WEBINAR: Tax Equity Critical Issues and State of the Market Sneak Preview

Posted in Events

On Thursday, Dec. 10 at 12:00 p.m.- 1:00 p.m. CST, Greenberg Traurig is partnering with Marathon Capital on a virtual presentation on tax equity that will focus on critical deal points and feature a sneak-peek panel discussion on the state of the market as we approach year end. GT’s Global Head of Energy Project Finance, Jeff Chester, will serve as a panelist alongside Shareholder April Kim and Of Counsel Margaret Weil. Guest speakers include Marathon Capital’s VP of Tax & Restructuring, Wayne Chomitz.
Click here to register for the webinar.

Topics Include:

  • 2020 Market Recap
  • Tax Equity Yields
  • Extension of Tax Credits/Revival of Cash Grants
  • Safe Harbor Strategies
  • Tax Equity for Energy Storage
  • 45Q Tax Credit
  • Trend on DROs
  • Syndication of Investors
  • 2021 Market Preview

The State of Coal Ash Regulation and Implications for the Commonwealth

Posted in Coal, Coal Ash, Environment, Featured, Litigation

Two recent developments, the finalization of Part B of the coal combustion residuals, or CCR, rule and the finalization of the 2020 Steam Electric Reconsideration Rule have triggered conversation about, and litigation over, the path forward for long-term management of CCR in the United States.

Click here to access the full article, “The State of Coal Ash Regulation and Implications for the Commonwealth.”

Rolling Back Environmental Rollbacks in the New Administration

Posted in Clean Air Act, Clean Water Act, Climate Change, COVID-19, EPA, Featured, NEPA, Policy, Politics, Regulatory, WOTUS

In 2016, the incoming Trump Administration stated its intention to reduce substantially federal environmental regulation. The president issued executive orders requiring two rule repeals for each new rule and directing the reorganization of the U.S. Environmental Protection Agency (EPA). He also carried through on promises to announce the country’s withdrawal from the Paris Climate Accords and to reverse the Obama Administration’s controversial Waters of the U.S. Rule.

Now, the incoming Biden Administration has stated its intention to adopt a number of measures to address climate change, many of which entail reversing Trump Administration regulatory changes, either to the original or to some updated form. And even beyond those priorities, many commentators, including our podcast, our Government Law and Policy colleagues, and the New York Times have observed that the Biden Administration may roll back its predecessor’s environmental regulatory rollbacks much more broadly.

Four years ago, we advised at a webinar convened to discuss the incoming Trump Administration that the federal government was large and full of inertia and that changing environmental rules would be difficult and time-consuming. That remains true: rolling back regulations is uphill in both directions.

The Biden Administration, however, faces unique challenges to its regulatory agenda that the outgoing administration did not. Since fiscal year 2010, the EPA has lost more than 26% of its budget and 18% of its personnel. The Trump Administration retrenched the agency’s Science Advisory Board, reorganized broad swaths of the agency’s enforcement and program offices, and proposed profound changes to the civil service personnel system; many senior managers have either retired early or left the agency for the private sector. Calls to provide new resources to EPA will compete with COVID-19 response and economic relief.

The loss of institutional knowledge and bureaucratic skill makes bold change more challenging. After all, regulatory changes generally have to be adopted with all the procedure and formality of an initial rule adoption, whether they repeal or merely reinstate an old rule. And each change is subject to judicial review; it cannot be arbitrary, capricious, or contrary to law.

Courts recognize that elections have consequences, and a non-arbitrary shift in policy can justify a change in a rule. But an election itself is a less-ready justification for a change in the factual determinations underlying a rulemaking. In order to change factual findings, the agency typically requires additional evidence on which to base them.

The Trump Administration repealed or amended more than a hundred environmental rules. Many of those changes were the subject of litigation brought by opponents to the change, typically states and environmental advocacy groups. Much of that litigation remains pending. Any change in rules will likely reshuffle the parties or moot existing cases and induce a subsequent challenge to the Biden rulemaking.

