Law Of Stimulus

First Edition

w w w. s t o e l . c o m

S how Me t h e Money The Law Of The Stimulus Package

Compliments of

Ta b l e o f C o n t e n t s

Show Me th e M o n e y The Law Of The Stimulus Package

Wind Industry........................................................................1 Solar Industry........................................................................2 Biofuels Industry.....................................................................3 Biomass Industry....................................................................4 Smart Grid ...........................................................................5 Transmission...........................................................................6 Geothermal Industry................................................................7 Marine and Hydrokinetic Energy..............................................8 Green Building.......................................................................9 Energy Efficiency .................................................................10 Advanced Battery and Fuel Cell Technology..............................11 Renewable Energy Equipment Manufacturing...........................12 Green Vehicles.......................................................................13 Clean Coal...........................................................................14 Resumes and Contact Information............................................15

Show Me the Money: The Law of The Stimulus Package, First Edition is a publication of the Stoel Rives BioEnergy Group for the benefit and information of any interested parties. This document is not legal advice or a legal opinion on specific facts or circumstances. The contents are intended for informational purposes only. Copyright 2009 Stoel Rives LLP.

WELCOME TO SHOW ME THE MONEY! A Guide to Sources of Funding through the American Recovery and Reinvestment Act

Dear Member of the Renewable Energy Community, The American Recovery and Reinvestment Act (“ARRA”) provides almost $94 billion dollars in direct and indirect spending, through tax incentives, grants and loan guarantees to clean energy companies and projects. While financing challenges continue to hold back many worthy companies and projects, we believe that the ARRA funding will provide an important and significant boost to the clean energy industry over the next eighteen months. We recognize that the funding opportunities presented by ARRA do not apply uniformly to all sectors of the clean energy industry, and that the opportunities that may apply to a particular company or project are often buried in the legislation, with the result that the applicability and application processes are often difficult to discern. Accordingly, we created this guide to separately identify the programs and the potential sources of funding under ARRA based on the type of company or project rather than the typical approach of describing the tax incentives, grants or loan guarantees generally for all types of clean energy companies and projects. This guide covers the ARRA and identifies some of the funding opportunities that have been announced. We are also continuing to track the near daily announcements from the federal government and the states on specific funding opportunities under ARRA and would be happy to discuss these opportunities with you as well. We hope that you find this guide to be helpful and productive in your efforts to identify ARRA funding opportunities. Please contact us with your questions, comments and feedback.

David L. Benson, Chair BioEnergy Practice Group Stoel Rives LLP [email protected] 206-386-7584 direct 206-386-7500 fax

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Introduction SHOW ME THE MONEY! —A Guide to Sources of Funding through the American Recovery and Reinvestment Act— On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”), a $787 billion economic stimulus package that contains nearly $72 billion in direct investments and $22 billion in tax incentives for renewable energy, smart grid/transmission, energy efficiency, green vehicles and green job training. In this guide, we collectively refer to these areas as the clean energy industry. The goal of this guide is to begin to answer the question of what financing (direct investment or tax incentives) may be available to a specific company. As the ARRA covers so many areas in the clean energy industry, it is not always easy to determine what is available for a particular company or project. This problem is made more difficult by the lack of rules, regulations, guidance and applications that will govern the distribution of many of funds and tax credits. These rules, regulations, guidance and application processes are being disseminated as they are developed, and the government’s goal is to have all information available by mid-June. We continue to track all developments and would be pleased to help you understand the current status of funding under various programs. Additionally, various federal agencies are releasing funding opportunities on almost a daily basis. We have not tried to capture all of the various notices and this guide will not be kept up to date. However, we are tracking these opportunities closely and would be pleased to discuss them with you. In considering seeking funding through the ARRA, it is helpful to understand where the funding is being directed and the channels through which it will be distributed. A significant portion of the direct investment is focused on energy efficiency (almost $26 billion), smart grid ($17 billion) and green vehicles and transportation ($21 billion). The majority of the tax incentives are focused on renewable energy projects ($16.5 billion). Funds allocated for direct investments in energy will generally be distributed through two primary channels: (1) the federal government (primarily through the Department of Energy but also through the Department of Defense, the General Services Administration, Department of Labor, Department of Transportation and the Environmental Protection Agency) and (2) the several states. The states will receive up to $11.3 billion under the DOE’s Energy Efficiency and Conservation Block Grants ($3.2 billion), the Weatherization Program ($5 billion) and the State Energy Program ($3.1 billion). Aside from energy efficiency and weatherization projects (primarily for low income families), a company is most likely to have success in obtaining funding from their local municipality under the block grants or from their state under the State Energy Program. Each state is taking their own approach to funding under these programs so we have not attempted to identify all of the potential funding opportunities within each state. However we have addressed the State Energy Program as it is a source of funding that should be explored. Similarly to the federal funding, if you have questions on funding opportunities within a particular state, we would be pleased to review the opportunities with you. To address the question of what funding under ARRA is potentially available to you, we have broken up our analysis into the sections listed below. Please keep in mind that in some cases the same opportunities may be

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applicable to more than one section so there are repeats in the information in order to allow each section to stand on its own. Finally, please also keep in mind that there are other significant sources of funding available through other federal departments, such as the US Department of Agriculture, and through other programs under the Food Energy and Conservation Act, the Energy Independence and Security Act, the Energy Policy Act, and various state programs. We would again be pleased to discuss these other potential sources of funding with you. We have provided information about the following energy industry areas: wind, solar, biofuels, biomass, smart grid, transmission, geothermal, marine and hydrokinetic, green building, energy efficiency, advanced battery and fuel cell technology, clean energy equipment manufacturing, green vehicles and clean coal. If you have any questions on any of the information contained in this guide, please feel free to contact any of the authors listed below or your Stoel Rives attorney.

Authors: David Benson – 206-386-7584

Janet F. Jacobs – 206-386-7582

Greg Jenner – 612-373-8857

Dina M. Dubson – 503-294-9675

Debra H. Frimerman – 612-373-8819

John S. Laney – 206-386-7505

This guide and any updates do not, and are not intended to, constitute legal advice and should not be relied on as such.

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Chapter One SHOW ME THE MONEY! —Wind Industry— The American Recovery and Reinvestment Act of 2009 (“ARRA”), a $787 billion economic stimulus package, contains numerous tax provisions related to wind and other renewable energy projects, and presents significant new opportunities for developers of, and investors in, wind energy projects and technologies. I.

Tax Incentives.

A. Extension of PTC Sunset Date. ARRA extends the production tax credit (“PTC”) for wind energy projects from December 31, 2009 through December 31, 2012. To qualify for the PTC under the Act, a wind energy project must be “placed in service” on or before that date. ARRA did not change the basic operation or calculation of the PTC for wind energy projects. Thus, any qualifying project that meets the placed-in-service requirement will qualify for a credit (indexed for inflation) per kilowatt hour of electricity generated and sold to an unrelated person during each year of the 10-year period beginning on the date the project is originally placed in service. The amount of the credit is 2.1¢ per kilowatt hour for 2009. B. Election to Claim ITC Rather Than PTC. ARRA allows a taxpayer that is eligible to claim the PTC for a wind energy project to claim an investment-based tax credit (“ITC”) in lieu of the PTC. This election can apply to wind energy facilities that are placed in service from January 1, 2009 to January 1, 2012. The entire amount of the ITC is available for the year in which a qualifying facility is placed in service. The credit equals 30% and applies to most of the cost of the facility. Any unused portion of the credit can be carried back one tax year and carried forward up to 20 tax years. The owner of a qualifying facility can elect to claim either the ITC or the PTC, but not both. The tax basis of the facility must be reduced by one-half of the credit claimed. ARRA also eliminates the reduction of a project’s tax basis (for the purposes of calculating the ITC) if it was financed through subsidies or tax-exempt bonds. C. Grant in Lieu of ITC. To help monetize the ITC, ARRA enables taxpayers (that are otherwise eligible to claim the ITC) to elect to receive a cash grant from the U.S. Treasury Department instead of claiming the ITC. To qualify, the project must be placed in service during 2009 or 2010 or, if construction began in 2009 or 2010, before January 1, 2013. The grant is not available to any governmental agency, tax-exempt entity, or rural electric cooperative. Applications must be submitted before October 1, 2011. These grants generally function the same way as the ITC. The amount of the grant generally is 30% of most of the cost of the facility. A grant is not included in the taxable income of the recipient, but the tax basis of the facility is reduced by one-half of the amount of the grant. The Treasury Department must pay the grant by 60 days after the later of: (a) the date of the application or (b) the date the facility is placed in service. ARRA contains a specific provision appropriating “such sums as necessary” to make sure that funds will be available to pay grants on all qualifying projects. D. Small Wind Investment Tax Credit. ARRA repeals the dollar caps on the small wind ITC established by the Emergency Economic Stabilization Act of 2008, enabling eligible homeowners and businesses to claim a full 30% ITC for a qualifying small wind energy property.

