Renewable Energy Law Insider -

Photo Credit: Larry Downing, Reuters

The votes have been cast and the dust has settled, and it is now clear that Democrats were able to score some significant points in the 2012 election.  For the advocates of wind, solar, and biomass projects across the U.S., however, the key question is what this means for the future of federal renewable energy policy.

President

Of course, the big news of the night was the re-election of President Barack Obama.  President Obama has been a consistent supporter of renewable energy of all types, and has publically endorsed an extension of the vitally important federal Production Tax Credit (“PTC”). 

Governor Romney, on the other hand, appeared to be less enthusiatic about the PTC.  As pointed out in an excellent article by Laura DiMugno in North American WindPower, Gov. Romney stated in July that he was in favor of letting the PTC expire, but then revised that opinion to support a phase-out of the credit at a late-October campaign event in Iowa.  “We will support nuclear and renewables but phase out subsidies once an industry is on its feet.” Romney said.

Fortunately, the uncertainty of the election is now behind us, and with voters showing strong support for Democrats across the board, it is much more likely that President Obama will have the political capital necessary to ensure continuing, consistent support of the various renewables industries.

Senate

With the imminent consideration of the wind energy Production Tax Credit on the immediate horizon, and a more broad evaluation of tax incentives for renewables likely to occur over the next legislative session, it is extremely important that the renewable industries continue to find strong support in the U.S. Senate. With this in mind, taking a broad look, the fact that the Democratic Party has maintained its majority should be excellent news for advocates of renewable energy.

More specifically, renewable project developers have been fortunate to find a number of staunch allies on the floor of the Senate, and for the most part this core of support appears to have remained largely in-tact through the election.  Of particular note, Republican Sen. Scott Brown of Massachusetts (who co-sponsored a bipartisan four-year PTC extension bill) appears likely to lose his bid for re-election, but he will be replaced by Democrat Elizabeth Warren who is likely to share his support for the PTC.  Many other stalwart advocates of renewables, such Sens. Chuck Grassley (IA), Mark Udall (CO), Al Franken (MN) and Ron Wyden (OR), were not up for re-election in 2012.

Additionally, as Ben German of The Hill’s Global Affairs Blog points out, the election also has a significant impact on key Senate committees relating to energy issues.  Of particular importance, Sen. Jeff Bingaman (D-N.M.) is retiring and will step down as Chairman of the Energy and Natural Resources Committee.  Because Democrats retained control of the Senate, the chairmanship will likely pass to Sen. Ron Wyden (D-Ore.), rather than passing to Sen. Lisa Murkowski (R-AK). Sen. Murkowski, who will likely be the ranking member of the Energy and Natural Resources Committee, has said in the past that she is in favor of a phase-out of the PTC.  As quoted by Nick Juliano, Sen. Murkowski has stated “I’m in the camp that says we need to figure out how we phase down, how we transition out, but I’m also not one that just wants to cut it off cold turkey.”

House

Leading up to the 2012 election, Democrats held 190 seats as compared to Republicans 240 seats in the U.S. House of Representatives.  Increasing, or at the very least maintaing, this number is extremely important for the renewable industries, as there are a number of Representatives who are willing to reach across the aisle in support of renewable energy. With this in mind, it is fortunate that voters in the 2012 election appear to have looked favorably upon Democrats.  With a number of races still too close to call as of the time of this writing, it appears very likely that the Democrats will manage to win a few additional seats in the House, but those gains will fall short of taking back control from the Republicans.

Of particular relevance to wind developers, however, is how the most vocal opponents of the federal Production Tax Credit have fared.  In September, 47 House Republicans signed a letter to House Speaker John Boehner asking that the PTC not be extended.  Using those signatories as a representative group of PTC opponents, it appears that the core group of PTC opponents in the House remains largely in-tact.  Specifically, 43 of the 47 signatories were reelected.  Of those four, one successfully ran for Senate (Jeff Flake of Arizona), and three were replaced by Republicans (Jeff Flake, Cliff Stearns of Florida, and Jeff Landry of Louisiana).  Only one signatory of the anti-PTC letter has been replaced by a Democrat, as Joe Walsh of Illinois lost to Tammy Duckworth.