The reinstitution of environmental regulation will be complicated, time-consuming, and litigated, just like the last four years of deconstruction have been. That poses uncertainty for regulated entities, but also multiple opportunities to influence the form of any new rules. The specific complexities are different for different changes, but look for actions in the areas of:

  • climate change mitigation (reducing greenhouse gas emissions at sources and encouraging use of renewable fuels and power);
  • climate change adaptation (moving infrastructure, increasing resilience, and so forth);
  • the ongoing battle over the definition of Waters of the United States;
  • environmental review, both general review under the National Environmental Policy Act generally, including re-visiting the recently promulgated re-write of the NEPA regulations, and specific reviews like state issuance of water quality certifications under section 401 of the Clean Water Act, also the subject of recent rulemaking;
  • regulation of cars and trucks under the Clean Air Act (such as reissuance of the “California waiver”);
  • regulation of extractive industries (such as methane emissions from oil and gas operations, changes in leasing, and so forth);
  • regulation of the management of coal combustion residuals;
  • chemical and pesticide regulation, including regulation of nanotechnology; and
  • jurisdictional issues such as the Clean Air Act aggregation policy.

Rollbacks are somewhat easier when they merely involve issues of priorities and funding. Some approvals might move faster and some slower. For example, many believe that a Biden Bureau of Ocean Energy Management will review projects more quickly. Further, many expect a flurry of executive orders in the first weeks of the administration directed at, among other things, slowing or withdrawing rules that are not yet final.

So, stay tuned, and stay engaged if you would like to enhance your opportunity to influence the outcome.

Keeping Eyes on the Ball: Integration of Distributed Energy Resources

Posted in Distributed Energy Resource (DER), Energy, FERC

California residents experienced rolling blackouts – the first in two decades – in August this year, amidst the pandemic and triple-digit heatwave. Microgrids, rooftop solar, distributed generation, behind-the-meter batteries, and Demand Response – each, an example of distributed energy resource (DER) – are some of the ways that an energy consumer can be shielded from blackouts. The California Public Utilities Commission has been working to integrate demand-side energy solutions with limited success since 2007 and has approved a Demand Response Auction Mechanism (DRAM) as well as a pilot program for competitive utility solicitation of Distributed Energy Resources that would displace or defer utility investments. Unfortunately, these programs were not adequate to prevent the August blackouts. While the California Independent System Operator (CAISO) also allows DERs to participate in wholesale markets on an aggregated basis through a “Distributed Energy Resource Provider” program, various rules and conditions have stifled participation by aggregators. Now, a recent rule from the Federal Energy Regulatory Commission (FERC) is expected to create additional opportunities for DERs not only to serve the homes, businesses, and communities on which they are installed but also to compete more effectively in the U.S. wholesale markets on an aggregated basis. In this post, we explore this new rule from FERC and how it serves as a step towards building the grid of the future.

What is a DER?

DERs are decentralized energy assets that are typically behind-the-meter and situated close to the consumer’s electricity usage (load). Depending on the technology and the use-case, DERs can function as a load-only resource, load with generation, load with storage, or load with generation and storage.

Many DERs serving the grid do so under demand-response programs which are designed to reduce electricity usage during peak demand. DERs can also promote grid resilience in the form of microgrids. For example, earlier this year in California, Santa Barbara’s public school system issued a request for proposal to build solar plus storage microgrids. The global energy company Engie won the bid, launching this project. The idea behind this microgrid project is that the school system will be able to power their facilities through the solar installations and also address reliability through the batteries, which will keep lights on at key facilities in case of a power outage.

