Notwithstanding the financial tumult that has characterized early 2009, industries and investors with an interest in carbon capture and sequestration (CCS) technology have received positive news from Washington.  CCS investment played a prominent role in last month’s American Recovery and Reinvestment Act (ARRA) and could be expanded further in the Omnibus spending bill, which passed in the House and is expected to reach the Senate floor for a vote tomorrow.  These bills provide a range of CCS investment incentives, covering both coal and non-coal industrial CCS applications. 

ARRA:  The economic stimulus bill signed by the President last month appropriated $3.4 billion for various fossil-fuel programs, most with either express or potential application to the CCS industry, including:

• $1,000,000,000 for unspecified fossil energy research and development programs (While the final bill is silent as to what programs would qualify for these funds, members of the Illinois Congressional delegation have already argued that the $1 billion appropriation for unspecified “fossil energy research program” activities should be directed to rejuvenating the Futuregen project in Mattoon, IL);
• $800,000,000 for the Department of Energy’s Clean Coal Power Initiative (CPPI) Round III Funding Opportunity Announcement (FOA);
• $1,520,000,000 for industrial carbon capture and energy efficiency improvement projects, including a small allocation for innovative concepts for beneficial CO2 reuse;
• $50,000,000 for a competitive solicitation for site characterization activities in geologic formations; and
• $20,000,000 for geologic sequestration training and research grants. 

The tax provisions of ARRA provide billions more in tax incentives for CCS and other clean energy investments, including:

• $2.4 billion to expand the qualified energy conservation bond program (tax credit bonds allocated to states and large local governments to finance clean energy projects, including projects incorporating CCS technology); and
• $2.3 billion for an advanced energy property investment credit, providing a 30 percent credit for investment in property designed to capture and sequester carbon dioxide as part of qualified advanced energy manufacturing projects.”

The Department of Energy, on March 4, 2008, issued “Notices of Intent” to issue funding announcements in four areas, including:

• Geologic Sequestration Training and Research            
• CCS from Industrial Sources           
• Site Characterization of Promising Geologic Formations for CO2 Storage            
• An Amended FOA for Round 3 of the Clean Coal Power Initiative.

Omnibus Bill:  The proposed Omnibus spending bill that passed in the House and is now under consideration in the Senate would make hundreds of millions more available for CCS projects.  Specifically, the “statement accompanying the Bill” describes proposed appropriations to include:

• $288,174,000 in additional funding for CPPI;
• $73,000,000 in funding for Futuregen;
• $404,235,850 to support research and development into “Fuels and Power Systems,” including funding for a pre-feasibility analysis of the technical, economic and environmental aspects of a clean coal biomass polygeneration plant equipped with carbon capture using a range of coals to produce chemicals, fuels and power at diverse locations; and
• $43,864,150 for Congressionally-directed projects, many of which are related either directly or indirectly to the development of CCS technology for power generation and industrial systems.

Between the stimulus bill and the proposed Omnibus bill, power producers, manufacturers, investors and related industries should have a variety of opportunities to obtain federal support for CCS research, development and commercialization efforts.

For further information about this topic, please contact Akin Gump.

Today we continue with the third part of our “A Change in Climate” series, examining potential Obama administration goals and policy solutions to address American greenhouse gas emissions. Today we examine one of the broad pathways that a policy would likely take: green investment and economic stimulus.

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As we have outlined in this series, the current conditions in the credit markets and the global economy necessitate a massive stimulus package; with priorities directed towards the economy, a emissions reduction program will likely be delayed. Any economic stimulus, however, can have a definite effect on the nation’s climate change policy, by investing in the development of clean technologies, energy efficiency and renewable energy. During his campaign, Barack Obama consistently supported a series of programs centered around clean energy investment, which he said would allow American workers to “build the high-demand technologies of the future.”

President-elect Obama has continued to advocate for this program after his election; in one of his weekly post-election radio addresses, the President-elect stated that he had “directed [his] economic team to come up with an Economic Recovery Plan that will mean 2.5 million more jobs by January of 2011,” a plan involving, “building wind farms and solar panels; fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead.”

Investment in clean technology can potentially be an avenue for significant job growth. According to a report from the Center for American Progress, an investment of $1 million in clean tech creates 17 new jobs, as compared to only 4.5 new for jobs for a similar investment in oil. Even that investment is made budget neutral—by cutting spending in the oil industry—the economy still gains 12.5 jobs. In that same report, researchers predict that $100 billion in new spending could spawn as many as 2 million new jobs. That investment would be significantly smaller than the likely size of the new stimulus, which the President-elect has signaled could reach $775 billion.

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For further information about this topic, please contact Akin Gump.

