Julia Pettit
Julia Pettit is a member of the firm's Business Services Group and focuses her practice in the area of renewable energy finance and acquisition transactions, and the negotiation of core agreements for renewable energy projects. Ms. Pettit also has broad experience representing creditors, debtors and other parties-in-interest in general corporate restructuring and insolvency-related matters. Ms. Pettit's has diverse industry experience in biofuels project finance and development; wind energy development; construction of waste-to-energy facilities; aluminum smelters; sports arenas; real estate; and technology. Prior to joining Stoel Rives, Ms. Pettit gained a wide range of experience in complex commercial litigation matters.
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.
Wyoming Game & Fish Department Extends Comment Period for Wind Energy Recommendations
The Wyoming Game and Fish Department ("WGFD") has extended the public comment period on a draft document: "Wind Energy Issues: Impacts and Mitigation for Wildlife in Wyoming" from December 18, 2009 to February 1, 2010. The document provides recommendations for assessing impacts to wildlife from wind energy projects, for collecting data, and for mitigating effects on wildlife. The WGFD is especially concerned about the potential impacts of wind energy on sage grouse, which are highly sensitive to disturbances and habitat modification. The adoption of the proposed recommendations could greatly impact the future siting and development of those wind energy projects in Wyoming that are required to obtain a permit from the Wyoming Industrial Siting Council. The Interwest Energy Alliance, a trade association focused on furthering renewable energy development in the intermountain region (Arizona, Colorado, Nevada, New Mexico, Utah and Wyoming), will be working with wind energy developers and concerned stakeholders in this matter, including the Wyoming Power Producers Coalition and Pacificorp, in preparing comments to the WGFD's recommendations. Parties interested in becoming a member of the Interwest Energy Alliance should contact Craig Cox, Executive Director, Interwest Energy Alliance, P.O. Box 272, Conifer, Colorado 80433, (303) 679-9331, cox@interwest.org.
U.S. Department of Energy Announces Final Rule Amending Regulations for Loan Guarantee Program
On December 7, 2009, Energy Secretary Steven Chu announced the issuance of a final rule amending the October, 2007 Final Regulations implementing the Loan Guarantee Program under Section 1703 of Title XVII of the Energy Policy Act of 2005 (the "Section 1703 Program"). The amendments implemented through the final rule were first identified in a Notice of Proposed Rulemaking and Opportunity for Comment issued by the Department of Energy ("DOE") on August 7, 2009. The comment period for the proposed amendments ended on September 22, 2009; the comments received by the DOE from the industry and other interested parties were largely supportive of the proposed amendments.
In a nutshell, the amendments to the regulations outlined in the final rule are designed to:
- provide flexibility in the determination of an appropriate collateral package to secure the guaranteed loan obligations;
- eliminate the requirement that the Secretary receive a first priority lien on all project assets as a condition for obtaining the loan guarantee;
- facilitate collateral sharing and related intercreditor arrangements with other project lenders; and
- provide a more workable interpretation of certain statutory provisions regarding DOE's treatment of collateral that is more consistent with the intent and purposes of Title XVII.
Will Wyoming Tax Electricity Generated From Wind Energy Projects?