Of course, not all of the excitement yesterday was at the federal level, as renewable project developers also had significant stake in a number of state-level races.  With the continued support key incentives and state Renewable Energy Standards hanging in the balance, these races also deserve some commentary, but that analysis will have to be left for another day.

For all of you who are interested in renewable energy projects in the State of Kansas, I’m pleased to bring you some good news this Monday morning.  The Energy Law Practice Group of Polsinelli Shughart PC (a law firm that I am proud to be a part of) is announcing an ongoing collaboration with the Kansas Energy Information Network (KEIN), a phenomenal informational resource for energy projects in Kansas.  This collaboration is the result of significant work by Alan Claus Anderson and J. Britton Gibson of Polsinelli Shughart and Scott W. White of KEIN and Scott White Consulting.

What does this mean for you?  It means that KEIN will continue to provide the excellent content that has been its staple since 2001, but will also have access to additional resources and analysis from one of the nation’s leading energy law firms.  We are all extremely excited about the potential benefits of this collaboration for everyone involved.

Additional information from the Polsinelli press release is provided below.  If you have any questions or comments, please leave a comment, email me at lhagedorn@polsinelli.com, or seek me out at the Kansas Energy Conference being held this Tuesday and Wednesday in Manhattan, Kansas.

Literally and figuratively, Kansas and Missouri stand at the crossroads of the United State’s quest for an “all-of-the-above” energy policy. Located in the heartland of the United States, these states enjoy abundant access to traditional and renewable energy resources. Just as importantly, the central location of Kansas and Missouri place these states in a critical segment of the national infrastructure that is needed to transport those resources to population centers across the country. With proper planning, these critical investments create an excellent opportunity to create jobs and bolster the economies of communities throughout the region.

Generation and Production

Renewables

With the second best wind resource in the United States, the State of Kansas has made great strides in developing a robust wind industry over the last few years. In 2011 in particular, Kansas boasts eight major wind projects under construction, is set to nearly double its installed capacity in the span of a single year and leads the country in wind project construction.

In Missouri, the most recent successes involve solar energy. Based in large part on a solar carve-out in the state Renewable Energy Standard and a $2.00 per kilowatt rebate for net-metered solar installations, both of which were introduced as part of an overwhelmingly approved 2008 voter ballot initiative, Missouri has enjoyed a recent surge in small to mid-sized solar projects over the last year.

Oil & Gas

As with renewables, the Midwest region is ideally located to reap tremendous benefits from its access to traditional fuel resources. In particular, due to its prime location on the Mississippian Lime Play, Kansas has enjoyed a surge in oil and gas developments across the state. From March to July of 2012 alone, the Kansas Corporation Commission approved roughly 3,000 Notice of Intent to Drill filings.

Transmission & Pipeline Infrastructure

Regardless of whether it is moving north, south, east or west across the country, a significant amount of the electricity, oil, natural gas, or coal produced in the United States will pass through Kansas or Missouri at some point. As a result, it is vital that both Kansas and Missouri adopt well-reasoned policies to ensure that the states can enjoy the economic benefits that come with this infrastructure, and to avoid any bottlenecking of these valuable resources.

Transmission

It is no surprise that the renewable energy being generated in remote locations across the Midwest is only useful if it can be transported to consumers. Fortunately, there are a number of companies currently constructing transmission lines that create a modern, robust electricity grid across the region. These projects include Clean Line Energy’s 700-mile Grain Belt Express Clean Line, Kansas City Power & Light’s and the Omaha Public Power District’s proposed 190-mile Missouri to Nebraska line, ITC Great Plain’s 225-mile KETA Project, and the 122-mile “V-Plan” line being built by ITC Great Plains and Prairie Wind Transmission, a joint venture of Westar Energy and Electric Transmission America.

