Category: Energy Law

California and Florida Lead Trend of New State-Level Iran Sanctions

Posted this week at the National Law Review by Reid Whitten  of Sheppard, Mullin, Richter & Hampton LLP a good summary of recent  state legislation targeting potential contractors that deal with Iran.  

On June 2, 2011, Florida Governor Rick Scott signed a new state law prohibiting Florida government entities from contracting with companies invested in Iran’s petroleum energy sector.  Florida’s law, and a similar California law that went into effect on June 1, 2011, announce a coming trend of state laws targeting potential contractors that also deal with Iran.  These two laws, and several others on the horizon, present pitfalls for unwary companies as well as unique opportunities for informed, well-advised businesses.

On July 1, 2010, President Obama signed the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”) into law.  CISADA targets companies invested in Iran’s petroleum sector through provisions prohibiting the U.S. Government from contracting with such companies.  CISADA also permits the states to enact similar prohibitions against state contracts with companies invested in the Iranian petroleum sector.  Within months of enactment of the U.S. law, California and Florida passed their own laws, citing the desire to put further economic pressure on such companies. The legislatures of Oregon, Kansas, and other states are considering similar actions. Arizona also has a prohibition on contracting with companies invested in Iran that became law as part of a 2008 divestment act. Companies, particularly non-U.S. companies, intending to bid on state government contracts need to pay close attention to individual state statues, and review their own investments for connections to Iran’s petroleum energy sector.  U.S.-organized companies are unlikely to have such investments because (except in very narrow circumstances) the pre-existing U.S. economic embargo against Iran prohibits them.

On September 30, 2010, California passed the Iran Contracting Act of 2010 (“California Act”) requiring, among other actions, that the California Department of General Services compile a list of persons or companies involved in business or investment activities in Iran.  The California Act also declares that any person identified as having business or investment activities of $20 million dollars or more in the energy sector of Iran “is ineligible to, and shall not bid on, submit a proposal for, or enter into or renew, a contract with a public entity for goods or services of one million dollars ($1,000,000) or more.”  See Cal. Pub. Contr. § 2203(a)(1) (West 2010). Companies that are notified of their designation as doing significant business in Iran’s petroleum energy sectors must demonstrate to the government’s satisfaction that they should not be so designated. If they fail to do so, they will be subject to the contracting prohibition.

Similarly, the Florida Scrutinized Companies law (“Florida Act”) will take effect July 1, 2011. Under a 2008 Iran divestment act, Florida’s State Board of Administration maintains a “Scrutinized Companies with Activities in the Iran Petroleum Energy Sector List” (“Scrutinized Companies List”). The Florida Act prohibits a Florida state agency or local governmental entity from contracting for goods and services of more than $1 million dollars or more with any company on the Scrutinized Companies List.

The Florida Act requires contractors to certify that they are not on the Scrutinized Companies List before submitting a bid for, entering into, or renewing a contract with, a state agency or local government entity. In addition, any contract entered into or renewed on or after July 1, 2011 must contain a provision allowing for termination of that contract if the company is found to have submitted a false certification. Further, the bill would require the Florida state government to bring a civil action against any company that does not disprove a determination of false certification within a specified time.

The state laws present both a concern and an opportunity for contracting companies. Concerns, in particular, arise because states lack substantial experience in administering international sanctions policy. As a result, Companies may be mistakenly designated as a business significantly invested in Iran’s energy petroleum industry. Individual state resources, already spread thin, may not provide the means accurately to designate the correct companies falling under the new laws’ prohibitions. States are likely to borrow names of possible target companies from Federal CISADA actions and from one another, sometimes without independently verifying the alleged reasons for designating a company. Additionally, we have seen instances of private groups (such as human rights and anti-nuclear activists groups) distributing inaccurate lists of companies alleged to be violating CISADA.

Contracting companies may be presented with an opportunity, however, to get ahead of this trend of state sanctions in a number of ways. If a company receives notice that it is under scrutiny from one state, that company and its counsel can prepare a response that is both tailored and general;  a response that not only answers the initial notice but that can also be repeated to respond to any other notices it might receive from other states in the future. Companies may also have opportunities to communicate with the state administrators of these new laws about their application. Many of these administrators may not have extensive substantive experience with international sanctions policy;  therefore, companies and their counsel, particularly counsel with experience in international sanctions work, would be in a strong position to discuss with state officials the laws and the means of implementation.

