“Climate change policies at the state and federal levels will have significant impacts on natural gas companies and their customers. On the one hand, there is pressure on companies to maintain safe and reliable service – on the other, the push for net-zero carbon emissions by 2050. These competing objectives will have notable effects on how companies conduct their long-term planning to maintain system reliability while avoiding potential stranded costs and safeguarding ratepayers. This post and subsequent updates will focus on how federal and some state regulators are addressing the issues,” report Jared S. des Rosiers, Kayla J. Grant, Paul K. Connolly, Jr., Randall S. Rich and Valerie L. Green in The National Law Review.

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“Shortly before a utility lawyer and lobbyist was appointed Ohio’s top regulator of electric and power generating companies, he received $4.3 million from top executives at one of the companies whose fortunes would soon be in his hands,” report Mark Gillispie and Julie Carr Smyth in StarTribune.

“In the months that followed, that company — Akron-based FirstEnergy Corp. — won a string of legislative and regulatory victories worth well over $1 billion over time to the company and its subsidiaries, including a nuclear plant bailout that’s at the center of a $60 million federal bribery probe. The bulk of that tab was to be paid by the state’s electricity customers.”

“What investigators at the state and federal levels now want to know is whether Sam Randazzo, the utility lawyer-turned-regulator who has since resigned, helped FirstEnergy in exchange for millions.”

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“In April 2020, the Supreme Court issued its opinion in County of Maui v. Hawaii Wildlife Fund … vacating the Ninth Circuit’s decision. The appeals court had affirmed a district court’s finding of Clean Water Act (‘CWA’) liability for the County’s alleged failure to obtain a discharge permit for subsurface releases of pollutants into groundwater that conveys pollutants to navigable waters. In vacating the judgment below, the Supreme Court rejected the Ninth Circuit’s ‘fairly traceable’ test and set forth a new standard for determining when a source needs an NPDES permit: ‘the statute requires a permit when there is a direct discharge from a point source into navigable waters or when there is the functional equivalent of a direct discharge.’ In other words, ‘an addition falls within the statutory requirement that it be ‘from any point source’ when a point source directly deposits pollutants into navigable waters, or when the discharge reaches the same result through roughly similar means,'” posted Brent A. Rosser of Hunton Andrews Kurth in The National Law Review.

“Recognizing that this approach ‘does not … clearly explain how to deal with middle instances,’ the Court set forth ‘some of the factors that may prove relevant’ in any given case:”

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“In the wake of the deep freeze that recently swept the nation, natural gas has taken the forefront among a slew of price gouging allegations, write Christopher E. Ondeck, John R. Ingrassia and Nicollette R. Moser in Proskauer’s Antitrust.

“Last week’s winter storms caused natural gas spot market prices to spike, with some reporting up to a 100% percent increase. Reports also surfaced of spot prices for wholesale electricity in Texas’ power grid increasing more than 10,000%. In response, Minnesota Senator Tina Smith (D-MN) has not only encouraged federal regulators to investigate the price spikes, but has also requested regulators to “[i]nvoke, as appropriate, any emergency authorities available, including under the Natural Gas Policy Act, to allocate natural gas supplies at fair prices.” Whether natural gas prices exceeded allowable limits under applicable price gouging statutes currently in effect depends, among other things, on whether natural gas is within the scope of these laws in the first place.”

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“An unusually severe winter storm has left millions in Texas without natural gas and electricity as the state’s grid operator, the Electric Reliability Council of Texas (ERCOT), implemented rolling blackouts. The severe cold has left electric generators in ERCOT unable to meet base load requirements as a number of natural gas producers shut in production, some pipeline transporters were unable to transport natural gas due to the effects of the severe weather event on pipeline assets, and other thermal and renewable generation assets were unable to operate,” post Steve Spina, Levi McAllister, Kirstin Gibbs, Dan Skees and Patrick Pennella in Morgan Lewis’ Publications.

“ERCOT announced it had set a winter record for power demand: 69,150 megawatts on February 14. However, more than 40,000 megawatts of power generation had been forced off the system due to the severe cold.”

