In August Congress passed the Inflation Reduction Act, a landmark climate and clean energy bill. Six months later, we’re asking: where are we now?
Read MoreOn 27 July, Senators Manchin and Schumer announced a deal on the successor to the Build Back Better Act, which is expected to pass in the Senate on Saturday (6 August 2022) and the House the following Friday. This new legislation, called the Inflation Reduction Act of 2022, includes US$370 billion in programs and tax credits to boost renewable energy production in the United States.
That said, page 644 of the draft includes language that ties federal solar, wind and offshore wind development to federal lease sales for oil and gas.
The Details
The section of the bill titled “Ensuring Energy Security” prohibits the Bureau of Land Management (BLM) from issuing rights-of-way (ROW) for wind or solar development on federal land unless an onshore oil and gas lease sale has occurred within 120 days before the wind or solar lease issuance. In addition, these wind and solar ROWs would not be allowed unless, in the previous year, BLM completed onshore oil and gas lease sales covering 2,000,000 acres or 50% of the acreage in which interested parties have expressed interest, whichever is lower. (Note: Wind and solar projects that impact federal land are authorized by ROWs.)
Offshore wind (OSW) is similarly impacted by this provision, as it prohibits the Bureau of Ocean Energy Management (BOEM) from issuing an OSW lease unless an oil and gas offshore lease sale of at least 60 million acres is held during the year before the OSW lease issuance.
The Impact
This section of the agreement is intended to force the Biden Administration to restart the regularly scheduled oil and gas lease sales that it has been cancelling since 2021, while at the same time allowing the Biden Administration to conduct fewer annual oil and gas lease sales than currently required.
The Mineral Leasing Act requires four onshore oil and gas leases per year; the language in this bill requires three onshore oil and gas leases per year, as a prerequisite to solar and wind development on federal land. BOEM offshore oil and gas five-year leasing programs require two offshore oil and gas lease sales in most years; this bill requires one sale per year, in order to allow solar and wind development on federal land.
Furthermore, the acreage requirements for oil and gas sales outlined in the bill are in line with previous sales. And for the onshore oil and gas lease sales, just in case BLM falls shore of the 2,000,000 acre requirement, they can sell leases for 50% of the acreage that parties are interested in.
The Compromise
This Inflation Reduction Act of 2022 is a compromise forged by Senate Democrats with the slimmest of majorities. The Ensuring Energy Security section is Energy and Natural Resources Committee Chair Joe Manchin’s way of requiring an all of the above energy policy for the country.
By: Ruta Skučas, Kimberly Frank, and Maeve Tibbetts
Originally posted on Law360 on January 3, 2022
2021 was a pivotal year for the Federal Energy Regulatory Commission‘s Office of Enforcement. Under the direction of Chairman Richard Glick, the office gained a new director, Janel Burdick, added threats to infrastructure as a new priority, and increased its pace of opening and closing investigations and reaching settlements.
Most significantly, Glick asserted at the presentation of the 2021 enforcement report that “the cop is back on the street,” and that he intends to ensure “vigorous oversight and enforcement” of jurisdictional markets.
Increased Investigations Under Chairman Glick
During the commission’s November 2020 open meeting, when the Office of Enforcement presented its 2020 annual report, then-Commissioner Glick criticized the commission’s enforcement efforts, which he perceived as lacking. In 2020, the commission opened only six new investigations, and reached three settlements totaling $553,376.
U.S. Energy Infrastructure and Resources, Litigation and Dispute Resolution, and Policy and Regulatory Alert
By: Buck B. Endemann, Caitlin C. Blanche, David Wang, Damon M. Pitt
California’s new recyclability law could create liability associated with labeling and packaging issues. On 9 September 2021, the California Legislature overwhelmingly passed “The Truth in Labeling for Recyclable Materials” bill (SB 343), which prohibits the use of the “chasing arrows” symbol (or any other indication of recyclability) on products or packaging that are not deemed “recyclable” under criteria to be established by the California Department of Resources Recycling and Recovery (CalRecycle).1 Governor Gavin Newsom signed the bill into law on 6 October 2021.