FERC Order No. 2222

DERs are typically located on an end-use customer’s premises, often installed for purposes of supplying such customer’s retail electric load. However, DERs also have the potential to serve the wholesale bulk power system with appropriately utilized injections and demand elasticity. DERs serving the bulk power system is a step towards creating the grid of the future, which can consist of bi-directional flow of electricity from power plants and DERs in creative and flexible ways. In recognition of this potential, in September 2020 the FERC issued Order No. 2222, which amends FERC’s regulations to remove barriers to the participation of DERs in the wholesale markets. The rule applies to “any resource located on the distribution system, any subsystem thereof or behind a customer meter” above 100 kW and requires grid operators within FERC jurisdiction to include aggregated DERs in market participation models. Order No. 2222 is based on the premise that FERC has jurisdiction over DER activities to the extent they involve injection and sale of energy for resale in the wholesale energy markets.

Interestingly, the Order allows grid operators to set up participation rules designed to avoid market distortions that could arise from DERs participating in both the retail programs and the wholesale markets. The particular concern is that the double participation can allow DERs to earn revenue for the same services simultaneously from utility retail programs and wholesale capacity and energy markets.

Regional transmission organizations (RTOs)/independent system operators (ISOs), distribution utilities, electric retail regulatory authorities, and DER aggregators could face some challenges in the implementation of Order No. 2222. The Order provides RTOs/ISOs with significant flexibility in designing market rules. Such flexibility may result in considerable variations in the rules that each RTO/ISO proposes for DER aggregators in its markets. As a result, market participants that are active in multiple RTOs/ISOs will need to be aware of the differences among the various organized markets and plan and coordinate their participation accordingly.

Conclusion

Order No. 2222 does not offer states the option to opt out of the participation models that ISOs and RTOs create to comply with the Order. This is a good opportunity for states and stakeholders to review retail programs and work towards maximizing the value of DERs. Much thought and discussion will need to go into merging retail programs with wholesale market participation given the complexity of the task. Creative pricing methods that utilize both retail tariffs and wholesale capacity and energy market prices in ways that do not double count services will need to be part of the solution.

* Special thanks to Tom Brill and Greg Lawrence for their valuable assistance in preparing this blog post.

Webinar: The Coming Hydrogen Revolution in Europe: Opportunities and Challenges

Posted in Energy, Events, Featured, Hydrogen, International


Greenberg Traurig, in collaboration with German engineering firm DEEP.KBB and Dutch consulting firm Rebel group, are hosting an insightful discussion regarding the hydrogen revolution in Europe and its business opportunities and practical challenges.

Learn more about this event.

Some Problems With Superfund Settlement Premiums

Posted in Articles, CERCLA, EPA, Featured, Superfund

When a party “cashes out” of its liability to the government under the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), under Environmental Protection Agency (EPA) guidance in place since 1988 the settling party typically pays a premium over what would otherwise be its equitable share. Even though settlements have featured premiums for decades, parties often do not consider issues that they present.

Continue reading the full column.

Webinar: Renewable Energy in Latin America – An Industry Update

Posted in Energy, Environment, Events, Featured, Latin America, Renewables

On Nov. 5, 2020, at 11 a.m. CST, join Greenberg Traurig, in collaboration with Rubicon Capital Advisors, for a webinar on the current renewables climate in Latin America, with a focus on Chile and Colombia.

Guest speakers include: Invenergy LLC’s Gabriel Monroy, VP of Finance & Capital Markets; Patricia Tatto, ATA Renewables’ VP of America; and Maria Jose Ugalde, Business Development Manager of Statkraft. GT’s Global Head of Energy Project Finance, Jeff Chester will serve as moderator while GT Shareholder Erick Hernandez will serve as a panelist. Rubicon Capital Advisors Managing Director, Santiago Ortiz Monasterio, will be a co-moderator and Rubicon’s Columbia-based Managing Director, Andres O’Byrne will serve as a panelist.

Topics include:

  • Legal Frameworks
  • Investment Options
  • Financing
  • Predominant Technologies
  • Major Trends

Click here to register.

