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Join GTH at the Washington Future Energy Conference

September 9, 2014

Please join us at the Washington Future Energy Conference on November 5. Gordon Thomas Honeywell is proud to be a major sponsor of this event. Now in its fifth year, the Future Energy Conference brings together energy innovators, utilities, scientists, investors, and many others to discuss the future of the energy industry in our state.

Speakers include GTH partner Eric Christensen, who will moderate a panel discussing the electrification of Washington's transportation system. The panel will include Steve Marshall of the Center for Advanced Transportation and Energy Solutions, Charles Knutson, Senior Policy Advisor to Washington Governor Jay Inslee, and John McCoy, Legislative Director for the Seattle Electric Vehicle Association.

We look forward to seeing you November 5.

Milestone in Transmission Regulation: U.S. Court of Appeals Upholds Order No. 1000

August 18, 2014

On Friday, the U.S. Court of Appeals for the District of Columbia Circuit rejected a host of challenges to the Federal Energy Regulatory Commission's ("FERC") Order No. 1000, upholding the order in its entirety. As we've previously discussed, Order No. 1000 aims to create a level regulatory playing field for independent transmission developers, thus encouraging new sources of badly-needed investment in the nation's transmission infrastructure. The D.C. Circuit's 97-page opinion upholding the order represents an important milestone in the evolution of regulation in the electric industry.

Order No. 1000 changed the planning and cost allocation regime for interstate transmission projects in three major requirements:

(1) Each FERC-jurisdictional transmission provider must participate in a regional transmission planning process that identifies the most cost-effective regional and inter-regional transmission projects, and provides for a method of cost-allocation for the selected projects meeting six specific principles. Independent transmission developers and other non-incumbents need not participate in this process, but it must be open to their participation.

(2) The planning process must provide for transmission expansion driven by public policy requirements, along with economic and reliability needs. State renewable portfolio standards and other public policies favoring the development of renewable energy are the largest public policy factor driving the need for new transmission.

(3) The federal "right of first refusal" ("ROFR") must be removed from FERC-approved transmission tariffs. The ROFR allows incumbent utilities to construct transmission projects proposed by other entities within the incumbents' service territories. FERC views this as a major barrier to entry for independent transmission developers, whose investment in planning and permitting is essentially wiped out if the incumbent exercises its ROFR. Although not common in the Northwest, the ROFR requirement proved extremely controversial in other parts of the country.

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Sending Up a Flare, Washington UTC Provides Guidance on Jurisdiction for Third-Party Solar Leases

August 1, 2014

This week, the Washington Utilities & Transportation Commission ("UTC") issued its long-awaited policy statement concerning UTC jurisdiction over third-party owners of net-metered electric facilities, such as roof-top solar systems. The Interpretive Statement indicates that the UTC likely would assert at least limited jurisdiction over third-party owners of rooftop systems who contract with ordinary homeowners. Much of the Interpretive Statement, however, is a cry for help addressed to the Washington legislature, urging it to enact legislation addressing the unique jurisdictional and regulatory issues arising in this unique context.

As noted here, the UTC last year concluded that Washington's net metering statute allows for third-party ownership of rooftop solar systems, opening the door to innovative financing structures that have allowed rapid growth of distributed solar power in other states. However, the UTC left open one critical legal question -- whether the third-party owners of net metered systems operating under such leasing structures would be subject to UTC jurisdiction, and therefore potentially subject to the full range of utility-style regulation. While the Interpretive Statement is likely to disappoint those looking for a definitive statement from the UTC, it provides useful guidance both as to the UTC's concerns with third-party financing arrangements and the type of regulation the UTC likely would impose in those situations where it asserts jurisdiction. While not definitive, the Interpretive Statement, along with Washington's lucrative incentives for solar development and a recent change in the state's building code reducing upfront engineering costs, should spur development of distributed generation in the state.

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Department of Energy Offers $4 Billion in Loan Guarantees for Energy Efficiency, Renewables, and Energy Storage

July 24, 2014

The U.S. Department of Energy's Loan Programs Office recently announced a new solicitation for federal loan guarantees to help promote renewable energy, energy storage technology, and energy efficiency projects. The loan guarantees are aimed at promoting greenhouse gas-reducing technologies where DOE support will be "catalytic" -- that is, support of a particular project will help catalyze widespread adoption of the technology -- and the technology is replicable and market-ready.

Specific categories of projects eligible for loan guarantees include renewable energy projects that incorporate energy storage, smart grid and energy storage projects that promote renewables integration, and microgrid projects if they reduce carbon dioxide emissions. In addition, biofuels, waste-to-energy projects, and a variety of energy efficiency processes and technologies are eligible. Finally, loan guarantees can be used to retrofit existing non-powered dams with hydroelectric generation and to install variable speed pump-turbines into existing dams. As recently noted here, Congress also recently appropriated money to provide production incentives for hydroelectric power produced by new generators installed on existing non-powered dams and conduits.

