President Biden Raises the Bar on Electrification of the Auto Industry through Executive Order

On August 5, 2021, US President Joe Biden announced and signed an executive order that sets a new target to make half of all new vehicles sold in 2030 zero-emissions vehicles, including battery electric, plug-in hybrid electric and fuel cell electric vehicles. This executive order is consistent with President Biden’s goal of building more than 500,000 electric vehicle (EV) chargers throughout the United States, which will provide manufacturing opportunities for charging infrastructure and battery technology. These new actions announced by President Biden—paired with investments in the Build Back Better agenda—aim to build up American leadership in clean cars and trucks “by accelerating innovation and manufacturing in the auto sector, bolstering the auto sector domestic supply chain, and growing auto jobs with good pay and benefits.” The executive order will commence “development of long-term fuel efficiency and emissions standards to save consumers money, cut pollution, boost public health, advance environmental justice, and tackle the climate crisis.” It also directs agencies to:

  • Consult with the US Secretaries of Commerce, Labor and Energy on ways to accelerate innovation and manufacturing in the automotive sector, strengthen the domestic supply chain for that sector and grow jobs that provide good pay and benefits, as well as,
  • Secure input from a diverse range of stakeholders, including representatives from labor unions, industry, environmental justice organizations and public health experts.

Concurrently with President Biden’s announcement, American automakers Ford, GM and Stellantis, along with the United Auto Workers (UAW), released statements saying they look forward to working with the Biden Administration to enact policies that will enable President Biden’s 2030 target to be reached. In a joint statement, Ford, GM and Stellantis also recognized that the United States’ transition to electric vehicles “represents a dramatic shift from the U.S. market today that can be achieved only with the timely deployment of the full suite of electrification policies committed to by the Administration in the Build Back Better Plan, including purchase incentives, a comprehensive charging network of sufficient density to support the millions of vehicles these targets represent, investments in R&D, and incentives to expand the electric vehicle manufacturing and supply chains in the United States.” Similarly, in a joint statement from BMW, Ford, Honda, Volkswagen and Volvo, the automakers state that, “bold action from our partners in the federal government is crucial to build consumer demand for electric vehicles….” It is expected that government agencies will announce policies, procedures and regulations that will advance President Biden’s target of electric vehicles representing 50% of auto sales in 2030.




Biden Administration Issues National Security Memorandum Shortly after the House Passes Three Bills Aimed at Cybersecurity in the Energy Industry

The federal government is seeking to increase cybersecurity in critical infrastructure industries through the implementation of a voluntary Industrial Control Systems Cybersecurity Initiative (Initiative), while the US House of Representatives (House) concurrently focuses on the same goal by passing three bills aimed at enhancing cybersecurity. While it’s currently voluntary, it’s likely the Initiative—along with its performance goals issued in conjunction— may become mandatory for companies that own or operate critical infrastructure facilities.

In order to focus on strengthening the nation’s cybersecurity within the energy industry, the House recently passed the Energy Emergency Leadership Act (HR 3119), the Enhancing Grid Security through Public-Private Partnerships Act (HR 2931) and the Cyber Sense Act (HR 2928).

On July 28, 2021, shortly after the House passed the above three bills, the Biden Administration released a National Security Memorandum on Improving Cybersecurity for Critical Infrastructure Control Systems (Memorandum). The Memorandum affirmatively recognized the “[p]rotection of our Nation’s critical infrastructure is a responsibility at the Federal, State, local, Tribal and territorial levels and of the owners and operators of that infrastructure.” In order to protect such infrastructure, the administration provides that it is their policy “to safeguard the critical infrastructure of the Nation, with a particular focus on the cybersecurity and resilience of systems supporting National Critical Functions…”

As a result, the administration established the voluntary Initiative between the federal government and the critical infrastructure community with the primary objective of defending the United States’ critical infrastructure through facilitating the deployment of technologies and systems that will increase cybersecurity. The Memorandum further instructs the US Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) and the US Department of Commerce’s National Institute of Standards and Technology (NIST) to develop cybersecurity performance goals for critical infrastructure. The US Secretary of Homeland Security will issue initial goals for control systems no later than September 22, 2021, with cross-sector and sector-specific goals to be issued within a year of the Memorandum.