Companies intending to contract with any state agencies need to pay close attention to the changing landscape of state-level sanctions laws and remain aware of the continuing risks and opportunities that landscape presents.

Copyright © 2011, Sheppard Mullin Richter & Hampton LLP.

 

Bill Allowing More Offshore Drilling Introduced to Congress

Posted today at the National Law Review by Sabrina Mizrachi of Greenberg Traurig, LLP – news on the Infrastructure Jobs and Energy Independence Act introduced in Congress yesterday……

The Infrastructure Jobs and Energy Independence Act was introduced on May 12, 2011, and seeks to allow more offshore drilling in order to reduce U.S. reliance on imported fuels and create jobs. The bill was introduced by a bipartisan group of four congressmen, Democrats Jim Costa of California and Tim Walz of Minnesota in collaboration with Pennsylvania Republicans Tim Murphy and Bill Shuster.

The bill contains no new taxes or increase of existing taxes, and would allow drillers to reach natural-gas reservoirs that could fuel industry in the U.S. for 63 years and the U.S. oil industry for 80 years, and also create 1.2 million jobs per year.

©2011 Greenberg Traurig, LLP. All rights reserved.

EPA, Clean Air Act & Climate Change: Consider the Facts

This week’s guest blogger at the National Law Review is Jon D. Sohn of  McKenna Long & Aldridge LLP.  Jon provides a great overview of some recent hearings and proposed legislation impacting greenhouse gas regulations at both the state and federal levels:

The U.S. Environmental Protection Agency (EPA) has taken a lot of hits from those opposed to greenhouse gas regulations in the past week.  In the House of Representatives, tough hearings led by U.S. Rep. Ed Whitfield, (R-KY), Chairman of the House Subcommittee on Energy, were held with EPA Administrator Lisa Jackson. Jackson’s testimony followed that of lead witness Senator James Inhofe (R-OK) who promoted his upcoming book, “The Hoax,” which takes aim at the science of climate change.  The House subsequently passed an amendment to the proposed Continuing Resolution that would strip EPA of its authority to regulate GHG emissions and significantly decrease funding for environmental and clean energy programs. Meanwhile, outside of Washington, D.C., the first two permits considered by EPA suggest cleaner facilities and job creation can be compatible with new regulations as opposed to some of the concerns expressed in the hearings and continuing resolution.

This past week, South Dakota issued a draft permit for Best Available Control Technology for greenhouse gases under the Clean Air Act (CAA) to the Hyperion Energy Center. Project owners describe the facility as a “HEC is a 400,000-barrel per day (BPD) highly-complex, full-conversion refinery which will produce clean, green, transportation fuel such as ultra-low sulfur gasoline (ULSG) and ultra-low sulfur diesel (ULSD).” South Dakota regulatory officials found that significant energy efficiency improvements to the refinery were the most cost-effective manner to move forward.  The officials considered carbon capture & storage as an alternative path, but decided that while the technology is technically feasible it is not cost-effective or environmentally appropriate in this instance.  EPA will now have 30-days to review the decision, but don’t expect any radical changes to the State-level decision. Construction will create an estimated 4,500 jobs and when finished, 1,826 permanent jobs will be created for the ongoing operation of the refinery and associated utility plant according to company officials.

In Louisiana, State regulators recently approved an air quality construction and operating permit that includes emissions control requirements for greenhouse gases as well.  The permit clears the way for an iron production facility, the initial phase of the construction of a larger Nucor iron and steelmaking facility in St. James Parish. Under the permit granted, the greenhouse gas limits rely on energy efficiency measures and set a 13 million British thermal units of natural gas per metric ton of direct reduced iron. State regulators estimate the plant will emit 3.39 million metric tons of carbon dioxide per year.  500 construction jobs and 150 permanent jobs will be created according to Nucor, although they would like the facility to be larger and note regulatory uncertainty as a cause of concern. On the other hand, some environmental groups including the Tulane Law Clinic may challenge that the permit is not strict enough. EPA will now conduct a review here as well.

Congress would be well-advised to consider these case studies as it moves forward in its deliberations.

