Tag: wind energy

Nigeria’s Energy Sector: Looking Back at 2022 and Looking Ahead in 2023

We review the key events of 2022 in Nigeria’s energy sector – a year that saw significant steps in the implementation of PIA, intermittent M&A activity and the continuing effects of crude theft. We also consider what we can expect in 2023, ahead of what appears to be Nigeria’ closest presidential election yet.

2022: What happened in legal matters?

The Petroleum Industry Act (PIA) entered its second year of effectiveness and continued its slow march of implementation . The most notable step was the official “relaunch” of The Nigerian National Petroleum Corporation as NNPC Limited in July in a high profile ceremony led by President Buhari. As mandated in the PIA, NNPC Limited was incorporated as a new CAMA company which is wholly owned by the Nigerian government. Key consequences of this transition include:

  • Commercial entity: NNPC Limited is a limited liability company (rather than a state-owned and state-funded corporation) and is intended to operate as a commercial entity. It is expected to publish annual reports and audited accounts and declare dividends to its shareholders – the Nigerian government, and therefore should remain a vital contributor to state revenues.

  • Independence from government and self supporting: The new NNPC Limited is independent and should not depend on government support for its operations. It is expected to raise its own funds, which may lead to wider adoption of the incorporated joint venture model (as provided for, but is not mandatory, under PIA). Whether this will help unlock NNPC’s capability to be a functioning and cash call paying partner in its joint operations remains to be seen. The extent of actual government control and direction over NNPC Limited will also only become clear through practice. PIA retains (for now) total government ownerships of NNPC Limited and control over the selection of its management team.

  • Royalty-paying entity: NNPC Limited is, like any other oil and company operating in Nigeria, required to pay its share of all fees, rents, royalties, profit oil shares and taxes to the government in relation to any participating interests it holds in petroleum leases or licences.

NNPC Limited’s first actions as a commercial entity were notable: these included exercising pre-emption rights over a 40% stake in OML 86 and OML 88 and buying OVH Energy’s downstream assets (giving NNPC access to 380 fuel stations and eight liquefied petroleum gas plants), along with other purported pre-emptions over upstream M&A transactions. NNPC Limited has partnered with Afreximbank to raise US$5 billion to support NNPC Limited’s upstream business and energy transition plans.  NNPC Limited also made senior appointments in 2022 with Senator Margery Chuba Okadigbo as chair and Mele Kyari continuing as CEO.

Another consequential step in PIA implementation was the promulgation of the Nigeria Upstream Petroleum Host Communities Development Regulations in June, setting out the requirements for the establishment and funding of host community development trusts. The new trust structure was one of the more controversial parts of PIA, with licence holders required to pay into the trust a levy of 3% of their actual annual operating expenditure of the preceding financial year in the upstream petroleum operations affecting the host communities for which the fund was established.

What happened in politics / regulatory matters?

The continuing impact of the global pandemic, the war in Ukraine, rising energy costs and the consequences of crude theft and spills made for a challenging final year in office for President Buhari.

Progress was made on some of Nigeria’s key gas projects that form part of the “Decade of Gas” programme. Construction is under way on Nigeria LNG’s Train 7 project, which promises to increase LNG production capacity by 35%. The Assa North-Ohaji South Gas project moves closer to completion and promises to accelerate Nigeria’s transition towards cleaner fuels and improve availability of natural gas for power generation.

New projects were also lined up: Nigerian Minister of State for Petroleum Resources Timipre Sylva, alongside the Ministers of Energy of Niger and Algeria signed a memorandum of understanding to build an over 4,000km trans-Saharan gas pipeline at an estimated cost of US$13 billion. The pipeline is intended to start in Nigeria and end in Algeria and be connected to existing pipelines that run to Europe.

The government launched its energy transition plan in 2022 as it works towards Nigeria’s commitment to reach net zero by 2060 and provide access to affordable, reliable and sustainable energy to all of its citizens by 2030. Vice President H.E Yemi Osinbajo said that Nigeria would need to spend an additional US$10 billion per annum on energy projects. Nigeria’s federal minister of power, Engr. Abubakar D. Aliyu also announced new renewable energy policies: the national renewable energy and energy efficiency policy, the national renewable energy action plan, the national energy efficiency action plan and the sustainable energy for all action agenda.

