Energy Legal Blog

On February 16, 2010, President Obama announced that DOE had offered $8.3 billion in conditional commitments for loan guarantees for two new nuclear reactors to be built at the Vogtle Electric Generating Plant in Burke, Georgia. This announcement came on the heels of the release of Obama’s FY 2011 budget which proposed tripling the current loan guarantee authority for nuclear projects. These two actions signal a renewed willingness on the part of the Administration to support nuclear power as an essential ingredient in the nation’s future energy supply. (more…)

PR News announced that Bracewell & Giuliani’s Energy Legal Blog will be recognized as the best “Legal PR Blog” at its annual Corporate Social Responsibility & Legal Awards Luncheon on February 24, 2010 at the National Press Club in Washington, D.C. This award recognizes an outstanding and influential law-related weblog or online journal written by a representative of the organization with the goal of espousing the brand or a certain message and written with flair and personality.

“Managing a crisis and working with legal counsel are two areas of communication that will always be a part of a PR professional’s responsibilities,” notes Diane Schwartz, vice president of PR News. “The Legal PR Awards shines a light both on how law firms are communicating to their stakeholders and to how the PR industry is in the driver’s seat when a crisis hits.”

More information on the award program and this year’s winners is available at http://www.prnewsonline.com/awards/csr2009_event-finalists.html.

On June 3, 2008, the U.S. Department of Energy (DOE) finally submitted its initial license application to the U.S. Nuclear Regulatory Commission (NRC) seeking construction authorization pursuant to 10 C.F.R. § 63.31 for a high-level radioactive waste repository at a geologic repository operations area at Yucca Mountain in Nye County, Nevada.

The voluminous license application comprises both General Information and a Safety Analysis Report (SAR). The General Information includes a general description of the repository and its operations and the DOE’s plans for constructing and protecting the repository facilities and their contents.  The SAR is the principle technical document and discusses how the repository is considered safe and complies with the NRC’s regulations.  In the SAR the DOE provides information on the repository’s geology, hydrology, mineralogy and surface features and all of the structures and systems that will be constructed to receive, process and emplace spent nuclear fuel.  It also analyzes potential safety hazards and demonstrates that all of the features and structures will perform within acceptable ranges to keep the repository safe.

Congress and President Bush approved Yucca Mountain in 2002 as the site for the United States’ first permanent spent nuclear fuel and high-level radioactive waste repository.  Presumptive Republican presidential candidate John McCain has expressed support for the repository at Yucca Mountain, while presumptive Democratic presidential candidate Barack Obama (together with Senate Majority Leader Harry Reid) has expressed opposition to the project.

In the first test of the “backstop” transmission siting authority given to FERC in the Energy Policy Act of 2005 (EPAct 2005), Southern California Edison (SCE) recently discussed with FERC staff the siting of a 230-mile, 500 kV transmission line from the Palo Verde nuclear plant near Phoenix, Arizona to Devers, California, near Palm Springs (known as the Palo Verde-Devers II Line).  SCE representatives met with FERC staffers to begin a “pre-filing” consultation process in advance of filing an application for FERC to approve the proposed siting of the line. 

California covets the line as a means to bring more power into the state, and the California Public Utilities Commission (CPUC) approved the line.  However, SCE’s plans hit a obstacle at the Arizona Corporation Commission (ACC).  The ACC rejected SCE’s application in May 2007, stating it refused to allow SCE to plug a “230-mile extension cord” into Arizona’s generation supply.  The ACC found the line would cost Arizona ratepayers $242 million, could have detrimental environmental impacts, and would significantly reduce available generation in the state, which has a rapidly growing population. 

Arizona’s rejection of the line will test the extent of FERC’s authority under the national interest electric transmission corridors (NIETC) provisions of EPAct 2005.  Under these provisions, Congress gave FERC authority for the first time to approve, in certain circumstances, the siting of transmission lines in areas of congestion, designated as NIETCs by the US Department of Energy.  These circumstance include when a state public utility commission has “withheld approval for more than 1 year” after a siting application is filed.  In a controversial 2006 rulemaking decision, FERC interpreted the word “withheld” in the statute to mean “deny,” indicating that FERC believes it has authority to approve siting of a transmission line even when a state has rejected the line.  This order has been appealed to the US Court of Appeals for the Fourth Circuit.

