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.
The U.S. Energy Storage Association (ESA), the national trade association for the American energy storage industry, will recognize K&L Gates with the Brad Roberts Outstanding Industry Achievement Award at the 2020 ESA Annual Awards taking place during the association’s virtual conference next week.
The award recognizes K&L Gates for “its tremendous contributions that have advanced the industry forward including nurturing early storage developers, hosting an annual conference, and developing the widely circulated Energy Storage Handbook.” The ESA determines this award by surveying its members and past award recipients each year to identify a member organization that has made significant contributions in the storage industry.
Read more about the award in the ESA press release.
Join us on June 30, 2020 at 4:30pm EDT for a webinar on the Post-COVID-19 Outlook for renewable energy.
Emerging from the first wave of the COVID-19 crisis, the renewables industry has experienced many positive and negative effects, from enormous job loss to valuable cost reductions, innovation in project development, and an uptick in storage contracts. However, there is still significant uncertainty about what a second wave of lock-downs may bring as well as the effect of the macroeconomic climate on investor appetite.
Our expert panel will share with you what they expect to see in the development and power markets worldwide as well as the hot new trends they see as helping the industry emerge from the COVID-19 crisis stronger and more resilient than ever.
Moderator:
Speakers:
For more information and to register, please click here.
Join us on Wednesday, June 10, 2020, for a CLE presentation on “COVID-19: Perspectives for the “Next New Normal” for Renewable and Utility Companies.”
Companies are seeing unprecedented legal and business impacts due to the COVID-19 pandemic. These impacts are bringing about changes in strategy and how many companies approach their day-to-day business operations to adapt to this new business environment. This one-hour session will involve a presentation by the following K&L Gates attorneys sharing their perspectives on what to consider during the “next new normal.”
Moderator:
Panelists:
This presentation will include the evolving legal and business impacts of COVID-19 in connection with:
This webinar will contain a chat feature in which you can submit questions so that we may tailor this presentation to address your concerns.
To register, please click here.
Please join K&L Gates’ Elizabeth Crouse on the Energy Storage Association’s upcoming webinar, Energy Storage, Trade and China, on Thursday, May 21 from 12:00 PM – 1:00 CDT.
This webinar will explore the key trade and national security policies that currently impact the ESS market in the U.S. and assess their potential impacts on future deployments, including:
• How might regulatory developments under the Executive Order impact storage?
• What might the future hold for tariffs?
• How do these processes play out in an election year?
For more information and to register, please click here.
Author: Elizabeth Crouse
This afternoon, the Office of Legislative Affairs at the Department of Treasury, issued a letter to Charles Grassley, the Chairman of the Senate Committee on Finance, indicating that Treasury intends to issue administrative relief to the solar and wind industries regarding certain investment tax credit (“ITC”) and production tax credit (“PTC”) deadlines. Although the letter does not provide any details as to the nature of this relief, Chairman Grassley’s April 23, 2020 letter to Treasury requested that the four-year safe harbor for the continuous construction and continuous efforts test for the PTC and ITC be extended to a five-year safe harbor period.
Chairman Grassley did not request administrative relief concerning the impact of COVID-19 related measures taken by manufacturers and shipping companies on a customer’s “reasonable expectation” that materials purchased in 2019 would be delivered within 3.5 months after payment. This latter provision is important for purposes for establishing beginning of construction of solar projects in 2019.
By Charles Purcell, Won-Han Cheng, Elizabeth Crouse, and Andrea Templeton
Congress recently enacted the Bipartisan Budget Act of 2018, which contained a number of extenders applicable to tax credits for energy facilities. In the case of PTC-eligible energy facilities that were not covered by the earlier extension applicable to wind and solar, the credit was extended to facilities where construction was commenced before January 1, 2018. This new rule applies to closed and open loop biomass, geothermal, landfill gas, trash, qualified hydropower, and marine and hydrokinetic facilities. In addition, the election to claim the ITC in lieu of the PTC on these facilities was also extended to facilities where construction was commenced before January 1, 2018.
The ITC provisions were amended to extend the “commence construction” dates for 30% credits for fiber optic solar, qualified fuel cell, ground based thermal heating and cooling systems, and qualified small wind energy property to be consistent with solar facilities (terminating at the end of 2021). The Act also extended the “commence construction” dates for 10% credits relating to qualified microturbine and combined heat and power system property (also terminating at the end of 2021). To be eligible for the extension, combined heat and power system property must be placed into service after December 31, 2016.
