Discussion on Kerry Lieberman and EPA with William Brent
Here is a Q&A I did with William Brent, the head of Weber Shandwick’s cleantech practice and blogger at www.mrcleantech.com:
WB: I asked my friend Graham Noyes of law firm Stoel Rives who focuses his practice on bioenergy projects, federal energy incentives and carbon monetization for his thoughts on the Kerry Lieberman bill.
Q (WB): What was your main takeaway from the bill?
A (GN): Some context first. There’s a massive potential hammer out there on GHG emitters in terms of the risk of regulation under the Clean Air Act (CAA) by the EPA, which has already issued an endangerment finding that found GHGs to be a danger to public health and welfare, thereby making the EPA obligated to regulate GHG's under the CAA. So the wheels are turning forward at the EPA to regulate GHG. That’s what the EPA will do if nothing else happens. So it’s really surprising that Kerry Lieberman imposes what I think to be much stricter limitations on the EPA than the status quo.
In that sense the bill is very favorable to those industries that have the most to lose from GHG regulation, because it essentially weakens the regulatory landscape for GHG intensive industry when compared to what the EPA is likely to do. That’s why we have the strong industry support lined up for the bill. What’s odd is that we have universal Republication opposition (from a party known for its pro-business stance), and near universal Democratic support (from a party known to support more environmental protections). That is a fundamental disconnect.
The 800 lb gorilla in the room is the EPA's ability to utilize the CAA if the Kerry-Lieberman bill stalls. That’s a really interesting regulatory and political landscape for this thing to play out.
Q: Can you be more specific on how Kerry Lieberman is easier on emitters?
A: We don’t know what the EPA will do precisely in order to get its targets in the endangerment finding. Emissions levels, cost implications for regulated industries – we don’t know. But it’s easy to imagine a scenario in which the EPA ratchets down harder and harder on these emissions to get the problem under control, specifically the PPM concentration of CO2 in the atmosphere.. By contrast, Kerry Lieberman has a slow front-end phase-in (with only some industries included in the first years), price collars and very substantial offset programs to lower the economic impact, none of which the EPA would necessarily do. Most people expect the EPA would be more onerous than Kerry Lieberman.
Q: Is legislation or regulation better at the end of the day?
A: The Clean Air Act was not designed for GHGs, but for what we usually think of as pollutants- emissions that are directly unhealthy. CO2 is not something people worry about breathing, it’s the indirect risk of global warming caused by the escalating CO2 levels that triggerred the finding. CO2 is also more ubiquitous than other pollutants hence the tailoring rule actually reduces scope of CAA enforcement.
The EPA would regulate by mandate, not by consensus. If we can’t get legislation passed and the EPA begins enforcement, there will be a lot of criticism about over-reaching and strangling industry. EPA would take a lot of heat for this.
Q: Some argue that EPA will take much longer to regulate than legislation.
A: I don’t necessarily think so. This legislation requires extensive rule-making that will take a long time to happen, consider the RFS2 delay. And the EPA won’t build in phase-in limits like Kerry Lieberman. If EPA moves ahead on its present course, I think it would have a faster impact on emissions than the bill.
Ultimately, I think this landscape will spur a deal with a surprising alliance.
What are the top three ramifications on business from this bill?
The bill would establish a long-term value to CO2e reductions. This will benefit all renewable energy projects and support US offset projects in methane capture, agriculture and forestry that make good GHG sense.
Release of the "Western Wind and Solar Integration Study"
The National Renewable Energy Laboratory ("NREL") recently announced the release of the "Western Wind and Solar Integration Study" (the "WWSIS"), which investigated the operational impact of up to 35% energy penetration of wind, photovoltaic, and concentrating solar power on the power system operated by the WestConnect group of utilities in Arizona, Colorado, Nevada, New Mexico and Wyoming. The WestConnect group includes the following: Arizona Public Service, El Paso Electric Co., NV Energy, Public Service of New Mexico, Salt River Project, Tri-State Generation and Transmission Cooperative, Tucson Electric Power, Western Area Power Administration, and Xcel Energy.