On November 18, 2009, the Wyoming interim Joint Revenue Committee (the "Committee") considered two bills, each of which proposed to tax wind generated electricity. Neither bill passed the committee on tie votes of 6-6 (4-4 House members and 2-2 senate members). One of the bills sponsored by Sen John Schiffer, R-Kaycee, chairman of the Committee (legisweb.state.wy.us/interimCommittee/2009/10LSO-0126w4.pdf) proposed a tax of $.0010 upon each kilowatt hour for electricity produced and sold in the State of Wyoming. An exemption was provided for electricity produced for the personal consumption of the producer. A power producer using coal or other fuels would break even on the generation tax through a credit equal to the severance tax portion of their electricity production costs. The proposed tax works out to be an approximately 5 percent tax on generation. The second bill considered by the Committee was sponsored by Rep. David Miller, R-Riverton, (legisweb.state.wy.us/interimCommittee/2009/10LSO-0062w2.pdf). Rep. Miller's bill was similar to Sen. Schiffer's bill, but would only provide the credit to traditional power producers if they agree to use 90 percent of the credit on electricity generation or transmission projects and put the other 10 percent into the state's low income energy assistance program. Proponents of the proposed tax cited a number of factors in favor of the bill including the fact that wind projects should contribute to state and local governments equally with other energy industries. For example, Wyoming imposes a severance tax on natural resources, which includes (approximately) a 6 percent tax for oil and gas and a 7 percent tax for coal. Opponents of the tax bills, including the group of wind energy developers represented by the Wyoming Power Producers Coalition, argued, among other things, that (i) wind energy projects already pay property taxes and provide other financial benefits to the local communities and (ii) the taxation issue should be studied carefully so as not to discourage wind energy development in Wyoming.
Continue Reading...Public Service Commission of Utah Investigates Third-Party Power Purchase Agreements For Renewable Energy Generation
On October 12, 2009, the Public Service Commission of Utah ("PSC") joined the ranks of several other states in the west, including Oregon, when it established a docket to investigate whether, and the extent to which, certain third-party arrangements for renewable energy generation are subject to the PSC's jurisdiction. www.psc.utah.gov/utilities/misc/miscindx/0999912indx.html, Pursuant to the notice, the PSC may consider the following issues:
- Whether the third-party is a public utility under Utah law;
- Whether the third-party is a public utility under Utah law when arrangements are entered into primarily as a financing mechanism for distributed renewable energy generation systems whereby a third-party owns the renewable generation equipment, which is installed on a utility customer's premises, there is a long-term contract with the customer to supply a portion of that customer's electricity use, and payments are based on kilowatt-hours;
- Whether the third-party is a public utility under Utah law when (i) there is a single relationship between the third-party owner of the generation and a customer or (ii) there are multiple customers taking power from the same third party;
- Whether the third-party is a public utility under Utah law when arrangements involve the leasing of distributed generation equipment from non-utility lessors to lessees that are also retail customers of utilities.
Comments and/or legal briefs regarding the above issues must be filed with the PSC by November 16, 2009. A technical conference to discuss the specific terms and conditions surrounding third-party financing arrangements and other issues will be held on November 23, 2009, at 1:30 p.m. to 4:00 p.m., Fourth Floor Hearing Room Room 401, Heber M. Wells State Office Building, 160 East 300 South, Salt Lake City, Utah.
Show Me the Money: State Energy Programs for Seven States and Territories Awarded $119 Million from the American Recovery and Reinvestment Act ("Recovery Act")
On August 14, 2009, the Department of Energy ("DOE") State Energy Program ("SEP") announced that more than $119 million in funding from the Recovery Act to support energy efficiency and renewable energy projects has been awarded to Alabama, American Samoa, the District of Columbia, Illinois, Maryland, North Dakota and Wyoming.
Here is a summary of how the monies will be used by each of the states and territories:
- Alabama has been awarded $22,228,000 in federal stimulus funds. Alabama will utilize the Recovery Act SEP funding to promote energy efficiency of businesses (with a particular focus on the automotive supplier industry), schools, and correctional facilities and the development of renewable energy resources in the state. The state will also use funds to create a new "energy revolving loan fund" to stimulate the creation and retention of jobs and increase the generation of renewable energy by providing low-interest loans for new and existing industries in the state. The loans will be used for the installation of renewable energy systems and the implementation of energy efficiency measures. After demonstrating successful implementation of its plan, Alabama will receive nearly $28 million in additional funding, for a total of more than $55 million. Click here for more information regarding Alabama's state energy program and use of Recovery Act funds.