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“U.S. shale producer Chesapeake Energy Corp on Tuesday exited Chapter 11 bankruptcy with business plan that nods to its founders’ emphasis on natural gas after a recent push into crude oil,” writes Jennifer Hiller in Reuters’ Energy & Environment.

“Once the second-largest U.S. natural gas producer, Chesapeake was felled by a long slide in gas prices and heavy debts from overspending on deals. Two years ago it paid $4 billion in a bet on shale oil firm WildHorse Resource Development. But oil prices fell after the deal closed.”

“The company plans to focus 85% of this year’s spending on gas fields in the U.S. Northeast and Louisiana, and will let its oil output decline, Chief Executive Doug Lawler said in an interview.”

“It aims to spend between $700 million and $750 million per year on new projects that could generate $400 million in annual free cash flow, he said.”

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“Fundamental law of physics that most of us learn in junior high says that work requires energy. It explains why the number of people employed in the society and the gross domestic product (GDP) they produce, strongly correlate with the rate of the energy consumption. Both numbers — people employed and the energy consumed — drop during a recession but go up during an economic boom,” opines Eugene M. Chudnovsky in The Hill’s Opinion.

“As we are facing negative consequences of climate change due to carbon emissions, the Biden administration has launched an effort to quickly replace some of the fossil fuel industry that currently provides 80 percent of the U.S. energy supply with renewable energy, such as solar and wind. This effort must be welcome because fossil fuels, besides their effect on climate, are a limited resource that will be exhausted by the end of the century if we keep using it at the current growing rate.”

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“On January 6, 2021, the IRS issued T.D. 9944 (the “Final Regulations”), which finalizes the proposed regulations under section 45Q (the “Proposed Regulations”) that were issued in REG-112339-19 on May 28, 2020 and discussed in an earlier post. This article summarizes the key ways in which the Final Regulations differ from their predecessor,” reports Judy Kwok in Mintz’ Insights Center.

“The Final Regulations, as with the Proposed Regulations, contain numerous concepts that are roughly transposed, with some innovations, from the section 45 production tax credit (“PTC”) and the section 48 investment tax credit (“ITC”). The highlights of the Final Regulations, as they relate to these broadly applicable concepts, are listed” in the article.

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“The end-of-the year omnibus (H.R. 133) is a massive $2.3 trillion spending bill containing appropriations for Fiscal Year (FY) 2021, COVID-19 relief funds, the first energy authorization in over a decade and extensions of a number of tax incentives also important to the energy sector. The bipartisan package will foster innovation across a broad range of technologies that are critical to U.S. energy and national security, long-term economic competitiveness and the protection of the environment,” report Taite R. McDonald, Beth A. Viola, Sydney Lauren Bopp and Hannah M. Coulter in Holland & Knight’s Insights.

The Holland & Knight alert highlights:

• Congressional support for clean energy research and development (R&D) remains strong, as evidenced by increasing budgets for most of the relevant programs at federal agencies, especially the U.S. Department of Energy (DOE).
• Every DOE program dedicated to clean energy research, development and deployment received an increase for Fiscal Year 2021, making billions of dollars available through grants, cooperative agreements, loans and loan guarantees, and other federal support.

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“After what felt like one of the longest election seasons in history, Washington is preparing to welcome the incoming administration of President-elect Joe Biden and Vice President-elect Kamala Harris. Meanwhile, Capitol Hill adjusts to a dramatic shift in power as Democrats achieved an election night stunner by winning both Senate run-off elections in Georgia on January 5, sending Rev. Raphael Warnock and Jon Ossoff to Washington and giving Democrats a 50-seat majority with the new incoming vice president casting any tie votes. In the House of Representatives, Republicans narrowed the Democrats’ majority in November but are still in the minority and Rep. Nancy Pelosi (D-CA) has been reelected to serve as Speaker of the House.”

“What does this all mean for energy and sustainability?” questions R. Neal Martin in Mintz’ Insights Center.

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“the IRS issued new guidance (Notice 2021-05) on New Year’s Eve that extends the four-year window, within which projects must place in service in order to be deemed to have satisfied the ‘continuous efforts’ or ‘continuous construction’ requirement, to ten years,” reports Judy Kwok in Mintz’ Insights Center.