© 2011 McKenna Long & Aldridge LLP

EPA Redefines “Solid Waste” to Incentivize Creative Fuel Technology: Garbage to Gold

Recent Guest Blogger at the National Law Review  Kim K. Burke  of  Taft Stettinius & Hollister LLP highlights how the EPA recently changed the definition of Solid Waste and how this can lead to new fuel technology: 

Since the Resource Conservation and Recovery Act (RCRA, 42 U.S.C. §6901, et seq.) first became law, consternation among the regulated community has grown as a principal purpose of RCRA, namely, to encourage discarded material reuse as fuel, appears to have been ignored in EPA’s rulemaking.  Perhaps that discouraging trend is coming to an end.  On February 21, 2011, EPA released a pre-publication version of a proposed Final Rule amending the definition of “solid waste.”  What is particularly encouraging about the Final Rule is that innovative technologies for creating fuels from materials that would have previously been characterized as a “solid waste” are excluded from the definition.  This opens the door to creative technologies to transform municipal garbage into useable fuels for utilities and industrial boilers.  Not only does this technology reduce the amount of precious landfill space being consumed by valuable organic material, but it also offers the prospect of reduced and more easily controlled emissions from industrial boilers and fossil-fueled electric utilities that promise to be large consumers of this significantly cheaper, high BTU content fuel.

In this Final Rule, EPA spells out how previously discarded non-hazardous secondary materials may be used in combustion units for fuel.   40 CFR §241.3(b)(4).  The Final Rule is careful to spell out the criteria for assuring the “legitimacy” of the non-hazardous secondary materials which are used as “fuel” or “ingredients” in combustion units.  40 CFR §§241.3(d)(1) and (d)(2).  With this change in approach by EPA to encourage development of fuels from discarded materials, entrepreneurs in the wings with off-the-shelf recycling technologies are now given EPA’s blessing to pursue a green solution to some of our country’s energy and emission reduction problems.

Copyright © 2011 Taft Stettinius & Hollister LLP. All rights reserved.

April 8-10 the First Annual Young Professionals in Energy International Summit takes place in Las Vegas, Nevada

Young Professionals in Energy (“YPE”) is the first and only interdisciplinary networking and volunteer organization for people in the global energy industry – a place where bankers can connect with engineers, accountants with geologists and so on.  Their mission is to provide a forum for knowledge sharing and camaraderie among future leaders of the energy industry. This April 8-10, the first annual YPE International Summit takes place in Las Vegas, Nevada at the Tropicana Hotel, bringing together over 10,000 members and over 40 chapters for the energy’s industry’s biggest networking event of the year.  

The Young Professionals in Energy International Summit has been approved by the Nevada Board of Continuing Legal Education for 6.0 credits Continuing Legal Education  Attorneys and judges who attend this activity may claim up to the maximum credits indicated based on actual attendance at the event, to be held April 8-10, 2011 .

March 1st is the last day to save $50 on registration! For more information and to register – please click here:


EPA Defers GHG Permitting Requirements for Biomass Industries

An update from the National Law Review’s friends at Michael Best & Friedrich, LLP – Linda Bochert, Michelle Wagner & Anna Wildeman:  

In a move designed to encourage clean energy and the use of biomass as a fuel, on January 12, 2011, the U.S. Environmental Protection Agency (“EPA”) announced a 3-year deferral of the newly enacted Greenhouse Gas (“GHG”) permitting requirements for biomass-burning industries and other biogenic sources.

Effective January 2, 2011, large GHG emitters – e.g., power plants, refineries – must obtain air permits and implement energy efficiency measures or cost-effective technologies to reduce GHG emissions when building new facilities or making major modifications to existing facilities.  EPA plans to complete the rulemaking to implement the deferral of the GHG permitting requirements for biomass-burning industries and other biogenic sources by July 2011. To cover the six-month gap until the deferral rule becomes effective, EPA is expected to issue guidance allowing state and local permitting authorities to conclude that the use of biomass is the best available control technology for GHG emissions.

EPA is implementing the deferral to enable it to seek and consider scientific research on carbon dioxide (“CO2”) emissions from biomass sources, including evidence that biomass based energy generation can be carbon-neutral. During the deferral period, EPA will seek input from other governmental agencies as well as from independent experts. EPA will also consider more than 7,000 comments it received from its July 2010 “Call for Information,” requesting public comment on approaches to account for GHG emissions from biomass-burning sources. Before the three year deferral ends, EPA expects to develop a second rulemaking that addresses how GHG emissions from biomass-burning and other biogenic sources should be treated under the Clean Air Act GHG permitting requirements.

In a separate, but related matter, EPA notified the National Alliance of Forest Owners (“NAFO”) that the agency will grant NAFO’s petition to reconsider the portion of EPA’s “Tailoring Rule,” finalized this past May 2010, which addresses the treatment of biomass carbon emissions. The biomass industry at large, including NAFO, was taken aback when EPA finalized its Tailoring Rule without any exemption for biomass-burning facilities.