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E. Extension of Bonus Depreciation to 2009. ARRA extends first-year bonus depreciation for qualifying equipment placed in service in 2009, allowing the project owner to recover the costs of capital expenditures faster than the regular depreciation schedule. Under the bonus depreciation rule, an owner of qualifying property can write off 50% of the adjusted basis of the assets (such as turbines, towers, etc.) placed in service in 2009. The remaining 50% of the adjusted basis of the property is depreciated over the regular tax depreciation schedule applicable to the property. F. Advanced Energy Facilities Investment Credit. ARRA creates a new 30% tax credit for investment in property used in a “qualified advanced energy manufacturing project,” i.e., a project which establishes, re-equips, or expands a manufacturing facility that produces products used in the production of energy from renewable sources, including wind. The total amount value of credits available under the program is $2.3 billion. Projects will be selected based on a reasonable expectation of commercial viability, innovation, job stimulation, and environmental benefits. To receive the credit, projects must be certified by the Treasury Secretary in consultation with the Energy Secretary. Credits will be awarded through an application process. Treasury must announce requirements for the application by August 16. Applicants have three years from the date of the award to place the project in service. G. Clean Renewable Energy Bonds. Under the Clean Renewable Energy Bonds (“CREBs”) program, facilities that generate electricity from eligible renewable energy facilities, including wind energy, can take advantage of project-specific bonds issued by state, local, or tribal governments and electricity cooperatives. ARRA increases the existing CREBs limitation, authorizing an additional $1.6 billion of new bonds. Existing rules on how funds should be allocated under the CREBs program remain unchanged. H. Qualified Energy Conservation Bonds. The Qualified Energy Conservation Bond limitation has been increased to $3.2 billion from the $800 million authorized in the Emergency Economic Stabilization Act of 2008. These bonds may be used by state, local, and tribal governments to finance certain types of energy projects through loans, grants, and other repayment mechanisms that implement green community programs. Energy Conservation Bonds may be used for capital expenditures to reduce energy use in public buildings by at least 20% and implement green community programs. II. Federal Loan Guarantees. ARRA amends the Energy Policy Act of 2005 (“EPAct”) to provide $6 billion in federal loan guarantees to cover up to 80% of the costs for wind energy projects and facilities that manufacture related components. These projects will not be required to meet the “innovative technology” or other requirements of section 1703 of EPAct. Eligible projects must commence construction by September 30, 2011. Projects must also pay wages that are in line with the wages paid locally for similar work. The program is administered by the Department of Energy (“DOE”). The $6 billion appropriated for the program is expected to support as much as $60 billion in loans. III.

Federal Grant Programs.

A. R & D, Demonstration and Deployment Projects. The DOE’s Office of Energy Efficiency and Renewable Energy has announced that it anticipates allocating $2.5 billion to support its applied research, development and deployment activities. Those funds can be used for renewable energy projects including wind projects. STOEL RIVES LLP © 2009

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B. Advanced Research Projects Agency – Energy. ARRA also provides the Advanced Research Projects Agency – Energy (“ARPA-E”) with $400 million to support innovative energy research which could include wind technologies. The first funding opportunity (“FOA”) announced under ARPA-E is for a total of $150 million and individual awards of between $500,000 and $20 million are available to fund transformational energy research and development projects. This FOA is aimed at projects that have a well-formed R&D plan and that can make a significant contribution towards enhancing the economic and energy security of the United States by reducing imported energy, reducing energy-related gases, including GHG, and improving energy efficiency. IV. State Energy Program. ARRA provides $3.1 billion for the State Energy Program, a flexible federalstate partnership implemented by state energy offices to provide additional funds that do not need to be matched by state funds, allowing the states to leverage federal funds to match state, local, and private efforts for funding energy efficiency, renewable energy, and a wide variety of energy measures. Previously, the federal appropriation for this program was approximately $50 million; ARRA funding multiplies that appropriation by 60 and waives the state/local matching fund requirement. The states are awarded the funds pro rata on the basis of their share of total electric consumption so that larger states or states with high energy consumption receive a larger portion of the funds. However, the ARRA funds will only be available to states that intend to adopt strict building energy codes and incentivize the utilities to adopt energy efficiency measures. Given the amount of the available funding, states are scrambling to establish programs that can utilize the monies. Many states will roll out their programs during May 2009. V. Job Training. To assist states in adopting strict building energy codes and incentivizing the utilities to adopt energy efficiency measures, ARRA allocates $500 million to the Department of Labor to prepare a work force with an understanding of renewable energy and energy efficiency.

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Chapter Two SHOW ME THE MONEY! —Solar Industry— The American Recovery and Reinvestment Act of 2009 (“ARRA”), a $787 billion economic stimulus package, contains numerous tax provisions related to solar and other renewable energy projects. These provisions present significant new opportunities for developers of, and investors in, solar projects and technologies. I.

Tax Incentives.

A. Investment Tax Credit. ARRA eliminates the reduction of a project’s tax basis if it was financed through subsidies or tax-exempt bonds. B. Grant in Lieu of ITC. To help monetize the ITC, ARRA enables taxpayers (who are otherwise eligible to claim the ITC) to elect to receive a cash grant from the U.S. Treasury Department instead of claiming the ITC. To qualify, the project must be placed in service during 2009 or 2010 or, if construction began in 2009 or 2010, before January 1, 2014. The grant is not available to any governmental agency, tax-exempt entity, or rural electric cooperative. Applications must be submitted before October 1, 2011. These grants generally function in the same manner as the ITC. The amount of the grant generally is 30% of most of the cost of the facility. A grant is not included in the taxable income of the recipient, but the tax basis of the facility is reduced by one-half of the amount of the grant. The Treasury Department must pay the grant by 60 days after the later of: (a) the date of the application or (b) the date the facility is placed in service. ARRA contains a specific provision appropriating “such sums as necessary” to make sure that funds will be available to pay grants on all qualifying projects. C. Extension of Bonus Depreciation through 2009. ARRA extends first-year bonus depreciation for qualifying equipment placed in service in 2009, allowing the project owner to recover the costs of capital expenditures faster than the regular depreciation schedule. Under the bonus depreciation rule, an owner of qualifying property can write off 50% of the adjusted basis of the assets (such as solar panels) placed in service in 2009. The remaining 50% of the adjusted basis of the property is depreciated over the regular tax depreciation schedule applicable to the property. D. Advanced Energy Facilities Investment Credit. ARRA creates a new 30% tax credit for investment in property used in a “qualified advanced energy manufacturing project,” i.e., a project which establishes, re-equips or expands a manufacturing facility that produces products used in the production of energy from renewable sources. The total amount of credits available under the program is $2.3 billion. Projects will be selected based upon a reasonable expectation of commercial viability, innovation, job stimulation, and environmental benefits. To get the credit, projects must be certified by the Treasury Secretary in consultation with the Energy Secretary. Credits will be awarded through a application process. Treasury must announce requirements for the application by August 16. Applicants have 3 years from the date of the award to place the project in service. E. Clean Renewable Energy Bonds. Under the Clean Renewable Energy Bonds (“CREBs”) program, facilities that generate electricity from eligible renewable energy facilities, including solar energy, can take advantage of project-specific bonds issued by state, local, or tribal governments and electricity cooperatives.

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ARRA increases the existing CREBs limitation, authorizing an additional $1.6 billion of new bonds. Existing rules on how funds should be allocated under the CREBS program remain unchanged. F. Qualified Energy Conservation Bonds. The Qualified Energy Conservation Bond limitation has been increased to $ 3.2 billion from the $800 million authorized in the Emergency Economic Stabilization Act of 2008. These bonds may be used by state, local, and tribal governments to finance certain types of energy projects through loans, grants, and other repayment mechanisms that implement green community programs. Energy Conservation Bonds may be used for capital expenditures to reduce energy use in public buildings by at least 20% and implement green community programs. II. Federal Loan Guarantees. ARRA amends the Energy Policy Act of 2005 (“EPAct”) to provide $6 billion in federal loan guarantees to cover up to 80% of the costs for solar energy projects and facilities that manufacture related components. These projects will not be required to meet the “innovative technology” or other requirements of section 1703 of EPAct. Eligible projects must commence construction by September 30, 2011. Projects must also pay wages that are in line with the wages paid locally for similar work. The program is administered by the Department of Energy (“DOE”). The $6 billion appropriated for the program is expected to support as much as $60 billion in loans. III.

Federal Grant Program.

