Regional Greenhouse Gas Initiative to Lower Emissions Cap
As predicted earlier, the U.S. Northeast’s cap-and-trade program, RGGI (Regional Greenhouse Gas Initiative) will reduce its cap, which was above current pollution levels. The inflated cap depressed the RGGI permit price for carbon credits to under $2, way below the projected $20-$30 (causing New Jersey’s Chris Christie to pull New Jersey out of RGGI). The lower cap should stimulate interest and raise RGGI permit prices in the next auction. The original cap was set at 2009 emission levels, with the expectation that emissions would grow. However, emissions have dropped dramatically because of the use of natural gas and other efficiencies in the nine-state area, reducing the demand for the permits.
The full press release from RGGI can be found here: http://www.rggi.org/docs/PressReleases/PR130207_ModelRule.pdf
Qualifying Advanced Energy Project Program: IRS Announces Second Phase
DWT tax partner Pamela Charles reports:
The IRS has announced the second phase of the qualifying advanced energy project program to distribute the Section 48C tax credits that are available for reallocation now that the first phase of the program has been completed (see IRS Notice 2013-12). To be considered for an allocation of credits in the Phase II program, taxpayers must submit concept papers to the U.S. Department of Energy by April 9, 2013 and applications to the DOE and IRS by July 23, 2013.
Qualifying advanced energy project credits are equal to 30% of the taxpayer’s qualified investment in a qualifying advanced energy project, which includes a project that re-equips, expands or establishes a manufacturing facility for the production of specified advanced energy property. Specified advanced energy property includes property designed for use in the production of energy from sun, wind, geothermal deposits or other renewable resources, fuel cells, microturbines, energy storage systems, electric grids to support the transmission of intermittent sources of renewable energy, property designed to capture and sequester carbon dioxide, property designed to refine or blend renewable fuels or to produce energy conservation technologies, new plug-in electric drive motor vehicles or components and other property designed to reduce greenhouse gas emissions as may be determined by the IRS.
Pipeline Companies Look to Take Advantage of Natural Gas Produced from Shale
From Washington D.C. energy partner Barbara Jost:
The Tennessee Gas Pipeline Co. made a filing with the FERC proposing to transform one of its existing lean gas lines into effectively a gathering line to move wet gas from gas fields within the Utica Shale play to to-be-constructed processing facilities and then to market. As Tennessee states in its filing, it wishes to take advantage of the emerging market for rich gas transportation and processing arising from the natural gas produced from the Utica Shale play located near the middle of its pipeline system in eastern Ohio, western Pennsylvania, and northern West Virginia.
FERC has noticed the filing in Docket No. RP13-464-000. A substantial number of Tennessee’s pipeline customers have intervened and objected to Tennessee’s proposal, viewing this as adversely impacting the quality of their existing service with no real benefits to them. It is likely that a Technical Conference will be held at FERC in the near future to address these concerns.
Court Rejects Challenge to California’s Carbon Offsets Program
A California state judge in San Francisco has rejected a challenge to California’s carbon offsets program, ruling that regulators have the authority to include the mechanism in the cap-and-trade program for greenhouse gases.
San Francisco Superior Court Judge Ernest Goldsmith ruled Friday that the state Air Resources Board was authorized to use offset protocols under the guidelines set by AB 32.
PTC Update: IRS Plans to Release Guidance on Applying the “Begun Construction” Test
DWT tax partner Pamela Charles reports:
According to Tax Notes Today, the IRS discussed its plans to release guidance on applying the “begun construction” test for the production tax credit (“PTC”) at the American Bar Association Section of Taxation meeting in Orlando, Florida last week. As reported in our January 2, 2013 blog post, this was one of the changes made to the renewable energy tax credit provisions by the American Taxpayer Relief Act of 2012. The guidance is expected to provide parameters that taxpayers can rely on, while considering administrative burdens on the IRS and burdens on taxpayers. The IRS recognizes this is an important issue and that there is a need for answers as soon as possible.
Rep. Waxman, Sen. Whitehouse & Rep. Markey Form Bicameral Task Force on Climate Change
From Craig Gannett of DWT’s Seattle office:
Rep. Henry Waxman (D-CA), Sen. Sheldon Whitehouse (D-RI), and Rep. Ed Markey (D-MA), today announced the formation of a bicameral task force on climate change. Their letter essentially urges the President to aggressively pursue GHG emission reductions under existing law, implicitly recognizing that no new legislation is possible for at least the next two years (i.e., as long as the Republicans control the House).
To see the announcement live, click here.
To see the official press release, go to Rep. Waxman’s legislative page.
