring many (but not all) significant greenhouse gas emitters report their direct emissions starting in calendar year 2010. The SEC stated “management should ensure that it has sufficient information regarding the registrant’s greenhouse gas emissions and other operational matters to evaluate the likelihood of a material effect arising from the subject legislation or regulation.”
Unsurprisingly, the SEC said that registrants must weigh whether climate change related information is material or not. In doing so, they said that if it was a close question, the company should decide in favor of disclosure."
The complete language of the interpretive guidance has not yet been released. Corporate securities partners C. J. Voss and Ron McFall are reviewing the issue and will be issuing an Energy Law Alert on the topic. If you'd like to sign up for our Energy Law Alerts, click here.
Cuyahoga County Issues RFP for Studies on Lake Erie
On January 21, 2010, the Great Lakes Energy Development Task Force, under the authority of Cuyahoga County, issued a Request for Proposals to agencies and organizations interested in providing Avian and Bat ecological studies. The studies supplement the Task Force's Feasibility Study for an early stage commercial deployment project consisting of up to eight (8) turbines with total rated capacity at 20 MW for a Lake Erie Wind Power Project near the water intake crib of the City of Cleveland, Ohio.
Completed proposals must be submitted to the Cuyahoga County Office of Procurement and Diversity, no later than 11:00 a.m. on February 22, 2010.
Stoel Rives Clients Receive Huge Tax Credit Awards
Stoel Rives would like to congratulate REC Silicon and SolarWorld on their awards of tax credits by the IRS and DOE. These two companies, combined, received over 10 percent of all the tax credits awarded nationwide under section 48C of the tax code.
On Friday, January 8, the Department of Energy awarded to 183 companies $2.3 billion in tax credits for projects designed to expand, re-equip or establish manufacturing facilities for the production of equipment used to produce renewable and other green energy. The $2.3 billion was the full amount authorized by Congress in the stimulus bill as part of new section 48C of the tax code.
Applications for the credit far exceeded the dollar amount of credits available. Stoel Rives is proud to have been directly involved with these companies in preparing the complex applications for the credit. REC Silicon received the largest award of any company -- $154.8 million. SolarWorld received the seventh largest award -- $82.2 million. These credits will provide these companies with a dollar-for-dollar offset against their federal income tax liability.
There is considerable discussion in Congress regarding adding additional funds to the section 48C program, which will permit another round of awards. Please contact your favorite Stoel Rives attorney if you have any questions about these awards or extension of the section 48C credit.
Upcoming Webinar: Impact of State RPS's and the Prospect of a Federal RPS on What Utilities are Doing in Terms of Purchasing the Output of Wind Farms - January 27, 2010
With 3/5 of the States having Renewable Portfolio Standard in place and the prospect of a Federal RPS, many utilities are seeking to become first time purchasers of the output from wind projects. And utilities with a history of purchasing wind are seeking additional resources. In 2009, the presenters collectively worked on over 40 wind power purchase agreements for projects located throughout the United States, enabling them to present a comprehensive overview of the impact of these developments. A number of first time purchasers have been using the RFP process as a vehicle for educating themselves about wind, and often experience difficulty in translating PPA terms that are appropriate for base load resources into PPA terms that work for intermittent resources like wind. Through various PPA terms, utilities are increasingly seeking to place the risk of non-compliance with the RPS on the wind project developer. These developments can result in PPA terms that are very problematic for the financing of the project. This webinar will explore these recent developments, including issues related to output and availability guarantees, allocation of curtailment risk for long-distance transmission to load, wind integration charges, delay damages, conditions precedent, termination rights and the measure of damages.
Moderator:
Edward D. Einowski, Partner, STOEL RIVES LLP
Panelists:
Teresa Hill, Partner, STOEL RIVES LLP
William H. Holmes, Partner, STOEL RIVES LLP
Jennifer H. Martin, Partner, STOEL RIVES LLP
Marcus Wood, Partner, STOEL RIVES LLP
To register: http://infocastinc.com/index.php/conference/255
Show Me the Money: $12 million for Early Stage Solar Technologies
The Department of Energy (“DOE”) announced today that the National Renewable Energy Laboratory (“NREL”) will invest up to $12 million in total funding ($10 million from funds allocated to NREL under the American Recovery and Reinvestment Act (“ARRA”)) in four companies - three California and one North Carolina - to take early stage PV and CSP technologies to commercialization.
Each company will receive up to $3 million (and the benefit of NREL’s support and expertise) to take prototype and pre-commercial PV technologies and develop pilot/demo projects or full-scale manufacturing projects. Payment of the awarded $3 million will be made over time as each company completes specified project milestones.
DOE is investing more than $117 million in solar energy through ARRA.
Show Me the Money (and the Light): $37 Million for Solid State Lighting
The Department of Energy today announced the award of more than $37 million in American Recovery and Reinvestment Act funds to 17 projects supporting solid-state lighting core research, product development, and domestic manufacturing.