A. R & D, Demonstration and Deployment Projects. The DOE’s office of Energy Efficiency and Renewable Energy has announced that it anticipates allocating $2.5 billion to support its applied research, development and deployment activities. Those funds can be used for renewable energy projects including solar projects. B. Advanced Research Projects Agency – Energy. ARRA also provides the Advanced Research Projects Agency – Energy (“ARPA-E”) with $400 million to support innovative energy research which could include solar projects. The first funding opportunity (“FOA”) announced under ARPA-E is for a total of $150 million; individual awards of between $500,000 and $20 million are available to fund transformational energy research and development projects. This FOA is aimed at projects that have a well-formed R&D plan and that can make a significant contribution towards enhancing the economic and energy security of the United States by reducing imported energy, reducing energy-related gases, including GHG, and improving energy efficiency. IV. State Energy Program. ARRA provides $3.1 billion for the State Energy Program, a flexible federalstate partnership implemented by state energy offices to provide additional funds that do not need to be matched by state funds, allowing the states to leverage federal funds to match state, local, and private efforts for funding energy efficiency, renewable energy, and a wide variety of energy measures. Previously, the federal appropriation for this program was approximately $50 million; ARRA funding multiplies that appropriation by 60 and waives the state/local matching fund requirement. The states are awarded the funds pro rata on the basis of their share of total electric consumption so that larger states or states with high energy consumption receive a larger portion of the funds. However, the ARRA funds will only be available to states that intend to adopt strict building energy codes and incentivize the utilities to adopt energy efficiency measures.

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Given the amount of the available funding, states are scrambling to establish programs that can utilize the monies. Many states will roll out their programs during May 2009. V. Job Training. To assist states in adopting strict building energy codes and incentivizing the utilities to adopt energy efficiency measures, ARRA allocates $500 million to the Department of Labor to prepare a work force with an understanding of renewable energy and energy efficiency. VI. Funding Opportunities and Related Updates. Funding opportunities and related updates. The government has begun to issue requests for proposals for government solar projects. For example, the Department of the Air Force has a pre-solicitation announcement for high-efficiency, lightweight, multi-junction crystalline solar cells with an anticipated value near $12.5 million. The DOE has recently announced a Funding Opportunity Announcement providing $2 million for technical assistance for solar installation projects that have the ability to impact solar technologies. The DOE has issued a request for information regarding the creation of Solar Policy and Analysis Regional Centers to develop policy research and analysis that support solar commercialization.

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Chapter Three SHOW ME THE MONEY! —Biofuels Industry— The American Recovery and Reinvestment Act of 2009 (“ARRA”), a $787 billion economic stimulus package, contains numerous tax provisions related to biofuels and other renewable energy projects. These provisions present significant new opportunities for developers of, and investors in, advanced biofuels projects and technologies. I.

Tax Incentives.

A. Extension of Bonus Depreciation through 2009. ARRA extends first-year bonus depreciation for qualifying equipment placed in service in 2009, allowing the project owner to recover the costs of capital expenditures faster than the regular depreciation schedule. Under the bonus depreciation rule, an owner of qualifying property can write off 50% of the adjusted basis of the assets (such as water tanks) placed in service in 2009. The remaining 50% of the adjusted basis of the property is depreciated over the regular tax depreciation schedule applicable to the property. B. Advanced Energy Facilities Investment Credit. The ARRA creates a new 30% tax credit for investment in property used in a “qualified advanced energy manufacturing project,” i.e., a project which establishes, re-equips or expands a manufacturing facility that produces products used in the production of energy from renewable sources. The total amount of credits available under the program is $2.3 billion. Projects will be selected based upon a reasonable expectation of commercial viability, innovation, job stimulation, and environmental benefits. To receive the credit, projects must be certified by the Treasury Secretary in consultation with the Energy Secretary. Credits will be awarded through a application process. Treasury must announce requirements for the application by August 16. Applicants have 3 years from the date of the award to place the project in service. II. Federal Loan Guarantees. ARRA amends the Energy Policy Act of 2005 (“EPAct”) to provide $6 billion in federal loan guarantees for up to 80% of the costs of leading-edge biofuel projects using technologies that (a) are performing at the pilot or demonstration scale, (b) are determined likely to become commercial technologies, and (c) will produce transportation fuels that substantially reduce life-cycle greenhouse gas emissions compared to other transportation fuels. Of the $6 billion appropriated for the temporary program to pay for the costs of the guaranteed loans, a maximum of $500 million can be used for biofuel projects. Eligible projects must commence construction by September 30, 2011. Projects must also pay wages that are in line with the wages paid locally for similar work. The program is administered by the Department of Energy (“DOE”). The $6 billion appropriated for the program is expected to support as much as $60 billion in loans. III.

Federal Grant Programs.

A. R & D, Demonstration and Deployment Projects. The DOE’s Office of Energy Efficiency and Renewable Energy has announced that it anticipates allocating $2.5 billion to support its applied research, development and deployment activities. Those funds can be used for renewable energy projects including biofuels projects. B. Advanced Research Projects Agency – Energy. ARRA also provides the Advanced Research Projects Agency – Energy (“ARPA-E”) with $400 million to support innovative energy research which could include biofuels projects. The first funding opportunity (“FOA”) announced under ARPA-E is for a total of STOEL RIVES LLP © 2009

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$150 million; individual awards of between $500,000 and $20 million are available to fund transformational energy research and development projects. This FOA is aimed at projects that have a well-formed R&D plan and that can make a significant contribution towards enhancing the economic and energy security of the United States by reducing imported energy, reducing energy-related gases, including GHG, and improving energy efficiency. IV. State Energy Program. ARRA provides $3.1 billion for the State Energy Program, a flexible federalstate partnership implemented by state energy offices to provide additional funds that do not need to be matched by state funds, allowing the states to leverage federal funds to match state, local, and private efforts for funding energy efficiency, renewable energy, and a wide variety of energy measures. Previously, the federal appropriation for this program was approximately $50 million; ARRA funding multiplies that appropriation by 60 and waives the state/local matching fund requirement. The states are awarded the funds pro rata on the basis of their share of total electric consumption so that larger states or states with high energy consumption receive a larger portion of the funds. However, the ARRA funds will only be available to states that intend to adopt strict building energy codes and incentivize the utilities to adopt energy efficiency measures. Given the amount of the available funding, states are scrambling to establish programs that can utilize the monies. Many states will roll out their programs during May 2009. V. Job Training. To assist states in adopting strict building energy codes and incentivizing the utilities to adopt energy efficiency measures, ARRA allocates $500 million to the Department of Labor to prepare a work force with an understanding of renewable energy and energy efficiency. VI. Funding Opportunity. The DOE has recently announced a Funding Opportunity Announcement providing $15 million to stimulate the design and demonstration of a comprehensive system to handle the harvesting, collection, preprocessing, transport, and storage of sufficient volumes of sustainably produced feedstocks required to achieve the rapid expansion of the commercial domestic biofuels industry.

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Chapter Four SHOW ME THE MONEY! —Biomass Industry— On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”), a $787 billion economic stimulus package that contains numerous tax provisions related to biomass and other renewable energy projects. These provisions present significant new opportunities for developers of, and investors in, biomass projects and technologies. I.

Tax Incentives.

A. Extension of PTC Sunset Date. ARRA extends the production tax credit (“PTC”) for openloop and closed-loop biomass projects from the end of 2010 through the end of 2013. To qualify for the PTC under ARRA, a biomass project must be “placed in service” on or before December 31, 2013. ARRA did not change the basic operation or calculation of the PTC for open-loop or closed-loop biomass projects. Thus, any qualifying closed-loop biomass project that meets the placed-in-service requirement will qualify for a credit (indexed for inflation) per kilowatt hour of electricity generated and sold to an unrelated person during each year of the 10-year period beginning on the date the project is originally placed in service. The amount of the credit is 2.1¢ per kilowatt hour for 2009. Any qualifying open-loop biomass project that meets the placed-in-service requirement generally will qualify for a credit equal to one-half of the credit allowable for a closed-loop biomass project for the same 10-year period (1.1¢ for 2009). B. Election to Claim ITC Rather Than PTC. ARRA allows a taxpayer who is eligible to claim the PTC for a closed loop or open loop biomass facility to claim an investment-based tax credit (“ITC”) in lieu of the PTC. This election applies to facilities that are placed in service from January 1, 2009 through December 31, 2013. The entire amount of the ITC is available for the year in which a qualifying facility is placed in service. The credit rate is 30% and applies to most of the cost of the facility. Any unused portion of the credit can be carried back one tax year and carried forward up to 20 tax years. The owner of a qualifying facility can elect to claim either the ITC or the PTC, but not both. The tax basis of the facility must be reduced by one-half of the credit claimed. ARRA also eliminates the reduction of a project’s tax basis (for the purposes of calculating the ITC) if it was financed through subsidies or tax-exempt bonds. C. Grant in Lieu of ITC. To help monetize the ITC, ARRA enables taxpayers (who are otherwise eligible to claim the ITC) to elect to receive a cash grant from the U.S. Treasury Department instead of claiming the ITC. To qualify, the project must be placed in service during 2009 or 2010 or, if construction began in 2009 or 2010, before January 1, 2014. The grant is not available to any governmental agency, tax-exempt entity, or rural electric cooperative. Applications must be submitted before October 1, 2011. These grants generally function in the same manner as the ITC. The amount of the grant generally is 30% of most of the cost of the facility. A grant is not included in the taxable income of the recipient, but the tax basis of the facility is reduced by one-half of the amount of the grant. The Treasury Department must pay the grant by the later of 60 days after: (a) the date of the application or (b) the date the facility is placed in service. ARRA contains a specific provision appropriating “such sums as necessary” to make sure that funds will be available to pay grants on all qualifying projects.