Over the 21 months of his presidential campaign Barack Obama repeatedly stressed themes of change: finding new solutions to the problems of today’s world.  This philosophy certainly extends to the President-elect’s bold and comprehensive plan to overhaul the country’s energy policy and actively engage in the global fight against climate change.  Below, we outline some of the most significant items on the Obama administration’s climate and energy “to-do” list:

Diversify Energy Sources and Reward Energy Efficiency

A major plank of the President-elect’s energy proposals is to focus American ingenuity on renewable energy and other “green” technologies. As he sees it, this focus will have both environmental and energy security benefits, but most importantly in these troubled economic times, help stimulate the economy through the creation of new “green collar” jobs. President-elect Obama indicates that by ensuring that America is a leader in clean energy technology, such as deploying carbon capture and storage, his plan will create at least five million new jobs, and create demand for American expertise around the world. The President-elect’s plan has several strategies for accomplishing this:

1) Accelerating investment in green technology, both by providing incentives for the private sector and by investing $150 billion of federal money over the next 10 years;

2) Extending the Production Tax Credit for five years; and

3) Creating a national Renewable Portfolio Standard beginning at 10% by 2012 and increasing to 25% by 2025.

To support this massive expansion of alternative energy, President-elect Obama’s plan also advocates the creation of a unified national “smart grid,” which has been strongly encouraged by Al Gore’s group Alliance for Climate Protection. 

Design and Implement Comprehensive Cap and Trade Legislation

Throughout his campaign, President-elect Obama advocated for an economy-wide cap and trade program to significantly reduce greenhouse gas emissions. In fact, his proposal, which would slash GHGs to 80% below 1990 levels by 2050, is more aggressive than either GHG control effort undertaken by the House or Senate (the Dingell-Boucher bill proposes reductions of 80% below 2005 levels by 2050 and the Lieberman-Warner bill proposed reductions of 70% below 2005 levels by 2050). Then candidate Obama’s platform advocated a 100% auction of carbon credits, with a portion of the proceeds would go towards supporting clean energy and energy efficiency technology. Read the rest of this entry »

For further information about this topic, please contact Akin Gump.

Update:  The House passed the bailout bill with a 263-171 vote.

The economic rescue bill passed by the Senate earlier this week contains a wide array of tax incentives with the potential to influence investment in a variety of renewable energy and energy efficiency technologies. The House is currently debating the bill, with a vote expected in the next hour or so. The debate is proceeding under closed rules, meaning that no amendments may be offered, so the version that passed the Senate will get an up-or-down vote in the House. The original version of the bill was defeated in the House on Monday, but the new version - including the energy provisions - is expected to gain enough support to pass today’s House vote.

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For further information about this topic, please contact Akin Gump.

Late last night, the Senate passed the ‘‘Emergency Economic Stabilization Act of 2008,” a 450-page Bill designed to stabilize the highly-publicized crisis within domestic financial markets. Largely lost in the mass of financial stabilization provisions, the Bill also breathed new life into several clean energy provisions that had appeared moribund after public concern about a potential financial meltdown tabled movement on a comprehensive energy bill.

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For further information about this topic, please contact Akin Gump.

For clean coal advocates, the energy bill passed in the House Wednesday reflects the tough reality of getting a comprehensive bill passed by the end of the current session.  Speaker Pelosi indicated last week that the House Bill would incorporate the $10 billion funding mechanism for accelerating investment in carbon capture and sequestration (CCS).  On Tuesday when Democrats introduced the bill, the CCS funding provision was gone.  Instead it included modest changes to existing tax credits targeting integrated gasification combined cycle (IGCC) systems, carbon sequestration and other clean coal technologies.  Such changes include:

• Providing an additional $950 million in additional tax credits (based on a credit of 30 percent of the investment) for certain qualified advanced coal projects, and requiring that companies seeking such tax credits provide for capture and storage of at least 65 percent of its carbon emissions (Sec. 811);
• Providing an additional $150 million in additional tax credits (based on a credit of 30 percent of the investment) for qualifying coal gasification projects that include equipment to separate and sequester at least 75 percent of the project’s total carbon emissions (Sec. 812);

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For further information about this topic, please contact Akin Gump.

We are hearing that the energy bill, while close to agreement, still has a few hurdles to cross.

The biggest outstanding issue is what to do with the auto fuel efficiency numbers passed by the Senate, but not included in the House legislation. It seems that negotiators have split the proverbial baby. Rather than take a lower overall number (which had substantial backing in the House), the negotiations have centered on an overall number of 35 miles per gallon, originally proposed by the Senate. The automakers did win a huge concession with an agreement to keep cars and light trucks separate. Also, automakers will be granted credits for flex fuel vehicles; vehicles that get less miles per gallon than conventional autos.

Secondly, it appears likely that there will be no provision for federal-level “renewable portfolio standards” (RPS). Passed by the House, the RPS would have meant difficulties for utilities, especially in southern states where available wind and hydro power is scarce.

Finally, it looks like the chances of including small tax package have increased since initial reports to the contrary. Of course, with pay-as-you-go rules in effect, the Democratic majority might have to be creative to have the tax benefits included in a final package. Still no clarity on what, if anything, will be included, but there is still hope for a Production Tax Credit for 2008.

For further information about this topic, please contact Akin Gump.