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.
DOE to release eagerly awaited commercial solicitation
On a webinar yesterday, Michael Fraser, Senior Program Manager at the DOE, advised that the DOE plans to release a commercial solicitation for the loan guarantee program later this month or in early October. The current solicitation that is active for renewable energy projects requires that projects satisfy the innovative requirement. A project is defined as innovative only if it has not been employed in three or more similar applications in the US of five years duration. Thus many established renewable energy projects such as those utilizing wind or geothermal technology that is tested and proven, cannot apply under the current solicitation. The release of a commercial soliciation has been eagerly awaited by renewable energy project developers. These loans will be backed by private banks as well with DOE typically only guaranteeing 80-90% of the loan. DOE hopes that this structure will motivate private lenders to perform much of the due diligence necessary and only bring shovel-ready and bankable projects to the table. Interest rates on the loan are anticipated to run at Treasury plus 25 to 75 basis points. This is a very attractive interest rate but there are substantial fees associated with the program that will offset a portion of this value. The other key factor for projects to consider is whether they will be able to meet American Reinvestment and Recovery Act requirements and thus be eligible to have their credit subsidy costs covered by government funding. I am cautiously optimistic that DOE will be successful with these efforts and we will see a flurry of good projects moving forward Q1-Q2 2010 with the assistance of this program.
Friday Webinar on Commercialization of Advanced Biofuels (Algae)
On Friday August 28, Eric Lindeman of The Energy Daily will be moderating a webinar about "Advanced Biofuels: What Are the Commercial Possibilities? Why All the Interest in Algae?" My partner, the always-entertaining John Eustermann, will be speaking at the Webinar along with Connie Lausten (VP, Regulatory and Legislative Affairs, New Generation Biofuels (NGBF)) and Glenn Johnston (VP, Regulatory Affairs, GEVO, Inc.). You can sign up for the Webinar at http://www.theenergydaily.com/events/bio_fuels_webinar/
Stoel Rives recently published its new "Law of Algae", a guide to the business and legal issues affecting the development of a commercial scale algae biofuels facility. We've introduced The Law of Algae in an on-line “wiki” format because the processes, technologies, and issues are changing rapidly with the commercialization of algae. The wiki format enables us to update the book frequently to bring you the most current information, so feel free to stop by often!
NV Energy Issues RFI for Short Term (1 Month to 3 Years) Energy Supply
On August 21, NV Energy issued a press release reminding renewable energy developers of that it has issued a Request of Information (RFI) for renewable energy that can be provided on a short-term basis. This solicitation is separate from NV Energy's recently announced 2009 Renewable Energy Request for Proposals. NV Energy will consider proposals for solar, wind, geothermal, biomass and other resources eligible for portfolio energy credits under the Nevada renewable portfolio standard.
NV Energy is now looking for proposals from entities that can deliver renewable energy to its system on or after Oct. 1, 2009 and for a period of one month to three years.
Parties interested in submitting a response to the RFI, or those seeking more information related to the RFI or renewable energy laws can contact NV Energy at: ShortTermRFI@nvenergy.com . In addition, prospective bidders can email any questions to Ron Helbing, rhelbling@nvenergy.com.
Bidders must submit their responses to NV ENergy's short term renewables solicitaion by 9:00 AM (PPT) on Sept. 2, 2009.
DOE Announces $154 million in Funding for State Energy Programs
Yesterday, the Department of Energy (“DOE”) announced more than $154 million in Recovery Act funding to four states for their State Energy Programs (“SEPs”). The funds were awarded to California, Missouri, New Hampshire, and North Carolina. The funding is to be provided in two stages to the four states with the second stage requiring successful performance at the first level. The funding is to be utilized in the areas of energy efficiency, workforce training, education and related programs.
California will use its SEP funds to finance a statewide retrofit program, provide clean energy to buildings and facilities, and develop a public education and outreach program focusing on the advantages of energy efficiency. In addition, California will use its SEP funds to further develop a green workforce in the areas of energy efficiency and clean energy. After demonstrating success in the execution of its plan, California will receive additional funds of more than $113 million, for a total of $226 million.
Missouri will use its SEP funds to increase energy efficiency through various measures, including the expansion of existing home efficiency programs, building energy codes, and training programs. Missouri will also examine its most energy-intensive industrial/manufacturing sectors for energy-saving opportunities and will increase energy efficiency through a program that may include energy audits, rebates, and low-interest loans. After demonstrating success in the execution of its plan, Missouri will receive more than $28.6 million of additional funds, for a total of over $57 million.
New Hampshire will use its SEP funds to advance energy efficiency and renewable energy through building codes, competitive loans and grants, and financial and technical assistance to businesses and other institutions. New Hampshire will also support energy efficiency upgrades to colleges, universities, and state-owned buildings. After demonstrating success in the execution of its plan, New Hampshire will receive more than $12 million of additional funds, for a total of over $25.8 million.
North Carolina will use its SEP funds to promote energy efficiency and renewable energy through competitive grants, revolving loans, and education and training programs designed to encourage investment in energy-related technologies. The state will also establish a training program in its community colleges and universities to prepare workers for the green economy. After demonstrating success in the execution of its plan, North Carolina will receive $38 million of additional funds, for a total of $76 million.