The WWSIS was prepared by GE Energy and conducted over two and a half years by a team or researchers in wind power, solar power, and utility operations. The WWSIS was designed to answer questions that utilities, Public Utility Commissions, developers, and regional planning organizations had about renewable energy use in the West, such as:
- What is the operating impact of up to 35% renewable energy penetration and how can this be accommodated?
- How does geographic diversity help to mitigate variability?
- How do local resources compare to remote, higher quality resources delivered by long distance transmission?
- Can balancing area cooperation mitigate variability?
- How should reserve requirements be modified to account for the variability in wind and solar?
- What is the benefit of integrating wind and solar forecasting into grid operations?
- How can hydro generation help with integration of renewables?
Continue Reading...
DOE: up to $11 Million for Biofuels Technology Development
The DOE announced today that it will provide up to $11 million over three years for improving the conversion via pyrolysis of non-food biomass to biofuels, that can use the existing fueling infrastructure. (Pyrolosis is the process that decomposes biomass using heat without oxygen to produce bio-oil.)
Successful applications for projects will (among other things):
- Address how to make corrosive bio-oils compatible with the current infrastructure
- Catalytically de-oxygenate the molecular fragments in bio-oils
- Demonstrate the ability to produce a liquid transportation hydrocarbon fuel that can be blended at up to 30 percent by weight with petroleum fuels, or produce an upgraded bio-oil compatible with existing petroleum refining unit operations
- Include an analysis of greenhouse gas reductions using the applicant’s technology
DOE anticipates selecting three to four projects under this announcement and will require a minimum of 20% cost share from applicants. Eligible applicants include universities, national laboratories, or companies.
The deadline for the applications is July 9, 2010. Go to Grants.gov. for a copy of the funding opportunity and application.
Competition over Wind Turbine Technology Heats Up
The wind energy businesses at General Electric and Mitsubishi have come to blows over their competing wind turbine technology. At the center of the dispute are the companies’ patent portfolios. The New York Times reports that Mitsubishi opened up the battle on two new fronts on May 20, with an antitrust complaint filed in a U.S. District Court in Arkansas and a patent infringement complaint filed in a U.S. District Court in Florida. (Mitsubishi has put up a page on its web site devoted to the dispute, with media coverage and copies of its complaints.)
That two competing wind turbine manufacturers would develop a dispute over the scope of their patents is not terribly surprising. The technology involved requires substantial capital investments that are worth defending. What’s most interesting is that Mitsubishi has filed antitrust claims arguing that General Electric monopolized the wind turbines market through “baseless claims of patent infringement” – in other words, “sham litigation.”
The Supreme Court has recognized that filing lawsuits (including patent infringement suits) is a right protected by the First Amendment. One can only prevail on a sham litigation theory challenging a given suit by proving that the underlying claims were “objectively baseless.” In the patent context this typically means that a party must prove that the underlying patent was fraudulently obtained, or clearly did not cover the technology found in the “infringing” product. A Federal Trade Commission report explains that a sham litigation claim also requires proof that a defendant deliberately wielded baseless claims as an “anticompetitive weapon.”
Mitsubishi argues that General Electric filed baseless patent infringement claims that prevented Mitsubishi from selling its variable speed wind turbines for almost two years. At the same time, Mitsubishi’s counterattack includes a separate lawsuit arguing that General Electric infringes Mitsubishi patents. Mitsubishi’s theory of how General Electric monopolized the market is that General Electric used its patent infringement suits to scare developers away from Mitsubishi’s allegedly infringing wind turbines. The resulting lost sales, claimed by Mitsubishi, are in the billions. Then again, if General Electric’s patent claims were objectively reasonable (they don’t have to be ultimately successful), General Electric was within its rights to defend its patents.
In an industry requiring major capital for research and development, these types of disputes will not be uncommon. And where there are few competitors, it is easy to challenge an aggressive competitor as a “monopolist.” (Mitsubishi and General Electric share the large scale wind turbine market with only three other major competitors, Gamesa, Siemens, and Vestas.) If Mitsubishi can prove that General Electric’s patent infringement suits really did lack merit, expect Mitsubishi to hold out for a generous cash settlement. If Mitsubishi’s theory is not as strong as its press releases suggest, watch for a different type of settlement, perhaps a cross licensing agreement of Mitsubishi and General Electric patents – a deal which would allow the companies to compete head to head, while maintaining the right to sue other challengers using technology that might infringe the cross licensed patents.