Solid-state lighting, which uses light-emitting diodes (“LEDs”) and organic light-emitting diodes (“OLEDs”) instead of incandescent bulbs, has the potential to be ten times more energy-efficient than traditional incandescent lighting.
Lighting needs account for almost one-quarter of the total electricity used in the United States today. Those needs could be reduced by as much as one-third by 2030 if cost-effective solid-state lighting is adopted on a national basis.
Link to the full story and the list of selected projects: http://apps1.eere.energy.gov/news/progress_alerts.cfm/pa_id=287
GEA's Geothermal Energy Finance Forum hits New York
On January 14, the Geothermal Energy Association will host a one-day Geothermal Energy Finance Forum in New York. Almost 30 speakers are confirmed for the Forum, including heavy hitters from investment groups and banks, geothermal energy developers, and the DOE and Treasury. Senate Majority Leader Harry Reid (D-NV) will deliver the keynote address. My colleague, John McKinsey, will speak on federal and state legal and regulatory issues associated with the development of geothermal resources. The agenda for the Forum is jam-packed with panels and presentations on cost and financial modeling for geothermal projects; government finance and incentives, including under the American Recovery and Reinvestment Act; project development and design; and risk mitigation, along with myriad case studies from the likes of US Geothermal, Ormat, Ram Power, Raser Technologies, TAS, Vulcan Power, Nevada Geothermal Power, and Enel. Mayor Bloomberg has even proclaimed January 14, 2010 as "New York City Geothermal Energy Day."
U.S. Supreme Court Rules that Third-Parties Challenging Energy Contract Rates Must Clear the Mobile-Sierra Hurdle
Today, the U.S. Supreme Court issued an important ruling clarifying how the Federal Energy Regulatory Commission (FERC) must apply the Mobile-Sierra doctrine. The Mobile-Sierra doctrine informs how FERC should evaluate whether a contract rate for energy is just and reasonable, and the doctrine provides that FERC's sole concern should be whether the contract rates being challenged adversely affect the public interest--a high hurdle. Until today, some people questioned whether the Mobile-Sierra doctrine was limited to parties to a contract, and whether non-contracting parties bringing a challenge would be held to a lower standard. The Court, however, made clear that the Mobile-Sierra doctrine should apply to any party (including FERC) challenging whether energy rates are just and reasonable, stating that a presumption that applies to contracting parties only, but not anybody else, fails to establish the contractual stability that Mobile-Sierra aimed to secure.
To read more about today's U.S. Supreme Court decision, click here.
February 9 Breakfast Seminar on Developing, Permitting and Financing Biomass Facilities
During the WORLD AG EXPO in Tulare, CA on February 9, Stoel Rives will be hosting a Breakfast Seminar on Developing, Permiting and Financing Biomass Facilities. The seminar will take place in the Sequoia Room of the Hampton Inn and Suites, 1100 N. Cherry Street, which is near the Expo Site. The Seminar will be complimentary (breakfast included), and attendees will receive a copy of The Law of Biomass - the newest and 10th book in the Stoel Rives "Law of" series.
Please join attorneys John M. Eustermann, Michael N. Mills, Rebecca B. Sandberg, Lee N. Smith and Joe R. Thompson as they address the following agenda items:
- California Environmental Regulatory Update
- Successfully Bringing a Project to Commercial Operations
- Financing Your Biomass Project
The first portion of our seminar will explore new legislation and regulations affecting initial decision-making and the permitting process for biomass facilities. The second portion will discuss those issues the project developer will need to deal with in order to successfully develop a financeable project. The final hour will be dedicated to the financing aspect of biomass projects.
Click here for more details and to register for The Resurgence in Biomass Facilities: What You Need to Know to Develop, Permit and Finance Your Project .
ARRA SGIG Grants Taxable?
Concern is mounting over whether the smart grid awards and project grants to be distributed by the Department of Energy (“DOE”) will be taxable in the hands of the recipients. Certain grants administered by federal, state, or local programs for renewable energy projects located in the US may be reportable by the recipient. The 100 smart grid award recipients, who are waiting for their share of the promised $3.4 billion from the DOE, are anxious to resolve this issue as many of them prepared their budgets (and the DOE may have made the awards) on the assumption that the awards were going to be tax-exempt.
The DOE is working closely with the awardees and the Treasury Department to reach resolution and hopes to provide guidance shortly. We’ll be following this story closely – stay tuned for developments.