“Under the existing provisions, developers must ‘begin construction’—i.e., begin physical work or incur capital expenditures equal to 5% of the total project cost—by a specified date in order to qualify for the ITC or the PTC. Projects often start construction in contemplation of accessing the credits, and the default rule is that ‘continuous construction’ or ‘continuous efforts’ (depending on whether construction was begun via physical work or capital expenditures) must continue until the project is completed. Under Notice 2017-4, the ‘continuous construction’ or ‘continuous efforts’ requirement is considered to be met if the project is completed in or before the fourth calendar year following the calendar year of the beginning of construction (such rule, the ‘Continuity Safe Harbor’). To accommodate COVID-19 related delays, Notice 2020-41 extended the Continuity Safe Harbor to the fifth calendar year following the calendar year of the beginning of construction for projects that began construction in 2016 and 2017.”

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“On December 27, 2020, President Trump signed H.R. 133, the ‘Consolidated Appropriations Act, 2021,’ an agglomeration of dozens of individual pieces of legislation which together total nearly 6,000 pages. While general press coverage has mostly focused on the controversy concerning the size of relief checks that will be sent to most taxpayers, and on appropriations to prevent a federal government shutdown, the Act contains substantial, and potentially historic, provisions addressing energy, climate change, and sustainability. The Act helps lay the groundwork for what promises to be a major push towards renewable energy sources and reductions in greenhouse gases (GHGs). These developments create a tremendous opportunity for renewable energy and GHG reduction projects, but also create new compliance burdens across a variety of industries,” write Eric L. Christensen, Brook J. Detterman Aron H. Schnur, Allyn L. Stern and Deepti B. Gage in The National Law Review.

For a summary and key takeaways, read the article.

“On Monday, December 21, 2020, the United States Congress passed a second large stimulus bill[1] (the ‘Relief Bill’) aimed at curtailing the economic disruptions caused by COVID-19. The Relief Bill, among other things, extends renewable energy tax credits for wind projects, solar projects and carbon capture and sequestration and contains specific provisions addressing offshore wind farms. These extensions include a one-year extension for wind projects, a two-year extension for solar projects and a two-year extension for carbon capture and sequestration projects. President Trump is expected to sign the Relief Bill and has until December 28, 2020 to do so, when the current stopgap funding measure expires,” write Jeffrey G. Davis, Daniel T. Kiely, George K. Haines, Isaac L. Maron & Andre M. Smith II in Mayer Brown’s Tax Equity Times.

Read the article to learn about the credits.

“In late November 2020, EPA Assistant Administrator, David P. Ross, released a series of recommendations which encourage EPA permit writers to include PFAS monitoring, best management practices, and stormwater pollutant controls as requirements in EPA issued NPDES permits. These recommendations were developed by the recently formed PFAS NPDES Regional Coordinators Committee (‘Committee’), an EPA work group comprised of staff and other contacts from USEPA Headquarters and Regional offices. The Committee’s goal was to develop an interim strategy to address point source discharges of PFAS pending development and adoption of statutory and/or regulatory frameworks for managing PFAS under the Clean Water Act. Specifically, the Committee recommended that EPA permit writers ‘[i]nclude permit requirements for phased-in monitoring’ and ‘best management practices’ (for wastewater discharges) or ‘stormwater pollutant control’ (for stormwater discharges) in EPA-issued NPDES permits for facilities where ‘PFAS are expected to be present’ in the facility’s discharge,” posts Thompson Coburn in Publications.

“Little guidance is offered to permit writers as to when PFAS are ‘expected to be present’ in wastewater or stormwater discharges. Rather, permit writers are advised to look to the raw materials stored at the facility, products or byproducts of the facility operation or available data and information from similar facilities. These methods, however, are of little use where the discharger is a publicly owned treatment works (“POTW”) or municipal separate storm sewer systems (‘MS4’).”

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“A state district judge in Austin has ordered the Texas Railroad Commission to stop granting exceptions to environmental rules requiring oil and gas companies to cap unplugged wells and clean up waste pits,” repors Scott DiSavino and Shreyansi Singh in Reuters.

“‘The Commission does not agree with the Court’s order, and has filed a notice of appeal with the Third Court of Appeals,’ Andrew Keese, spokesperson for the Railroad Commission of Texas, said in a statement to Reuters.”