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D. Extension of Bonus Depreciation through 2009. ARRA extends first-year bonus depreciation deductions to qualifying equipment placed in service in 2009. Under the bonus depreciation rule, an owner of qualifying property is entitled to deduct 50% of the adjusted basis of the property placed in service in 2009. The remaining 50% of the adjusted basis of the property is depreciated over the regular tax depreciation schedule applicable to the property. E. Advanced Energy Facilities Investment Credit. ARRA creates a new 30% tax credit for investment in property used in a “qualified advanced energy manufacturing project” i.e., a project that establishes, re-equips or expands a manufacturing facility that produces products used in the production of energy from renewable sources. The total amount of credits available under the program is $2.3 billion. Projects will be selected based upon a reasonable expectation of commercial viability, innovation, job stimulation, and environmental benefits. To receive the credit, projects must be certified by the Treasury Secretary in consultation with the Energy Secretary. Credits will be awarded through an application process. Treasury must announce requirements for the application by August 16, 2009. Applicants have 3 years from the date of the award to place the project in service. F. Clean Renewable Energy Bonds. Under the Clean Renewable Energy Bonds (“CREBs”) program, facilities that generate electricity from eligible renewable energy facilities, including biomass production, can take advantage of project-specific bonds issued by state, local, or tribal governments and electricity cooperatives. ARRA increases the existing CREBs limitation, authorizing an additional $1.6 billion of new bonds. Existing rules on how funds should be allocated under the CREBs program remain unchanged. G. Qualified Energy Conservation Bonds. The Qualified Energy Conservation Bond limitation has been increased to $ 3.2 billion from the $800 million authorized in the Emergency Economic Stabilization Act of 2008. These bonds may be used by state, local, and tribal governments to finance certain types of energy projects through loans, grants, and other repayment mechanisms that implement green community programs. Energy Conservation Bonds may be used for capital expenditures to reduce energy use in public buildings by at least 20% and implement green community programs. II. Federal Loan Guarantees. ARRA amends the Energy Policy Act of 2005 (“EPAct”) to provide $6 billion in federal loan guarantees to cover up to 80% of the costs for biomass energy generation projects and facilities that manufacture related components. If the biomass project will produce biofuels, please see the description of the Federal Loan Guarantees in that section of the Guide. These projects will not be required to meet the “innovative technology” or other requirements of section 1703 of EPAct. Eligible projects must commence construction by September 30, 2011. Projects must also pay wages that are in line with the wages paid locally for similar work. The program is administered by the Department of Energy (“DOE”). The $6 billion appropriated for the program is expected to support as much as $60 billion in loans. III.

Federal Grant Programs.

A. R & D, Demonstration And Deployment Projects. The DOE’s Office of Energy Efficiency and Renewable Energy (“EERE”) has announced that it anticipates allocating $2.5 billion to support its applied research, development and deployment activities. Those funds can be used for renewable energy projects

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including biomass. EERE has been allocated an additional sum of $800 million to support biomass energy projects. B. Advanced Research Projects Agency – Energy. ARRA also provides the Advanced Research Projects Agency – Energy (“ARPA-E”) with $400 million to support innovative energy research which could include biomass energy projects. The first funding opportunity (“FOA”) announced under ARPA-E is for a total of $150 million; individual awards of between $500,000 and $20 million are available to fund transformational energy research and development projects. This FOA is aimed at projects that have a well-formed R&D plan and that can make a significant contribution towards enhancing the economic and energy security of the United States by reducing imported energy, reducing energy-related gases, including GHG, and improving energy efficiency. C. Wood-to-Energy Grants. ARRA has established $50 million to promote increased utilization of biomass from federal, state, and private lands. These wood-to-energy grants used for activities on state and private land are not subject to matching or cost -sharing requirements. IV. State Energy Program. ARRA provides $3.1 billion for the State Energy Program, a flexible federalstate partnership implemented by state energy offices to provide additional funds that do not need to be matched by state funds, allowing the states to leverage federal funds to match state, local, and private efforts for funding energy efficiency, renewable energy, and a wide variety of energy measures. Previously, the federal appropriation for this program was approximately $50 million; ARRA funding multiplies that appropriation by 60 and waives the state/local matching fund requirement. The states are awarded the funds pro rata on the basis of their share of total electric consumption so that larger states or states with high energy consumption receive a larger portion of the funds. However, the ARRA funds will only be available to states that intend to adopt strict building energy codes and incentivize the utilities to adopt energy efficiency measures. Given the amount of the available funding, states are scrambling to establish programs that can utilize the monies. Many states will roll out their programs during May 2009. V. Job Training. To assist states in adopting strict building energy codes and incentivizing the utilities to adopt energy efficiency measures, ARRA allocates $500 million to the Department of Labor to prepare a work force with an understanding of renewable energy and energy efficiency.

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Chapter Five SHOW ME THE MONEY! —Smart Grid— On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”), a $787 billion economic stimulus package contains numerous tax provisions, grants, bonds, and loan guarantees related to the smart grid. These provisions present significant new opportunities for developers of, and investors in, smart grid projects and technologies. I.

Tax Incentives.

A. Advanced Energy Facilities Investment Credit. ARRA creates a new 30% tax credit for investment in property used in a “qualified advanced energy manufacturing project,” i.e., a project that establishes, re-equips or expands a manufacturing facility that produces products used in the production of energy from renewable sources. The total amount of credits available under the program is $2.3 billion. Projects will be selected based upon a reasonable expectation of commercial viability, innovation, job stimulation, and environmental benefits. To receive the credit, projects must be certified by the Treasury Secretary in consultation with the Energy Secretary. Credits will be awarded through an application process. Treasury must announce requirements for the application by August 16, 2009. Applicants have 3 years from the date of the award to place the project in service. II. Federal Loan Guarantees. ARRA amends the Energy Policy Act of 2005 (“EPAct”) to provide $6 billion in federal loan guarantees to cover up to 80% of the costs for electric power transmission systems. These projects will not be required to meet the “innovative technology” or other requirements of section 1703 of EPAct. Eligible projects must commence construction by September 30, 2011. Projects must also pay wages that are in line with the wages paid locally for similar work. The program is administered by the Department of Energy (“DOE”). The $6 billion appropriated for the program is expected to support as much as $60 billion in loans. III. Federal Grant Program. ARRA provides $4.5 billion to the Department of Energy’s (“DOE”) Office of Electricity Delivery and Energy Reliability to upgrade the nation’s electricity grid with smart grid technology and facilitate the development of related technologies, such as energy storage. The funds are intended to support, among other things, research and development of technologies that modernize the nation’s electricity delivery systems. Such technologies include distributed energy (small-scale and modular devices designed to provide electricity to locations close to consumers), energy storage to help balance electricity output with demand (important to the integration of wind and solar energy, which produces electricity inconsistently), and other smart grid technologies. Of the $4.5 billion allocated to grid modernization, $100 million is related to worker training activities, $80 million is to conduct a resource assessment and analysis of future demand and transmission requirements, and $10 million is to create a smart grid interoperability framework. $3.375 billion has been allocated to the DOE’s Smart Grid Investment Grant Program (“SGIG Program”) and additional funds have been allocated to demonstration projects (see below under Funding Opportunities). ARRA also provides a mechanism for electric utilities to receive cost-sharing assistance from the federal government for smart grid improvements or demonstration projects. Upon approval, the federal government may

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provide up to 50% of the cost of the qualifying advanced grid technology improvements. Projects receiving these grants must use open protocols and standards. A. Smart Grid Collaborative. The Smart Grid Collaborative is a group of federal and state regulators jointly sponsored by the National Association of Regulatory Utility Commissioners and the Federal Energy Regulatory Commission (“FERC”). The Collaborative has submitted a detailed proposal to the DOE regarding the funding criteria that should be considered when funding projects through ARRA. B. R & D, Demonstration and Deployment Projects. The DOE’s office of Energy Efficiency and Renewable Energy has announced that it anticipates allocating $2.5 billion to support its applied research, development and deployment activities. Those funds can be used for renewable energy projects including smart grid projects. $50 million of those funds has been allocated to efforts to increase the energy efficiency of information and communications technologies. C. Advanced Research Projects Agency – Energy. ARRA also provides the Advanced Research Projects Agency – Energy (“ARPA-E”) with $400 million to support innovative energy research which could include smart grid projects. The first funding opportunity (“FOA”) announced under ARPA-E is for a total of $150 million; individual awards of between $500,000 and $20 million are available to fund transformational energy research and development projects. This FOA is aimed at projects that have a well-formed R&D plan and that can make a significant contribution towards enhancing the economic and energy security of the United States by reducing imported energy, reducing energy-related gases, including GHG, and improving energy efficiency. IV. State Energy Program. ARRA provides $3.1 billion for the State Energy Program, a flexible federalstate partnership implemented by state energy offices for additional funds that do not need to be matched by state funds, allowing the states to leverage federal funds to match state, local, and private efforts for funding energy efficiency, renewable energy, and a wide variety of energy measures. Previously, the federal appropriation for this program was approximately $50 million; ARRA funding multiplies that appropriation by 60 and waives the state/local matching fund requirement. The states are awarded the funds pro rata on the basis of their share of total electric consumption so that larger states or states with high energy consumption receive a larger portion of the funds. However, the ARRA funds will only be available to states that intend to adopt strict building energy codes and incentivize the utilities to adopt energy efficiency measures. Given the amount of the available funding, states are scrambling to establish programs that can utilize the monies. Many states will roll out their programs during May 2009. V.