Following the meeting with SCE, FERC emphasized that no application has yet been filed.  FERC also contacted the CPUC and ACC to inform them of the meeting and seek their input as to whether FERC has authority in this case.  If SCE eventually files an application, FERC will review the records developed before the CPUC and ACC, coordinate actions required by federal law, including federal environmental review, and conduct an independent evaluation.  FERC must issue a decision within one year of the filing of the application.

New York City welcomed leaders from more than a dozen sectors within the global energy industry at the 2007 Platt’s Global Energy Awards, held last Thursday at Cipriani Wall Street. Platt’s Global Energy Awards annually recognize the highest achievements in the industry.  For the second consecutive year, Bracewell & Giuliani LLP co-sponsored the event.

Firm representative Kayla Zerby spoke with a few nominees and winners about their accomplishments in ‘07 and what the future of energy holds.

Listen to the podcast here.

About the interviewees:

Kim Bowers is Senior Vice President and General Counsel for Valero Energy Corporation and oversees the company’s Commercial and Environmental Law departments as well as the Litigation, Labor and Ad Valorem Tax departments. Valero was awarded with the “Downstream Business of the Year” award.

Larry Pierce is Vice President of Corporate Communications, of Knight Inc., Kinder Morgan Energy Partners, L.P. and Kinder Morgan Management, LLC and leads the public relations and external and internal communications activities for the Kinder Morgan companies. He also oversees the Kinder Morgan Foundation.  Kinder Morgan was a finalist in the “Energy Transporter of the Year” category.

Arthur (“Art”) Wiese is vice president of corporate communications at Entergy Corporation and oversees corporate communications for Entergy, including internal and external communications, advertising, community relations, and opinion research.  Entergy took home the “Power Company of the Year” award.

Jeff Mobley is Senior Vice President of Investor Relations and Research at Chesapeake Energy and oversees all of Chesapeake’s energy industry and macroeconomic research initiatives.  Chesapeake was named this year’s “Hydrocarbon Producer of the Year.”

(Click here for a list of all the winners.  Click here for a list of all the 2007 finalists.)

On May 16, the Department of Energy (DOE) published its Notice of Proposed Rulemaking (NOPR) regarding loan guarantees for projects that would employ renewable energy systems, advanced nuclear facilities, and carbon sequestration units, among other innovative technologies.  In comments on the NOPR, lending and rating institutions slammed the proposal.

The Energy Policy Act of 2005 (EPAct 2005) authorizes DOE to guarantee loans “not to exceed an amount equal to 80 percent of the project cost of the facility.”  In the  NOPR, however, DOE proposed to guarantee up to only 90 percent of a particular loan rather than 100% of a loan covering 80% of project cost.  DOE's proposal also prohibited selling off or “stripping” the guaranteed portion of the debt instrument because DOE wishes (1) to preclude the guaranteed portion of the loan from being sold and (2) to ensure that the lender and later debt holders maintain the same level of financial risk in the project as when the debt was issued in order to spur continued due diligence.

Credit Suisse, Lehman Brothers, Goldman Sachs, Merrill Lynch, Morgan Stanley, and Citigroup expressed concern that the proposed rule “is not workable” because it relegates 10 percent of project debt to an un-guaranteed, deeply subordinated tranche, and, by barring stripping, prevents marketability of the debt instrument.  The “hybrid instrument” created by the NOPR, they explained, has no natural market, and “the higher costs associated with financing [it] would deter sponsors from moving forward . . . [or] increase the risk of default.”  Goldman Sachs also submitted very similar comments separately.

Standard & Poor's echoed concerns over the 90 percent guarantee limit and prohibition against stripping.  S&P cautioned that the “rating associated with a partially guaranteed obligation will be substantially lower than the 'AAA' rating of a fully guaranteed instrument” and will result in “a significantly higher cost of debt for the project than if it was fully guaranteed.”  A 100 percent debt guarantee and/or removal of the no stripping requirement would lower the cost of debt and is likely essential to “the early commercial use of innovative technologies.”

Banc of America Securities, LLC concluded that EPAct itself made clear that 100 percent of the loan is to be backed by the full faith and credit of the United States and the NOPR's proposal is consequently inconsistent with the statute.   The Electric Power Supply Association echoed this congressional intent argument when it urged DOE to guarantee 80 percent of the total project cost and up to 100 percent of the amount borrowed.  The Public Service Commission of Florida agreed, adding that the loan guarantee program “was intended to support the deployment of new technologies that reduce, avoid or sequester greenhouse gas emissions by providing a [100 percent] guarantee for up to 80 percent of project costs,” not 90 percent of 80 percent of project costs.