Crude theft was rampant in 2022 and remains a huge critical and unresolved issue for Nigeria, resulting in the shutdown of two of Nigeria’s major pipelines in July. Its impact is significant: the petroleum regulator estimated that Nigeria suffered a US$1 billion loss in revenue in the first quarter of 2022 as a result, and the (attempted) flight of international oil companies from the worst-affected onshore acreage has continued.

What deal activity happened?

Panoro Energy received government approval for the sale of its interest in OML 113 to PetroNor at the start of the year. The Majors divestment plans continued but encountered significant delays, with some being indefinitely postponed and others becoming mired in regulatory approval roadblocks and facing the new appetite of NNPC to assert purported pre-emptory rights.

What is expected in 2023?

  • Politics: The 2023 elections loom large, with the Presidential and National Assembly elections commencing on 25 February and Governorship and State House elections following on 11 March. The Presidential election is presently too close to call and we make no predictions. The onset of electioneering will slow regulatory decision making. International investments may pause until the election outcome is decided, key appointments made and the direction of economic and energy policies are explained.

  • Legal: Industry participants will continue to grapple with the new PIA regime, while its implementation continues over the coming year. Expected key steps include:

    • The deadline for voluntary conversion of existing OPLs and OMLs into their new forms was set for February 2023. Licence holders will need to decide whether to adopt early conversion, balancing the extent of improved PIA fiscal terms against the consequences, including termination of all outstanding arbitration and court cases related to the relevant OPL / OML, removal of any stability provisions or guarantees given by NNPC, and relinquishment of no less than 60% of the acreage. If not converted by this date, then it becomes mandatory on licence expiry / renewal.

    • The deadline for segregation of upstream, midstream and downstream operations also falls in February. Any midstream and downstream activities that were being carried out as part of upstream operations require the grant of a new midstream / downstream licence.

  • Regulatory: A new licensing round covering seven deepwater blocks has been announced for 2023, marking Nigeria’s first offshore bid round in 15 years. A pre-bid conference is taking place this month with pre-qualification applications due by the end of January.

  • Transaction activity: Upstream deals may need to wait for the dust from the 2023 election to settle, but there should be a resumption of the divestment programmes of the Majors in 2023.  Outside of M&A, Nigeria is due to go to trial in London in January 2023 as it seeks to overturn an approximately US$11 billion (including interest) arbitration award won by Process and Industrial Developments Ltd in relation to a 2010 gas project agreement. The award is now worth about a third of Nigeria’s foreign reserves.

  • Projects: Following significant delays, in part due to the COVID-19 pandemic, we understand that the Dangote refinery is expected to be officially commissioned by President Buhari in January and start up mid-2023. First gas from both the Ajaokuta-Kaduna-Kano pipeline and from Seplat’s Assa North-Ohaji South Gas project is forecast for the first half of 2023.

© 2023 Bracewell LLP

U.S. Fish & Wildlife Service Proposes New Regulations Creating General Eagle “Take” Permits for Certain Wind Energy and Power Line Infrastructure Projects

The U.S. Fish and Wildlife Service recently published a proposed rule revising regulations that authorize permit issuance for eagle incidental take and eagle nest take under the Bald and Golden Eagle Protection Act (the “Act”). In addition to retaining the individual permits already available under the Act, the new rule proposes creation of a “general” permit for qualifying wind energy and power line infrastructure projects.

The Act generally prohibits the “take,”[1] possession, and transportation of bald eagles and golden eagles, except pursuant to federal regulations. However, the Act also authorizes the Secretary of the Interior to issue regulations to permit the take of these eagle species for various purposes. Under the current regulations, there are 2 permit types for the incidental take of eagles and eagle nests, which are issued on an individual, project-specific basis. Due, in part, to inefficiencies in the application review and approval process, issuance of these project-specific eagle take permits has – historically – been relatively rare. The Service acknowledges that, while participation in the permit program by wind energy projects has increased since 2016, it still remains well below the Service’s expectations.

