Holland & Knight - Energy and Natural Resources Quarterly Newsletter: Spring 2020

ENERGY AND NATURAL RESOURCES QUARTERLY NEWSLETTER SPRING 2020 TABLE OF CONTENTS About This Issue.......................................................................................................................................................................2 Decarbonizing the Carbon Economy Picks Up Steam (Green Steam, of Course)......................................................................2 Microgrids on the Rise as CPUC Seeks to Streamline Resiliency Projects.................................................................................3 Holland & Knight’s Clean Tech Quarterly Update.......................................................................................................................3 House Climate Proposals To Be Examined in Blog Series.........................................................................................................4 Top 10 Things You Should Know About PFAS: Real Estateand Corporate Due Diligence..........................................................4 Tools Available to Learn More About Tribal Energy Development in 2020..................................................................................5 Electric Cooperatives’ Arbitration Agreement Upheld................................................................................................................5 Pre-Litigation Decision-Making in the Oil Field...........................................................................................................................6 About Our Energy and Natural Resources Industry Sector Group.............................................................................................6

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About This Issue Holland & Knight invites you to read our inaugural Energy and Natural Resources Quarterly newsletter, in which our authors discuss important hot topics and developments in energy, natural resources and environment. This newsletter will come to you quarterly to provide a look around the corner, highlighting top issues and emerging opportunities for the private sector.

Recognizing this newsletter is arriving in your inbox during uncertain times, we also wanted to let you know that Holland & Knight is tracking developments on the emerging situation surrounding the coronavirus (COVID-19) and the impacts the crisis may have on the Energy and Natural Resources industry. Analysis on what the developments may mean for business can be found on our COVID-19 Response Team page.

This edition covers, among other relevant topics, a number of recent U.S. political developments that may continue to be important market drivers throughout 2020. We encourage you to reach out to our authors with thoughts or questions on these topics.

OIL AND GAS

Decarbonizing the Carbon Economy Picks Up Steam (Green Steam, of Course)

By Seth R. Belzley, Norberto E. Quintana and Keith N. Sambur The strong trend of traditional oil and gas companies acquiring low-carbon assets continued in 2019. And it appears that the pace of investment by these traditionally carbon-focused companies will gain even more steam in 2020 and beyond, spurred on by an investor community that is beginning to insist that directors and officers consider climate change as a matter of business fundamentals.

According to IHS Markit, in 2019, traditional oil and gas companies increased acquisitions of low carbon companies by 50 percent year over year during each of the past four years (2016–2019). Acquisitions of solar energy assets increased the most, representing none of the transactions in 2016, but more than 35 percent of the deal activity in 2019. Wind energy and energy storage also saw marked increases. In recent years, BP, Shell and Total made significant acquisitions of interests in solar and wind energy production and development capabilities, along with companies that deliver this green energy to homes and business as well as to cars through electric vehicle charging networks. These investments appear driven primarily by an interest in diversifying income streams as energy consumption moves more toward electricity and away from carbon-based fuels, and the rapidly improving economics of low-carbon energy.

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ALTERNATIVE ENERGY AND RENEWABLES

Microgrids on the Rise as CPUC Seeks to Streamline Resiliency Projects

By Tara S. Kaushik and Kevin J. Ashe The state of California is calling for more investments in microgrids for electric power resiliency. Spurred by a 2018 legislative effort that recognized the multitude of benefits microgrid technologies can offer (e.g., grid reliability, renewable integration), the reality of increasing California wildfires and power outages make microgrid deployment a necessary option.

In February, the California Public Utilities Commission (CPUC) received comments from stakeholders on a CPUC staff proposal and utility proposals filed in a proceeding to streamline and improve the commercialization of California microgrid projects. The proceeding will span three phases, where interested stakeholders may file comments to shape the terms by which utilities must procure from this resource in the near future. The proceeding signifies the state’s goal to introduce microgrids at a greater scale in the state’s energy platform.