Secretary Chu Announces $80M for Biofuels
DOE Secretary Chu's announcement today regarding $80 million of ARRA funding for biofuels is potentially a positive development for the long-term development of the biofuels industry. What is worrisome from a practical perspective is the division of funding. The National Alliance for Advanced Biofuels and Bioproducts, centered in St. Louis, received $44 million to develop a systems approach for the sustainable commercialization of algal biofuel and bioproducts. The National Advanced Biofuels Consortium, based here in the Pacific Northwest, received up to $34 million to develop infrastructure compatible biomass-based fuels. Meanwhile eight infrastructure projects received up to $1.6 million to support expanded fueling infrastructure for ethanol blends. While the Administration is ahead of the curve in recognizing the importance of long-term support for the development of advanced biofuels, it is overlooking the increasingly challenging environment in first generation biofuels. Simply put- and purely in my opinion- there will be no second generation of biofuels if the first generation does not again thrive. The ethanol industry has hit a blend wall that the EPA has not been willing to help them overcome in the short term. Adding $1.6 million in E-85 infrastructure is but a chip in that wall when one considers the massive costs involved in building a national infrastructure. On the biodiesel side, the current industry has not yet received an extension of its tax credit and was already facing severe challenges. The investors who supported the expansion of the first generation biofuels industry are still tracking their investments and the policy support for the industry. While government funding will further the development of the science of advanced biofuels, private sector involvement will be essential to the ultimate commercialization of these fuels. To accomplish its ultimate goals, the Administration will need to begin to address these issues in a systematic manner.
NMFS Proposes Critical Habitat Designation for Endangered Sea Turtles Along the West Coast
On January 5, 2010, the National Marine Fisheries Service ("NMFS") issued a proposed rule designating 70,600 square miles of critical habitat for endangered leatherback sea turtles (Dermochelys coriacea) along the West Coast, covering portions of Washington, Oregon, and California. Section 4 of the Endangered Species Act ("ESA") requires NMFS to designate critical habitat for threatened and endangered species on the basis of the best available scientific data, after taking into consideration economic, national security, and other impacts. The designation of critical habitat does not create a wildlife preserve, but Section 7 of the ESA requires that federal agencies ensure that federally authorized projects, such as wave or tidal energy projects, do not destroy or adversely modify critical habitat.
The leatherback sea turtle is a pelagic species with a range that spans the entire Pacific Ocean. Leatherbacks aggregate in productive coastal areas to forage on jellyfish and, for this reason, they seasonally occupy portions of the California current along the West Coast. The leatherback sea turtle was listed as "endangered" in 1970. In 1978, critical habitat was initially designated for the turtle in and around portions of the island of St. Croix in the U.S. Virgin Islands. In October, 2007, NMFS received a petition from environmental advocacy groups to designate additional critical habitat along the West Coast.
In the proposed rule, NMFS proposes to designate portions of the area petitioned by the environmental groups. The basis for the designation is evidence suggesting that leatherback sea turtles may occupy offshore areas to prey on jellyfish. Areas proposed for designation are areas thought to support jellyfish populations and areas thought to provide migration corridors for turtles to access prey. NMFS declined to designate certain areas along the West Coast on the basis that economic and national security considerations outweigh the benefits of the designation in those particular areas. The proposed rule, along with a map showing the areas proposed for designation, is available at the link above .
The proposed designation may have ramifications for offshore energy developers planning tidal, wave, or LNG projects. Under Section 7 of the ESA, FERC must ensure that any such projects occurring in areas designated as critical habitat do not destroy or adversely modify the habitat. Stoel Rives has a broad depth of experience covering all aspects of the ESA, including advising on critical habitat issues and issues involving leatherback sea turtles.
XCEL Plans New Wind Solicitation In Connection With Anson Plant
In a January 8 letter to the Minnesota Public Service Commission, Xcel Energy informed the Commission that it intends to conduct competitive negotiations with wind projects that are able to interconnect at Xcel's Angus Anson generating station in Sioux Falls.
The Angus Anson plant is a gas-fired peaking facility that has firm transmission to deliver its output. Xcel wants to make better use of this transmission by looking at ways to locate wind generating capacity nearby and connect it to the transmission system at Anson. Over the next several months, Xcel plans to accept proposals and conduct competitive negotiations for wind projects that can interconnect at the Anson site. Xcel does not believe that transmission upgrades will be needed for the proposed interconnection.
CPUC Proposed Decision on TRECs--Comments Due January 19
The California Public Utilities Commission ("CPUC") issued a proposed decision on December 23, 2009 that would, if adopted, allow California investor-owned utilities, energy service providers, and community choice aggregators to purchase renewable energy credits alone, without the associated energy (sometimes referred to as "unbundled renewable energy credits ("RECs)" or "tradable RECs"), to satisfy their obligations under California's RPS. California's largest investor-owned utilities—Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric—would be limited to meeting no more than 40% of their annual procurement targets under the RPS with tradable RECs, and a price cap of $50 would be imposed. The CPUC will revisit both the percentage cap and the cost cap and whether those caps should be revised within 24 months of the decision.