According to the Service, the purpose of the new regulations is to: (i) increase the efficiency and effectiveness of permitting; (ii) facilitate and improve compliance with the regulations; (iii) and increase the conservation benefit for eagles. The Service proposes to do this by creating a general permit program to streamline the permitting process and provide more timely and cost-effective coverage for affected industries.

General permits would be available to authorize incidental take by activities that occur frequently enough for the Service to have developed a standardized approach to permitting. Specifically, the Service proposes activity-specific eligibility criteria and permit requirements in 4 new sections based on activity and type of take: (i) incidental eagle take for permitting wind energy; (ii) incidental eagle take for permitting power lines; (iii) bald eagle disturbance take; and (iv) bald eagle nest take. As part of the revised application process, a general permit applicant would self-identify as eligible and register with the Service. The applicant is then required to submit an application containing all requested information and fees, as well as certification that the applicant meets the eligibility criteria and would implement permit conditions and reporting requirements.

Two particular proposed general permits – for wind energy and power line projects – could prove particularly useful for renewable energy developers.

Wind Energy Projects

The core general permit eligibility criterion for wind energy projects would be a relative eagle abundance threshold, which a project would need to be below in order to qualify for a general permit. The proposed rule includes specific abundance thresholds for bald and golden eagles, applicable during 5 defined portions of the year. For project eligibility, seasonal bald or golden eagle abundance at all existing or proposed turbine locations must be lower than all 5 seasonal thresholds listed. Presently, the Service estimates that nearly 80% of all existing wind-energy turbines in the coterminous United States are located in areas under the proposed relative abundance thresholds for both species and thus eligible for a general permit under this proposal. The Service plans to offer publicly available online mapping resources depicting areas that qualify. However, at this time, we note that under the proposed rule, Alaska would be excluded from the general permitting program.

In addition to falling below the relative eagle abundance thresholds, wind energy projects would also need to be sited more than 660 feet from bald eagle nests and more than 2 miles from golden eagle nests to be eligible for a general permit.

For existing projects where not all turbines are located within an area below the designated thresholds of relative abundance, the project operator would need to apply for an individual permit and request consideration for a general permit in the application. The Service would review the project and issue a letter of authorization if it determines it is “appropriate” to extend general permit coverage.

Although the Service has not yet promulgated a complete set of conditions for wind energy project general permits, the proposed rule requires permittees to implement all practicable avoidance and minimization measures to reduce the likelihood of take. Permittees would also be subject to a 4 discovered-eagle permit condition, under which discovery of 4 eagle mortalities at a wind energy project covered by a general permit would prohibit the project from reapplying for additional 5-year general permits. Such a project would have to apply for an individual permit.

Power Lines

In the proposed rule, the Service acknowledged that it has sufficient understanding of how eagles interact with power lines to develop a general permit for eagle take resulting from power-line infrastructure.

While the proposed rule does not include detailed eligibility criteria, the Service contemplates 6 key conditions for the new power line general permit:

  1. All new construction and reconstruction of pole infrastructure must be electrocution-safe for bald eagles and golden eagles, except as limited by human health and safety.
  2. All new construction and reconstruction of pole infrastructure must be electrocution-safe for bald eagles and golden eagles, except as limited by human health and safety. All new construction and reconstruction of transmission lines must consider eagle nesting, foraging, and roosting areas in siting and design, as limited by human health and safety. Specifically, the Service recommends siting utility infrastructure at least 2 miles from golden eagle nests, 660 feet from a bald eagle nest, 660 feet from a bald eagle roost, and 1 mile from a bald eagle or golden eagle foraging area.
  3. A reactive retrofit strategy must be developed that governs retrofitting high-risk poles when an eagle electrocution is discovered. A reactive retrofit strategy responds to incidents in which eagles are killed or injured by electrocution.
  4. A proactive retrofit strategy must be developed and implemented to convert all existing infrastructure to be electrocution-safe, prioritizing poles identified as the highest risk to eagles.
  5. A collision-response strategy must be implemented for all eagle collisions with power lines. If an eagle collision is detected, a strategy must outline the steps to identify and assess the collision, consider options for response, and implement a response.
  6. An eagle shooting response strategy must be developed and implemented when an eagle shooting is discovered near power-line infrastructure.