DOE will being receiving initial applications October 1, 2014, and will begin receiving supplemental applications for those projects passing the initial screen on January 14, 2015. The solicitation provides for four additional rounds of applications.

If you have any questions about the DOE's loan program, energy project construction or finance, or other matters involving energy or environmental law, please contact a member of GTH's Energy, Telecommunications, and Utilities or Environment & Natural Resources practice groups. We're proud that our partner Jim Waldo was recently named 2013 Lawyer of the Year for Energy and Natural Resources Law, and six practice members were recently recognized as Washington Super Lawyers.

Please Join Us for LSI's Columbia River Treaty Conference

July 21, 2014

Please join us for Law Seminar International's Columbia River Treaty Conference, which will be held here in Seattle on September 22 & 23, 2014. The conference is particularly timely because, as we've discussed at length here, September marks a critical turning point for the Treaty, which is one of the cornerstones of our regional economy, and a major factor in issues ranging from salmon restoration to water quality and flood control. We're pleased to announce that GTH partner Jim Waldo will co-chair the conference and GTH partner Eric Christensen will be speaking. We hope to see you there!

Nearly Nine Years Later, Congress Finally Funds Incentives for Power Production on Existing Dams

July 21, 2014

When Congress passed the Energy Policy Act of 2005 nearly nine years ago, it included a provision, Section 242, authorizing incentives to retrofit non-powered dams, canals, and conduits with new hydroelectric generation. Until this year, however, Section 242 gathered dust, with Congress failing to authorize any funding. For the first time, when it finally passed its funding bill for Fiscal Year 2014 (October 1, 2013-September 2014) in January, Congress authorized $3.6 million to fund the Section 242 incentives program, dubbed the Hydropower Production Incentive Program ("HPIP"). The U.S. Department of Energy is now finalizing guidance on operation of the HPIP, and anticipates it will begin taking applications for HPIP funding later this summer.

There are over 80,000 non-powered dams in the United States, and a 2012 Oak Ridge National Laboratory study concluded that these dams have the potential to produce about 12,000 MW of new, renewable generation capacity, including about 225 MW here in the Pacific Northwest. In addition to HPIP funding, last summer Congress enacted two bills that greatly reduce the regulatory barriers to constructing new hydroelectric generation on existing dams, canals, and similar facilities. In combination with this legislation, the HPIP represent a major opportunity to extract value from existing dams, especially in the West, where many irrigation dams and canals were constructed without hydroelectric capacity.

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Iowa Supreme Court Clears Regulatory Path for Rooftop Solar Providers, Concluding They Are Not Regulated "Public Utilities"

July 16, 2014

Last week, in a decision that is likely to have far-reaching consequences both for the solar power industry and for traditional utilities, the Iowa Supreme Court found that a solar rooftop leasing company is not a "public utility" subject to regulation by the Iowa Utilities Board. The Iowa Court is the first to address whether a company leasing solar panels on a customer's rooftop is a regulated "public utility" under state utility laws. If followed in other states, the court's conclusion will greatly reduce the regulatory burdens faced by sellers of solar rooftop systems, especially those using innovative leasing/PPA arrangements, while intensifying pressure on traditional utilities from the growing market for customer-owned solar power. (SZ Enterprises, LLC d/b/a Eagle Point Solar v. Iowa Utilities Board, No. 13-0642 (Iowa Sup. Ct., issued July 11, 2014).

As noted previously, the Washington Utilities and Transportation Commission ("UTC") last year cleared some regulatory roadblocks for third-party owners of distributed generation systems such as rooftop solar generators. However, it reserved the question whether such third-party owners are "public service companies" subject to UTC regulation, and has yet to issue an guidance on that question. The Iowa court's conclusion therefore may hold particular sway in this state.

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U.S. Senate Confirms Norman Bay and Cheryl LeFleur as FERC Commissioners

July 15, 2014

The United States Senate today confirmed President Obama's nominations of Cheryl A. LeFleur and Norman Bay to serve on the Federal Energy Regulatory Commission. Commissioner LeFleur has served on the Commission since 2010 and the confirmation will allow her to serve a full five-year term. Mr. Bay will replace former Chairman Jon Wellinghoff.

Mr. Bay has been the Director of FERC's Office of Enforcement since 2009. In that capacity, he was responsible for a substantial rise in that office's profile. For example, as a result of an Office of Enforcement investigation of market manipulation in the West, FERC last year sought nearly $500 million in penalties against Barclays Bank and certain of its power traders, and $410 million against JP Morgan.