Pipelines

Just as with the electricity transmission lines, the influx of new oil and natural gas projects across the Midwest have dramatically increased demand for a strong pipeline infrastructure. Both Kansas and Missouri have made great strides in this regard recently. For example, Missouri hosts portions twelve interstate natural gas pipelines, including the largest state-to-state pipeline in the region, the Southern Star Central Gas Pipeline Company’s line. Other notable interstate pipelines include those developed by ANR Pipeline Co., Centerpoint Energy Gas Transmission Co., Mississippi River Transmission Corp., Panhandle Eastern Pipeline Co., and Texas Eastern Transmission Corp.

An Energy Policy for the Future

Whether you look at renewable resources or traditional fuel resources, it is clear that Kansas and Missouri are ideally located to play a national role as both a producer and courier for our nation’s future energy supply. All that is required is a well-reasoned set of policies that ensure that these industries can develop at their full potential, and that local communities that host these developments receive appropriate economic rewards. Standing at this crossroads in our nation’s energy policy, the key question is which paths these states will choose to best secure their place as a key player in the United State’s energy future.

On March 23, 2012 the Interior Department’s U.S. Fish and Wildlife Service (Service), working with the Wind Turbine Guidelines Advisory Committee, released guidelines designed to help wind energy project developers avoid and minimize impacts of land-based wind projects on wildlife and their habitats.  These voluntary Guidelines, which take effect immediately, are designed to provide Best Management Practices for site development, construction, retrofitting, repowering, and decommissioning for wind projects across the country.

A significant portion of the Guidelines are dedicated to providing advice to developers regarding the identification of species of concern that may potentially be affected by the proposed project, as well as the potential impacts that the project may have on those species, including:

 •     Collisions with wind turbines and associated infrastructure; loss and degradation of habitat from turbines and infrastructure;

•     Fragmentation of large habitat blocks into smaller segments that may not support sensitive species;

•     Displacement and behavioral changes; and

•     Indirect effects such as increased predator populations or introduction of invasive plants.

 Additionally, the Guidelines recommend a “tiered approach” for assessing potential impact of a wind project on species of concern and their habitats. As described in the Guidelines:

The tiered approach is an iterative decision-making process for collecting information in increasing detail; quantifying the possible risks of proposed wind energy projects to species of concern and habitats; and evaluating those risks to make siting, construction, and operation decisions.

[ . . . ]

Briefly, the tiers address:

•     Tier 1 – Preliminary site evaluation (landscape-scale screening of possible project sites)

•     Tier 2 – Site characterization (broad characterization of one or more potential project sites)

•     Tier 3 – Field studies to document site wildlife and habitat and predict project impacts

•     Tier 4 – Post-construction studies to estimate impacts

•     Tier 5 – Other post-construction studies and research

Under the Guidelines, developers will work with the Service to identify and avoid and minimize risks to species of concern during the pre-construction phases of the project (Tiers 1, 2, and 3), and then assess the effectiveness of those conservation measures and take additional actions as necessary during post-construction phases (Tiers 4 and 5).

Though adherence to the Guidelines is voluntary and does not relieve any individual, company, or agency of the responsibility to comply with laws and regulations, adherence may be beneficial to developers if a violation occurs.  FWS is permitted to take a developer’s action to comply with the Guidelines into consideration when determining whether a violation has occurred, as well as the severity of any penalties.

A copy of the Guidelines is available on the U.S. Fish and Wildlife Service’s website at http://www.fws.gov/windenergy/docs/WEG_final.pdf.  If you have any questions about compliance with these Guidelines, or about any other statutes and regulations affecting a wind project, please feel free to leave a comment below or contact me directly at lhagedorn@polsinelli.com.

President Barack Obama delivers the State of the Union address in the House Chamber at the U.S. Capitol in Washington, D.C., Jan. 24, 2012. (Official White House Photo by Pete Souza)

On Tuesday, President Barack Obama presented his annual State of the Union address. One of the most interesting topics discussed, at least to my biased ears, was the importance of pursuing an “all-of-the-above” strategy for developing every potential energy resource at the country’s disposal.