On May 7, 2021, just before 5 am, an employee in the Colonial Pipeline Co.’s control room found a ransom note sent by hackers demanding cryptocurrency. In response, Colonial Pipeline Co. Chief Executive Officer Joseph Blount shut down the entire pipeline by 6:10 am. This marked the first time in its 57-year history that Colonial Pipeline Co. shut down its entire gasoline pipeline system. Colonial Pipeline Co. paid the hackers, who were an affiliate of a Russia-linked cybercrime group known as DarkSide, a $4.4 million ransom shortly after the hack. However, the US Department of Justice announced it recovered $2.3 million of the ransom in June.

Only mere months after this significant breach of cybersecurity, the House approved HR 3119, which was introduced by US Representatives Bobby Rush (D-IL) and Tim Walberg (R-MI) to increase energy emergency and cybersecurity responsibilities as a core function for the US Department of Energy (DOE) and create a new assistant secretary position to specifically focus on these issues. In a statement released [...]

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Carbon Capture, Utilization and Sequestration – An Industry Primed for Explosive Growth? A Summary of the White House Council on Environmental Quality’s Report

On June 30, 2021, the White House Council on Environmental Quality (CEQ) delivered a Carbon Capture, Utilization and Sequestration (CCUS) report to Congress in accordance with the Utilizing Significant Emissions with Innovative Technologies (USE IT) Act passed in December 2020. The CEQ report highlights an inventory of existing permitting requirements for CCUS deployment and identifies best practices for advancing the efficient, orderly and responsible development of CCUS projects at an increased rate.

The Biden Administration is “committed to accelerating the responsible development and deployment of CCUS to make it a widely available, increasing cost-effective, and rapidly scalable climate solution across all industry sectors.” CEQ Chair Brenda Mallory recognized that in order “[t]o avoid the worst impacts of climate change and reach President Biden’s goal of net-zero emissions by 2050, we need to safely develop and deploy technologies that keep carbon pollution from entering the air and remove pollution from the air…The report … outlines a framework for how the U.S. can accelerate carbon capture technologies and projects in a way that benefits all communities.” Development of CCUS projects and related infrastructure will be encouraged and favorably looked upon by the Biden Administration as a demonstrable example of how it’s seeking to combat climate change.

CCUS – OPPORTUNITY OF THE FUTURE FOR MIDSTREAM COMPANIES?

CCUS refers to a set of technologies that remove carbon dioxide (CO2) from the emissions of point sources or the atmosphere and permanently sequesters them. In addition to removing CO2, carbon capture technology has the potential to remove other types of pollution, such as sulfur oxides. According to leading scientists and experts, removal of CO2 from the air is essential to addressing the climate crisis and alleviating the most severe impacts of climate change. Beyond the impact carbon capture technology will have on the climate crisis, CCUS will continue to have a valuable role in the US economy as the technology continues to evolve.

The CEQ report makes it extremely clear that any effective nationwide rollout of CCUS is heavily dependent on a massive buildout of pipelines for CO2 transportation infrastructure. Currently, there are approximately 45 CCUS facilities in operation or in development and 5,200 miles of dedicated CO2 pipelines. The number of CCUS facilities and the breadth of dedicated CO2 pipelines will need to expand at a rapid rate if CCUS is to become an effective tool for meeting net-zero emission by 2050.

Establishing CCUS at scale is going to be heavily dependent on—and presents a great opportunity for—midstream pipeline developers. Despite the 5,200 miles of CO2 pipelines and the potential to employ “orphaned” pipeline networks previously used by the oil and gas industry once remediated, there is no current network of CO2 pipelines at a scale large enough for permanent carbon sequestration across all industrial sectors. Thus, to achieve climate goals set by the Biden Administration, a significant amount of CO2 pipelines will need to be developed. According to the CEQ report, expansion of CO2 pipeline infrastructure in “the near term is [...]

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IRS Provides Relief on Begin Construction Continuity Requirements

Yesterday, the Internal Revenue Service (IRS) issued Notice 2021-41 (the Notice), providing relief for continuity requirements for the investment tax credit (ITC) under Section 48 and the production tax credit (PTC) under Section 45.

The applicable tax rate for the ITC and PTC is based on the year a project “begins construction.” Under existing IRS guidance, projects are treated as having begun construction by either satisfying the Physical Work Test or the Five Percent Safe Harbor. Both methods require a taxpayer to make continuous progress toward completion of the facility once construction has begun (Continuity Requirement). The IRS previously provided a Continuity Safe Harbor, whereby the Continuity Requirement will be deemed met if the project is placed in service within a certain number of years from beginning construction. For most projects, the Continuity Safe Harbor was previously four years and was extended to five years last year for projects that otherwise began construction in 2016 or 2017. Under the existing guidance, if the Continuity Safe Harbor is not met, a taxpayer can satisfy the Continuity Requirement by meeting the Continuous Construction Test (in the case of the Physical Work Test) or the Continuous Efforts Test (in the case of the Five Percent Safe Harbor). The Continuous Construction Test and Continuous Efforts Test are both demonstrated through facts and circumstances.