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U.S. Supreme Court Denies Review of California Low-Carbon Fuel Standard

June 30, 2014

The U.S. Supreme Court today denied several petitions seeking review of the Ninth Circuit's decision upholding California's Low-Carbon Fuel Standard ("LCFS") against claims that the LCFS violates the Commerce Clause of the U.S. Constitution. While today's decision makes the Ninth Circuit's decision final, the underlying issue -- how far individual states can go to regulate greenhouse gases and promote renewable energy without violating the Commerce Clause -- will remain the subject of intense litigation. For example, recent lower-court decisions from Colorado and Minnesota, reaching apparently opposite conclusions on the constitutionality of state renewable portfolio requirements, suggest that the Supreme Court may ultimately have to step into the fray.

As we've previously reported here and here, California's LCFS requires petroleum distributors in the state to reduce the carbon intensity of motor fuels they sell by blending them with biofuels or other lower-carbon alternatives. The LCFS contains a complex mechanism which uses a life-cycle analysis to assign carbon intensity scores to different biofuels production processes, providing a significant economic advantage to fuels with lower carbon intensity scores. This mechanism was challenged by a coalition of out-of-state alcohol fuels producers and trade groups, who argued that California's mechanism discriminates against them on its face by assigning higher carbon intensity scores to out-of-state producers than in-state producers. California rebutted these claims by asserting that its life-cycle analysis model is location-neutral and reflects the reality that production of alcohol fuels in some areas has a greater carbon footprint than fuels produced within California. Alcohol fuels produced in the Midwest, for example, generally have a higher carbon footprint than fuels produced within California because Midwest biofuels are produced using electricity from a grid that relies more heavily on coal-fired plants and because of the lengthy transportation routes required to deliver Midwest fuels into California add to the out-of-state fuel's carbon intensity.

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Six GTH Energy and Environmental Named Washington "Super Lawyers"

June 23, 2014

We're pleased to announce that nineteen Gordon Thomas Honeywell attorneys have been named 2014 Washington Super Lawyers, including six members of our Energy, Telecommunications & Utilities and Environmental & Natural Resources practice groups.

The "Super Lawyers" practicing in our energy, environmental, and natural resources areas are Margaret Archer, Eric Christensen, Don Cohen, Brad Jones, and Bill Lynn. In addition, practice member Bill West has been named a "Rising Star."

"Super Lawyers" are selected through a process of peer review and independent evaluation, and represent the top five percent of practitioners in the State of Washington.

FERC Approves Energy Imbalance Market Tariffs, Paving Way for October Start-Up

June 20, 2014

At its monthly meeting yesterday, the Federal Energy Regulatory Commission ("FERC") approved tariffs that will allow the western Energy Imbalance Market ("EIM") to open as planned on October 1, 2014. The EIM is designed to allow economic dispatch at five-minute intervals of energy balancing resources in the footprint of participating utilities. The EIM is one of a number of initiatives undertaken by utilities in the West to address the problems created by the rapid expansion of non-dispatchable wind and solar resources. Because these resources produce output that can be both highly variable and unpredictable, they have created increasing demand for balancing resources that can respond rapidly to changes in generation output to maintain the balance between generation supply and electric demand necessary for reliable operation of the electric system.

Yesterday's FERC orders approve the EIM proposed jointly by PacifiCorp and the California Independent System Operator ("Cal-ISO"). The PacifiCorp-ISO EIM will employ the Cal-ISO's existing five-minute market mechanism to dispatch balancing resources in the EIM's footprint. Initially, the EIM will dispatch resources within California, as well as within the two balancing authorities operated by PacifiCorp, which are centered on its service territories in the Pacific Northwest and Utah. Participation in the EIM is voluntary and the system is designed to allow expansion through addition of new utility participants.

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EPA Proposes Limits on Carbon Dioxide From Power Plants: What It Means for the Pacific Northwest

June 6, 2014

The U.S. Environmental Protection Agency this week issued is long-anticipated proposal to limit carbon dioxide from power plants, dubbed the "Clean Power Plan." Predictably, both industry groups and environmental interests attacked the plan, in some cases even before it was released. A careful review of the proposal suggests, however, that the impacts of the rule, if adopted, are likely to be relatively modest in the Pacific Northwest, chiefly by placing additional economic pressure on already beleaguered coal-fired plants in Montana and Wyoming, while adding the pressure of federal law to break the log-jam in Olympia regarding climate-related legislation. The flexibility provided to states to comply with carbon dioxide limitations also lays the groundwork for interstate cooperation to identify least-cost solutions and may create new and lucrative opportunities for companies involved in energy conservation, clean tech, renewable energy and a variety of other industries where carbon dioxide emissions might be reduced at relatively little cost.