President Creates Interagency Task Force to Develop Marine Policy and Spatial Planning Framework
President Obama has issued a memorandum calling for the creation of a temporary Interagency Ocean Policy Task Force led by the Chair of the Council on Environmental Quality (CEQ) to develop a unifying framework for responsible development and ecosystem management for the nation’s oceans, coasts and the Great Lakes. Specifically, within 90 days the Task Force must develop recommendations for a national ocean, coastal and Great Lakes policy that addresses coastal economies, climate change and adaptive management while prioritizing resource stewardship, as well as a framework for policy coordination and an implementation strategy that identifies and prioritizes policy objectives. Within 180 days, the Task Force must develop a recommended framework for comprehensive, ecosystem-based coastal and marine spatial planning that addresses “conservation, economic activity, user conflict, and sustainable use of ocean, coastal and Great Lakes resources....”
In addition to the Chair of CEQ, the Task Force will be composed of senior officials from the Departments of State, Defense, the Interior, Agriculture, Health and Human Services, Commerce, Labor, Transportation, Energy, and Homeland Security and Justice, the Environmental Protection Agency, Office of Management and Budget, National Aeronautics and Space Administration, National Intelligence, Office of Science and Technology Policy, National Science Foundation, and Joint Chiefs of Staff, as well as several Presidential assistants and an employee designated by the Vice President.
For additional information, please contact my colleague Cherise Oram.
IRS Provides Guidance on Electing ITC in Lieu of PTC
On Friday, June 5, the Internal Revenue Service issued Notice 2009-52, which provides guidance informing taxpayers how to elect to claim the Investment Tax Credit under IRC § 48 in lieu of the Production Tax Credit under IRC § 45 with respect to qualifying projects. This election was provided for as part of the American Recovery and Reinvestment Act of 2009 (ARRA”).The election to claim the ITC in lieu of the PTC applies to the following types of renewable energy facilities:
Wind; Biomass (both closed- and open-loop); Geothermal; Landfill gas; Trash facilities; Qualified hydropower; and Marine and hydrokinetic.
Notice 2009-52 appears to provide the exclusive means by which taxpayers may make the election. To qualify, a taxpayer must claim the ITC with respect to qualified property that is an integral part of the facility on a completed Form 3468. Form 3468 must be filed with the taxpayer’s income tax return for the year in which the property is placed in service.
A separate election must be made for each qualifying facility.
Observation:This requirement may be very important if the Service defines “qualifying facility” very narrowly. For example, if the qualifying facility for a wind farm is each turbine, the election procedure will be extremely onerous. There is no indication in Notice 2009-52 of how the Service will define a facility for this purpose.
The following information must be provided with each election:
1. Name, address, taxpayer ID number, and telephone number of the taxpayer.
2. For each qualified investment credit facility:
(i) A detailed technical description of the facility, including generating capacity.
(ii) A detailed technical description of the energy property placed in service during the taxable year as an integral part of the facility, including a statement that the property is an integral part of such facility.
(iii) The date that the energy property was placed in service.
(iv) An accounting of the taxpayer’s basis in the energy property.
(v) A depreciation schedule reflecting the taxpayer’s remaining basis in the energy property after the energy credit is claimed.
3. A statement that the taxpayer has not and will not claim a grant under Section 1603 of ARRA for property for which the taxpayer is claiming the energy credit.
4. A declaration, applicable to the statement and any accompanying documents,
signed by the taxpayer, or signed by a person currently authorized to bind the taxpayer
in such matters, in the following form:
Under penalties of perjury, I declare that I have examined this statement, including accompanying documents, and to the best of my knowledge and belief, the facts presented in support of this statement are true, correct, and complete.
Observation: The Notice does not address what constitutes what property will be considered “integral” to a qualified facility. Presumably, this will be addressed in subsequent guidance.
Finally, the Notice requires that the taxpayer making the election retain adequate books and records, including the information required to be provided by the Notice and all supporting documentation.
Observation: The Notice is focuses on the procedural aspects of the PTC to ITC election. It provides virtually no guidance on grants in lieu of the ITC under Section 1603 of ARRA, and offers little in the way of substantive guidance. Treasury is expected to issue such substantive guidance on these and other issues in the coming months.
Please contact your favorite Stoel Rives attorney with any questions.
New Minnesota Solar Power Incentives
Minnesota politicians held a news conference yesterday on the state capitol mall to provide an overview of recent legislation relating to solar energy projects. Minnesota has allocated $14.5 million in stimulus money for renewable energy projects, with a portion flagged for solar projects to encourage the installation and use of solar-powered systems. Another piece of legislation gives utilities the opportunity to double their commitments to solar energy projects under the Conservation Improvement Program currently in place. Representatives from Xcel Energy Inc. (Xcel), which serves more than 1.2 million customers in Minnesota, announced yesterday that they filed a $280 million plan with regulators to offer incentives for Minnesota customers to conserve energy, which could include installation of solar panels on homes and businesses. Under Xcel’s proposed “Solar Rewards Program,” Xcel would provide rebates to customers who install solar photovoltaic systems of up to 40 kilowatts on their premises.