- American Samoa was awarded $7,420,000 in federal stimulus funds. American Samoa will utilize the Recovery Act SEP funding to expand the use of renewable energy across the territory, as well as to supplement weatherization funds to improve home energy efficiency for low-income residents. Specifically, the territory will install a 1,000 kW photovoltaic solar-energy array near the Tafuna Power Station, 19 smaller 28 kW solar arrays on the roofs of government and other buildings, and a solar water heating system at the LBJ Tropical Medical Center. American Samoa is also interested in expanding its use of wind power, and will use Recovery Act funds to set up eight anemometers to measure and quantify the territory's wind potential. After demonstrating successful implementation of its plan, the territory will receive more than $9 million in additional funding, for a total of $18 million.
Show Me the Money: $304 Million Allocated to Three States for Weatherization Assistance Programs
On Friday, June 25, 2009, the Department of Energy ("DOE") announced more than $304 million in Recovery Act funding to three states for their weatherization assistance programs. The DOE’s Weatherization Assistance Program will enable families making up to 200% of the federal poverty level – about $44,000 a year for a family of four – to save on energy costs by increasing the energy efficiency of their homes.
Here is a summary of how the funds will be used in Georgia, Illinois, and New York:
Georgia will use its funds to weatherize more than 13,600 homes over three years, with priority given to homes occupied by elderly residents and elderly residents with disabilities. After demonstrating success in the execution of its plan, Georgia will receive $62 million in additional funds, for a total of almost $125 million.
Illinois will use its funds to weatherize nearly 27,000 homes over three years. The state will provide sub-grants to existing local agencies that have effectively provided energy audits and home weatherization in the past, followed by final inspections of weatherized homes. In addition, Illinois will expand its training and certification program to prepare its workforce for the weatherization assistance program. After demonstrating success in the execution of its plan, Illinois will receive over $121 million in additional funds, for a total of more than $242.5 million.
New York will use its funds to weatherize more than 45,000 homes over three years. The state plans to coordinate its weatherization program with other state agencies to maximize benefits to low-income clients. The state will also encourage weatherization assistance to be rendered along with services provided by non-federal sources, like utilities and the Red Cross. After demonstrating success in the execution of its plan, New York will receive $197 million in additional funds, for a total of more than $394 million.
Show Me the Money: Minnesota, South Carolina, and South Dakota State Energy Programs Received $51.4 Million from the American Recovery and Reinvestment Act (ARRA)
On June 24, 2009, the Department of Energy (“DOE”) announced more than $204 million in ARRA funding to ten states for their State Energy Programs (“SEPs”).
Here is a summary of how the monies will be used in Minnesota, South Carolina and South Dakota:
Minnesota has been awarded $21.7 million in federal stimulus funds for retrofitting existing public buildings and homes, renewable energy and energy efficiency programs and to develop new training opportunities. Minnesota’s SEP will award grants to small, medium, and large businesses to help provide for the design, financing and installation of various energy efficiency improvements and retrofits. The state will also administer grants to work with utilities to develop programs that leverage ARRA funds to promote energy efficiency with customers, such as low-interest loans and grants. After demonstrating successful implementation of its plan, Minnesota will receive more than $27 million in additional funding, for a total of more than $54 million. This money is in addition to the $132 million the state will receive for weatherization grants for low-income households.
South Carolina has been awarded $20.2 million in federal stimulus funds. South Carolina’s SEP will utilize the funding to provide grants and loans to improve energy efficiency in public school districts, public colleges and universities, and state agencies to reduce the burden of energy bills for taxpayers, while creating jobs and reducing greenhouse gas emissions. South Carolina also intends to provide financial assistance to various industrial, commercial and small business entities to support energy efficiency and renewable energy projects. This financial assistance, along with education and training programs included in the SEP, will help create clean energy jobs in the state and make business and industry more economically stable. After demonstrating successful implementation of its plan, the state will receive more than $25 million in additional funding, for a total of over $50 million.
