Category: Green Tech

EPA Approves Flint Hills Resources’ Plant For Cellulosic Ethanol Production

On October 12, 2017, Edeniq, Inc., a leading cellulosic and biorefining technology company, announced that Flint Hills Resources, a member of the Biobased and Renewable Products Advocacy Group (BRAG®), received approval from EPA for cellulosic ethanol production at its Iowa Falls ethanol plant.  The 100 million gallons per year plant will use Edeniq’s Pathway technology to produce the cellulosic ethanol and will be eligible to qualify its cellulosic gallons for generating D3 Renewable Identification Numbers (RIN).  Iowa Falls is the second Flint Hills Resources plant, and the fifth overall, to receive approval for cellulosic ethanol production using Edeniq’s technology.  Edeniq announced in December 2016 that EPA approved Flint Hills Resources’ registration of its Shell Rock ethanol plant for cellulosic ethanol production.  According to Edeniq, its Pathway technology “remains the lowest-cost solution for producing and measuring cellulosic ethanol from corn kernel fiber utilizing existing fermenters at existing corn ethanol plants, and has already proven cellulosic ethanol yields of up to 2.5% or higher, as a percentage of its customers’ total volume output.”  Additionally, the technology allows for increases in corn oil production and greater overall ethanol yields.

This post was written by Lauren M. Graham, Ph.D. of Bergeson & Campbell, P.C., ©2017
For more legal analysis go to The National Law Review

What 2014’s Continued IPO Surge Means for Clean Tech and Renewable Energy Companies

Mintz Levin Law Firm

The year 2014 is on track to be the most active IPO marketin the United States since 2000, with the mid-year total number of IPOs topping last year’s mid-year total by more than 60%.[1] There were 222 US IPOs in 2013, with a total of $55 billion raised, and 2014 has already seen 151 US IPOs, for a total of $32 billion, completed by the mid-year mark. The year 2000 (over 400 IPOs) was the last year of a 10-year boom in US IPOs that reached its peak in 1996 (over 700 IPOs).

What does this mean for emerging energy technology andrenewables companies that might be looking to the capital markets? As of mid-year 2014, there have been six cleantech/renewables IPOs, while there were a total of seven in all of 2013. In both years, these deals have represented a relatively small percentage of total IPOs and still do not match the level of activity in the more traditional energy and oil & gas sector.  In 2014, IPOs were completed by a range of innovative companies, including Aspen Aerogels, TCP International and Opower.

Two unambiguously positive developments for clean energy in 2013 and the first half of 2014 have been the strong market for follow-on offerings and YieldCo IPOs. As was the case in 2013, several larger energy tech companies that are already public completed follow-on offerings to bolster cash for growth in 2014. Following in the footsteps of Tesla, SunEdison, First Solar, and other companies who completed secondary offerings in 2013, Jinko Solar (January 2014), Pattern NRG (May 2014), Plug Power (January and April 2014), Trina Solar (June 2014), and several other public companies capitalized on the continued receptiveness of clean-tech capital markets.

Following on successful YieldCo IPOs in 2013 (NRG Yield, Pattern Energy), there have already been three YieldCo IPOs in 2014: Abengoa Yield, NextEra Energy Partners, and, most recently, Terraform Power. The continued growth of YieldCo deals as well as the growing dollar amount of such offerings is an extremely encouraging sign for the energy and clean-tech sector as a whole, signaling a longer-term market acceptance of the ongoing changes in domestic and global energy consumption. The successful public market financings of these companies – whose strategy typically involves the purchase and operation of existing clean, energy-generating assets – should result in increased access to capital for renewable energy generation assets, as well as related technologies and services across the sector.

If the first half of this year is any indication, 2014 should prove to be a strong year for clean-tech and renewable energy companies opting to pursue the IPO path. The IPOs, follow-on offerings, and YieldCo successes that we’ve seen so far should improve the prospects for forthcoming clean-energy IPOs in the second half of 2014 and beyond.  I expect to see more renewable/clean energy companies follow the IPO route and make the most of the market’s continued receptiveness.

