On January 20, 2021, President Joseph Biden issued Executive Order No. 13990 (“Executive Order”), which, among other things, suspended Executive Order 13920, “Securing the United States Bulk-Power System” (“Executive Order 13920”) until April 20, 2021 and directed all executive departments and agencies to review and take action to address all actions taken during former-President Donald Trump’s tenure in office that conflict with President Biden’s stated goals of improving public health, environmental protection, reducing greenhouse gas emissions, bolstering resilience to the impacts of climate change, and confronting the climate crisis. Continue Reading President Biden Suspends Bulk Power System Executive Order; Directs Agencies to Address Public Health- and Climate-Related Rules

Power Finance & Risk recently brought together John LeontiKrish KoomarJavier Cavada Camino, Mike LorussoClaus Hertel and Santosh Raikar for a virtual discussion on one of the hottest topics in energy infrastructure today – storage.

Read the article here.

On May 28, 2020, Treasury and the IRS issued Proposed Regulations under Section 45Q of the Code, which provides for a production tax credit for persons who physically or contractually ensure the capture and disposal of qualified carbon oxide. The Proposed Regulations address the requirements for capture and disposal, the use of qualified carbon oxide as a tertiary injectant in a qualified enhanced oil or natural gas recovery project, and the utilization of qualified carbon oxide in a manner that qualifies for the credit. The IRS previously requested comments on issues arising under Section 45Q in Notice 2019-32. On March 9, 2020, the IRS published Revenue Procedure 2020-12, which provides a safe harbor for allocating Section 45Q credits in a partnership flip structure and Notice 2020-12, which provides guidance on when construction of a carbon capture facility or carbon capture equipment has begun. Continue Reading Treasury and IRS Issue Long-Awaited Proposed Regulations for Section 45Q Production Tax Credits for Qualified Carbon Sequestration

On May 27, 2020, the IRS issued Notice 2020-41, which provides much-anticipated relief for delays caused by the COVID-19 pandemic with respect to the “beginning of construction” requirements for renewable energy projects eligible for the production tax credit (“PTC”) or investment tax credit (“ITC”). Continue Reading IRS Extends Continuity Safe Harbor and Provides Safe Harbor Delivery Deadline for Renewable Energy Projects

On Thursday, May 21, attorneys from our Capital Projects & Infrastructure and Energy practices hosted a webinar on the topic of build transfer agreements. During the hour-long discussion John Leonti, Justin Boose, Todd Coles and Vaughn Morrison discussed topics, including:

  • Origins of build-transfer for traditional generation assets
  • Application to different renewable technologies
  • Varying structures regarding site control and permitting
  • Managing EPC and construction risk
  • Variations in contracting structures
  • Regulated versus unregulated utility buyers

To access a replay of the program, click here.

Speakers:
Matthew H. Adler, Partner, Pepper Hamilton
Coburn R. Beck, Partner, Troutman Sanders
John T. Bradley, Partner, Troutman Sanders
Joanna J. Cline, Partner, Pepper Hamilton
Sean Ehni, Associate, Troutman Sanders

Troutman Sanders and Pepper Hamilton are producing a series of podcasts to discuss litigation topics that have been brought to the forefront by the COVID-19 pandemic and how businesses might be able to prepare and respond.

In this episode, Troutman associate Sean Ehni leads a discussion on Material Adverse Effect (MAE) clauses. Sean is joined by Pepper partners Matt Adler and Joanna Cline, and Troutman partners John Bradley and Coby Beck. Topics discussed include how they are drafted and negotiated, and whether COVID-19 could qualify as an MAE and be used as an escape hatch to contractual performance. They also discuss how MAE clauses are drafted and negotiated, how MAEs have been interpreted by courts, the litigation related to them, and dig into some other ways COVID-19 has affected the negotiation and execution of M&A transactions.

LISTEN HERE

On May 1, 2020, President Trump issued Executive Order No. 13920 (“Executive Order”) prohibiting Federal agencies and U.S. persons from engaging in certain “transactions” defined thereunder—specifically, acquiring, importing, transferring, or installing certain items defined in the Executive Order as “bulk-power system electric equipment”—with “foreign adversaries.” Such equipment classifications and types are specified in the order and include “items used in bulk-power substations, control rooms, or power generating stations.” The prohibitions apply to transactions involving such equipment if such items are (i) designed, developed, manufactured, or supplied by a foreign adversary, or by persons under the control, direction, or jurisdiction of such adversaries and where (ii) such equipment pose an unacceptable risk to national security and America’s safety.

The Executive Order also authorizes the Secretary of the U.S. Department of Energy (“DOE”), in consultation with other Executive Branch agencies, to (i) establish a “pre-qualified” list of vendors to ensure that future equipment transactions are not in violation of the order; (ii) develop recommendations to identify, isolate, monitor, or replace existing bulk-power system electric equipment presenting a security risk from foreign adversaries; and (iii) oversee a Task Force to update the Federal government’s acquisition regulations and to develop policy recommendations and issue reports.

Authority and Declaration of National Emergency

In the Executive Order, the President declared a national emergency with respect to the U.S. bulk-power system, citing the authority granted to him pursuant to the U.S. Constitution, the International Emergency Economic Powers Act (“IEEPA”), National Emergencies Act (“NEA”), and Section 301 of United States Code Title 3. The IEEPA authorizes the President to investigate, regulate, or prohibit certain foreign transactions “to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared.” A Congressional resolution terminating the national emergency is required to revoke the authorities granted to the President by the IEEPA.