© MICHAEL BEST & FRIEDRICH LLP

Assessing Your Current Leases for Implementation of LEED®

Recently featured on the National Law Review as a featured blogger Hannah Dowd McPhelin of Pepper Hamilton LLP reviews some things to look for in your company’s leases as related to LEED  implementation. 

If you are the owner of a multi-tenant commercial building and you are considering implementing LEED or another green building rating system, consider these four aspects of your existing leases before making the leap.

First, what costs associated with new sustainability efforts can be shared with the tenants?  A threshold issue in your decision to implement new measures will likely be cost and whether any of the cost can be shared with tenants.  Take stock of what expenses are permitted to be passed through to tenants under the current leases.  In particular, consider the treatment of capital expenditures and similar “big ticket” items.  A lease may allow at least some of the cost (perhaps on an amortized basis) of capital expenditures that are energy saving devices to be shared.

Second, what latitude do you have to impose new operational procedures on the current tenants?  A common example of a new operational procedure is a recycling program.  A good rules and regulations provision will be helpful here because it may allow you to stretch the four corners of the lease a bit to add new sustainability measures and ensure tenants’ compliance.  If you are planning to pursue certification or recognition through LEED or another green building rating system, then this will be an important consideration as the tenants’ compliance and cooperation may mean the difference between achieving certification and not.

Third, where will sustainability defaults fit into your leases’ current defaults and remedies provisions?  With respect to sustainability measures that are law, it is often appropriate for you to mandate tenants’ compliance.  For those measures that are not yet law, consider whether your tenants have an obligation to comply under the leases and when noncompliance becomes a default.  It is likely that any noncompliance would be a covenant default, which may be subject to a longer notice and cure period.  Practically, consider what remedies you are willing to exercise for noncompliance with sustainability measures.

Fourth, which party will reap the benefits of any rebates, credits or other incentives that accrue due to the new sustainability efforts?  Often, a standard lease form will not address the allocation of these items.  It is often assumed that the landlord receives the benefit but consider your tenants’ contributions to your sustainability efforts and also consider that for tax purposes and otherwise each party may benefit more from certain incentives.

Finally, and perhaps most importantly, you must communicate with your tenants and they must buy in to this process.  It will make the implementation of sustainability measures infinitely easier if your tenants are on board and enthusiastic – involve them early and often so they can share in the success of your building’s transformation.

Copyright © 2010 Pepper Hamilton LLP

About the Author:

Ms. McPhelin is an associate with Pepper Hamilton LLP, resident in the Philadelphia office. Ms. McPhelin concentrates her practice in real estate matters and other business transactions, including the acquisition and sale of commercial real estate properties and leasing of office, retail, warehouse and industrial space, representing both landlords and tenants. She is a LEED® (Leadership in Energy and Environmental Design) Accredited Professional and a member of the firm’s Sustainability, CleanTech and Climate Change Team.  215-981-4597 /www.pepperlaw.com

Renewable Energy Financial Incentives: Interested Parties Scramble for More Time

The National Law Review’s featured guest bloggers this week are from Pepper Hamilton LLP.  Jane C. Luxton provides a ‘heads up’ on important deadline which is quickly approaching.  Read on:  

When Congress passed the American Recovery and Reinvestment Act – familiarly known as the “stimulus bill” or “ARRA” – in 2009, it specified that funding would expire on September 30, 2011.  Any project not “shovel ready” by that date is out of luck, and application deadlines for available money fall due even earlier.  Renewable energy funding under ARRA comes principally under Department of Energy loan guarantee programs and Treasury Department grants in lieu of existing tax credits.

Originally, DOE established a cutoff date of August 30, 2010, for part 1 applications for the multi-billion dollar loan guarantee fund for commercial-scale renewable energy projects added under ARRA as Section 1705 of the Energy Policy Act of 2005.  Giving away all that money turned out to be harder than expected, however, and under pressure from critics, DOE recently extended its deadlines, but not by much.  It is possible further extensions will occur, but for now applications for renewable energy generation projects must be filed by October 5, and for proposals based on manufacture of renewable energy components, by November 30.  Further, DOE recently clarified that only large projects will qualify for manufacturing grants:  those totaling $75 million or more.  Details are available at  http://www1.eere.energy.gov/financing/.