[1]  Please note that there will be some variance in the statistics for IPOs generally. This is because most data sets exclude extremely small initial public offerings and uniquely structured offerings that don’t match up with the more commonly understood public offering for operating companies. The data above is based on information from http://bear.warrington.ufl.edu/ritter/IPOs2012Statistics.pdf and Renaissance Capital www.renaissancecapital.com.

ARTICLE BY:

Sahir Surmeli
OF:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C

The North Carolina Senate Passes Energy Modernization Act

Womble Carlyle

When I was a child, and daring, “frack” was my risky substitute cuss word; but not substitute enough…. Well it’s back at the General Assembly this summer as lawmakers set the stage for hydraulic fracturing “fracking” in North Carolina. Opponents claim there is not enough clarity regarding the rights of property owners under which the fracking might occur and not enough public disclosure regarding what chemicals are used in the fracking process. Proponents insist that the revenue and job creating opportunity is too good to delay further and that the state’s Mining Commission can adequately oversee the process.

SB 786 – Energy Modernization Act. Also known as An Act to

(1) Extend the Deadline for Development of a Modern Regulatory Program for the Management of Oil and Gas Exploration, Development, and Production in the State and the Use of Horizontal Drilling and Hydraulic Fracturing Treatments for that Purpose;

(2) Enact of Modify Certain Exemptions from Requirements of the Administrative Procedures Act Applicable to Rules for the Management of Oil and Gas Exploration, Development, and Production in the State and the Use of Horizontal Drilling and Hydraulic Fracturing Treatment for that Purpose;

(3) Create the North Carolina Oil and Gas Commission and Reconstitute the North Carolina Mining Commission;

(4) Amend Miscellaneous Statutes Governing Oil and Gas Exploration, Development, and Production Activities;

(5) Establish a Severance Tax Applicable to Oil and Gas Exploration, Development, and Production Activities;

(6) Amend Miscellaneous Statutes Unrelated to Oil and Gas Exploration, Development, and Production Activities; and

(7) Direct Studies on Various Issues, as Recommended by the Joint Legislative Commission on Energy Policy.

Attempts to amend the bill with stricter water quality and property protections failed. The latest version of the bill is here: http://www.ncleg.net/Sessions/2013/Bills/Senate/PDF/S786v2.pdf

 

Progress on the Western Front in the Solar Net Metering Battle?

 

The ongoing discussion between solar energy stakeholders and utilities concerning the merits of net metering and the best approach to ensure that ratepayers with installed solar power systems contribute appropriately to overall electric transmission and distribution costs spans the nation,  with state utility commissions from Georgia to California considering this issue.  However, nowhere is that discussion presently more heated and more closely watched than in Arizona and Colorado.

After a day of public comments and a full day of discussions with interveners, the Arizona Corporation Commission (A.C.C.) voted 3 – 2 on November 14, 2013 to modify APS’s Net Energy Metering (NEM) program. (A.C.C. Docket No. E-01345A-13-0248)  In brief, the A.C.C. voted to adopt a 70 cent/kW installed monthly charge for ratepayers with rooftop solar.  For the average-sized rooftop installation of 7 kW, this means a monthly charge of $4.90.  The two commissioners who voted against the decision felt that this did not go far enough in addressing the cost shift from NEM.

While the decision is likely to be perceived as a win for the rooftop solar companies, APS and other utilities can take solace in the fact that the Commission recognized that NEM does produce a cost shift and that the grid has value for all customers.  The details of the cost shift, including consideration of the value of the grid, will be the subject of A.C.C. workshops that will take place prior to the next APS rate case.

Prior to the open meeting, it appeared as though the A.C.C. would adopt a solution that would reduce the NEM subsidy based on a formula that took into consideration the lower cost of utility scale solar.  The monthly charge calculated through this formula ranged from $7.00 to $56.00 per month for a 7 kW installation, depending on the individual Commissioner’s proposal.