In the Notice, the IRS further extended the Continuity Safe Harbor to six years for projects that otherwise began construction in 2016 through 2019 and to five years for projects that otherwise began construction in 2020. In other words, the Continuity Safe Harbor will be satisfied if a taxpayer places the project in service by the end of a calendar year that is no more than five or six years (as applicable) after the calendar year during which construction of the project otherwise began.

The Notice further provides that for a project that does not satisfy the Continuity Safe Harbor, the taxpayer can satisfy either the Continuous Efforts Test or Continuous Construction Test (regardless of whether the taxpayer is relying on the Physical Work Test or the Five Percent Safe Harbor). Under previous guidance, a taxpayer relying on the Physical Work Test was all but certain to fail the Continuous Construction Test, which seems to require regular physical work from the time construction begins. The Continuous Efforts Test appears to encompass more activities than the Continuous Construction Test and may be easier to satisfy for some taxpayers.

The Notice clarifies that the relief was in response to the fact that “regional, national, or global circumstances due to the COVID-19 pandemic have continued to cause delays in the development of certain facilities eligible for the PTC and the ITC. These extraordinary delays have adversely affected the ability of many taxpayers to place facilities in service in time to meet the Continuity Safe Harbor.”

The Notice will be welcome relief to many taxpayers who have struggled with project delays in recent years.




Seeing a $100 Billion Market Opportunity, North Carolina Governor Commits to Developing 2.8 Gigawatts and Eight Gigawatts of Offshore Wind by 2030 and 2040, Respectively, through Executive Order

Last week, North Carolina Governor Roy Cooper issued Executive Order No. 218 titled, “Advancing North Carolina’s Economic and Clean Energy Future with Offshore Wind,” announcing a goal of developing 2.8 gigawatts of offshore wind energy resources by 2030 and eight gigawatts by 2040. This executive order comes after the North Carolina Department of Commerce issued a report in March that found offshore wind energy development along the Atlantic is a more than $100 billion market opportunity through 2035.

Within the order, Cooper recognizes the favorable economic impact offshore wind development will create for North Carolina, including an estimated 85,000 new jobs and $140 billion in capital expenditure along the Atlantic Coast by 2035. “This coordinated approach to developing our offshore wind supply chain will bring new jobs to North Carolina for generations to come,” North Carolina Secretary of Commerce Machelle Baker Sanders said. “From building out the supply chain, to installing equipment, to operating the wind facilities, North Carolina’s manufacturers and workforce are well positioned to play an integral role in the entire East Coast market, not just for projects directly off the state’s coast.”

In addition to the economic benefits the offshore wind development will bring to North Carolina, this executive order will further assist the state in achieving the North Carolina Clean Energy Plan’s goal of a 70% reduction in power sector greenhouse gas emissions by 2030 and carbon neutrality by 2050. “The coordinated effort of state and federal partners on this issue is an important step forward in our transition to a clean energy economy in North Carolina and key to meeting the goals of the state’s Clean Energy Plan,” North Carolina Clean Energy Director Dionne Delli-Gatti said.

North Carolina’s commitment to create 2.8 gigawatts of offshore wind capacity by 2030 and eight gigawatts by 2040 is one of the largest targets to date, exceeding Virginia’s goal of installing 5.2 gigawatts of offshore wind power by 2034 and New Jersey’s goal of 7.5 gigawatts by 2035, Michelle Allen, project manager for the North Carolina political affairs team at the Environmental Defense Fund, said. Although North Carolina’s target is one of the biggest to date, the target of 2.8 gigawatts would almost be completely fulfilled should North Carolina’s current offshore wind project, Kitty Hawk Offshore, be built to its full capacity of up to 2.5 gigawatts. If North Carolina reaches its target, the energy generated will power roughly 2.3 million homes by 2040.

As a result of the executive order, Sanders must appoint a clean energy economic development coordinator and create the North Carolina Taskforce for Offshore Wind Economic Research Strategies. The order further requires the state’s Department of Environmental Quality and Department of Military and Veterans Affairs (NCDMVA) to elect offshore wind coordinators and take steps to support offshore wind development.




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