Mitsubishi Alleges that General Electric, Co. Is Engaging in Anti-Competitive Behavior in the Variable Speed Wind Turbine Market
From our colleagues Beverly Pearman and Jeremy Sacks:
Mitsubishi Heavy Industries, Ltd. and Mitsubishi Power Systems Americas, Inc. v. General Electric Company
On May 20, 2010, Mitsubishi Heavy Industries, Ltd. (“MHI”) and Mitsubishi Power Systems Americas, Inc. (“MPSA”) (collectively “Mitsubishi”) filed suit in the U.S. District Court for the Western District of Arkansas contending that General Electric Company (“GE”) is engaged in a scheme to monopolize the sale of variable speed wind turbines in the United States in violation of state and federal statutes. They seek a compensatory damages award in excess of $100 million, an award of treble damages, punitive damages, and a permanent injunction prohibiting further litigation by GE for infringement of specified patents that GE claims to own. Mitsubishi’s claims are brought pursuant to Section 2 of the Sherman Act, Section 43(a) of the Lanham Act, and a state law claim of tortious interference with contractual and prospective business relationships.
DOE to Invest $6 Million in Midsize Wind Turbine Technology Development
DOE today announced that it will provide up to $6 million over 2 years for the development, testing, and commercialization of domestically manufactured, midsize wind turbines (i.e. nameplate capacity of between 100 kilowatts and 1 megawatt). DOE anticipates making up to four grants under this competitive solicitation and is looking to support U.S. turbine manufacturers and supply chain vendors.
Midsize turbines are used on site at schools, farms, factories, and other private and public facilities, alleviating the pressure on transmission lines. However, the midsize turbine market has not kept pace with the market for large, utility-scale turbines (larger than 1 megawatt ) or for small turbines (under 100 kilowatts) because few manufacturers build that size of turbine and unhealthy project economics.
For more details, please view the Funding Opportunity Announcement.
Limit Liability Risk By Complying With Recommended Wind Energy Guidelines?
From our colleague Eric Martin:
After over two years of work, the federal Wind Turbine Guidelines Advisory Committee (“Committee”) recently released its final policy recommendations on how wind energy developers and operators can best assess and prevent adverse impacts to wildlife. Comprised of government, environmental, and wind industry stakeholders, the Committee recommends a five-tier approach that begins with the preliminary evaluation of potential wind energy sites and continues through post-construction studies. These consensus recommendations are designed to cover all elements of wind energy facilities—from access roads through transmission line connections. Following Secretary of the Interior Ken Salazar’s review, the U.S. Fish and Wildlife Service (“USFWS”) will use the Committee’s recommendations as the basis for new guidelines replacing the problematic interim guidance that the USFWS had issued back in 2003.
Compliance with the voluntary guidelines could have significant legal benefits for developers and operators. Perhaps most importantly, in the event of death or injury to species protected under the Migratory Bird Treaty Act or the Bald and Golden Eagle Protection Act, the Committee recommends that the USFWS exercise its enforcement discretion by not prosecuting developers and operators that have complied with its recommendations. The Committee has identified the implementation of company- or project-specific Avian and Bat Protection Plans as one way to evidence compliance. This alone, however, would not shield developers and operators from liability for the “take” of species protected by the Endangered Species Act.
The Committee’s recommendations are available here. For more information on these recommendations and their potential effects, please contact:
Greg Corbin at (503) 294-9632 or gdcorbin@stoel.com
Barb Craig at (503) 294-9166 or bdcraig@stoel.com
Eric Martin at (503) 294-9593 or elmartin@stoel.com
DOE: $25 M for Solid State Lighting
The DOE announced that it will allocate $25 million to two Solid-State Lighting (“SSL”) funding opportunities to advance R&D and market adoption of SSL technology. TThis will be the seventh round of such funding that has been awarded in recent years.