However, on the morning of the second day of the open meeting, the rooftop solar interveners and the Arizona Residential Utility Consumers Office (RUCO) negotiated a settlement that was the subject of most of the discussion.  This “settlement” proposed a monthly charge of 70 cents per kw installed or $4.90 for a 7 kW system.  While Commissioner Pierce and others mentioned the lower cost of utility scale solar, the final outcome had less to do with addressing the rate-shift and more to do with the amount that the DV industry said that the average customers, who they contend only save $5-10/month, could absorb and still be willing to install a system.  APS opposed the eventual outcome, as did Commissioners Pierce and Brenda Burns.

The following solution was adopted:

Monthly charge.  New rooftop PV customers beginning after December 31, 2014 will be billed a monthly charge of 70 cents per kW installed to help address the rate-shift from solar to non-solar customers.  For the average-sized system of 7 kW, that would mean a charge of $4.90/month.  The charge can be adjusted by the Commission in the future – either up or down – based on the volume of installations.  Reports of rooftop installation volumes will be provided quarterly.  There is no automatic escalation of the charge based on installation volume.  This charge will be added to the rooftop solar customer’s Lost Fixed Cost Recovery (LFCR) fund assessment currently paid by APS customers.  An offsetting reduction will be made to the monthly LFCR assessment currently paid by customers without rooftop solar.

Grandfathering.  Rooftop installations under the current NEM structure will be grandfathered.  There was a long discussion about grandfathering with a general consensus being reached that while any Commission can change any previous decision made, future Commissions were likely to honor grandfathering decisions made by previous Commissions.  Customers who sign up for systems under the new 70 cent charge will be grandfathered if the charge is increased to 80 cents or $1.00, but only until the next rate case in 2015.  Customers who then sign up under any increased charges (e.g., 80 cents or $1.00) will also be grandfathered until the next rate case.  However, all new rooftop customers (post December 2013) will be subject to any changes agreed to in the next rate case.

The NEM issue will be taken up again in the next APS rate case.

While the net metering discussion in Arizona has reached a conclusion – for now, the debate continues in Colorado.

On July 24, 2013, Public Service Company of Colorado (PSCo), Xcel Energy’s Colorado subsidiary, filed with the Colorado Public Utilities Commission (CPUC) its 2014 Renewable Energy Standard Compliance Plan detailing its updated proposal to meet Colorado’s requirement that 30% of PSCo’s retail electric sales come from eligible energy resources by 2020.  (CPUC Docket No. 13A-0836E)  Long recognized for its substantial commitment to wind energy, PSCo’s renewable energy portfolio also includes utility scale solar facilities and various programs designed to facilitate expansion of distributed solar energy installations, including the popular Solar*Rewards® program which has over 15,000 participants and represents more than 160 MW of installed solar capacity.

In its 2014 RES Compliance Plan PSCo proposed adding 42.5 MW of new distributed solar generation, including 36 MW of retail distributed solar generation through the Solar*Rewards® program and 6.5 MW of community solar gardens through the Solar*Rewards® Community program.  At the same time, the company proposed reducing the per kilowatt-hour incentives paid to customers with distributed solar installations.

The more controversial aspect of the utility’s filing related to PSCo’s call for more transparency in the NEM credit paid to customers with installed solar systems and the costs and benefits associated with distributed solar facilities.  PSCo explains that customers with installed solar arrays receive a 10.5 cent credit per kilowatt-hour of electricity they deliver to the grid, however, that electricity only provides 5 cents in benefits to PSCo systems and customers.  While PSCo acknowledges that distributed solar generation allows for some savings associated with fuel costs, energy losses, and the deferral of new generation resources, the utility argues that the NEM incentive paid to solar-owning customers does not adequately consider other costs related to generation, transmission, and distribution, costs that are presently being borne by non-solar customers.  As did APS in the NEM debate in Arizona, PSCo takes the position that the need for and nature of NEM incentives must be reevaluated as the solar industry moves toward becoming self-sustaining.  If the CPUC does not agree with PSCo’s NEM proposals, the utility indicated that it intends to acquire only enough distributed solar generation needed for minimum RES compliance – a total of 12.5 MW.