South Dakota has been awarded $9.5 million in federal stimulus funds. South Dakota’s SEP will use its funding to support the Energy Efficient Government program and to provide revolving energy loans to state institutions. The programs will promote energy efficiency efforts while reducing energy costs in state owned buildings, which will directly benefit state residents. The state’s energy office will administer the funds, provide technical guidance, and assure accountability and transparency for the state institutions who apply for the two programs. These programs coordinate with South Dakota’s energy goals to promote and encourage energy conservation, energy efficiency, renewable energy and alternative fuels. After demonstrating successful implementation of its plan, the state will receive more than $11 million in additional funding, for a total of more than $23 million.
My colleagues have blogged on the other seven states that received funds including: Florida, Idaho, Kansas, Utah, Connecticut, Washington and Arizona.
Western Governors Consider Regional and National Polices Regarding Global Climate Change
At the Western Governors' Association Annual Meeting on June 15, 2009, the Western Governors heard a sobering and candid report from Secretary of Energy Steven Chu, which, at its core, indicated that climate change is real and happening faster than scientists previously warned. According to Secretary Chu, "the news is getting scary . . . but the most scary thing in my mind is the [scientific] observations. People can be entitled to their own opinions, but they are not entitled to their own facts." A few of the observations cited by Secretary Chu included the following:
- Loss of 1/2 of the Northern polar ice cap in the last 10 years
- Sea level rise
- 40% of the British Columbia pine is dead
- Extreme water stress in the Western United States (with exception to the Pacific Northwest) as a result of decreased snow pack and changing weather patterns
Secretary Chu was particularly concerned with the continued melting of the permafrost in the Northern Hemisphere, which he predicted could have "runaway effects" due to the massive release of CO2 and methane from the biomass that has accumulated over time.
President of the World Bank, Robert B. Zoellick, also participated in the discussion on climate change, indicating that the rule making that will be necessary for implementing climate change policies will stay with us for decades and will be some of the "toughest negotiations" he has ever seen. Mr. Zoellick stressed the importance of having the Governors plugged into the rule making process since this will be the framework that the states will have to live with. There was also an acknowledgment among the group that the farmers and ranchers are skeptical about climate change, but that this is a key stakeholder group that needs to be part of the equation. Governor Bill Richardson commented that the key will be the creation of a carbon offset market that will work. Secretary of Agriculture, Tom Vilsack, concurred indicating that a carbon offset market will be critical to the survival of rural communities.
Continue Reading...Strategies for Tapping the West's Renewable Energy Potential
The Western Governors' Association ("WGA") gathered in Park City, Utah for its annual meeting, which was held on June 14-16, 2009. Attendees at the meeting included Governors Bill Ritter (Colo.); C.L. "Butch" Otter (Idaho); Brian Schweitzer (Mont.); Dave Heineman (Neb.); Bill Richardson (N.M.); Benigno Fitial, Northern Mariana Islands; Ted Kulongoski (Ore.); Mike Rounds (S.D.); Dave Freudenthal (Wyo.); and Jon Huntsman, Jr. and Lieutenant Governor Gary Herbert (Utah) , along with Canadian Premiers Ed Stelmach, Alberta; Gary Doer, Manitoba; and Brad Wall, Saskatchewan.
The morning session on Monday, June 15, 2009, was kicked off with the unveiling of the Western Renewable Energy Zones-Phase 1 Report, which was a product of a joint initiative between the WGA and the U.S. Department of Energy (the "WREZ Initiative"). The intention of the WREZ Initiative is twofold: (1) to identify Western Renewable Energy Zones in the Western Interconnection and (2) to facilitate the development of high voltage transmission to those areas with abundant high-quality renewable resources and low environmental impacts. Governor Schweitzer provided an overview of the WREZ Phase I report, which included a summary of the process for obtaining feedback from a diverse group of stakeholders to provide the analysis and tools for constructing a plan to facilitate the construction of new, utility scale renewable energy facilities and any needed transmission to deliver that energy across the Western Interconnection. The WREZ Initiative has developed a modeling tool for evaluating the relative economic attractiveness of costs of delivered renewable energy, including transmission costs, from specific renewable resource areas delivered to specific load centers.
Continue Reading...