Funding is subject to congressional appropriations and will focus on the following:
$15M for core technology projects demonstrating efficiency, performance, and cost targets. Selected projects will fill technology gaps or provide enabling knowledge or data.
$10 million for product development projects using existing technology or research to develop or improve commercially viable materials, devices, or systems, meeting certain performance parameters.
To view the complete SSL Core Technology Research (Round 7) funding opportunity, visit FedConnect, click on "Search Public Opportunities," and search on Reference Number DE-FOA-0000329.
To view the complete SSL Product Development (Round 7) funding opportunity, visit FedConnect, click on "Search Public Opportunities," and search on Reference Number DE-FOA-0000330.
For more information on DOE's Solid State Lighting Program, visit the Solid-State Lighting Web site.
California and FERC Agreement to Coordinate Hydrokinetic Project Development
From our colleague Michael O'Connell:
On May 18, 2010, California and the Federal Energy Regulatory Commission (FERC) signed a Memorandum of Understanding (MOU) to coordinate federal and state procedures and schedules for development of hydrokinetic projects off California’s coast. FERC previously entered MOUs for such coordination with Oregon, Washington and Maine.
The California-FERC MOU provides that the parties will encourage developers to seek pilot project licenses prior to a full commercial license. The footprint and number of devices deployed in California waters for testing would be limited under pilot project licenses in order to minimize environmental risk. FERC’s 2008 hydrokinetic pilot project white paper provides that pilot licenses would be issued for five years in order to allow licensees to conduct device testing and monitoring in support of studies required by applications for longer-term licenses. The California-FERC MOU also provides for consultation with stakeholders on the design of studies and other environmental matters.
According to the MOU, permits, leases and licenses issued by California agencies will require technology performance reporting and study results together with safeguards to ensure that projects will not have significant adverse effects on environmental, economic or cultural resources. The MOU parties also agree to share information from project developers regarding their facility’s energy production and “if applicable, power purchase contracts awards, during a project’s licensing application process and/or license term; provided that dissemination of the information is not otherwise protected from disclosure.” These MOU provisions are likely to raise confidentiality concerns among developers. The MOU recognizes that FERC cannot issue a license for a hydrokinetic project within California marine waters unless certain concurrences are issued or waived that a project is consistent with California’s Coastal Management Program. Any license issued by FERC will include, to the maximum extent practicable, terms and conditions determined by California agencies to be necessary to avoid, minimize and mitigate damage to fish, wildlife, and public trust resources.
The California-FERC MOU confirms state support for development of wave energy projects that can play a significant role in meeting the California’s goal of producing 33 percent of its electricity from renewable energy by 2020.
Washington Revising its State Energy Strategy
The Washington State Department of Commerce (formerly the Department of Community, Trade and Economic Development or CTED) has announced that it is attempting to revise Washington’s comprehensive energy plan (the “State Energy Strategy”).
The State Energy Strategy was last revised in 2003, and it does not serve current energy realities and forecasts. Therefore, the Washington State Legislature has tasked the Department of Commerce with updating the State Energy Strategy while taking account the following three goals and nine principles:
Continue Reading...RFS2 Deadlines are Rapidly Approaching
Several deadlines relating to the implementation of RFS2 are rapidly approaching and should be strictly followed by renewable fuel producers to avoid loss of the value of RINs under the new system. Producers who miss the registration deadline of July 1, 2010 will be unable to generate RINs until they have completed the registration process and 60 days have passed. Thus, a producer who completes registration on July 2 will not be able to generate RINs until September 1.
All producers must provide the following registration documents to EPA by the July 1 deadline:
- Engineering Review of the Facility – this must be done by a third-party qualified engineering firm and meet RFS2 requirements.
- Process Heat Fuel Supply Plan – this plan is required, as process heat is one of the aspects of plant performance that EPA considers in evaluating GHG performance.
- Records of actual production or copies of applicable air permits to allow EPA to determine the facility’s baseline volume.
For producers who use yard waste, food waste or the biogenic portion of municipal solid waste as their feedstock, a feedstock plan must also be submitted.
Additional RFS2 compliance information is available on the RFS website: http://www.epa.gov/otaq/fuels/renewablefuels/.