Solar businesses and trade groups, renewable energy advocates, and environmental groups have strongly opposed PSCo’s analyses and have characterized the utility’s proposal as declaring war on the solar industry.  These stakeholders argue that PSCo’s analyses fail to properly consider distributed solar’s grid, environmental, and job creation benefits.  To that end, the Vote Solar Initiative (VSI) filed a motion requesting that the CPUC sever the NEM issue from PSCo’s RES Compliance docket and conduct a separate, comprehensive NEM cost-benefit analysis.  While VSI’s motion was supported by various other stakeholders, it was opposed by PSCo and CPUC Staff, and was ultimately denied.

An evidentiary hearing on PSCo’s 2014 RES Compliance Plan, including consideration of PSCo’s proposed NEM changes, is scheduled for February 3-7, 2014.  Until then, it is likely that the NEM battle in Colorado will continue both in the CPUC docket and in the public debate concerning the costs and benefits associated with distributed solar generation, how those costs and benefits should be accounted for and allocated, and the continued need for incentives related to this distributed energy resource.

Article by:

Of:

Lewis Roca Rothgerber LLP

Rite Aid to Pay $12.3 Million for Failing to Properly Manage Waste Products from its California Stores

Beveridge Diamond Logo

Rite Aid Corporation has agreed to pay more than $12.3 million to settle a civil lawsuit alleging that Rite Aid improperly managed, transported, and disposed of hazardous waste at hundreds of its California stores and distribution centers.  The hazardous wastes at issue include: pharmaceuticals and over-the-counter medications, bleaches, photo processing chemicals, pool chlorine and acids, pesticides, fertilizers, batteries, electronic devices, mercury containing lamps, paints, lamp oils and other ignitable liquids, aerosol products, oven cleaners and various other cleaning agents, automotive products, and other flammable, reactive, toxic and corrosive materials.

Background

The case against Rite Aid began in 2009 when local environmental health agencies began to investigate Rite Aid facilities’ management of hazardous wastes. Prosecutors, investigators, and environmental regulators statewide conducted a series of waste inspections at Rite Aid stores and local landfills. The inspections revealed that over a six-and-a-half year period, Rite Aid had improperly managed certain hazardous wastes at its facilities, transported hazardous waste without meeting regulatory requirements, and in some cases illegally disposed of hazardous waste in landfills not authorized to accept such waste. On September 17, 2013, fifty-three California district attorneys and two city attorneys filed a joint environmental protection lawsuit against Rite Aid. Pursuant to California Health and Safety Code sections 25516 and 25516.1, the prosecutors brought a civil action in the name of the People of the State of California and sought to enjoin violations of California’s hazardous waste, medical waste, hazardous waste transportation and hazardous materials release response laws and implementing regulations.

The Allegations

The prosecutors asserted that Rite Aid stores engaged in numerous violations of California’s hazardous waste laws and regulations, including:

  • Disposal of hazardous waste at unauthorized points, such a trash compactors, dumpsters, drains, sinks, toilets, Rite Aid facilities, and landfills or transfer stations not authorized to receive hazardous waste, in violation of Health and Safety Code sections 25189 and 25189.2;
  • Failure to determine whether each waste generated at each facility in question as a result of a spill, container break, or other means of rending the product not useable for its intended purpose was a hazardous waste, as required under the California Code of Regulations (“CCR”), Title 22, sections 66262.11 and 66260.200;
  • Transporting or transferring custody of hazardous wastes without a properly licensed and registered transporter, as required by Health and Safety Code section 25163;
  • Failure to dispose of accumulated hazardous wastes from facilities at least once during every 90 day period, as required by CCR Title 22, section 66262.34;
  • Failure to timely file with the Department of Toxic Substances Control (“DTSC”) a hazardous waste manifest for all hazardous waste transported for offsite handling, treatment, storage, disposal or combination thereof, as required by Health and Safety Code section 25160(b)(3) and CCR Title 22, section 66262.23;
  • Failure to contact the transporter or owner/operator of the designated receiving facility to determine the status of hazardous waste in the event of non-receipt of a copy of a manifest with the signature of the owner/operator within 35 days of the date the waste was accepted by the transporter, as required by CCR Title 22, section 66262.42;
  • Treatment, storage, disposal, and transport of hazardous waste without receiving and using a proper EPA or DTSC identification number for the originating facility, as required by CCR Title 22, section 66262.12(a);
  • Failure to maintain a program for the lawful storage, handling and accumulation of hazardous waste, as required by Health and Safety Code section 25123.3 and CCR Title 22, sections 66262.34, 66265.173 and 662165.177;
  • Failure to properly designate hazardous waste storage areas, segregate hazardous wastes, and failure to conduct inspections, as required by CCR Title 22, sections 66262.34 and 66265.174;
  • Failure to comply with employee training obligations for the management of hazardous waste, as required by CCR Title 22, section 66262.34;
  • Failure to have in place at all times a hazardous waste contingency plan and emergency procedures for each facility, as required by CCR Title 22, section 66262.34;
  • Failure to continuously implement, maintain, and submit a complete hazardous materials business plan, as required by Health and Safety Code sections 25503(a), 25504, 25505 and CCR Title 19, sections 2729 et seq.;
  • Failure to immediately report any release or threatened release of a reportable quantity of any hazardous material from any facility into the environment, as required by Health and Safety Code sections 25501 and 25507;
  • Failure to properly manage, mark, and store universal waste in compliance with management standards in CCR Title 22, sections 66273.1 et seq.;
  • Failure to comply with the California Medical Waste Management Act (Health and Safety Code sections 117600 et seq.); and
  • Causing to deposit, without permission of the owner, hazardous substances upon the land of another, in violation of California Penal Code section 374.8(b).

The prosecutors sought civil penalties for each violation and reimbursement of the costs of investigation, enforcement, prosecution, and attorneys’ fees.

The Consent Judgment

On September 24, 2013, Judge Linda L. Lofthus issued an order approving the consent judgment negotiated by the parties. Under the agreement, Rite Aid agreed to fully comply with the Code sections and regulations at issue in the Complaint. Moving forward, stores will be required to retain their hazardous waste in segregated, labeled containers so as to minimize the risk of exposure to employees and to ensure that incompatible wastes do not combine to cause dangerous chemical reactions. The company will continue to designate four full-time employees responsible for environmental, health, regulatory and safety compliance assurance in California. California Rite Aid stores will work with state-registered haulers to document, collect and properly dispose of hazardous waste produced through damage, spills and returns. Moreover, Rite Aid has implemented a computerized scanning system and other environmental training to manage its waste.

Rite Aid agreed to pay $9,500,000.00 in civil penalties pursuant to Health and Safety Code sections 25189 and 25514 and Business and Professions Code section 17206, to the prosecuting and regulatory agencies. Rite Aid also agreed to pay $1,974,000 for certain supplemental environmental projects. Finally, Rite Aid will pay $950,000 for reimbursement of attorneys’ fees, costs of investigation, and other costs of enforcement.

According to the Los Angeles County District Attorney’s Office, Rite Aid was cooperative with prosecutors and investigators throughout the case.

Conclusion

The Rite Aid case reflects continued active enforcement by California’s prosecutors and regulators of the state’s environmental protection laws against retailers related to alleged mismanagement of hazardous wastes. Since 2011, California regulators have secured more than seven multi-million dollar settlements in hazardous waste enforcement actions against large retailers.

Article By:

Of:

Beveridge & Diamond PC

$7B in Contracting Opportunities for Renewable Energy Projects

Recently The National Law Review published an article regarding Renewable Energy Projects written by Stephen E. Ruscus, Kenneth M. Kulak, and Wayne W. Song of Morgan, Lewis & Bockius LLP:

 

U.S. Army issues an RFP to secure locally generated renewable and alternative energy.

On August 7, the U.S. Army Corps of Engineers issued its long-awaited request for proposal (RFP) to procure up to $7 billion worth of locally generated renewable and alternative energy through power purchase agreements and other contractual equivalents. The RFP solicits contractors that can develop, finance, design, build, operate, own, and maintain solar, wind, biomass, or geothermal power generation facilities under energy purchase contracts of up to 30 years.