COMMERCE EXTENDS INITIATION DEADLINE IN SOLAR CIRCUMVENTION INQUIRIES – NEW DEADLINE LATE NOV
On September 29, 2021, Commerce determined to delay a decision on initiation in the solar circumvention inquiries. Commerce instead asked the US solar manufacturers – A-SMACC (the so-called American Solar Manufacturers Against Chinese Circumvention) – for additional information. In particular, Commerce requested additional information related to why the A-SMACC companies have requested anonymity in the circumvention proceeding. Commerce also requested information regarding the A-SMACC companies’ ties to business interests in China or Southeast Asian countries.
Read MoreTuesday
26 January 2021
3:00 p.m. – 4:00 p.m. ET
Please join K&L Gates for an open conversation with FERC Commissioner Neil Chatterjee, as we discuss energy market trends, infrastructure development, renewables, and the energy transition.
Commissioner Neil Chatterjee was nominated to the Federal Energy Regulatory Commission by President Donald J. Trump in May 2017 and confirmed by the U.S. Senate in August 2017. He served as Chairman from August 2017 to December 2017. He was again named Chairman on October 24, 2018, and served in that role through November 5, 2020.
Since joining the Commission, Chatterjee has championed strategic initiatives reflecting his firm commitment to ensuring that FERC regulations and actions reflect changes in today’s energy landscape. Additionally, Chatterjee has made energy infrastructure a top priority.
Prior to his tenure at the Commission, Chatterjee served as an advisor to Senator Mitch McConnell (R-KY), where he played an integral role in the passage of major energy, highway and agriculture legislation. Chatterjee previously worked as a principal in government relations for the National Rural Electric Cooperative Association and as an aide to House Republican Conference Chairwoman Deborah Pryce (R-OH). He began his career in Washington, D.C., as a staff member on the House Committee on Ways and Means.
A native of Lexington, Kentucky, Chatterjee is a graduate of St. Lawrence University and the University of Cincinnati, College of Law. Chatterjee resides with his wife and three children in Virginia.
The program will be moderated by K&L Gates’ Policy & Regulatory Practice Area Leader, David Wochner, and Power Practice Group Coordinator, Elizabeth Crouse.
Authors: Ankur K. Tohan and Gabrielle E. Thompson
In her opening statement to an August 11 opinion, United States District Court Judge Valerie Caproni writes:
“It is not only a sin to kill a mockingbird, it is also a crime.”
Judge Caproni’s literary reference is the launching point for addressing the matter at hand: the validity of the Department of Interior’s December 22, 2017, Memorandum M-37050, which concludes that the Migratory Bird Treaty Act (MBTA) prohibition on the “taking” or “killing” of migratory birds applies only to deliberate acts intended to take a migratory bird. The M-Opinion announced the Trump administration’s view of the take prohibition in the MBTA, and states that the Trump administration will not seek criminal penalties against individuals and industries —such as oil and gas, as well as renewable energy— for incidentally taking migratory birds. The M-Opinion significantly limited the scope of the take prohibition in the MBTA, reducing the potential liability for development of infrastructure and renewable energy projects.
Judge Caproni writes that Interior’s opinion violates the letter of the law for the past century and contradicts Interior’s long held position that even incidental take or kill of a migratory bird violated the MBTA “irrespective of whether the activities targeted birds or were intended to take or kill birds.” Now, Judge Caproni stated,
“[I]f the Department of the Interior has its way, many mockingbirds and other migratory birds that delight people and support ecosystems throughout the country will be killed without legal consequence.”
Judge Caproni devotes the remainder of her ruling explaining why the M-Opinion violates the Administrative Procedures Act as contrary to law. Judge Caproni rejected Interior’s narrow reading of the statute as lacking support in the plain language of the MBTA. As Judge Caproni explained,
“There is nothing in the text of the MBTA that suggests that in order to fall within its prohibition, activity must be directed specifically at birds. Nor does the statute prohibit only intentionally killing migratory birds. And it certainly does not say that only ‘some’ kills are prohibited.”