New Lawsuit Challenges DOJ Policy Prohibiting SEPs

Posted in Compliance, Court Cases, DOJ, Environment, EPA, Featured, Federal, Federal Regulation, Litigation, Politics, Pollution

The ongoing battle over Supplemental Environmental Projects (SEPs) – environmentally-beneficial, beyond-compliance projects that defendants agree to undertake for potential penalty mitigation in settlement of environmental enforcement actions – heated up last week when an environmental group sued the attorney general and others for violating the Administrative Procedure Act (APA) in issuing a legal memorandum effectively halting the projects.

The last time we discussed SEPs, the United States Department of Justice (DOJ) was challenging a separate agreement entered into between two private parties – that were also parties to a consent decree with the DOJ – that required one of those parties to undertake projects akin to SEPs. That matter is still being briefed (for additional background on DOJ’s new stance on SEPs, see our May 2020 post and September 2019 post).

The United States Environmental Protection Agency (EPA) has supported SEPs since 1984, when the agency issued its first SEP policy. SEPs have enjoyed widespread support from communities and regulated entities alike. But over the past several years, the DOJ has expressed increasing skepticism over the propriety of SEPs, culminating in the issuance on March 12, 2020, of a memorandum entitled, “Supplemental Environmental Projects (“SEPs”) in Civil Settlements with Private Defendants” (SEP Prohibition Memo), prohibiting SEPs in all but a small class of diesel emission reduction projects in mobile source matters. The SEP Prohibition Memo posits that SEPs represent a violation of the Miscellaneous Receipts Act, which provides that a government official “receiving money for the Government from any source shall deposit that money with the Treasury,” subject to certain exceptions.

On Oct. 8, the Conservation Law Foundation (CLF) filed a lawsuit in the United States District Court of Massachusetts (Conservation Law Foundation v. William Barr et al., Case No. 1:20-cv-11827), seeking to vacate the SEP Prohibition Memo and enjoin DOJ and EPA from implementing that policy – as an arbitrary and capricious violation of the APA. In challenging the SEP Prohibition Memo, CLF noted that the EPA and other agencies have long relied on the rationale that because no penalty is owed to the government until a settlement is finalized, including a SEP in settlement agreement does not trade penalties for projects.

The CLF notes that pollution disproportionately harms low income and minority communities, and SEPs have been a tool for reducing those impacts. Jeffrey Clark, the current assistant attorney general of DOJ’s Environment and Natural Resource Division (ENRD) and author of the SEP Prohibition Memo, argues in the memo that despite the safeguards contained within EPA’s SEP policy, SEPs still divert funds that otherwise would have gone to the Treasury to projects benefiting third parties, in violation of the law.

CLF, in its complaint, argues that EPA had implemented robust protocols, through its SEP Policy, to ensure that SEPs met certain criteria to avoid running afoul of the Miscellaneous Receipts Act. That policy, says CLF, has been blessed by the Office of Legal Counsel, as well as by the many courts that have entered consent decrees including SEPs. According to CLF, by misreading the plain language of the Miscellaneous Receipts Act and ignoring the decades of precedent supporting the SEP Policy, DOJ acted arbitrarily and capriciously – and in a manner likely to disproportionately harm low-income and minority communities.

If the upcoming election results in a change in administration, a new attorney general could potentially withdraw the SEP Prohibition Memo and perhaps moot the CLF case. In the meantime, however, the SEP Prohibition Memo will continue to bar SEPs in settlements, until withdrawn or deemed illegal.

 

Technical and Economical Considerations for Hydrogen Storage

Posted in Clean energy, Energy, Featured, Hydrogen

Hydrogen recently has been touted by various political leaders around the world as a clean panacea to the problem of energy storage or heat or electricity. Hydrocarbons traditionally have served that role and have been stored in above-ground tanks and below-ground caverns or geologic formations. Future use of hydrocarbons, however, in some jurisdictions is not politically favored. Electric batteries are an energy storage alternative, but they are limited in capacity, are costly and eventually must be replaced. What about hydrogen? Hydrogen also can serve as an energy-storage mechanism in the form of a gas, as a liquid formed cryogenically, or within a liquid compound, such as in ammonia. There are, however, technological and economic drawbacks. Continue Reading

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