Service review and approval would not be required prior to obtaining coverage under either of these general permits. Rather, according to the Service, the general permit authorization would be “generated” using permit conditions and reporting requirements for the proposed activity. Under the proposed rule, upon submitting an application, the Service will “automatically issue a general permit to authorize the take requested in the application.”

The Service intends to conduct annual audits for a small percentage of all general permits to ensure applicants are appropriately interpreting and applying eligibility criteria. The maximum term for wind energy and power line project general permits would be 5 years; after expiration, with certain narrow exceptions, projects could reapply for new 5-year general permits.

Finally, because the Service will undertake environmental review to support its final rule, obtaining coverage under the general permits would not require project-specific environmental review under the National Environmental Policy Act. However, applicants for the general permit must certify, among other things, that: (i) the activity for which take is to be authorized does not affect a property that is listed, or is eligible for listing, in the National Register of Historic Places; or (ii) that the applicant has obtained, and is in compliance with, a written agreement with the relevant State Historic Preservation Officer or Tribal Historic Preservation Officer that outlines all measures the applicant will undertake to mitigate or prevent adverse effects to the historic property.

The Service is accepting comments on the proposed rule until November 29, 2022. The Service hosted an initial listening session for the general public on October 20th, and will host an additional listening session on November 3, 2022.

FOOTNOTES

[1]Under the federal Endangered Species Act, “take” is defined as any action “to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct.”

Article By S. Keith Garner and Daniel S. Maroon of Sheppard, Mullin, Richter & Hampton LLP

For more environment and energy legal news, click here to visit the National Law Review.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.

Troubles for Massachusetts Town’s Wind Turbine

Beveridge & Diamond PC environmental and energy law firm

In the long-running dispute between the Town of Falmouth and the neighbors to the Town’s wind turbine that powers the municipal wastewater treatment facility (WWTF), score one for the neighbors. The Massachusetts Appeals Court reversed the decision of Barnstable Superior Court Justice Robert C. Rufo in Drummey v. Town of Falmouth, 87 Mass. App. Ct. 127 (2015), finding that the Town was required to obtain a special permit from the Falmouth Zoning Board of Appeals to install the wind turbine on Town land.

Claiming harm from sound pressures and noise from the turbine’s operations, the plaintiffs first sought the building commissioner’s enforcement of the Zoning Bylaw. They alleged that the town violated the Bylaw by failing to secure a special permit for the turbine’s construction and maintenance. The building commissioner denied their request. The plaintiffs appealed to the ZBA and the Superior Court, both of which affirmed the building commissioner’s ruling.

Notwithstanding that the Bylaw provides that a petitioner may apply for a special permit to construct a windmill, the Superior Court found that this provision did not “apply in the limited circumstance where the Town itself desires to construct and operate a windmill for municipal purposes in a district where all such purposes are permitted as of right.” The Court explained that the turbine was a “municipal purpose” that fell within the enumerated community service uses permitted as of right in the Bylaw, which includes: “All municipal purposes, including the administration of government, parks, playgrounds, recreation buildings, Town forests, watershed, water towers and reservoirs, beaches, fire and police stations and armories.” Although turbines were not expressly included in the list of municipal purposes, the Superior Court found the list to be illustrative and not exclusive.

On appeal, the Appeals Court first recited the rule of law that the interpretation of a town’s bylaw raises a question of law. As such, the Court “reviews the judge’s… interpretations of zoning bylaws, de novo[anew or afresh].” It remarked that, as in other districts of the Bylaw, windmills were specifically designated in the public use district as an accessory use by special permit. Therefore, it logically followed that windmills could not have been intended to fall within the list of more general municipal uses allowed as of right. While the Superior Court’s understanding of the non-exclusive nature of the list was accurate, the Appeals Court found that that characterization of the list “did not adequately consider the weight that must be given a specific by-law provision that has been drafted to take into account the public welfare.” Specifically, the Bylaw included “a comprehensive scheme” for wind turbines including controls on their placement and impact on the town. In effect, the lower court erroneously reviewed the key Bylaw provision in isolation, not in context as the law requires.