In addition to the registration requirements, deadlines are also approaching regarding the technical amendments EPA promulgated to RFS2, published in the Federal Register on May 10 at Volume 75, No. 89, page 26026. The EPA published these amendments, some of which have generated controversy, through the use of a direct final rule. To request a public hearing, commenters must provide notice to EPA by May 25, 2010. Adverse comments must be filed no later than June 9, 2010. Further details and the technical amendments are available at http://www.epa.gov/otaq/fuels/renewablefuels/regulations.htm
Supplemental Treasury Requests May Create Delays in 1603 Grant Payments
The U.S. Department of the Treasury, as part of the process of reviewing applications for the ARRA Section 1603 grant, has been making supplemental requests that applicants submit copies of their power purchase agreements (PPAs). This is creating delays in the payment of the grant beyond the 60-day period beginning with the date the original application was submitted.
See the rest of our alert here ... http://www.stoel.com/showalert.aspx?Show=6645.
FOA: $20 Million for Innovative Geothermal Technologies
The U.S. Department of Energy (“DOE”) today announced up to $20 million for research, development, and demonstration of cutting-edge geothermal technologies. DOE want projects that demonstrate the technical and economic feasibility of certain non-conventional geothermal energy technologies, such as low-temperature fluids, geothermal fluids recovered from oil and gas wells, and highly pressurized geothermal fluids.
Specifically, the funds will be allocated to research in the following areas:
- Low-temperature geothermal fluids at temperatures up to 300° Fahrenheit (F) or approximately 150° Celsius (C).
- Geothermal fluids produced from productive, unproductive, or marginal oil and gas wells, mining operations or other hydrocarbon or mineral extraction processes.
- Highly pressurized or "geopressured" fluid resources that show potential for cost-effective recovery of heat, kinetic energy, and gas.
- Innovative cooling systems; systems with more efficient heat exchanging materials or systems that maximize energy output through a combination of electricity generation and direct-heat technologies.
All US entities are eligible including universities, nonprofit and for-profit private entities, State and local governments and federally funded contractors. The cost share is 20%. Applications are due July 9, 2010.
The complete funding opportunity announcement can be viewed here: https://www.fedconnect.net/FedConnect/PublicPages/PublicSearch/Public_Opportunities.aspx
Utah's Salt Lake County Will Announce a Solar Project RFP on May 14, 2010
On May 14, 2010, Salt Lake County, Utah will be releasing a Request for Proposals (“RFP”) for a 1 MW solar project. If your company is interested in receiving the RFP as soon as it is released, you should register with BidSync (registration is free).
About the Solar Project:
It is anticipated that the initial solar project will include three County facilities (Salt Palace Convention Center, Environmental Health, and the Riverton Senior Center) with solar installations totaling approximately 1 MW. This solar project will utilize a power purchase agreement (“PPA”) financing model. It will also employ public and private capital, Federal grants, and public/private subsidized bonds that are able to work together efficiently because of the recent Stimulus Bill. The project also makes use of recent changes to Federal tax rules, and the recent re-awakening of private capital markets that make a significant public-private partnership possible. The County is working to coordinate these financial resources to make them easily accessible. More details will be available in the RFP. Longer term, Salt Lake County Mayor Peter Corroon has set a goal to install 10 MW of solar on as many county-owned facilities as possible.
PPAs and Third-Party Financing Now an Option in Utah:
In 2010, with the passage of HB 145 – Renewable Energy Financing Provisions, Utah enabled third-party financing of renewable energy systems for the following entities: a county, municipality, city, town, other political subdivision, local district, special service district, state institution of higher education, school district, charter school, or any entity within the state system of public education; an entity qualifying as a charitable organization under 26 U.S.C. Sec. 501(c)(3) operated for religious, charitable, or educational purposes that is exempt from federal income tax and able to demonstrate its tax-exempt status. Significantly, this recent legislation clarified that certain third-party financing arrangements are exempt from regulation by the Utah Public Service Commission, which is consistent with how these arrangements are viewed in several other states across the country. This clarification will now open the door for more innovative financing for renewable energy technologies, which has the ability to remove the upfront cost hurdles of capital intensive investments and offer an attractive bundle of services, including: design, installation, financing (including monetizing tax benefits), permitting and interconnection, maintenance, etc.