The RFP calls for the award of multiple indefinite delivery, indefinite quantity (IDIQ) contracts with a base period of three years and seven one-year options (total 10 years). These contracts do not guarantee work and are not project specific. Rather, each contract serves as a “license to hunt,” and the Army intends to award such contracts to all qualified offerors. Individual task orders for specific projects will be issued after qualified contract holders are given a fair opportunity to be considered. To satisfy this requirement, the Army must issue a notice of the task order containing a clear statement of its requirements and allow for a reasonable response period. The winner of each task order will be awarded the work described in the task order’s statement of work.

Project locations are not identified in the RFP but will be specified in subsequent individual task orders. The locations may include private land or installations under the jurisdiction of the Department of Defense located within the continental United States. Renewable energy facilities also may be located on any properties available for use by the contractor that are in the proximity of the location of the federal property for which the services will be provided.

The RFP divides projects into three categories: (1) For projects greater than 12 MW, task order competition will be unrestricted by contractor size; (2) for projects 4 MW up to 12 MW, the contracting officer will consider reserving the task order for small businesses; and (3) for projects less than 4 MW, the task order will be reserved for small businesses. Under the terms of the RFP, a firm is considered small if it is primarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fiscal year did not exceed 4 million MWh.

The RFP and an accompanying “frequently asked questions” (FAQ) document raise several important issues for contractor qualifications and for projects to be constructed under future task orders:

  • The RFP requires all offerors to submit Small Business Participation Plans. It is the Army’s goal to have 50% of the total contract value go to small businesses.
  • The RFP requires contractors to offer a maximum price per kWh, project-specific variables notwithstanding. The figure should be based on an offeror’s estimate of the total cost for development, construction, operation, and maintenance of the renewable energy production facility at a location and size that is “suitable, but not ideal for the technology proposed.” The figure is intended to operate as a ceiling price, and a contractor will not be required to submit a task order proposal on a project exceeding its ceiling price.
  • The RFP includes a most-favored-customer provision stating that, as a general rule, the government will require that its energy unit price under a task order remain equal to or lower than the unit price offered to any other customer with a contract containing substantially similar terms and conditions for power generated at the renewable energy facility or facilities.
  • The RFP includes a government contract clause requiring certifications regarding the country of origin of photovoltaic devices; requiring proof, at certain total estimated values, of a specified price differential between foreign and domestic devices; and prohibiting, at other total estimated values, consideration of offers utilizing photovoltaic devices from certain countries. Other provisions incorporated in many government contracts will also apply (e.g., compliance with Buy American Act and Davis-Bacon Act labor requirements).
  • The RFP FAQ addresses the question of termination liability in the event the government terminates a particular power purchase agreement in accordance with a required Termination for Convenience Clause. Specifically, the FAQ acknowledges contractor concerns and contemplates inclusion, in task orders, of a negotiated floor and ceiling for termination charges as well as additional negotiable elements.
  • The RFP also anticipates issues relating to third-party financing through special purpose entities. It suggests these issues can be addressed through government contract novation of the underlying IDIQ contract to isolate a project for financing purposes and through reissuance of a separate IDIQ contract to the original awardee to maintain that contractor in the contract pool.

Comments on the final RFP may be submitted by August 24, 2012; the Army intends to hold a pre-proposal conference at a date to be announced (tentatively in Chicago). The deadline for submission of proposals in response to the RFP is October 5, 2012.[1]

[1]. The RFP, Attachment A – Table of Max Unit Price Rates, Amendment 1, and FAQs can be accessed at here.

Copyright © 2012 by Morgan, Lewis & Bockius 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 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.

A Brave New World for Commercial Buildings: ASTM's "BEPA" Standard

Recently posted at the National Law Review by Douglas J. Feichtner of Dinsmore & Shohl LLP –   ASTM BEPA standard is expected to become the standard for building energy use data collection. 