Funding Opportunities.

On April 20, 2009, the DOE released a Notice of Intent (“NOI”) for the DOE Smart Grid Investment Grant Program (“SGIG”), as well as a draft Funding Opportunity Announcement (“FOA”) from the DOE for a smart grid regional demonstration initiative. SGIG, which has been allocated $3.375 billion out of the available $4.5 billion, will provide up to 50% of the cost of investments by electric utilities and other entities for projects that promote the development of a smart, strong, and secure electrical grid, create new jobs and help deliver reliable power more effectively with less impact

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on the environment to customers across the nation. A portion of the funds will be allocated to projects that deploy Phasor Measurement Unit (“PMU”) technology within the transmission system infrastructure. Grants will range from $500,000 to $20 million for smart grid technology deployments to grants of $100,000 to $5 million for grid monitoring devices. The program will use a competitive, merit-based process to select qualified projects. Eligible applicants include electric utilities and distributors, manufacturers of equipment enabling smart grid technology, companies that distribute or sell electricity, and firms that wish to install smart grid technology. The final program structure will depend on feedback submitted to the DOE during the 20-day public comment period on the NOI. The DOE also announced an FOA for three types of smart grid demonstrations allocating $615 million as follows: •

$40 million has been allocated to regional demonstrations that will calculate smart grid costs and benefits, substantiate the feasibility of the technology viability, and study new business models. The DOE expects to make about 8 to 12 grants in this category.

•

$60 million has been allocated to utility-scale energy storage demonstrations that can incorporate different technologies including advanced battery systems, compressed air energy systems, and applications such as wind and photovoltaic integration and grid congestion relief. The DOE expects to make about 12 to 19 grants in this category.

•

Grid monitoring demonstrations that will support the installation and set of connections between PMUs that allow transmission system operators to identify, react to, and manage the flow of electricity in real time. The DOE expects to make about 4 to 5 grants in this category.

Each demonstration project must be carried out in collaboration with the electric utility that owns the grid facilities. Successful applicants will include products and services suppliers, end users, and state and municipal governments on their applications. The projects require a cost share of at least 50% of non-federal funds. VI. Job Training. To assist states in adopting strict building energy codes and incentivizing the utilities to adopt energy efficiency measures, ARRA allocates $500 million to the Department of Labor to prepare a work force with an understanding of renewable energy and energy efficiency. VII. Proposed Rule on Cost Recovery. FERC has drafted a proposed interim rate policy. Under the proposed policy, FERC will accept rate filings submitted to recover the costs of smart grid deployments involving jurisdictional facility. FERC proposes to consider smart grid devices and equipment so long as the security of the bulk-power system will not be adversely affected by the deployment at issue and the applicant has minimized the possibility of stranded investment in smart grid equipment by designing for upgrade abilities.

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Chapter Six SHOW ME THE MONEY! —Transmission— On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”), a $787 billion economic stimulus package that contains numerous tax provisions, grants, bonds, and loan guarantees related to the transmission infrastructure. These provisions present significant new opportunities for developers of, and investors in, transmission projects and technologies. I.

Tax Incentives.

A. Advanced Energy Investment Credits. ARRA creates a new 30% tax credit for investment in property used in a “qualified advanced energy manufacturing project,” i.e., a project that establishes, re-equips or expands a manufacturing facility that produces products used in the production of energy from renewable sources. The total amount of credits available under the program is $2.3 billion. Projects will be selected based upon a reasonable expectation of commercial viability, innovation, job stimulation, and environmental benefits. To receive the credit, projects must be certified by the Treasury Secretary in consultation with the Energy Secretary. Credits will be awarded through an application process. Treasury must announce requirements for the application by August 16, 2009. Applicants have 3 years from the date of the award to place the project in service. II.

Federal Loan Guarantees.

A. DOE Loan Guarantee Program. ARRA amends the Energy Policy Act of 2005 (“EPAct”) to provide $6 billion in federal loan guarantees to cover up to 80% of the costs for electric power transmission systems. These projects will not be required to meet the “innovative technology” or other requirements of section 1703 of EPAct. Eligible projects must commence construction by September 30, 2011. In determining whether to issue loan guarantees, the DOE will consider factors such as the importance of the project in meeting reliability needs and a project’s effect on meeting state or regional energy and environmental goals. Given the widely recognized importance of upgrading and expanding the transmission grid for these very reasons, transmission projects that meet other DOE criteria may be well positioned for federal loan guarantees under the rules of the new program that are due to be rolled out by early summer 2009. Projects must also pay wages that are in line with the wages paid locally for similar work. The program is administered by the Department of Energy (“DOE”). The $6 billion appropriated for the program is expected to support as much as $60 billion in loans. B. Borrowing Authority. ARRA significantly increases the borrowing authority of both the Bonneville Power Administration and the Western Area Power Administration by $3.25 billion each to upgrade the transmission system. The expanded borrowing authority extends to construction of new transmission lines, as well as to improvements of existing lines. III.

Federal Grant Programs.

A. R & D Demonstration Projects. The DOE’s Office of Energy Efficiency and Renewable Energy has announced that it anticipates allocating $2.5 billion to support its applied research, development and deployment activities. Those funds can be used for renewable energy projects including transmission projects. $50 million of those funds has been allocated to efforts to increase the energy efficiency of information and communications technologies.

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B. Advanced Research Projects Agency – Energy. ARRA also provides the Advanced Research Projects Agency – Energy (“ARPA-E”) with $400 million for to support innovative energy research which could include transmission projects. The first funding opportunity (“FOA”) announced under ARPA-E is for a total of $150 million; individual awards of between $500,000 and $20 million are available to fund transformation energy research and development projects. This FOA is aimed at projects that have a well-formed R&D plan that can make a significant contribution towards enhancing the economic and energy security of the United States by reducing imported energy, reducing energy-related gases, including GHG, and improving energy efficiency. C. Electricity Delivery and Energy Reliability Program. ARRA allocates $4.5 billion to the DOE’s Electricity Delivery and Energy Reliability program to help facilitate grid modernization. Of these funds, $100 million will be used for hiring and workforce training, $80 million will be devoted to conducting a resource assessment and analysis of future demand and transmission needs, and $10 million will go toward a smart grid “interoperability framework.” Over $4 billion remains to be allocated. IV. State Energy Program. ARRA provides $3.1 billion for the State Energy Program, a flexible federalstate partnership implemented by state energy offices to provide additional funds that do not need to be matched by state funds, allowing the states to leverage federal funds to match state, local, and private efforts for funding energy efficiency, renewable energy, and a wide variety of energy measures. Previously, the federal appropriation for this program was approximately $50 million; ARRA funding multiplies that appropriation by 60 and waives the state/local matching fund requirement. The states are awarded the funds pro rata on the basis of their share of total electric consumption so that larger states or states with high energy consumption receive a larger portion of the funds. However, the ARRA funds will only be available to states that intend to adopt strict building energy codes and incentivize the utilities to adopt energy efficiency measures. Given the amount of the available funding, states are scrambling to establish programs that can utilize the monies. Many states will roll out their programs during May 2009. V. Job Training. To assist states in adopting strict building energy codes and incentivizing the utilities to adopt energy efficiency measures, ARRA allocates $500 million to the Department of Labor to prepare a work force with an understanding of renewable energy and energy efficiency. VI.

Funding Opportunities and Other Updates.

A. Smart Grid Funding. See the Smart Grid section for information on recent funding opportunities for activities related to the modernization of the electric grid. B. Renewable Electricity Transmission Study. ARRA requires the DOE to complete a National Electric Transmission Congestion Study with an eye toward developing “adequate transmission capacity” for renewable energy by identifying what forms of renewable energy are constrained by inadequate transmission capacity, why adequate transmission capacity has not been developed, and what can be done to achieve adequate transmission capacity.

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Chapter Seven SHOW ME THE MONEY! —Geothermal Industry— On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARA”), a $787 billion economic stimulus package that contains numerous tax provisions, grants, bonds, and loan guarantees related to geothermal and other renewable energy projects. These provisions present significant new opportunities for developers of, and investors in, geothermal energy projects and technologies. I.

Tax Incentives.