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FEDERAL POLICY AND REGULATION

Holland & Knight’s Clean Tech Quarterly Update

By Taite R. McDonald and Michael Obeiter Welcome to Holland & Knight’s Clean Tech Quarterly Update, where we’ll distill the biggest clean tech and net zero-related updates and government-related market trends and developments from the past few months, and summarize what these developments mean for clean technology companies and investors.

The most significant development so far this year beyond the implications of the coronavirus (COVID-19) was the introduction of the American Energy Innovation Act (AEIA). This bipartisan legislation, which aggregates dozens of smaller bills that passed the Senate Energy and Natural Resource Committee with bipartisan support as originally discussed in our Q4 2019 quarterly update, would be the first meaningful overhaul of federal energy policy since 2007. The bill provides new direction to the research and development programs at the U.S. Department of Energy (DOE), ensuring that the priority focuses for those programs — such as the Office of Energy Efficiency and Renewable Energy, Office of Electricity, Office of Fossil Energy, Office of Nuclear Energy and others — reflect the massive shifts that have been seen in the energy sector in the last decade, and position the U.S. as energy leaders for the decade to come. Similar to everything else in the world, this legislation is taking a backseat to COVID-19. The market uncertainty, especially given the impact on oil prices, will ultimately create government opportunity for innovative energy since a stimulus package is underway, and appropriations operate on an annual basis.

Holland & Knight’s upcoming COVID-19 Energy Financing and Innovation alert will speak to the opportunities in further detail, while this update focuses on pre-COVID-19 trends and developments from Q1 2020.

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FEDERAL POLICY AND REGULATION

House Climate Proposals To Be Examined in Blog Series

By Beth A. Viola and Isabel C. Lane In the first two months of 2020, congressional Democrats released two ambitious climate-related legislative proposals targeting the goal of net-zero U.S. emissions by 2050. Developed after months of legislative legwork, the proposals are a first step toward establishment of economywide federal climate policy sought by Democrats.

The Democrat-controlled House of Representatives is expected to remain in the driver’s seat on climate legislation development until the 2020 elections are decided. This said, Senate Democrats have also introduced a more general version of legislation targeting the same net-zero emissions by 2050 goal, suggesting the consensus that Democratic climate policy must be at least this ambitious moving forward.

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ENVIRONMENTAL

Top 10 Things You Should Know About PFAS: Real Estate and Corporate Due Diligence

By Meaghan A. Colligan, Amy L. Edwards, Paul C. Sarahan, Dianne R. Phillips and Nicholas William Targ Per- and polyfluoroalkyl substances (PFAS) present a new and potentially expensive environmental risk in real estate and corporate deals. Regulators are focused on developing standards for PFAS across the country. However, it is still uncertain at the federal level, and in many states, how PFAS will be regulated and to what levels. New risk-based research continues to be released showing that certain strands may pose risks to health and the environment. Additionally, many large-scale lawsuits have been advanced in the past several years seeking damages for personal injury, property damage and recovery of remediation costs under federal environmental statutes. At least nine federal enforcement actions and dozens of state enforcement actions have been advanced related to PFAS to date. As such, PFAS poses a major risk in transactions that, if not managed, can result in significant liabilities.

This update from environmental practitioners in Holland & Knight’s PFAS Working Group provides the top 10 things you should know about PFAS, including what PFAS are; the current regulatory landscape; the litigation, enforcement and transactional risks that PFAS pose; what industries and properties may be affected by PFAS; and how PFAS liabilities can be mitigated. In essence, it is recommended that every real estate and corporate deal be reviewed for PFAS liability by an environmental practitioner, particularly because consultants performing Phase I environmental site assessments may not bring this risk to your attention because they are not required to, yet.

