Energy & Infrastructure Projects

2012 may have been coming to a close, but the last week of November proved a new start and pivotal moment for the UK’s nuclear energy programme.

Energy partners Robert A. James, Michael S. Hindus and Philip J. Tendler, counsel Julie Hutchings Mayo and senior associate Stella Pulman have contributed to the Getting the Deal Through series for several years. In this second edition of our pieces, we present the thought leadership of Pillsbury lawyers across the entire fuel spectrum—oil and gas on one hand, and nuclear, renewable, gas and coal power generation on the other—and across the private and public-private partnership (PPP) approaches to project development and finance for infrastructure as well as energy facilities.

The U.S. energy and infrastructure sectors have undergone dramatic change since 2006, the year of Pillsbury’s first contribution to the GTDT publications. Natural gas production and reserves have increased largely from shale and other unconventional sources, which have reinvigorated the petrochemical sector; challenged the prospects of power generation from coal, nuclear and renewable sources; and turned talk of LNG imports into talk of potential exports and gas as a more widespread transportation fuel. Oil production has increased in the Midwest, which faces obstacles for new and increased means of transportation, and the federal agencies regulating offshore oil leases and safety have been completely transformed after the Macondo accident. Power generators must as ever monitor the changing political drivers of policymakers and agencies, with higher renewable procurement standards being more concentrated in the Northeast and the West Coast and new generation projects often needing to coordinate with plans for greater local and regional transmission. A common thread is the greater need for investments in infrastructure of all types, including private finance and PPPs to cope with the constraints on public funding.

Most upstream oil and gas projects in Abu Dhabi are joint investments between two or more international oil companies (IOCs). We anticipate that new investment opportunities, such as those expected following the expiration of the existing onshore concession in 2014, will likely also be awarded to consortia. Therefore, IOCs and national oil companies (NOCs) seeking to approach the Abu Dhabi government may wish to do so jointly.

The United Arab Emirates and the Emirate of Abu Dhabi do not have any domestic laws to protect foreign investors from nationalization or expropriation, but the UAE is a signatory on a number of bilateral investment treaties and international conventions. Investment protection and legal recourse are important factors to consider when reviewing any investment opportunity. Governing law and dispute resolution provisions in oil and gas sector agreements have developed over time.

Gas development has become a top priority for Abu Dhabi in recent years due to growing domestic electricity demand. Unlike oil exploration and production, for which there is essentially no legislative framework, gas development is subject to Abu Dhabi’s Natural Gas Ownership Law of 1976, which grants the Emirate ownership of all natural gas and requires ADNOC majority participation in all gas projects.

Effective September 1, 2011, the Texas Legislature enacted the Public and Private Facilities and Infrastructure Act (the Act) for the purpose of enabling private investment in public facilities and infrastructure. The Texas Facilities Commission (the Commission) recently adopted Public-Private Partnership Guidelines (the Guidelines) setting forth the application requirements for qualifying projects and the review criteria and processes by which applications will be evaluated. The Guidelines are intended to provide certainty to the process of proposing and negotiating public-private partnerships (PPPs), which in turn should result in additional development opportunities to private parties while better utilizing and developing the State of Texas’ (the State) real estate assets and providing the State with non-tax revenue sources.

Energy team co-leader Rob James and Finance partner Philip Tendler, chapter co-authors, discuss project finance—collateral, security interests, liens, bankruptcy, offshore accounts, foreign investment, ownership restrictions, health/safety laws, and PPPs.

The Presidio Parkway Project, California’s first public-private partnership (“P3”) to move forward under legislation enacted in 2009, is expected to proceed after a California appellate court denied a request to enjoin the project. Filed on August 8, the decision upheld a lower court ruling dismissing a claim that the project did not meet the requirements of California’s P3 transportation authorization statute.¹ This is significant not only for the Presidio Parkway Project, but also because the legislation applicable to this project is the blueprint for structuring eight other pending transportation projects with a total estimated cost of $25 billion.²

Sponsors have made some tentative moves to share risk on new nuclear plant construction. But lender and investor perceptions are still obstacles to further shifts. Energy partners George Borovas and John Mauel and associate Li Zhang discuss emerging nuclear finance structures, emerging nuclear risk allocation methods, construction delays and EPC contracts, in this article, which originally appeared in the June 22, 2010 edition of Project Finance Magazine.

This article by Finance partner Carol Burke and partner Jane Wallison Stein, co-leader of the firm’s Energy & Infrastructure Projects practice, first appeared in Exploration+Processing. Both partners are members of the Recovery Act Initiative Team.

The Project
Three countries, multiple bankruptcies, the absence of an EPC contractor, a complicated fuel supply plan, a credit market meltdown, two lawsuits on the eve of closing... and a deal that was the first of its kind. These were just some of the challenges Pillsbury’s client, Mitsui, faced in the C$650 million development and financing of the Greenfield Energy Centre, the largest project developed under Ontario, Canada’s new Clean Energy Program, and the largest power generating project financed in North America in 2007.

The Department of Energy (“DOE”) has announced the Financial Institution Partnership Program (“FIPP”), its much anticipated Loan Guarantee program for renewable energy systems that use commercial technologies to generate electricity or thermal energy. It implements DOE’s mandates under Section 1705 of Energy Policy Act of 2005 (“EPAct”), which was added to the EPAct by the American Reinvestment and Recovery Act of 2009 (“ARRA”).

The Program on Energy and Sustainable Development (PESD) at Stanford University's Freeman Spogli Institute for International Studies has released a Working Paper authored by Pillsbury Energy & Infrastructure Projects partner Robert A. James. In its August 15 release, PESD noted that James "classifies frontier project development strategies into 'finesses' and 'game-changers.' James then considers the implications of this framework for the case of carbon capture and storage (CCS), where numerous legal, business and technological barriers seem to stand in the way of wide technology deployment."

The U.S. Treasury Department has announced that it will now accept applications for cash grants for renewable energy projects under Internal Revenue Code section 48(d) and section 1603 of the American Recovery and Reinvestment Tax Act of 2009 (Division B of P.L. 111-5, the Stimulus Act). This news has been eagerly awaited. Certain conditions, however, may somewhat delay the receipt of grant moneys by taxpayers.

An overview of Pillsbury's Energy & Infrastructure Projects practice capabilities.

On June 8, 2009, the Department of Energy (DOE) issued a Funding Opportunity Announcement (FOA) to spur investment in industrial carbon capture and sequestration (CCS) and clean technology. Pursuant to the American Recovery and Reinvestment Act of 2009 (Recovery Act), the DOE is allocating over $1.3 billion for large-scale industrial CCS projects, and $100 million for innovative concepts for beneficial use of carbon dioxide (CO₂).