A. Extension of PTC Sunset Date. ARRA extends the production tax credit (“PTC”) for geothermal projects from December 31, 2010 through December 31, 2013. To qualify for the PTC under the Act, a geothermal project must be “placed in service” on or before that date. ARRA did not change the basic operation or calculation of the PTC for geothermal projects. Thus, any qualifying project that meets the placedin-service requirement will qualify for a credit of (indexed for inflation) per kilowatt hour of electricity generated and sold to an unrelated person during each year of the 10-year period beginning on the date the project is originally placed in service. The amount of the credit is 2.1¢ per kilowatt hour for 2009. B. Election to Claim ITC Rather Than PTC. ARRA allows a taxpayer who is eligible to claim the PTC for a geothermal project to claim an investment-based tax credit (“ITC”) in lieu of the PTC. This election applies to geothermal facilities that are placed in service from January 1, 2009 through December 31, 2013. The entire amount of the ITC is available for the year in which a qualifying facility is placed in service. The credit rate is 30% and applies to most of the cost of the facility. Any unused portion of the credit can be carried back one tax year and carried forward up to 20 tax years. The owner of a qualifying facility can elect to claim either the ITC or the PTC, but not both. The tax basis of the facility must be reduced by one-half of the credit claimed. ARRA also eliminates the reduction of a project’s tax basis (for the purposes of calculating the ITC) if it was financed through subsidies or tax-exempt bonds. C. Grant in Lieu of ITC. To help monetize the ITC, ARRA enables taxpayers (who are otherwise eligible to claim the ITC) to elect to receive a cash grant from the U.S. Treasury Department instead of claiming the ITC. To qualify, the project must be placed in service during 2009 or 2010 or, if construction began in 2009 or 2010, before January 1, 2014. The grant is not available to any governmental agency, tax-exempt entity, or rural electric cooperative. Applications must be submitted before October 1, 2011. These grants generally function in the same manner as the ITC. The amount of the grant generally is 30% of most of the cost of the facility. A grant is not included in the taxable income of the recipient, but the tax basis of the facility is reduced by one-half of the amount of the grant. The Treasury Department must pay the grant by the later of 60 days after (a) the date of the application or (b) the date the facility is placed in service. ARRA contains a specific provision appropriating “such sums as necessary” to make sure that funds will be available to pay grants on all qualifying projects. D. Extension of Bonus Depreciation through 2009. ARRA extends first-year bonus depreciation for qualifying equipment placed in service in 2009, allowing the project owner to recover the costs of capital expenditures faster than the regular depreciation schedule. Under the bonus depreciation rule, an owner of STOEL RIVES LLP © 2009

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qualifying property can write-off 50% of the adjusted basis of the assets (such as turbines, towers, etc.) placed in service in 2009. The remaining 50% of the adjusted basis of the property is depreciated over the regular tax depreciation schedule applicable to the property. E. Clean Renewable Energy Bonds. Under the Clean Renewable Energy Bonds (“CREBs”) program, facilities that generate electricity from eligible renewable energy facilities, including geothermal energy, can take advantage of project-specific bonds issued by state, local, or tribal governments and electricity cooperatives. ARRA increases the existing CREBs limitation, authorizing an additional $1.6 billion of new bonds. Existing rules on how funds should be allocated under the CREBs program remain unchanged. F. Qualified Energy Conservation Bonds. The Qualified Energy Conservation Bond limitation has been increased to $ 3.2 billion from the $800 million authorized in the Emergency Economic Stabilization Act of 2008. These bonds may be used by state, local, and tribal governments to finance certain types of energy projects through loans, grants, and other repayment mechanisms that implement green community programs. Energy Conservation Bonds may be used for capital expenditures to reduce energy use in public buildings by at least 20% and implement green community programs. II. Federal Loan Guarantees. ARRA amends the Energy Policy Act of 2005 (“EPAct”) to provide $6 billion in federal loan guarantees to cover up to 80% of the costs for geothermal energy projects and facilities that manufacture related components. These projects will not be required to meet the “innovative technology” or other requirements of section 1703 of EPAct. Eligible projects must commence construction by September 30, 2011. Projects must also pay wages that are in line with the wages paid locally for similar work. The program is administered by the Department of Energy (“DOE”). The $6 billion appropriated for the program is expected to support as much as $60 billion in loans. III.

Federal Grant Programs.

A. R & D Demonstration Projects. The DOE’s office of Energy Efficiency and Renewable Energy has announced that it anticipates allocating $2.5 billion to support its applied research, development and deployment activities. Those funds can be used for renewable energy projects including geothermal projects. $400 million of those funds has been allocated to the Geothermal Technologies Program and over $10 million for specific geothermal projects has already been allocated under the 2009 Omnibus Appropriations Act has allocated. B. Advanced Research Projects Agency – Energy. ARRA also provides the Advanced Research Projects Agency – Energy (“ARPA-E”) with $400 million to support innovative energy research which could include geothermal projects. The first funding opportunity (“FOA”) announced under ARPA-E is for a total of $150 million; individual awards of between $500,000 and $20 million are available to fund transformational energy research and development projects. This FOA is aimed at projects that have a well-formed R&D plan that can make a significant contribution towards enhancing the economic and energy security of the United States by reducing imported energy, reducing energy-related gases, including GHG, and improving energy efficiency. IV. State Energy Program. ARRA provides $3.1 billion for the State Energy Program, a flexible federalstate partnership implemented by state energy offices to provide additional funds that do not need to be matched

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by state funds, allowing the states to leverage federal funds to match state, local, and private efforts for funding energy efficiency, renewable energy, and a wide variety of energy measures. Previously, the federal appropriation for this program was approximately $50 million; ARRA funding multiplies that appropriation by 60 and waives the state/local matching fund requirement. The states are awarded the funds pro rata on the basis of their share of total electric consumption so that larger states or states with high energy consumption receive a larger portion of the funds. However, the ARRA funds will only be available to states that intend to adopt strict building energy codes and incentivize the utilities to adopt energy efficiency measures. Given the amount of the available funding, states are scrambling to establish programs that can utilize the monies. Many states will roll out their programs during May 2009. V. Job Training. To assist states in adopting strict building energy codes and incentivizing the utilities to adopt energy efficiency measures, ARRA allocates $500 million to the Department of Labor to prepare a work force with an understanding of renewable energy and energy efficiency. VI. Funding Opportunities. On March 4, 2009, DOE issued two Funding Opportunity Announcements (“FOAs”) for enhanced geothermal systems. The combined FOAs offer up to $84 million over six years, with $20 million allocated for the 2009 fiscal year. Future funding is subject to congressional appropriations. The first FOA would provide up to $35 million for component research, development, and analysis to investigate the use of engineered geothermal reservoirs. The second FOA apportions $49 million for five to 10 domestic enhanced geothermal system demonstration projects.

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Chapter Eight SHOW ME THE MONEY! —Marine and Hydrokinetic Energy— On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”), a $787 billion economic stimulus package that contains numerous tax provisions, grants, bonds, and loan guarantees related to marine and hydrokinetic renewable energy projects. These provisions present significant new opportunities for developers of, and investors in, marine or hydrokinetic projects and technologies. I.

Tax Incentives.

A. Extension of PTC Sunset Date. ARRA extends the production tax credit (“PTC”) for marine and hydrokinetic energy projects from December 31, 2010 through December 31, 2013. To qualify for the PTC under the Act, a marine and hydrokinetic energy project must be “placed in service” on or before that date. ARRA did not change the basic operation or calculation of the PTC for these projects. Thus, any qualifying project that meets the placed-in-service requirement will qualify for a credit (indexed for inflation) per kilowatt hour of electricity generated and sold to an unrelated person during each year of the 10-year period beginning on the date the project is originally placed in service. The amount of the credit is 1.1¢ per kilowatt hour for 2009. B. Election to Claim ITC Rather Than PTC. ARRA allows a taxpayer who is eligible to claim the PTC for a marine and hydrokinetic power project to claim an investment-based tax credit (“ITC”) in lieu of the PTC. This election applies to marine and hydrokinetic energy facilities that are placed in service from January 1, 2009 through December 31, 2013. The entire amount of the ITC is available for the year in which a qualifying facility is placed in service. The credit rate is 30% and applies to most of the cost of the facility. Any unused portion of the credit can be carried back one tax year and carried forward up to 20 tax years. The owner of a qualifying facility can elect to claim either the ITC or the PTC, but not both. The tax basis of the facility must be reduced by one-half of the credit claimed. ARRA also eliminates the reduction of a project’s tax basis (for the purposes of calculating the ITC) if it was financed through subsidies or tax-exempt bonds. C. Grant in Lieu of ITC. To help monetize the ITC, ARRA enables taxpayers (who are otherwise eligible to claim the ITC) to elect to receive a cash grant from the U.S. Treasury Department instead of claiming the ITC. To qualify, the project must be placed in service during 2009 or 2010 or, if construction began in 2009 or 2010, before January 1, 2014. The grant is not available to any governmental agency, tax-exempt entity, or rural electric cooperative. Applications must be submitted before October 1, 2011. These grants generally function in the same manner as the ITC. The amount of the grant generally is 30% of most of the cost of the facility. A grant is not included in the taxable income of the recipient, but the tax basis of the facility is reduced by one-half of the amount of the grant. The Treasury Department must pay the grant by 60 days after the later of: (a) the date of the application or (b) the date the facility is placed in service. ARRA contains a specific provision appropriating “such sums as necessary” to make sure that funds will be available to pay grants on all qualifying projects. D. Extension of Bonus Depreciation through 2009. ARRA extends first-year bonus depreciation for qualifying equipment placed in service in 2009, allowing the project owner to recover the costs of capital expenditures faster than the regular depreciation schedule. Under the bonus depreciation rule, an owner of STOEL RIVES LLP © 2009