The Law of Biomass is Available Now
We are pleased to announce that the first edition of THE LAW OF BIOMASS is available now. THE LAW OF BIOMASS is a guide which contains insights and lessons that our team has developed through our position as a market leader in renewable energy legal issues. THE LAW OF BIOMASS focuses on electricity generated from biomass sources. As changes in the energy markets and views on natural resources create a compelling case for renewable and sustainable energy, biomass is emerging as a positive solution.
We hope that you find THE LAW OF BIOMASS useful. To request a copy of THE LAW OF BIOMASS, please visit our website: http://www.stoel.com/lawofseries.aspx.
May 11 Public Hearing Regarding Changes to Washington's Renewable Energy System Cost Recovery Program
Our Seattle tax attorneys (listed below) have told us about Washington Department of Revenue's ("DOR") public hearing on May 11 regarding proposed amendments to its rule governing administration of the Renewable Energy System Cost Recovery program.
Kim Risenmay at (206) 386-7525 or gkrisenmay@stoel.com
Carl Lewis at (206) 386-7688 or cslewis@stoel.com
Erin Toland at (206) 386-7563 or emtoland@stoel.com
Pursuant to this program, participating light and power companies may make incentive payments to customers who purchase and use renewable energy systems, and the light and power companies then receive offsetting tax credits against their Washington Public Utility Tax liabilities.
The DOR has indicated that the rule will be updated to reflect recent changes to Washington law, (1) increasing the annual payments that light and power businesses can make to individual customers; (2) increasing the total amount of incentive payments that participating light and power businesses can make to their customers; (3) changing the formula used to determine payment amounts based on “economic development kilowatt-hours;” (4) extending the incentive program to include community solar projects; (5) creating three categories of eligible community solar projects; (6) setting limitations on total incentive payments for community solar projects; and (7) setting capacity generating restrictions on systems in community solar projects.
If you're interested in attending the hearing which begins at 10:00 a.m. on Tuesday, May 11, 2010, go to the DOR's Fourth Floor Executive Conference Room at Capital Plaza Building,
1025 Union Avenue SE, Olympia, WA 98501
IRS Circular 230 notice: Any tax advice contained herein was not intended or written to be used, and cannot be used, by you or any other person (i) in promoting, marketing or recommending any transaction, plan or arrangement or (ii) for the purpose of avoiding penalties that may be imposed under federal tax law.
New REAP grants; EPA and USDA Promote Renewable Energy Generation from Livestock
New programs are in place to step up the use of renewable energy on farms through new grants and feasibility surveys:
1. USDA announced yesterday that it is soliciting applications for a total of four renewable energy programs.
a. Rural producers and small businesses installing renewable energy systems can apply for grants and loan guarantees under the Rural Energy for America Program (“REAP”), with applications due by June 30, 2010, to purchase energy-efficient equipment, add insulation, and improve heating and cooling systems.
b. The USDA is going to solicit applications for three other renewable energy programs: the Biorefinery Assistance Program, Repowering Assistance Program, and the Bioenergy Program for Advanced Biofuels. The solicitation for those programs will be published in the Federal Register by May 7. See the USDA press releases on the survey and the funding, the REAP solicitation as published on the REAP Web site;
2. The EPA and the USDA announced a new joint agreement on Monday to promote renewable energy generation and reduction of greenhouse gas emissions from livestock farming operations. This is an expansion of the AgStar program, a joint EPA-USDA endeavor to help livestock producers reduce methane emissions. The program will provide $3.9 million over the next five years to help the livestock farmers recover and use the biogas produced by decomposing manure.
3. On-Farm Energy Production Survey: the decomposition of manure is accelerated by feeding it into an anaerobic digester. The resulting biogas can be used to produce electricity, heat, or hot water. There are about 150 anaerobic digesters currently operating on farms across the US, and there are several thousand other farms that lend themselves to the installation of renewable biogas systems. To find out more, the USDA is now conducting the first national On-Farm Energy Production Survey, with results to be published in February 2011.