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FEDERAL POLICY AND REGULATION

Tools Available to Learn More About Tribal Energy Development in 2020

By Kayla Gebeck and Tara S. Kaushik The U.S. Department of Energy (DOE) issued a 2012 report, Developing Clean Energy Projects on Tribal Lands, which found that while land owned by tribes comprises approximately 2 percent of the United States, this same land has the potential to produce 5 percent of the country’s renewable energy sources. Notwithstanding this potential, Indian Country continues to lag behind the rest of the country in accessing, developing and transmitting efficient energy. Moreover, Indian Country suffers from widespread areas that remain in the dark without electricity or the infrastructure to support it. For instance, the U.S. Commission on Civil Rights’ Broken Promises report found that an estimated 14 percent of households in Indian Country do not have access to electricity, which is 10 times higher than the national average.

Recently, the DOE Office of Indian Energy Policy and Programs took one step of many required to address these issues.

The DOE announced that it would host a monthly 2020 Tribal Energy Webinar Series intended for tribal leaders, tribal staff and others interested in energy development in Indian Country. The webinars will focus on how to accomplish specific tasks related to energy development on tribal lands. The 2020 series began on Feb. 26, 2020, with a webinar on “Energy Efficiency Basics.” In case you missed it, access to slides and additional information on lessons learned is available on the DOE website.

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ELECTRIC COOPERATIVES

Electric Cooperatives’ Arbitration Agreement Upheld

By Christina M. Schwing, Derek K. Mountford and Robert M. Gore Rural electric power associations (EPAs) in Mississippi breathed a collective sigh of relief in February, as several cooperatives obtained favorable rulings from Judge Keith Starrett of the U.S. District Court for the Southern District of Mississippi. After several months of intense litigation, Coast Electric Power Association and Dixie Electric Power Association received confirmation that the arbitration agreement found in their respective bylaws were binding on members and could be enforced. Starrett’s decision overturned rulings from Mississippi Chancery Courts and mandates the members to individually arbitrate their claims.

For context, eight Mississippi electric cooperatives are being sued for allegedly violating Mississippi law in the retention and retirement of capital credits. The cooperatives, all represented

by Holland & Knight, have unequivocally denied the claims and believe that these cases are being brought by members who have been deceived by their attorneys who are only concerned about their financial gain. In many instances, members at the heart of these cases were unaware that they were named as plaintiffs in class action lawsuits and did not know their attorneys.

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OIL AND GAS

Pre-Litigation Decision-Making in the Oil Field

By Julia M. Haines and Jared L. Young Advancements in oil and gas production have continued to improve over time bringing greater safety and greater recovery to the oil fields. However, despite recent improvements in technology, equipment and training, oil field incidents still pose a risk. Thus, it is crucial to be prepared and have a strategy ready to implement in the event that disaster strikes and the well site becomes compromised. This article details a few initial steps to take to ensure individual safety and to properly preserve evidence.

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About Our Energy and Natural Resources Industry Sector Group The energy and natural resources industries will play a significant role in shaping the future of the global economy, and they must continue their innovative efforts in timely and responsible ways. In order to keep up with competitors and meet their many challenges, companies in the field need to stay ahead of the curve and be prepared for new issues and challenges.

Holland & Knight’s Energy and Natural Resources Industry Sector Group consists of more than 80 experienced attorneys and professionals who work on all facets of transactional, regulatory, legislative and litigation matters related to energy and natural resources. In addition to our work with regulatory bodies such as the Federal Energy Regulatory Commission (FERC), we interface with the White House and key agencies such as the U.S. Environmental Protection Agency (EPA), Department of Energy, Department of Agriculture, Department of Defense and Department of the Interior. We understand the importance of tailoring regulatory strategies to meet the unique needs of a particular client and of accommodating existing and anticipated state and national regulation, technology and infrastructure.

Newsletter Editors Taite R. McDonald Washington, D.C. +1.202.469.5200 taite.mcdonald@hklaw.com

Beth A. Viola Washington, D.C. +1.202.457.7030 beth.viola@hklaw.com

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