While I’m always thrilled when renewable energy policy gets a prominent place in our public discourse, the President’s remarks necessarily only skimmed the surface of the issues that the administration will face when seeking to continue promoting renewable energy in 2012, especially in light of the significant uncertainty caused by the PTC issue.  So, I went digging for more information.  Fortunately for me, the White House has released a “Blueprint for An America Built to Last”, which contains additional information about the President’s energy policy.  This is in addition to the “Blueprint for a Secure Energy Future“ issued by the White House last March.  Boiling these documents down into the main points, it appears that the administration is planning on focusing its renewable energy efforts on the following:

Implementing a federal clean energy standard: During the State of the Union address, I was surprised and pleased to see the President renew the call for a federal Renewable Energy Standard, something which has been introduced numerous times through legislation but has failed to gain any serious traction among the legislators.  We have discussed state-level Renewable Energy Standards at length on this blog, but action taken at the federal level would provide much needed regulatory uniformity and a more robust and consistent REC market, both of which would make it quite a bit easier for projects to get financing from risk-averse lending institutions.

Targeted tax incentives: The President briefly called upon Congress during the State of the Union to “[p]ass clean energy tax credits.  Create these jobs.  We can also spur energy innovation with new incentives.”  The most obvious example of a program that needs a life-line from Congress is the Production Tax Credit originally set forth by Section 1603 of the American Recovery and Reinvestment Act of 2009.    These credits have been a major driver of project financing for the last few years, and the uncertainty surrounding their extension has put a major damper on the number of projects in the pipeline past 2012.

Opening public lands:  Community-level opposition has long been an obstacle that many renewable projects have faced.  President Obama’s energy plan seeks to assuage some of this resistance by opening up sizable tracts of public lands to renewable developers.  To this end, the President has directed the Department of the Interior to commit to issuing permits that will enable the generation of 10 gigawatts of renewable generation capacity.  Of course, projects that are developed on these lands will also introduce additional regulatory burdens, including compliance with the National Environmental Policy Act (“NEPA”).

Powering the U.S. military with renewable energy: During the State of the Union, President Obama announced that the Department of the Navy will make a 1 gigawatt renewable energy purchase.  As the largest consumer of goods and services in the world, the Federal Government consumes an enormous amount of energy.  Additionally, the government often asserts requirements upon its agencies and departments to take into consideration societal benefits rather than pure price points when making its purchasing decisions, as is seen through the “Buy American” mandates and small and disadvantaged business requirements in federal procurement.  Ultimately, as far as the renewable industries are concerned, the more heavily-invested the various departments and agencies become in renewable energy, the better.

Ultimately, the President’s energy plan will not guarantee a bright future for renewable energy, but such guarantees are exceptionally rare in the business world (if you know of any, my contact information is below).  The key question that must be answered is whether or not this plan will incentivize the development of renewable projects.  To answer that question, we have to take a step back and look at the plan’s impact on the most significant risks that all renewable projects face, such as:

1.) Finding land for the project, and overcoming any community-level resistance.  The President’s plan reduces this risk by opening up public lands for development.

2.) Finding buyers.  The plan would increase the number of buyers by implementing a federal renewable energy standard and allowing the federal government to be a major consumer of renewable energy.

3.) Making a profit.  If tax incentives are increased, projects make more money.  Additionally, introducing a federal RES and opening up a federal REC market could potentially increase profits.

4.) Acquiring financing.  Lenders don’t like to lend money to risky ventures.*  However, by decreasing the risks discussed above, the President’s plan should increase the level of financing available to new projects.

* stunningly insightful analysis, I know, but you get what you pay for.

Taken as a whole, this plan appears to address a number of key areas of risk that renewable developers face over the life of their projects and this should help the various industries as they continue to grow.

Now, if only we could convince the federal legislature . . .

If you have any questions or comments about the information discussed above or about renewable project development generally, please feel free to leave a comment below or contact me directly at lhagedorn@polsinelli.com.