Transcript Base Renewable Projects Legal & Regulatory Hurdles February 16, 2011 Bob Tritt McKenna Long & Aldridge LLP.

Base Renewable Projects
Legal & Regulatory Hurdles
February 16, 2011
Bob Tritt
McKenna Long & Aldridge LLP
Legal/Regulatory Issues
• Real Estate Authority
• Power Purchase Authority
• CBO Scoring
• OMB Scoring
• State Utilities Laws
Real Estate Authority
Enhanced Use Leasing (10 USC § 2667)
• Underutilized Assets
• Up to 50 years
• In-kind consideration
But Also – Easements
• 10 USC § 2668 (Fort Bliss –El Paso Desalination Plant)
• 40 USC § 1314 (Air Force Academy – Photovoltaic Project)
• 43 USC § 961
• 10 USC § 2688
Power Purchase Authority
FAR 41.103
•
10 year, renewable at government option
Western Area Power Authority (DOE)
•
•
At least 20 year authority
Western states
Energy Savings Performance Contracts (42 USC § 8287)
•
•
25 years
But revenues only from savings
Power Purchase Authority (cont.)
Utilities Privatization (10 USC § 2688)
• 50 years
• Cost effective requirement
Utility Energy Service Contract
• 25 years
• Only local utility
10 USC § 2922(a) (formerly 10 USC § 2394)
• 30 years
• Requires Sec Def approval
10 USC § 2922(a)
Secretary of military departments may enter into contracts for up to 30 years
•
Under 10 USC § 2917 (geothermal);AND
•
operation of energy production facilities on real property under the
Secretary’s jurisdiction…and the purchase of energy produced from such
facilities
•
But requires approval of Secretary of Defense
CONJUNCTIVE VS. DISJUNCTIVE
1
House Report 10 USC § 2922(a)
• (1) geothermal
• (2) provision and operation by others of energy production facilities
on government or private land and purchase of energy from such
facilities;AND
• purchase of refuse derived fuel or fuel derived from biomass
CONJUNCTIVE VS. DISJUNCTIVE
1
(H.R. Rpt. 97-612 at § 30)
Purchases of Private Sector On Base Generation
FAR
Army
§ 2922(A)
WAPA
Special Circumstances
Army Position:
Applies to All
Renewables
Fort Carson
2MW Solar
__________
Fort Detrick
Electric Energy not sold
__________
17 years w/one 3 year
option
Fort Irwin
Sold off base to grid
Navy Position:
Applies to All
Renewables
__________
Navy
Navy Southwest
40 MW Solar
30 years
Air Force
Nellis AFB
14.2 MW Solar
__________
Davis Monthan AFB
14.5 MW solar
__________
Edwards AFB
3.5 MW solar
Indefinite Term with 1
year Termination
AF Position:
Only Applies to
Geothermal
Edwards AFB
Sold off base to grid
CBO Scoring
• Impact on budget from legislation
• Only arises if change in law
• Recent legislative effort
– S. 3251 Sen Carper (D – Del)
– DOD action needed
OMB Scoring
• Purchase of Asset vs. Use of Assets
• Financial Accounting Board Standards
(OMB Circular A-11, Appendix A & B)
OMB Scoring (cont.)
If Capital lease
• present value of all [lease] payments
If Operating lease
• one year [lease] payments, plus termination liability
Definition of an “Operating Lease”
• pv lease payments don’t exceed 90% of asset Fair Market Value,
and
• lease term is not greater than 75% of the economic life of the asset,
and
• no bargain-price purchase option, and
• ownership of asset remains with lessor and is not transferred to the
government, and
• asset is a general purpose asset, not built for special purpose of the
government, and
• private sector market for the asset
State Utility Laws
State laws often restrict who can make retail sales
• Is it retail? (WAPA)
• Do state laws apply?
– Federal law (40 USC § 591) says must buy electricity in accordance
with state law
– But West River Electric Association v. Black Hills Power (918 F.2d 713,
8th Cir. 1990) (if exclusive enclave, still not subject to state law)
– ESPC and 10 USC § 2922(a) excepted from statute
• Exceptions for distributed generation
• Sale through public utility