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qualifying property can write-off 50% of the adjusted basis of the assets (such as turbines, towers etc.) placed in service in 2009. The remaining 50% of the adjusted basis of the property is depreciated over the regular tax depreciation schedule applicable to the property. E. Clean Renewable Energy Bonds. Under the Clean Renewable Energy Bonds (“CREBs”) program, facilities that generate electricity from eligible renewable energy facilities, including solar energy, can take advantage of project-specific bonds issued by state, local, or tribal governments and electricity cooperatives. ARRA increases the existing CREBs limitation, authorizing an additional $1.6 billion of new bonds. Existing rules on how funds should be allocated under the CREBs program remain unchanged. F. Qualified Energy Conservation Bonds. The Qualified Energy Conservation Bond limitation has been increased to $ 3.2 billion from the $800 million authorized in the Emergency Economic Stabilization Act of 2008. These bonds may be used by state, local, and tribal governments to finance certain types of energy projects through loans, grants, and other repayment mechanisms that implement green community programs. Energy Conservation Bonds may be used for capital expenditures to reduce energy use in public buildings by at least 20% and implement green community programs. II. Federal Loan Guarantees. ARRA amends the Energy Policy Act of 2005 (“EPAct”) to provide $6 billion in federal loan guarantees to cover up to 80% of the costs for ocean and hydrokinetic energy projects and facilities that manufacture related components. These projects will not be required to meet the “innovative technology” or other requirements of section 1703 of EPAct. Eligible projects must commence construction by September 30, 2011. Projects must also pay wages that are in line with the wages paid locally for similar work. The program is administered by the Department of Energy (“DOE”). The $6 billion appropriated for the program is expected to support as much as $60 billion in loans. III.

Federal Grant Programs.

A. R & D Demonstration Projects. The DOE’s Office of Energy Efficiency and Renewable Energy has announced that it anticipates allocating $2.5 billion to support its applied research, development and deployment activities. Those funds can be used for renewable energy projects including marine and hydrokinetic projects. $50 million of those funds has been allocated to efforts to increase the energy efficiency of information and communications technologies. B. Advanced Research Projects Agency – Energy. ARRA also provides the Advanced Research Projects Agency – Energy (“ARPA-E”) with $400 million for to support innovative energy research which could include marine and hydrokinetic projects. The first funding opportunity (“FOA”) announced under ARPA-E is for a total of $150 million; individual awards of between $500,000 and $20 million are available to fund transformation energy research and development projects. This FOA is aimed at projects that have a well-formed R&D plan that can make a significant contribution towards enhancing the economic and energy security of the United States by reducing imported energy, reducing energy-related gases, including GHG, and improving energy efficiency.

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IV. Funding Opportunities. Funding opportunities created by ARRA are beginning to roll out. Currently the DOE’s EERE has a Funding Opportunity Announcement (“FOA”) related to advanced water power. The FOA is seeking letters of intent for marine and hydrokinetic projects and provides up to $17 million in funding.

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Chapter Nine SHOW ME THE MONEY! —Green Building— On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”), a $787 billion economic stimulus package that contains numerous provisions related to green building. These provisions present significant new opportunities for developers of, and investors in, green building projects and technologies. See also, Energy Efficiency Section. I.

Tax Incentives.

A. Qualified Energy Conservation Bonds. The Qualified Energy Conservation Bond limitation has been increased to $ 3.2 billion from the $800 million authorized in the Emergency Economic Stabilization Act of 2008. These bonds may be used by state, local, and tribal governments to finance certain types of energy projects through loans, grants, and other repayment mechanisms that implement green community programs. Energy Conservation Bonds may be used for capital expenditures to reduce energy use in public buildings by at least 20% and implement green community programs. II.

Federal Grant Programs.

A. Federal Buildings. ARRA has allocated funds so that federal agencies can demonstrate green building, and there are numerous opportunities for federal contractors that employ green building concepts. As part of ARRA, at least $4.5 billion of the $5.5 billion federal buildings fund is to be used to convert facilities to high-performance green buildings. Further opportunities are expected to be created by the $769 million allocated for Department of Interior construction projects, $400 million for military medical facilities, and $255 million for tribal green building under the Native American Housing Block Grant. B. Green Built Schools. Of the $48.32 billion in fiscal stabilization funds awarded to the states, $8.79 billion is to be used for government services, public safety, and the modernization and repair of schools and higher learning facilities in a manner consistent with recognized green building ratings systems. C. Priority Investments. By September 30, 2009, $1 billion will be awarded competitively for priority investments. The funds can be used to leverage private sector funding or finance renovations and energy conservation retrofits for HUD public housing.

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Chapter Ten SHOW ME THE MONEY! —Energy Efficiency— On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”), a $787 billion economic stimulus package that contains numerous tax provisions related to biomass and other renewable energy projects. These provisions present significant new opportunities for developers of, and investors in, energy efficiency projects and technologies. I.

Tax Incentives.

A. Residential Energy Credit. ARRA removed the previous dollar limitations on the amount of the residential energy credit available to individuals for expenditures for qualified solar electric, solar water heating, small wind energy, and geothermal heat pump property. The credit rate remains at 30 percent. A $500 limit still applies to fuel cells. B. Qualified Energy Conservation Bonds. The Qualified Energy Conservation Bond limitation has been increased to $3.2 billion. These bonds may be used by state, local, and tribal governments to finance certain types of energy projects. The bonds may be used for loans, grants, and other repayment mechanisms that implement green community programs. C. Nonbusiness Energy Property. ARRA increased the tax credit available to individuals for energy efficiency improvements installed and residential energy property expenditures paid or incurred during 2009 and 2010. The credit now equals 30 percent of the cost of such improvements, up to a maximum of $1,500 per year. ARRA also modified the calculation of the credit and the standards for qualifying property. II.

Federal Grant Programs.

A. Energy Efficiency and Conservation Block Grants. ARRA allocated $3.2 billion to the Energy Efficiency and Conservation Block Grants program, which assists eligible entities in implementing strategies to reduce fossil fuel emissions and total energy use and to improve energy efficiency. State, local, and tribal governments, and U.S. territories can obtain block grants to improve energy efficiency and install renewable energy systems. Grants from the federal government are not available to private entities. Of the $3.2 billion allocated to the program, $2.8 billion will be allocated to the eligible entities based on population and various other factors. The remaining $400 million will be allocated pursuant to competitive grants, which will be solicited through a separate Funding Opportunity Announcement, which has not yet been released. B. Weatherization Assistance Program. ARRA allocated $5 billion to fund the Weatherization Assistance Program to provide funds to the states, which will be distributed to homeowners to assist in the weatherization of homes. Any household at or below 200% of the federal poverty guideline is considered an eligible household and the funding assistance has been increased to $6,500 per home. Priority service is given to the elderly, people with disabilities, and families with children. C. R & D Demonstration Projects. The DOE’s Office of Energy Efficiency and Renewable Energy has announced that it anticipates allocating $2.5 billion to support its applied research, development and deployment activities. Those funds can be used for clean energy projects including energy efficiency projects.

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D. Advanced Research Projects Agency – Energy. ARRA also provides the Advanced Research Projects Agency – Energy (“ARPA-E”) with $400 million to support innovative energy research which could include energy efficiency projects. The first funding opportunity (“FOA”) announced under ARPA-E is for a total of $150 million; individual awards of between $500,000 and $20 million are available to fund transformation energy research and development projects. This FOA is aimed at projects that have a well-formed R&D plan that can make a significant contribution towards enhancing the economic and energy security of the United States by reducing imported energy, reducing energy-related gases, including GHG, and improving energy efficiency. III. State Energy Program. ARRA provides $3.1 billion for the State Energy Program, a flexible federalstate partnership implemented by state energy offices to provide additional funds that do not need to be matched by state funds, allowing the states to leverage federal funds to match state, local, and private efforts for funding energy efficiency, renewable energy, and a wide variety of energy measures. Previously, the federal appropriation for this program was approximately $50 million; ARRA funding multiplies that appropriation by 60 and waives the state/local matching fund requirement. The states are awarded the funds pro rata on the basis of their share of total electric consumption so that larger states or states with high energy consumption receive a larger portion of the funds. However, the ARRA funds will only be available to states that intend to adopt strict building energy codes and incentivize the utilities to adopt energy efficiency measures. Given the amount of the available funding, states are scrambling to establish programs that can utilize the monies. Many states will roll out their programs during May 2009. IV. Job Training. To assist states in adopting strict building energy codes and incentivizing the utilities to adopt energy efficiency measures, ARRA allocates $500 million to the Department of Labor to prepare a work force with an understanding of renewable energy and energy efficiency.