The Court vacated the judgments of the Superior Court and remanded the case to the Superior Court for entry of new judgments consistent with its opinion. The Town has filed an application for further appellate review, which is pending before the Supreme Judicial Court.

ARTICLE BY

Brian C. Levey
Beveridge & Diamond PC

Department of Interior Announces January Auction Date for Martha’s Vineyard Wind Energy Leases

Mintz Levin Law Firm

On November 24th, the Department of the Interior’s Bureau of Ocean Energy Management (BOEM) announced that it would be auctioning off four commercial leases for the Wind Energy Area (WEA) south of Martha’s Vineyard on January 29th. The area to be leased, which is identical to the area proposed in the Proposed Sale Notice published this past June, encompasses more than 1,160 square miles of open water – a tract larger than the state of Rhode Island. The project is slated to become the largest off-shore wind tract in federal waters in the United States.

Martha's Vineyard Wind Energy

If and when it is fully developed, the Martha’s Vineyard WEA has the potential to increase wind generation capacity by four or five Gigawatts (GW). According to the BOEM, which framed the announcement as part of the Obama Administration’s ongoing efforts to curb carbon pollution and mitigate climate change, a fully-developed Vineyard WEA would support 800 turbines and produce enough energy to power 1.4 million homes in the United States. Secretary of the Interior Sally Jewell said the auction will “triple the amount of federal offshore acreage available for commercial-scale wind energy projects,” making it the largest competitive wind energy lease sale to date.

Several advocacy organizations, including the New England Fishery Management Council and the Massachusetts Audubon Society, had previously voiced concerns about possible harm to aquatic and aviary life, but the Bureau’s most recent Environmental Assessment (EA) concluded that “reasonably foreseeable environmental effects associated with the commercial wind lease issuance and related activities would not significantly impact the environment.”

Twelve companies are qualified to bid for the four leases, including Deepwater Wind New England, EDF Renewable Development, Energy Management, Fishermen’s Energy, Green Sail Energy, IBERDROLA RENEWABLES, NRG Bluewater Wind Massachusetts, OffshoreMW, RES America Developments, Sea Breeze Energy, US Mainstream Renewable Power (Offshore) and U.S. Wind. For more information about the auction announcement, please visit the BOEM’s website.

ARTICLE BY

Sahir Surmeli
Jordan M. Collins
OF
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

Fiscal Cliff Legislation Extends Production and Investment Tax Credits

The National Law Review recently published an article, Fiscal Cliff Legislation Extends Production and Investment Tax Credits, written by Alexander W. Jones of Bracewell & Giuliani LLP:

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The fiscal cliff legislation temporarily ends the uncertainty surrounding the extension of tax credits related to wind facilities that generate electricity. Under current law, the production tax credit (the “PTC”) applied to wind facilities that were operational by the end of 2012. The legislation amends the Code and provides that such PTC is available for wind facilities “the construction of which begins before January 1, 2014.” A wind facility typically cannot be planned and constructed within a calendar year, thus, the amended language could significantly increase the amount of facilities that are eligible to qualify for the PTC and cause an even greater demand in 2013 for wind turbines and other equipment necessary to generate electricity.

In addition, the fiscal cliff legislation extends the provision that allows developers and investors involved with wind facilities to elect to receive the investment tax credit (the “ITC”) in lieu of the PTC. The existing ITC provides for an immediate 30% tax credit in the year the facility is placed into service instead of the 2.2 cents per kilowatt hour PTC that is available for the 10 year period commencing when the wind facility is operational. The ability to elect to receive the ITC instead of the PTC will apply to most wind facilities that commence construction prior to January 1, 2014. The extension of such election should cause an increased amount of wind facility transactions to be partially financed by tax equity investors that prefer to take into account the ITC when the facility is completed.

The extension of the PTC and the amendment expanding the scope of wind facilities that are eligible to qualify for the PTC will be welcome by wind developers and investors and may result in increased investment in wind electricity in 2013. However, because the extension applies only for one year, there remains little certainty that the PTC will continue to be available for wind facilities the construction of which begins after 2013.

© 2012 Bracewell & Giuliani LLP