In addition, the credits for fiber optic solar, qualified fuel cell and qualified small wind project will step down over the next 5 years. It also appears that any such property not placed in service by the end of 2023 will not be eligible for any ITC.
By Buck B. Endemann and Jeff M. Cohen
The federal Renewable Fuel Standard (RFS) requires refiners and importers of gasoline and diesel to blend a minimum volume of renewable fuel into their transportation fuel products. Refiners and importers subject to the RFS must purchase Renewable Identification Numbers (RINs), which are compliance credits traded on a secondary market, to prove that their fuel contains U.S. Environmental Protection Agency (EPA)-required volumes of cellulosic biofuels, biomass-based diesel, advanced biofuels, and total renewable fuel. While the RFS has generated controversy from the moment its first iteration was passed in the Energy Policy Act of 2005, volatile RIN prices and lower fuel demand have more recently prompted refiners to become increasingly vocal in their opposition to the program.
Two recent court rulings and a rulemaking proceeding could contribute to additional uncertainty, at least in the short term. On August 15, 2017, the U.S. Tenth Circuit Court of Appeals potentially expanded the RFS exemptions available to small refineries, a ruling that was followed by lower RIN prices in the secondary market. The RFS has a case-by-case exemption for small refineries that face “disproportionate economic hardship” in achieving compliance. EPA had previously interpreted the exemption to apply only where there existed an existential threat to a refinery’s survival. In Sinclair Wyoming Refinery Company v. EPA, the 10th Circuit rejected EPA’s interpretation, finding that a small refinery could qualify for an exemption if it suffered hardship that was merely out-of-line with that suffered by other small refineries. While the longer term implications of the case are unclear, if EPA grants more small refinery exemptions, fewer entities will be required to purchase RINs, which could potentially depress the market. It is worth noting that the Tenth Circuit broke with other circuits on the standard used to review EPA’s decision, and this case could be taken up by the U.S. Supreme Court.
While Sinclair may reduce the pool of regulated entities required to buy RINs, there is also reason to believe that EPA may require the remaining refiners and importers to blend an increased volume of biofuels into their gasoline and diesel. On July 28, 2017, the D.C. Circuit Court of Appeals struck down an Obama-era reduction in the amount of ethanol required to be blended in the nation’s fuel supply. In Americans for Clean Energy v. EPA, the D.C. Circuit concluded that the EPA had improperly used its “inadequate domestic supply” waiver to reduce blending targets below Congressionally-approved levels. Going forward, EPA will not be able to consider the “inadequate domestic supply” waiver by considering the retail demand for biofuels—the biofuel supply available to refiners, blenders, and importers should instead be the focus of the analysis. Pro-biofuel stakeholders praised the decision, which could result in more biofuels being sold into the marketplace.
These two cases were decided against the backdrop of EPA’s Renewable Fuel Standard Program rulemaking for its 2018 standards and 2019 biomass-based diesel volume. While the annual rulemaking process is used to set volumetric requirements and to consider various waivers, EPA is also presently seeking comment on whether the proposed 2018 biofuel volumes would cause “severe harm” to the economy. EPA is accepting public comments on the rulemaking through August 31, 2017.
Given recent developments, those in favor and those opposed to the RFS should have plenty to say in the rulemaking proceeding. K&L Gates attorneys are continuing to monitor the situation as we guide our clients through important RIN and RFS issues that affect their businesses.
K&L Gates is pleased to congratulate our partner Teresa A. Hill on being named to the National Law Journal’s “Energy & Environmental Trailblazers.” The National Law Journal recognized lawyers across the country that have moved the needle in the energy or environmental space through devising new strategies, pioneering technological advancements, litigating landmark cases, and other innovative initiatives.
Teresa was honored for her work in the cutting edge area of corporate energy sourcing, which helps corporate customers develop and implement sustainability and carbon reduction goals through their energy strategy.
In addition to her work spearheading the K&L Gates Corporate Energy Sourcing Initiative, Teresa focuses her practice in the areas of energy and infrastructure projects and transactions with an emphasis on on wind, solar, biomass, geothermal and hydroelectric power.
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