While Judge Caproni acknowledged that in drafting the MBTA Congress may have been “principally concerned” about over-hunting, Congress chose not to narrowly draw the prohibition in the statute to intentional take or kill of birds.
The August 11 order vacates the M-Opinion.
By Kimberly Frank, Buck Endemann, Abraham Johns
On July 16, 2020, the Federal Energy Regulatory Commission (“FERC” or “the Commission”) issued two noteworthy electric power orders: the first is a final rule (“Order No. 872”) that updates regulations implementing the Public Utility Regulatory Policies Act of 1978 (“PURPA”);[1] the second dismisses the New England Ratepayer Association’s (“NERA”) petition for a declaratory order on FERC’s jurisdiction over net energy metering sales.[2]
Final Rule on PURPA Update
In September 2019, FERC issued of a Notice of Proposed Rulemaking (“NOPR”) to significantly change how it implements PURPA, a law that applies to small power producers.[3] In Order No. 872, FERC largely adopted the NOPR’s proposed revisions to the Commission’s regulations implementing PURPA sections 201 and 210. Notable changes to the PURPA regulations include: (1) providing additional flexibility to set “avoided cost” rates for qualifying facilities (“QFs”) sales; (2) modifying the “one-mile rule” to allow for consideration that affiliated QFs more than one mile but less than ten miles apart may be at the same site ; (3) revising procedures to challenge initial QF certification and re-certification; (4) revising the threshold from 20 megawatts (“MW”) to 5 MW at which a utility may petition to terminate its obligation to purchase from certain QFs; and (5) requiring states to develop criteria that must be met for a QF to be entitled to a contract or legally enforceable obligation (“LEO”).
Changes included in Order No. 872 will be effective 120 days from publication in the Federal Register. When effective, Order No. 872 will not affect existing contracts, LEOs, or existing certifications for facilities, but will be prospective, applying to new contracts or LEOs, and certifications or recertifications for facilities filed after the order’s effective date.
Dismissal of NERA Petition for Declaratory Order
On April 14, 2020, NERA filed a petition for declaratory order, seeking FERC’s declaration that FERC holds exclusive jurisdiction over wholesale energy sales from behind-the-meter generation[4] and requiring that the rates for such sales be priced pursuant to the Federal Power Act (“FPA”) or PURPA, when applicable. Specifically, NERA asked FERC to declare jurisdiction over energy sales of rooftop solar and other distributed energy resources on the customer side whenever the output exceeds the customer’s demand, or the energy is meant to bypass customer load. NERA characterized “full net metering,” as “a practice through which an electricity consumer produces electric energy from a generation source (most often solar panels) that is located on the same side of the retail meter as the customer’s load.”[5] Historically, the Commission sees such transactions as retail in nature and regulated by the states. NERA argued, however, that the energy exceeding customer demand or bypassing customer load is sold to a utility for resale to customers, making them wholesale sales, and therefore, subject to FERC’s jurisdiction.[6]
The Commission began its analysis with a reminder: “Declaratory orders to terminate a controversy or remove uncertainty are discretionary.”[7] The Commission then used its discretion not to address the issues presented, as they did not “warrant a generic statement” from FERC.[8] The Commission found that NERA never identified “a specific controversy or harm” to be addressed.[9] Further, the Commission found that to the extent NERA is concerned that certain New England state regulatory authorities are not pricing QF sales in accordance with PURPA, the petition did not meet PURPA’s requirements for enforcement.
[1] Qualifying Facility Rates and Requirements Implementation Issues Under the Public Utility Regulatory Policies Act of 1978, 172 FERC ¶ 61,041 (2020).
[2] New England Ratepayers Ass’n, 172 FERC ¶ 61,042 (2020) (“NERA Order”).
[3] Qualifying Facility Rates and Requirements Implementation Issues Under the Public Utility Regulatory Policies Act of 1978, 168 FERC ¶ 61,184 (2019) (“NOPR”).
[4] Behind-the-meter generation refers to energy generated from the customer side of the retail meter.
[5] NERA Order at P 3.
[6] NERA Order at P 4.
[7] NERA Order at P 35.
