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Six Takeaways: Utilization and Structuring for Section 45Q Carbon Capture Credits

On Thursday, June 11, McDermott partners Phil Tingle, Heather Cooper and Jacob Hollinger were joined by Ken Ditzel, managing director at FTI Consulting, to discuss their insights into the proposed Section 45Q carbon capture and sequestration credit regulations. The Treasury Department and IRS recently published proposed regulations implementing the Section 45Q carbon capture and sequestration credit. The regulations clarify some questions about the credit, though many questions remain. For further discussion, see our On The Subject. Below are six key takeaways from this week’s webinar: 1. Carbon capture projects are likely to be economically important moving forward. Ken Ditzel estimated there are more than 600 economically viable projects, including both secure geological storage at deep saline formations and enhanced oil recovery projects. 2. The proposed regulations provide a compliance pathway for satisfying the reporting requirements. For long-term...

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How Energy Company Buyers Can Limit Environmental Liability Risk

Many energy companies may be driven into bankruptcy because of the COVID-19 pandemic. Third parties seeking to purchase those companies’ assets may be concerned about potential successor liability for the seller’s environmental obligations. This article highlights some steps that asset purchasers in bankruptcy can take to reduce the risk of such liability. Successor liability exists under each of the major federal environmental laws. Four especially important statutes for energy companies are the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, the Resource Conservation and Recovery Act, the Clean Water Act and the Clean Air Act. Access the full article.

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Six Takeaways: How Utilities and IPPs Are Responding to COVID-19

On Thursday, April 30, McDermott was joined by Brett Kerr, vice president of external affairs at Calpine, Drew Murphy, senior vice president of strategy and corporate development at Edison International, and Andrew Campbell, director of regulatory support and planning at NiSource who shared their perspectives on how investor-owned utilities and independent power producers are managing the COVID-19 crisis. Below are six takeaways from this week’s webinar: 1. As businesses go back to work, it is essential that they carefully plan for a new normal, including consideration of travel restrictions, acquisition of personal protective equipment, maintaining social distancing of employees and contractors, and compliance with new rules and regulations. 2. Utilities have been and will continue to optimize their maintenance schedules to balance safety and reliability concerns considering the essential nature of electricity and risks potentially associated with deferred...

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IRS Releases Initial Section 45Q Carbon Sequestration Credit Guidance

Treasury and the IRS released initial guidance on the amended Section 45Q carbon oxide sequestration credit on February 19, 2020. Notice 2020-12 and Revenue Procedure 2020-12 provide guidance relating to the beginning of construction and tax equity partnership allocations. This is the first Section 45Q guidance since Treasury issued a request for comments in Notice 2019-32 last year. That Notice sought input on a number of issues raised by amendments to Section 45Q that expanded the scope and enhanced the amount of the Section 45Q credit pursuant to the Bipartisan Budget Act of 2018, P.L. 115-123. The new guidance in Notice 2020-12 and Revenue Procedure 2020-12 is effective March 9, 2020. Notice 2020-12 closely follows the beginning of construction guidance for the Investment Tax Credit (ITC) in Notice 2018-59 and the Production Tax Credit (PTC) in Notice 2013-29 (as clarified and modified by subsequent notices). Like the ITC and PTC guidance, taxpayers can...

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FERC Announces Tax Reform Actions and Eliminates Income Tax Allowance for Master Limited Partnerships

FERC announced actions in response to the 2017 tax reform legislation and a revised income tax policy, which eliminates the income tax allowance for Master Limited Partnerships. Regulated entities should ensure that they comply with FERC’s orders regarding the treatment of income taxes and consider whether to file comments on the proposed rulemaking and notice of inquiry. Access the full article.

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Transmission Planning and Construction Right of First Refusal Ruled Unduly Discriminatory, Not Mobile-Sierra Protected

The provision contained in incumbent electric utility tariffs—conferring on the holder the right of first refusal (ROFR) to construct additions to the high-voltage electrical grid, regardless of who conceived of and proposed the addition—is unduly discriminatory, the U.S. Circuit Court of Appeals for the D.C. Circuit held in a July 1 decision in Oklahoma Gas & Electric Co. v. FERC, No. 14-1281.   The court’s decision upheld utility-specific applications of the FERC mandate—a central open-access innovation of the agency’s Order No. 1000 (Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities)—that directed independent system operators and regional transmission organizations (ISO/RTO) to remove from their existing tariffs and membership agreements the ROFR provision (Removal Mandate). Earlier in South Carolina Public Service Authority v. FERC, 762 F.3d 41 (D.C. Cir. 2014), the same court generally had upheld the...

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Timing Is (Almost) Everything: FERC Implements D.C. Circuit Guidance on NEPA Review of Multiple Pipeline Construction Projects

In the wake of two recent D.C. Circuit decisions, the Federal Energy Regulatory Commission (FERC) has begun to implement its new policy concerning the review of natural gas pipeline construction proposals under the National Environmental Policy Act (NEPA). To decide whether a NEPA review must include other projects proposed by the pipeline, FERC will look at the timing and maturity of other proposals and the independence of the projects. In the first decision, Delaware Riverkeeper Network, the U.S. Court of Appeals for the D.C. Circuit held that FERC failed to consider the cumulative environmental impact of four projects that had been separately proposed by the same pipeline. The D.C. Circuit held that the projects were not financially independent and were “a single pipeline” that was “linear and physically interdependent,” so the cumulative environmental impacts must be considered concurrently. In the second decision, Minisink Residents for Environmental...

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Key Energy-Related Tax Provisions in the 2017 Budget Proposal

President Obama’s recently released budget proposal for the 2017 fiscal year repeats many of his past energy-related tax proposals, including a permanent extension of the renewable energy production tax credit and a provision making it refundable. Making the production tax credit permanent and refundable signals the administration’s continued strong support for renewable energy. This On the Subject summarizes the key energy-related tax provisions contained in the budget proposal and detailed further in the US Department of the Treasury’s general explanation of the proposal. Read the full newsletter.

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Oil and Gas in Egypt

Egypt has suffered from significant social and political unrest.  This resulted in a drop in oil and gas production levels at the same time as domestic energy consumption was rising.  Egypt was facing a serious energy crisis. The election of Abdel Fattah al-Sisi as president in June 2014 proved to be a turning point: There has been a substantial reduction in the level of fuel subsidies. Significant steps have been taken to repay debts owed to international oil and gas companies. There is ongoing diversification of energy sources, with more renewable power projects and increasing imports of liquefied natural gas (LNG). The future looks positive.  A number of agreements have recently been signed by international oil and gas companies and it seems Egypt is still a destination for international investment. Read the full article in Oil & Gas Financial Journal.

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Certificated Natural Gas Storage Capacity Is Based on Science, Not Sales, FERC Rules

The Federal Energy Regulatory Commission (the Commission) issued an order on Thursday, March 19, 2015, refusing to allow the abandonment of certificated working gas capacity when the reason for the request was unrelated to the physical characteristics of the storage facility and unsupported by engineering or geological data.  The applicant had sought the abandonment authorization for the sole purpose of reducing its lease payments, which are largely based on the certificated working gas capacity of the facility. The order, Tres Palacios Gas Storage LLC, 150 FERC ¶ 61,197 (2015), was issued following an  application by Tres Palacios Gas Storage LLC (Tres Palacios) for authorization to abandon a significant amount of its certificated working gas storage capacity in a salt dome storage facility in Matagorda and Wharton Counties, Texas.  Tres Palacios claimed that abandonment was justified because market conditions were such that it could not sell the capacity at...

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