In prefatory findings, the Executive Order describes increasing concerns regarding involvement in the bulk-power system by “foreign adversaries,” which are defined as any foreign government or non-government person “engaged in a long-term pattern or serious instance of conduct significantly adverse” to the national security of the United States or its allies. In particular, the Executive Order determines that the “unrestricted foreign supply of bulk-power system electric equipment constitutes an unusual and extraordinary threat” to national security and the U.S. economy.

Prohibited Transactions and Implementation of Executive Order

In relevant part, the Executive Order prohibits federal agencies and U.S. persons from acquiring, importing, transferring, or installing bulk-power system electric equipment that poses an “undue” or “unacceptable” risk to the U.S. and over which a “foreign adversary” or a national thereof has an interest.

  • Importantly, the Executive Order defines bulk-power system electric equipment to include “items used in bulk-power system substations, control rooms, or power generating stations, including, reactors, capacitors, substation transformers, current coupling capacitors, large generators, backup generators, substation voltage regulators, shunt capacitor equipment, automatic circuit reclosers, instrument transformers, coupling capacity voltage transformers, protective relaying, metering equipment, high voltage circuit breakers, generation turbines, industrial control systems, distributed control systems, and safety instrumented systems.”
  • Bulk-power system electric equipment does not include local distribution facilities or items “that have broader application of use beyond the bulk-power system . . . .”
  • The transaction prohibitions apply “except to the extent provided by statute, or in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted prior to the date of this order.” (emphasis added)

The Executive Order also authorizes and empowers the Secretary of Energy, in consultation with the heads of a number of other executive departments and agencies, to:

  • Take actions regarding the “timing and manner of the cessation” of pending and future prohibited transactions;
  • Take necessary steps to implement the Executive Order, such as determining what particular countries or persons are considered “foreign adversaries” for purposes of the prohibited actions;
  • Establish criteria for recognizing particular equipment and vendors as “pre-qualified” for future transactions;
  • “[I]dentify, isolate, monitor, or replace” any now-prohibited equipment already in use as soon as practicable, taking into consideration risks to the overall “bulk-power system” (as defined in the Executive Order); and
  • Publish rules and regulations within 150 days implementing the authorities delegated to the Secretary of Energy by the Executive Order.

Finally, the Secretary of Energy is tasked with overseeing a “Task Force on Federal Energy Infrastructure Procurement Policies Related to National Security,” to be chaired by the Secretary. The Task Force is required to, among other things, conduct studies and issue periodic reports to the President and Congress, engage with “distribution system industry groups,” and develop a recommended set of energy infrastructure procurement policies for submission to the Federal Acquisition Regulatory Council (“FAR Council”). The FAR Council is in turn required to consider proposing amendments to federal agency procurement regulations for notice and public comment within 180 days of receiving any such recommendations.

The Executive Order defines terms that are key to identifying its scope and breadth. These terms are not capitalized, but can be found in Section 4 of the Executive Order. The full text of the Executive Order can be found here.

On April 16, the Federal Energy Regulatory Commission (FERC) issued two orders in proceedings related to PJM Interconnection, L.L.C.’s (PJM) Minimum Offer Price Rule (MOPR). First, FERC denied requests for rehearing and granted limited clarification with respect to its June 29, 2018 order (2018 Paper Hearing Order) where it (i) found PJM’s then-existing tariff to be unjust and unreasonable because it failed to address the suppressive effect of resources receiving out-of-market payments on the capacity market, and (ii) implemented a paper hearing to establish a revised MOPR to apply to both new and existing resources receiving out-of-market payments, regardless of resource type (see July 11, 2018 edition of the WER).

Continue Reading FERC Grants Limited Rehearing and Provides Limited Clarification on PJM’s Minimum Offer Price Rule

Authors:
Hugh M. McDonald, Partner, Troutman Sanders
Deborah Kovsky-Apap, Partner, Pepper Hamilton
Andrew L. Buck, Associate, Troutman Sanders

Chapter 11 bankruptcy filings are up 12% year-over-year from 2019, largely due to the COVID-19 crisis. Many companies are filing expressly in order to sell their assets, while others are dual-tracking standalone reorganizations with sale processes. Bankruptcy sales offer significant opportunities and advantages to strategic and financial buyers who are open to acquiring distressed assets. This high-level overview answers key questions about the bankruptcy sale process. For further information, please feel free to contact the authors.

Continue Reading Bankruptcy Asset Sales: A Primer

As we help our clients navigate the impacts of the novel coronavirus (COVID-19), Troutman Sanders has authored two Frequently Asked Question summaries particularly relevant to energy and infrastructure projects: one on Renewable Energy and Infrastructure and another on Force Majeure.

As COVID-19 continues to spread, Pepper Hamilton LLP and Troutman Sanders LLP have developed a dedicated Resource Center to guide clients through this unprecedented global health challenge. We regularly update the Resource Center with COVID-19 news and developments, recommendations from leading health organizations, and tools that businesses can use free of charge. Visit the full Resource Center here.