“Public Citizen and two ranchers sued the Railroad Commission in July for unlawfully suspending the rules.”

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“State lawmakers are considering pausing for a year an energy law at the center of an alleged $60-million bribery case rather than repealing it,” reports Laura A. Bischoff in Dayton Daily News.

“More than 4.5 million ratepayers across Ohio are scheduled to start paying new fees Jan. 1 that will deliver $150 million a year to subsidize two nuclear power plants owned by Akron-based Energy Harbor. Those fees and other provisions are part of House Bill 6, which was signed into law by Gov. Mike DeWine in July 2019.”

“But in July 2020, FBI agents arrested then Ohio House speaker Larry Householder, R-Glenford, and four associates. Prosecutors alleged that utility companies funneled more than $60 million into groups that don’t have to disclose donors to position Householder to become speaker and he in turn helped pass HB6.”

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“From a fossil-fuel friendly state with only a small renewables presence, Virginia went to one with a mandatory schedule for phasing out fossil fuels by 2050, participation in a regional carbon market and some of the highest renewables targets in the nation,” writes Saray Vogelsong in Virginia Mercury’s Energy + Environment.

“Much of this transition will occur under the aegis of the Virginia Clean Economy Act, a law described by Sigora Solar policy chief and Solar Energy Industries Association board member Karla Loeb as “the single largest shift in energy policy as it relates to the electricity sector that’s ever been achieved in any state.” But that law wasn’t the only major clean energy legislation to get the General Assembly’s stamp of approval. Other measures sought to give local governments more power in negotiating permits with large-scale solar developers, to give apartment-dwellers access to solar and to pump money into low-income energy efficiency efforts. ”

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“Addressing climate change and its effects is one of President-elect Joe Biden’s top four priorities. Growing the clean-energy sector will be necessary to achieve his new administration’s goal of economy-wide, net-zero emissions by 2050 at the latest, a 2035 target for a ‘carbon pollution-free power sector’ and plans to rejoin the 2015 Paris Agreement, from which President Donald Trump announced the US would withdraw, an action that took effect on Nov. 4,” write Corinne Grinapol, Mary B. Powers, Pam Radtke Russell, and Debra K. Rubin in Engineering News-Record.

“That global agreement sets a collective goal of limiting CO₂ rise in the 21st century to under 2° C above pre-industrial levels, with each country submitting specific reductions. The U.S. had initially pledged to cut, by 2025, greenhouse gas emissions to 26%-28% below the 2005 level, as well as strive for an overall 28% emissions reduction.”

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“One of the noteworthy moments of the recent Presidential campaign came in the candidates’ last debate, when Vice President Biden” commented that he would transition away from the oil industry and that it has to be replaced by renewable energy over time,” discuss Scott H. Segal, Liam P. Donovan, John Lee, Anna Burhop, Christine G. Wyman, George D. Felcyn, Jeffrey R. Holmstead, Timothy J. Urban, Joshua C. Zive, Paul Nathanson, and Edward D. Krenik in Bracewell’s Insights.

“While much was made of that remark, the term ‘transition’ was an unmistakable reference to specific language in his campaign’s July energy plan calling for a net-zero carbon economy by 2050, coupled with an intermediate net-zero commitment for the power sector by 2035. While reasonable minds may differ as to whether those goals are achievable without major technological breakthroughs or robust use of offset mechanisms (or both), the language of a ‘transition over time’ is familiar. Echoes of such a transition can be found in the climate policies of oil & gas and power sector companies and in policy debates happening in the halls of major trade associations.”

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“S&P Global Ratings downgraded FirstEnergy Corp. and its subsidiaries, citing the dismissal Thursday night, Oct. 29, of former CEO Charles Jones in relation to a bribery scandal,” reports Bloomberg in Crain’s Cleveland Business.

“The ranking was cut two steps to BB+ from BBB, S&P said in a statement. The company and its subsidiaries remain on CreditWatch with negative implications, it said.”

“Akron-based FirstEnergy fired Jones and two other senior executives after a board review in the wake of a federal corruption scandal found they had violated the company’s policies and code of conduct.”

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