[8] NERA Order at P 35.
[9] NERA Order at P 36-37.
By: Ankur K. Tohan, Buck B. Endemann, and Tad J. Macfarlan
On April 15, 2020, the Montana federal district court issued an Order in Northern Plains Resource Council v. U.S. Army Corps of Engineers, No. 4:19-cv-00044-BMM (D. Mont.) (NPRC v. Corps) that may have far reaching implications for energy development projects across the United States.
In a case involving the Keystone XL Pipeline Project, the Montana court vacated the U.S. Army Corps of Engineers’ (Corps) Nationwide Permit (NWP) 12. The Court concluded that because the Corps failed to consult under the Endangered Species Act (ESA) Section 7 when it reissued NWP 12 in 2017, the permit is not valid and the Corps may not authorize work under the terms and conditions of NWP 12.
Background, Key findings, and Order
The Corp’s 2017 Reissuance of NWP 12. When the Corps reissued NWP 12 (along with all other NWPs) in 2017, it determined that ESA consultation with the U.S. Fish and Wildlife Service and National Marine Fisheries Service (the “Services”) was not required because the reissuance of NWPs has “no effect” on ESA-listed species or critical habitat.
Court’s Key Findings. The court held that the Corps’ “no effect determination and resulting decision to forego programmatic consultation proves arbitrary and capricious in violation of the Corps’ obligations under the ESA.” The court concluded that the Corps cannot circumvent ESA Section 7(a)(2) consultation requirements by relying on project-level review (e.g., by non-federal entities) under NWP General Condition 18’s preconstruction notification (PCN) requirement. The court reasoned that (1) General Condition 18’s PCN requirement fails to ensure that the Corps fulfills its obligations under ESA Section 7(a)(2) because it delegates the Corps’ initial effect determination to non-federal permittees.
Court’s Order. Based on the court’s findings, the Order (1) vacated NWP 12; (2) remanded NWP 12 to the Corps to initiate consultation now; and (3) enjoined the Corps from authorizing work under NWP 12 until consultation is completed.
Potential Implications if a Motion for Reconsideration or Stay is not Granted
Immediate Impact on Projects with NWP 12 Authorization. The Order creates immediate uncertainty for project proponents needing NWP 12 authorization. If the Order is not stayed or appealed, the Corps could reopen programmatic consultation with the Services, which could take several months or longer to complete and, once completed, may be subject to further litigation. In addition, the Order could be leveraged by other plaintiffs targeting the Corps’ other NWPs that rely on General Condition 18. Given the uncertainty, developers will need to consider their current permitting options, which may include other NWPs, individual 404 permits (which trigger NEPA, NHPA, and ESA), or project redesign to avoid impacts to regulated waters.
Current Status
On April 27, 2020, the Corps filed motions for expedited briefing and consideration for a partial stay of the Order pending an appeal. The Corps’ motion asks the Court to stay “those portions of its April 15, 2020, Order that vacate NWP 12 and broadly enjoin the Corps from authorizing any dredge or fill activities under the permit”; or at “the very least, the Court should stay its vacatur and injunction as they relate to anything other than the Keystone XL pipeline.”
**UPDATE**: On April 28, 2020, U.S. District Court Judge Brian Morris denied the Corps’ motion for a temporary administrative stay of the court’s vacatur, injunction, and remand orders. Judge Morris ordered Plaintiffs and the Corps to complete briefing on an expedited basis by May 8, however, on the Corps’ broader request for a stay pending appeal, which should give permit-seekers and holders additional insight into the immediate future of NWP 12.
**UPDATE May 7, 2020**: On May 7, 2020, Plaintiffs filed their opposition to the Corps’ Motion for Partial Stay Pending Appeal. Significantly, Plaintiffs agree with the Corps to ask the Court to revise the remedy that the was ordered on April 15, 2020. Specifically, Plaintiffs propose that the Court modify these remedies as follows.