On February 10, 2011, ASTM formally published its Building Energy Performance Assessment (BEPA) Standard – E 2797-11. This standard will enable users to measure the energy performance of a commercial building in connection with a real estate transaction. Regulatory drivers spurred the development of the BEPA standard, even in the midst of a construction recession. In the past few years, several states and local governments passed mandatory building energy labeling and transactional disclosure regulations. These disclosure regulations, combined with some building codes that are now requiring specific energy-efficiency improvements, triggered the development of a standardized methodology to assess and report on a commercial building’s energy use. The BEPA’s passage arrives at a crucial time when building certification standards face increased scrutiny, both in the market and the courtroom.

The ASTM BEPA standard includes the following five components: (1) site visit; (2) records collection; (3) review and analysis; (4) interviews; and (5) preparation of a report. ASTM is not creating or implying the existence of a legal obligation for the reporting of energy performance or other building-related information. Rather, the BEPA offers certain guidelines to the industry to promote consistency when collecting (and perhaps reporting) buildings’ energy usage data, such as:

 

  • collecting building characteristic data (i.e., gross floor area, monthly occupancy, occupancy hours)
  • collecting a building’s energy use over the previous three years (with a minimum of one year) – including weather data representative of the area where the building is located;
  • analyzing variables to determine what constitutes the average, upper limit, and lower limit of a building’s energy use and cost conditions;
  • determining pro forma building energy use and cost; and
  • communicating a building’s energy use and cost information in a report

One of the options available to users of the BEPA standard is to identify government-sponsored energy efficiency grant and incentive programs that may be available for any energy efficiency improvements that could be installed at the building (thereby increasing its value, and making it more attractive to potential buyers).

Building benchmarking (i.e., comparing a building’s energy output to its peers) is not part of the ASTM BEPA standard’s primary scope of work, but rather a “non-scope consideration.” The BEPA certainly could be used in conjunction with building certification tools already in the marketplace, such as ASHRAE, Green Globes, and U.S. Green Building Council (LEED), to name a few.

However, as the economic noose has tightened in recent years, green building standards have received increased scrutiny. Indeed, builders and landlords who sell their properties with the promise that they have some green certification (which can be expensive to obtain), and that promise for whatever reason fails to translate to the economic savings contracted for, could face liability.

The Gifford v. USGBC lawsuit currently pending in the United States District Court for the Southern District of New York crystallizes the debate over green building certification (in this case – LEED). The core allegations in the lawsuit prompt this author to see significant value for stakeholders to use ASTM’s BEPA as a supplement to applying rating and benchmarking systems like LEED.

Gifford’s primary complaint is that LEED-certified buildings are not as energy-efficient as advertised. Support for this contention rests on Gifford’s analysis of a 2008 New Buildings Institute (NBI) study comparing predicted energy use in LEED-certified buildings with actual energy use. In the study, NBI concluded that LEED buildings are 25-30% more energy-efficient compared to the national average. To the contrary, Gifford concluded that LEED-certified buildings use 29% more energy than the national average. He further emphasized that the NBI results were skewed in part because the NBI study compared the median energy use of LEED buildings to the mean energy use of non-LEED buildings.

The purpose of this article is not to comment on the merits of the Gifford lawsuit or criticize LEED. But this apples-to-oranges argument articulated by Gifford magnifies the proverbial elephant in the “green” room – the need for sufficient objective data to accurately compare the energy use and energy cost of buildings against their relevant peer groups. With such data in hand, the benchmarking and rating systems already in place can be buttressed with a greater measure of consistency and transparency (a big issue for detractors of green building certification, like Gifford). Furthermore, the more stakeholders in the real estate industry (buyers, sellers, lenders) understand how a building’s energy performance was determined, the better equipped they will be to put a price on the economic and environmental benefits of green buildings.

In sum, the ASTM BEPA standard is expected to become the standard for building energy use data collection. It can be used to quantify a building’s energy use as well as its projected energy use and cost ranges, factoring in a number of independent variables (i.e., weather, occupancy rates), by way of a transparent process. Finally, the BEPA building energy use determination can complement compliance reporting under applicable building energy labeling or disclosure obligations. In the end, ASTM’s BEPA can provide the foundation by which an apples-to-apples comparison can take place in evaluating commercial building energy performance determinations and certifications.

© 2011 Dinsmore & Shohl LLP. All rights reserved.

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