The proposed rule has been summarized in greater detail elsewhere. In brief, the proposal at its core would require existing power plants to reduce carbon dioxide emissions by 30 percent over 2005 levels by 2030, with interim limits that would come into force in 2020. The proposal establishes state-specific goals for carbon dioxide emissions, but provides states considerable flexibility to meet these goals using four "building blocks" -- improving power plant heat rates, improving energy conservation, dispatching power from natural gas and other less carbon-intensive resources rather than from coal generation, and encouraging the construction and dispatch of renewable energy resources. The proposal also encourages interstate cooperation and allows for trading of carbon-reduction credits, as already occurs, for example, in the Northeast's RGGI program. The EPA's final rule is due by June 2015, with state implementation plans to be finalized by June 2016. Litigation over the rule is certain to occur, so it is unclear whether these deadlines will be met.

The choice of a 2005 baseline, rather than the 1990 baseline generally used in discussions of greenhouse gas reductions, is important because U.S. GHG emissions peaked in that year and have declined 9% overall since then, while power plant emissions have declined 16%, primarily because the "fracking" boom has created cheap natural gas, which has displaced significant amounts of coal used for electricity generation. Georgetown University's Climate Center has published a useful table, which provides an indication of reductions required from 2012 emissions levels rather than 2005 levels.

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FERC Proposes To Clarify Open Access Obligations for Owners of Generator Tie Lines

May 19, 2014

In a proposal that should clarify federal rules concern access to generator tie-lines, and therefore provide assurance to project developers and their financial backers, the Federal Energy Regulatory Commission ("FERC") at last week's monthly meeting proposed new rules to govern third-party access to such tie-lines. While at first blush, this issue may seem obscure, it has far-reaching consequences for both open access to and investment in the nation's electric system. The proposed rule also clarifies how FERC will reconcile two of its most important policy goals -- investment in new generation resources and open access to the nation's transmission grid.

The proposed rules are important because generator tie-lines often cover hundreds of miles and operate at extremely high voltages, especially when delivering power from generation resources located in remote, rural areas that otherwise have limited access to the backbone transmission grid. The proposed rules are therefore particularly important for wind generation and utility-scale solar, where the best resources are often located far from existing transmission lines. FERC's proposal notes several cases where tie-lines to link, for example, large wind generation projects to the grid span hundreds of miles and operate at voltages as high as 345-kV, and therefore look much like backbone transmission assets.

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New National Lab Study Identifies Huge Hydropower Potential, Especially in the Pacific Northwest

May 16, 2014

Recently, the U.S. Department of Energy ("DOE") and the Oak Ridge National Laboratory ("ORNL") released a comprehensive analysis of the potential for new hydroelectric development in the United States, finding that up to 65,500 MW of new hydro capacity could be built, nearly equal to the country's existing hydro capacity of 79,500 MW. The Pacific Northwest (defined in the report as the U.S. portion of the Columbia-Snake River Basin) contains the largest share of this capacity, nearly 26,000 MW. Major resources are also available in Alaska and Hawaii.

The analysis employs advanced geographical and mapping techniques to identify stream potential, and provides an array of advanced resources to developers wishing to identify sites that offer both favorable hydrological characteristics and characteristics favorable to permitting projects. For example, the study identifies stream reaches that have been designated as critical habitat for a federally-listed endangered species.

When considered together with the DOE/ORNL's 2012 report showing that up to 12,000 MW of new generation could be added to existing dams that do not presently have generation installed, the analysis demonstrates the great potential for new hydropower development, which can help supply the nation's need for carbon-free electricity using a mature and well-understood technology.

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U.S. District Court Rejects Broad Commerce Clause Attack on Colorado's Renewable Portfolio Standard

May 13, 2014

On May 9, the Judge William J. Martinez of the U.S. District Court for the District of Colorado summarily dismissed a broad-based challenge to the Colorado Renewable Portfolio Standard ("RPS"), which argued that the RPS per se violates the "dormant" Commerce Clause of the United States Constitution. The decision supports the view that a RPS will pass muster under the Commerce Clause as long as it regulates in-state and out-of-state generators in an even-handed way, and does not impose restrictions on RPS eligibility that favor in-state generators over out-of-state generators. Energy & Environmental Legal Inst. v. Epel et al., No. 11-cv-00859-WJM-BNB (issued May 9, 2014).

Enacted by Colorado voters in 2004 and amended several times since, the Colorado RPS now requires Colorado's investor-owned utilities to obtain 30% of their electricity from renewable sources by 2020, while cooperatives serving 100,000 or more meters must meet a 20% standard, and smaller cooperatives and municipal utilities must meet a 10% standard. In 2011, plaintiff Energy and Environmental Legal Institute (then known as the American Traditions Institute) filed a lawsuit seeking to invalidate Colorado's RPS statute on Commerce Clause grounds. Last week's decision rejects that challenge in its entirety, although plaintiffs have indicated they plan to appeal to the U.S. Court of Appeals for the Tenth Circuit.

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