Out-of-state renewable energy projects could be adversely impacted if the proposed order were adopted. The proposed decision would define all renewable generation purchased from out-of-state facilities1 as the purchase of unbundled or tradable RECs, making any out-of-state renewable energy sale subject to the cap that bars the large investor-owned utilities from using such sales to meet more than 40% of their overall RPS obligation. Although the proposed decision states that this classification would apply only to contracts signed on or after the effective date of the decision, contracts signed prior to the effective date would be considered REC-only contracts from the effective date forward, and would be "subject to the limits and rules applying to REC-only contracts" according to the proposed decision. Furthermore, although the purchase of tradable RECs from out-of-state facilities would be permitted, the delivery requirement in the RPS legislation would still have to be met, so a comparable amount of power would have to be imported into the state, along with the RECs. The jurisdiction to determine whether and how this delivery requirement is met, however, still remains with the California Energy Commission.
Comments on the proposed decision are due on January 19, 2010, and reply comments are due January 25, 2010.
For additional information about the history and effect of the proposed decision, see our Stoel Rives alert on the topic.
Show Me The Money: $2.3 Billion for Clean-Tech Manufacturing Jobs
January 8, 2010: today President Obama announced the award of $2.3 billion in American Reinvestment and Recovery Act (“ARRA”) Advanced Energy Manufacturing Tax Credits for tens of thousands of clean energy jobs on 183 clean energy manufacturing projects across the 43 states. United States, including the domestic manufacture of wind turbine and solar panels. The tax credits will support job creation in the domestic clean tech manufacturing industry and are a step towards meeting the President's goal of doubling the US’ use of renewable energy in the next three years.
Interior Secretary Salazar Invites Parties Interested in Cape Wind Project to Resolve Impact of Determination that Nantucket Sound Is Eligible for Listing as an Historic Property
Stoel Rives partner Michael O'Connell reports:
On January 4, 2010, the Keeper of the National Register determined that Nantucket Sound is a traditional cultural property (TCP) of two Indian tribes that is eligible for listing in the National Register of Historic Places, even though the area is submerged. The Keeper made that determination in response to a request from the Mineral Management Service (MMS), which is considering a request for a lease of outercontinental shelf land for 130 wind turbines for the Cape Wind Project. MMS and the Massachusetts State Historic Preservation Officer (SHPO) disagreed on whether Nantucket Sound was eligible for listing.
Continue Reading...Colorado Division of Property Taxation Considers Proposed Tax Treatment of Transmission Lines
The Colorado Division of Property Taxation will hold an important open public meeting Thursday, January 14, 2010, to discuss the "tax treatment of transmission lines". Details of the proposed options will be posted on the Division's website under the "state assessed tab." In the notice provided by the Division, the agenda for the meeting will include addressing the following questions:
- Is the value of the transmission lines accounted for anywhere using the current valuation methodology?
- If not, how should this be accounted for?
- Pick up locally.
- Add to the value of the renewable energy facility determined by the state.
- Increase the capital cost threshold to account for the transmission line.
While the details of the proposed tax treatment have not been disclosed publicly, it is currently unclear how this will impact new and existing transmission lines, including gen-tie lines from renewable energy projects. The Division has provided a remote access opportunity to participate in the meeting. For those interested in attending in person, the meeting will be held at the Division of Property Taxation Office, 1313 Sherman Street, Room 419, Denver, Colorado 80203. It is anticipated that key parties involved in the development of renewable energy projects will be in attendance, along with representatives from the Interwest Energy Alliance.
To the degree that the proposed change in tax treatment increases the taxes borne by existing facilities--most of which have already entered into power purchase agreements--the experience underscores a topic that developers ought to consider when negotiating long term PPA's: if a tax or other charge imposed after the PPA's effective date materially increases a project's cost burden, does the developer have the right under the PPA to pass any or all of the costs onto the buyer? If not, does the developer have any right to renegotiate or terminate the PPA so as to reprice it to account for the unexpected tax burden? Or must the developer absorb the cost for its own account?
Utility pro forma PPAs rarely allow the developer to pass such "change of cost" risks through to the buyer, but the Seller should nonetheless carefully consider such risks (e.g., changes in taxes or integration charges) and its willingness to absorb all of those risks over the life of a long term PPA--it is sometimes possible to negotiate a sharing of unexpected costs that arise after the effective date of the PPA, especially if the utility offtaker is in a position to resist the imposition of such costs.
Show Me the Money: $47 Million for Efficiency in IT & Communications
Today Energy Secretary Chu announced that the Department of Energy will award $47 million for 14 nation-wide projects that will support the development of new technologies improving energy efficiency in the information technology (IT) and communications sectors – specifically, data processing, data storage, and telecommunications industries. The increase in energy consumption in these sectors is a direct corollary of the industries’ brisk expansion. Improving energy efficiency will provide significant energy and cost savings.