Meanwhile, interested parties have secured bipartisan congressional support to extend the Treasury Department program that allows taxpayers to obtain cash grants in lieu of renewable energy tax credits, authorized under Section 1603 of ARRA.  Whether this support is sufficient to win passage in the waning pre-election days of a turbulent Congress is an open question.  Developers, investors, and other interested parties should monitor these developments closely.

While time may be growing short for the ARRA programs, other sources of federal and state incentive money remain available and continue to play a key role in promoting renewable energy deals.

Copyright © 2010 Pepper Hamilton LLP

About the Author:

Ms. Luxton is a partner in the Environmental Practice Group of Pepper Hamilton LLP, resident in the Washington office. She is chair of the firm’s Sustainability, CleanTech and Climate Change Team. Ms. Luxton has practiced for more than 20 years in the field of environmental law, and she is actively involved in climate change and renewable energy matters. 202-220-1437 / www.pepperlaw.com


Considerations for Design Services Agreements for Projects Seeking LEED® or Similar Certification

The National Law Review’s featured guest bloggers this week are from Pepper Hamilton LLP.  Wendy Klein Keane outlines things that need to be considered for LEED® or similar certifications:  

If you are contemplating pursuing certification under the LEED (Leadership in Energy and Environmental Design) Green Building Rating System or another green building code or standard for a construction project, it is important that you integrate these objectives and requirements into your design services agreement. It is equally important that these issues be integrated into the construction services agreement(s) for the project as well, but those issues will be addressed in a future post. As a starting point, you should consider the following questions and ensure that they are covered by your design services agreement.

1) What kind/level of certification are you seeking for the project? While you may not know the precise level of certification that you will obtain, you should include a provision in the contract that identifies the governing standard that has been chosen (or is required) for the Project.

2) Does the agreement permit you to use the instruments of services to obtain that certification? You need to make certain that your agreement with the design professional permits the underlying design documents to be used to apply for and obtain certification, without constituting a breach of the contract or violation of copyright laws.

3) What additional scope of services will be required as a result of seeking LEED or similar certification? Obtaining LEED or similar certification is dependent on not just the design professional’s performance, but also a variety of other factors including the contractor’s performance, the budget, the documentation, and the institution responsible for the certification process. As a result, the agreements for the project should be carefully drafted to make sure that the required scope is correctly and completely allocated amongst the parties. There are currently only a few standard forms that address a design professional’s scope of services for a project seeking LEED or similar certification. One example is the American Institute of Architects (“AIA”) Document B214-2997 (Standard Form of Architect’s Services: LEED Certification) (http://www.aia.org/contractdocs/AIAS076745). Article 2 of the AIA-B214 includes services that could be provided by the design professional for projects seeking LEED certification. The B214 can be modified and made an exhibit to your design services agreement. Another example is the ConsensusDOCS 310, Green Building Addendum, (http://consensusdocs.org/catalog/300-series/), which is appropriate for use on any green building project. You could also review and integrate parts of the LEED Green Building Rating System or other relevant written codes or standards into the agreement. All of these sources are starting points only and must be evaluated and made suitable for your project.

4) How will achieving LEED or similar certification be guaranteed or incentivized in the agreement? Owners and design professionals should consider the risks and benefits of obtaining certification and develop contractual provisions to ensure that the desired certification is obtained. One way to encourage performance is through a liquidated damages provision where the design professional bears some financial responsibility if certification is not obtained due to his or her acts or omissions. Another possibility is to include a bonus payment tied to completing the application process or obtaining actual certification.

These questions touch on only a few considerations that can be integrated into your design services agreement to make certain that the necessary contractual framework is in place to successfully achieve the desired green certification for your project. The specific facts and goals of each project should be considered and included in the design services agreement for that  project.

Copyright © 2010 Pepper Hamilton LLP

About the Author:

Ms. Klein Keane is an associate in the Construction Practice Group of Pepper Hamilton LLP, resident in the Philadelphia office. She also is a member of the firm’s Sustainability, CleanTech and Climate Change Team. She is one of the few attorneys who passed the Green Building Certification Institute’s exam to qualify as a LEED® (Leadership in Energy and Environmental Design) Accredited Professional. Ms. Klein Keane has experience counseling clients through all phases of the construction process on both public and private projects, including contract drafting and negotiation, bidding, contract administration, and litigation and alternative dispute resolution proceedings.  www.pepperlaw.com / 215-981-4982