(1) narrowing the vacatur of NWP 12 to a partial vacatur that applies to the construction of new oil and gas pipelines, thereby keeping NWP 12 in place during remand insofar as it authorizes non-pipeline construction activities as well as routine maintenance, inspection, and repair activities on existing NWP 12 projects; and
(2) narrowing the injunction to enjoin the Corps from authorizing any dredge or fill activities for Keystone XL under NWP 12. This relief would afford appropriate protection for endangered and threatened species and their critical habitats while minimizing any potential disruption claimed by Defendants.
**UPDATE May 12, 2020**: On May 11, 2020, the Montana District Court issued its ruling on the Corps’ motion to stay the court’s original Order issued on April 15, 2020.
The Court denied the motion to stay Order pending an appeal to the 9th Circuit. However, the Court adopted Plaintiffs’ proposal that the Court revise the scope of remedy in the original Order to apply only to new and gas construction projects. The Court narrowed the scope vacatur and injunction as follows:
**UPDATE June 17, 2020**: On June 15, 2020, the US Solicitor General, on behalf of the US Army Corps of Engineers, filed an application for a stay with the US Supreme Court.
The application seeks a stay of the April 15, 2020, order issued by the United States District Court for the District of Montana (as amended May 11), pending an appeal of that order to the Ninth Circuit Court of Appeals and, if necessary, pending a future appeal to the US Supreme Court.
The Solicitor states that the district court “had no warrant to set aside NWP 12 with respect to Keystone XL, let alone for the construction of all new oil and gas pipelines anywhere in the country.”
The Solicitor points to the fact that when plaintiffs brought the original lawsuit to challenge the Corps’ alleged use of NWP 12, they limited their claims and relief to the use of NWP 12 to authorize construction of the Keystone XL pipeline. According to the filing, plaintiffs expressly disclaimed any request for vacatur of NWP 12, or an injunction, extending beyond Keystone XL itself; and made no “meaningful effort to establish Article III standing to challenge the potential application of NWP 12 to crossings by any other specific proposed pipelines.” Despite these facts, the Solicitor argues, the district court first vacated NWP 12 on a nationwide basis, and then in an amended order narrowed the scope of vacatur to all new oil and gas projects.
The Solicitor argues that a stay is appropriate because the district court order went well beyond what the plaintiffs original sought, is inconsistent with Article III and traditional principles of notice and equity, and was wrongly decided on ESA grounds. The Solicitor argues that the “Corps reasonably determined that merely re-issuing NWP 12 would have no effect on listed species or critical habitat — and therefore did not trigger any consultation requirement under the ESA — because the regulatory scheme and conditions in NWP 12 ensure that any necessary consultation occurs on an activity-specific basis.”
The US Supreme Court is evaluating the application.
**UPDATE July 6, 2020**: On July 6, 2020, the U.S. Supreme Court ruled that the Montana District Court Order (as amended on May 11) is stayed, except with regard to the Keystone XL pipeline. Until the Ninth Circuit issues a ruling on the appeal — and any subsequent appeal to the U.S. Supreme Court — of the District Court Order by the U.S. Army Corps of Engineers, the order remains in effect for Keystone XL but does not apply to other entities or parties.
Authors: Rhys W. Hefta, Craig S. Trueblood, David L. Benson, Kari L. Larson
Commercial property owners in the state of Washington may soon have access to a new source of funding for energy efficiency, renewable energy, and resiliency improvements to their buildings. Washington’s C-PACER legislation (House Bill 2405), passed by the legislature during the 2020 regular session, went into effect 11 June 2020. The C-PACER program aims to address the significant needs for property owners to finance energy efficiency upgrades, renewable energy improvements, stormwater management, water conservation, and resiliency retrofits to address vulnerabilities to earthquakes and other natural disasters.
The state and many local governments across the country are imposing new requirements on the owners of existing buildings to reduce water and energy consumption, control stormwater runoff, minimize damage from earthquakes, and convert to renewable sources of energy. These types of building improvements often have high up-front capital costs and long cost-recovery periods. This combination has inhibited investment by property owners who may not plan on holding an asset long enough to see the benefit of these improvements.