Montana Bankruptcy Court Confirms Electricity Is a “Good” Under the Bankruptcy Code
From DWT bankruptcy partner Hugh McCullough:
The United States Bankruptcy Court for the District of Montana in connection with In re Southern Montana Electric Generation and Transmission Cooperative, Inc. held that electricity was a “good” for purposes of section 503(b)(9) of the Bankruptcy Code. That means that anyone sells electricity to a person who later goes bankrupt is entitled to a high-priority administrative expense claim for the value of the electricity delivered in the 20 days prior to the bankruptcy.
The decision was not a surprise. It falls squarely within a line of cases concluding that electricity is a “good” for purposes of the Bankruptcy Code and the Uniform Commercial Code. It is, however, a useful reminder that electricity suppliers may be entitled to a priority claim for part of the amount owed by a bankrupt debtor.
To protect a section 503(b)(9) administrative expense claim, it is often necessary to do something more than merely file an ordinary proof of claim in the case. Sometimes courts issue procedures orders that specify additional filing obligations to protect section 503(b)(9) claims.
More Information About the Extension of the Production Tax Credit
DWT tax partner, Pamela Charles explains:
The American Taxpayer Relief Act of 2012, which was passed by Congress to avoid the “fiscal cliff,” extends certain federal income tax benefits for renewable energy projects, including:
- Extending the production tax credit (PTC) for wind projects by one year and changing from a “placed in service” to a “begun construction” deadline. Now, to qualify for the PTC, the construction of qualifying wind facilities must begin before January 1, 2014.
- Changing the PTC deadline for other renewable energy projects – closed-loop biomass, open-loop biomass, geothermal, landfill gas, trash, qualified hydropower, and marine and hydrokinetic – from a “placed in service” to a “begun construction” deadline. Now, to qualify for the PTC, construction of qualifying facilities (or of qualifying modifications, improvements or additions to facilities) must begin before January 1, 2014.
- Extending the ability to elect the investment tax credit (ITC) in lieu of the PTC to include any qualified facility (wind, closed-loop biomass, open-loop biomass, geothermal, landfill gas, trash, qualified hydropower, or marine and hydrokinetic facility) the construction of which begins before January 1, 2014.
- Extending by one year the ability to claim 50% bonus depreciation for certain qualifying property that is placed in service before January 1, 2014.
The change from a “placed in service” deadline to a “begun construction” deadline for the PTC and ITC election are significant changes for all qualifying renewable energy projects. It is not clear how the IRS will define “beginning of construction” for purposes of the PTC and ITC election or whether the IRS, like the Treasury Department did for the Section 1603 cash grant program, will adopt a safe harbor. We will alert you to further developments and additional guidance on these issues as they become available.
Production Tax Credit Extended For Another Year
More information about this later, but Congress has extended the Production Tax Credit (“PTC”) for wind as part of its agreement to avoid the fiscal cliff. The new sunset date for the PTC for wind is through December 31, 2013.
Interestingly, reports indicate that Congress also appears to have modified what facilities are eligible for the PTC. Previously, a facility had to be “placed into service” by a certain date to qualify. Now, it appears that a facility need only have “begun construction” by the deadline in order to qualify.
Looks for more information on this soon.
PG&E Issues Its 2012 Renewables Portfolio Standard Request for Offers
At long last, PG&E finally issued its 2012 Renewables Portfolio Standard (RPS) Request For Offers (RFO). PG&E is seeking offers to procure approximately 1,000 GWh per year of renewable energy from long-term Power Purchase Agreements and Renewable Energy Credit Purchase Agreements (so they will accept offers of products that would qualify for any of the three portfolio content categories).
However, PG&E has a “strong preference” for products from projects that commence renewable energy deliveries to PG&E beginning in 2019-2020. PG&E also “prefers Offers for Product that is eligible to be counted toward Category 1 procurement for the purpose of the RPS Program.” The 2012 Solicitation Protocol can be found here.
The schedule for the RFO:
| PG&E Issues RFO | December 10 | |
| Deadline for Participant to submit registration for Bidders’ Webinar | December 17 by 5:00 P.M. PPT | |
| Bidders’ Webinar | December 20 at 10:00 A.M.- Noon PPT | |
| Deadline for Submission of Offers | January 29, 2013 by Noon PPT | |
| PG&E selects shortlist | April 1, 2013 | |
| Execution of Final Agreements and Submit for CPUC Approval | TBD | |
| PG&E 2012 RPS Solicitation Shortlist Expires | April 17, 2014 |
More information, documents and schedules is available on PG&E’s website.