$150 Million to Fund ARPA-E Transformation Energy R&D Projects
On April 27, 2009, the first Funding Opportunity Announcement (FOA) under the Advanced Research Projects Agency-Energy (ARPA-E) was announced offering up to $150 million to fund transformation energy research and development projects. These funds are part of the $400 million appropriated to ARPA-E under the American Reinvestment and Recovery Act. Individual awards of $500,000 to $20 million are available to eligible projects. This FOA is aimed at projects that have a well-formed R&D plan that can make a significant contribution towards enhancing the economic and energy security of the United States by reducing imported energy, reducing energy-related gases, including GHG, and improving energy efficiency.
To be eligible, an interested applicant must submit a concept paper to ARPA-E that briefly outlines the technical concept for its project between May 12 and June 2. Early submission is strongly encouraged. Successful applicants will then be asked to submit full applications. More information on this FOA is available at www.grants.gov.
Oregon Senate Bill 190 Would Change Oregon Geothermal Law
The Oregon Legislature is set to consider a bill during the 2009 Regular Session (Senate Bill 190) that would substantially revise ORS Chapter 522 dealing with geothermal resources. Among other things, the bill eliminates the specified minimum per well and blanket bond amounts and gives the State Department of Geology and Mineral Industries (“DOGAMI”) authority to set bonds amounts in a future rulemaking. Future bond amounts set by DOGAMI “must be based on the estimated costs of plugging and decommissioning the well and any other associated expenses for reclamation of the site of the well.”
SB190 also increases permitting fees and extends permitting timelines. For example, geothermal well permit fees are increased from $250 to $2,000 and DOGAMI’s timeline for responding to a complete permit application is extended from 45 to 90 days. The bill also imposes new fees for extending the period for completion of drilling ($500), permit transfers ($500), and requests to plug and decommission a well ($1,000).
The bill would take effect July 1, 2009 and would apply to wells permitted before that date.
Stoel Rives has also published information about the bill in the Geothermal Energy Association's "GEA Weekly Update" for February 18, 2009 (p. 8).
Michigan Governor Creates Great Lakes Wind Council
On February 6, Michigan Governor Jennifer Granholm signed an executive order creating the Great Lakes Wind Council, an advisory body within the Department of Energy, Labor, and Economic Growth that will provide citizens with a public forum to begin to identify where, in the Great Lakes, wind energy systems may be prudently sited. Appointments to the Council include representatives from the Michigan State University Land Policy Institute, the Michigan Environmental Council, the Little Traverse Bay Bands of Odawa Indians, ITC Holdings Corp., the Michigan Charter Boat Association, and Detroit Edison. This follows on the heels of actions by the Wisconsin Public Service Commission and others to investigate the feasibility of siting wind turbines in the Great Lakes, as discussed in one of my recent blog entries.
EPA Stalls Regarding RFS Waiver
EPA Administrator Stephen Johnson granted himself a continuance last week to make his decision on whether to grant Texas Governor Rick Perry’s request for a waiver of the Renewable Fuel Standard (RFS). As an attorney accustomed to living with deadlines, I certainly appreciate the lure of being able to grant oneself a continuance. Like many others participating in the biofuels industry, however, it is somewhat frustrating to encounter yet another delay on the policy front.
To be fair, Administrator Johnson has his work cut out for him in resolving this issue. Advocates on both sides see potentially substantial impact from a decisive ruling on the waiver. The waiver provision has been described as a pressure relief valve for the RFS. The interesting thing about this pressure valve is that no one knows what pressure the valve will withstand before it releases. Oil industry advocates would prefer a “hair trigger” type pressure release valve whereas biofuel advocates would like to see a more robust fixture.
Governor Perry’s request has some unique attributes. He actually based his request not on the RFS causing difficulty for the petroleum industry- which would have been difficult since ethanol has typically been less costly than gasoline and in ample supply- but on food and livestock supply arguments. Governor Perry’s request also precedes the ramp up period in the RFS when the real challenges will likely begin and thus his request could be viewed as an early attempt to hobble the RFS.
Let us hope that cooler heads prevail. Given the tremendous energy security and cost issues presently caused by our fossil fuel dependence, now is not the time for the EPA to start buckling on the RFS. As noted by the NBB’s CEO, Joe Jobe, "If the RFS is waived or cut in half in 2008, then the growth of all biofuels, including 'advanced biofuels' such as biodiesel, will be severely hindered." As Jobe and others have noted, these advanced biofuels may hold the real key to relieving the pressure on both fuel and food prices in the future.
Minerals Management Service Issues Proposed Rules For Alternative Energy on the OCS
On Tuesday, MMS released its proposed rule for alternative energy development on the Outer Continental Shelf, including wave, current, and wind energy technologies. You can access the rule from MMS's website.
Stoel Rives attorneys are in the process of reviewing the rule and will release a client alert soon. Please feel free to subscribe if you'd like to receive that alert.