With the enactment of the C-PACER program, Washington joins 36 other states that have enacted some form of property assessed clean energy legislation (20 of which have current active programs). Washington’s C-PACER program, like some other states, relies on private rather than public financing. Unlike traditional private financing models, C-PACER loans are not personal debt obligations. Rather, the C-PACER loan is repaid through a voluntary assessment on the improved property that runs with the land and is secured by a super-priority lien. Accordingly, the obligation to repay the C-PACER loan remains with the property regardless of any transfer of ownership. Because of this unique structure, C-PACER loans can allow for a much longer repayment period than traditional financing options. In addition, the super-priority of the lien allows for lower interest rates. In theory, the longer term and beneficial rate will improve the ability of the owner to repay the C-PACER loan, as the owner actually accrues the benefit of savings on utility bills, lower insurance premiums, and other operating cost reductions from the improvements.
The following is a brief summary of the key information to know about the C-PACER program.
Is the C-PACER Program Available Statewide?
The C-PACER program is a voluntary program that is to be managed on a statewide basis by the Washington Department of Commerce (though a C-PACER program guidebook is not expected this year as a result of COVID-19). Once established, each county must opt into the program on a voluntary basis. However, counties are not required to wait for the statewide program. Each county is empowered to establish its own program in compliance with the requirements of the state legislation. Accordingly, availability will vary by jurisdiction. No counties have yet adopted a program.
What Properties Qualify?
Under the C-PACER program, owners of agricultural, commercial, and industrial properties are eligible to obtain financing for qualifying projects. The C-PACER program also applies to owners of multifamily residential properties with five or more dwelling units. Eligible property may be owned by any type of business, corporation, individual, or nonprofit organization permitted by state law. However, as noted above, individual counties have broad discretion to establish their own program within the parameters of the state legislation and could limit the types of properties that qualify.
What Projects Qualify?
C-PACER financing is available both for qualifying improvements to existing commercial buildings and new construction. Qualified improvements include, among others, solar panels, high-efficiency heating and cooling systems, insulation and other improvements that address safe drinking water, or those that decrease energy or water consumption or demand through efficiency technologies, products, or activities. Improvements that support the production of clean, renewable energy, including a product, device, or interacting group of products or devices on the customer’s side of the meter that generates electricity, provides thermal energy, or regulates temperature, would also be deemed qualifying improvements. Likewise, improvements that increase resilience are also qualified improvements. Examples of resilience improvements include seismic retrofits, flood mitigation, stormwater management, wildfire and wind resistance, energy storage, and microgrids. The inclusion of resiliency improvements is a feature of the Washington legislation that is not found in other jurisdictions and may be of particular interest for owners of unreinforced masonry buildings and other properties in need of seismic improvements.
How Is the C-PACER Loan Repaid?
As discussed above, C-PACER loans are repaid by a voluntary assessment on the improved property, secured by a lien in favor of the county, which is then immediately assigned to the C-PACER lender. The lien is second only in priority to the lien for unpaid taxes. Once a C-PACER loan is advanced, the administration of the C-PACER loan (including enforcement) is done by the private lender. After the adoption of a C-PACER program, a county’s role is limited to the approval of an assessment and recordation of a C-PACER lien, as well as to the administration of the C-PACER program (which may be contracted out to a private third party).
Who Makes the C-PACER Loans?
Subject to compliance with generally applicable licensing requirements, any private entity can make a C-PACER loan.
What Is the Impact for Holders of Mortgages on the Property?
Because the lien of a C-PACER loan is superior to all other debt obligations other than unpaid taxes, written consent of any existing mortgagee or other holder of a security interest in the real property is required before an owner can obtain a C-PACER loan. Note that the super-priority nature of C-PACER loans may be objectionable to mortgage lenders (and, in fact, some lenders expressly prohibit borrowers from obtaining any such loans).
How Is the C-PACER Lien Enforced?
The private lender is responsible for collection and enforcement of delinquent C-PACER liens or C-PACER loan installment payments. The C-PACER lien is enforced by the lender in the same manner that the collection of delinquent real property taxes is enforced by the county under chapter 84.64 RCW, including the provisions of RCW 84.64.040, with minor exceptions.
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