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Chapter Eleven SHOW ME THE MONEY! —Advanced Battery and Fuel Cell Technology— On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”), a $787 billion economic stimulus package that contains numerous tax provisions related to biomass and other renewable energy projects. These provisions present significant new opportunities for developers of, and investors in, advanced battery and fuel cell projects and technologies. I.

Tax Incentives.

A. Advanced Energy Facilities Investment Credit. The ARRA creates a new 30% tax credit for investment in property used in a “qualified advanced energy manufacturing project” i.e., a project that establishes, re-equips or expands a manufacturing facility that produces products used in the production of energy from renewable sources. The total amount of credits available under the program is $2.3 billion. Projects will be selected based upon a reasonable expectation of commercial viability, innovation, job stimulation, and environmental benefits. To receive the credit, projects must be certified by the Treasury Secretary in consultation with the Energy Secretary. Credits will be awarded through an application process. Treasury must announce requirements for the application by August 16. Applicants have 3 years from the date of the award to place the project in service. The types of projects that qualify include: •

equipment designed to be used in the generation of energy from renewable resources;

•

fuel cells or energy storage systems for use with electric or hybrid-electric motor vehicles;

•

advanced equipment designed to reduce greenhouse gas emissions; and

•

other equipment having the greatest potential for technological innovation and commercial deployment, as determined by the Secretary of the Treasury in consultation with the Secretary of Energy.

ARRA authorizes $2.3 billion for manufacturing credits to be allocated by the U.S. Treasury Department in a competitive bidding process. Applications must be received within two years from the date the Treasury Department begins accepting applications, and each applicant will have one year from the date the application is accepted to provide the Treasury Department with evidence that the requirements for certification have been met. An applicant receiving certification will then have three years to place the project in service. II. Federal Loan Guarantees. ARRA amends the Energy Policy Act of 2005 (“EPAct”) to provide $6 billion in federal loan guarantees to cover up to 80% of the costs for wind energy projects and facilities that manufacture related components. These projects will not be required to meet the “innovative technology” or other requirements of section 1703 of EPAct. Eligible projects must commence construction by September 30, 2011. Projects must also pay wages that are in line with the wages paid locally for similar work. The program is administered by the Department of Energy (“DOE”). The $6 billion appropriated for the program is expected to support as much as $60 billion in loans. STOEL RIVES LLP © 2009

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III.

Federal Grant Programs.

A. Advanced Battery Manufacturing Grant Program. ARRA authorizes $2 billion in grants to support the manufacturing of advanced batteries and components within the United States as well as the development of supporting software. These grants are available to manufacturers to fund facilities that produce vehicle batteries and other advanced battery systems in the United States, including advanced lithium ion batteries and hybrid electric systems. Grants are also available to firms for manufacturing components and designing software for advanced battery systems.

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Chapter Twelve SHOW ME THE MONEY! —Renewable Energy Equipment Manufacturing— On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”), a $787 billion economic stimulus package that contains numerous tax provisions, grants, bonds, and loan guarantees related to renewable energy projects. These provisions present significant new opportunities for developers of, and investors in, renewable energy equipment manufacturers. I.

Tax Incentives.

A. Advanced Energy Facilities Investment Credits. ARRA creates a new 30% tax credit for investment in property used in a “qualified advanced energy manufacturing project” i.e., a project that establishes, re-equips or expands a manufacturing facility that produces products used in the production of energy from renewable sources. The total amount of credits available under the program is $2.3 billion. Projects will be selected based upon a reasonable expectation of commercial viability, innovation, job stimulation, and environmental benefits. To receive the credit, projects must be certified by the Treasury Secretary in consultation with the Energy Secretary. Credits will be awarded through an application process. Treasury must announce requirements for the application by August 16, 2009. Applicants have 3 years from the date of the award to place the project in service. •

property designed to be used to produce energy from the sun, wind, and geothermal deposits;

•

fuel cells, microturbines, or an energy storage system for use with electric or hybridelectric motor vehicles;

•

electric grids to support the transmission of intermittent sources of renewable energy, including storage of such energy;

•

property designed to capture and sequester carbon dioxide emissions;

•

property designed to refine or blend renewable fuels or to produce energy conservation technologies (including energy-conserving lighting technologies and smart grid technologies);

•

new qualified plug-in electric drive motor vehicles, including electric motors, generators, and power control units; or

•

other advanced energy property designed to reduce greenhouse gas emissions.

B. Bonds and Subsidized Funds. ARRA makes Industrial Development Bonds available for facilities that create or produce intangible property, such as renewable energy technology, including facilities that are functionally related and subordinate to another manufacturing facility. II. Federal Loan Guarantees. ARRA amends the Energy Policy Act of 2005 (“EPAct”) to provide $6 billion in federal loan guarantees to cover up to 80% of the costs facilities that manufacture components for

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renewable energy systems that generate electricity or thermal energy. These projects will not be required to meet the “innovative technology” or other requirements of section 1703 of EPAct. Eligible projects must commence construction by September 30, 2011. Projects must also pay wages that are in line with the wages paid locally for similar work. The program is administered by the Department of Energy (“DOE”). The $6 billion appropriated for the program is expected to support as much as $60 billion in loans. On March 20, 2009, the DOE made the first loan guarantee offer under the program in the amount of $535 million to support construction of a commercial-scale manufacturing plant to create cylindrical solar photovoltaic panels. III. Federal Grant Program. ARRA provides $2 billion in grants for the manufacture of advanced batteries and components. State and local governments will be awarded $156 million in grants under the Clean Diesel Funding Assistance Program. IV. State Energy Program. ARRA provides $3.1 billion for the State Energy Program, a flexible federalstate partnership implemented by state energy offices to provide additional funds that do not need to be matched by state funds, allowing the states to leverage federal funds to match state, local, and private efforts for funding energy efficiency, renewable energy, and a wide variety of energy measures. Previously, the federal appropriation for this program was approximately $50 million; ARRA funding multiplies that appropriation by 60 and waives the state/local matching fund requirement. The states are awarded the funds pro rata on the basis of their share of total electric consumption so that larger states or states with high energy consumption receive a larger portion of the funds. However, the ARRA funds will only be available to states that intend to adopt strict building energy codes and incentivize the utilities to adopt energy efficiency measures. Given the amount of the available funding, states are scrambling to establish programs that can utilize the monies. Many states will roll out their programs during May 2009. V. Job Training. To assist states in adopting strict building energy codes and incentivizing the utilities to adopt energy efficiency measures, ARRA allocates $500 million to the Department of Labor to prepare a work force with an understanding of renewable energy and energy efficiency. VI. Funding Opportunities. Currently the DOE has two Funding Opportunity Announcements (“FOAs”) related to advanced electric and hybrid vehicle manufacturing. The first FOA provides up to $378 million, and recipients will be awarded between 20% and 50% of their project costs: •

Up to $100 million is for advanced vehicle electrification.

•

Up to $75 million is for transportation sector electrification.

•

Up to $10 million is for advanced electric drive vehicle education.

•

Up to $175 million is for projects that are a combination of advanced vehicle electrification and transportation sector electrification.

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The second FOA is for $2 billion to be used in connection with hybrid and electric vehicle batteries: •

$1.2 billion is to build or increase the production capacity of cell and battery pack manufacturing facilities.

•

$275 million is to build or increase the production capacity of advanced battery supplier manufacturing facilities.

•

$25 million is to build or increase the production capacity of advanced lithium ion battery recycling facilities.

•

$35 million is to build or increase the production capacity of electric drive component manufacturing facilities.

•

$15 million is to build or increase the production capacity of electric drive subcomponent manufacturing facilities.

•

The remaining $450 million could be used to fund facilities that combine the production of the items above, or could be saved for another round of FOAs.

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Chapter Thirteen SHOW ME THE MONEY! —Green Vehicles— On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”), a $787 billion economic stimulus package that contains numerous tax provisions, grants, bonds, and loans guarantees related to green vehicles. These provisions present significant new opportunities for developers of, and investors in, projects and technologies related to advanced vehicles including plug-in, hybrid, and alternatively fueled vehicles. I.

Tax Incentives.

A. Advanced Energy Facilities Investment Credits. ARRA creates a new 30% tax credit for investment in property used in a “qualified advanced energy manufacturing project” i.e., a project that establishes, re-equips or expands a manufacturing facility that produces products used in the production of energy from renewable sources. The total amount of credits available under the program is $2.3 billion. Projects will be selected based upon a reasonable expectation of commercial viability, innovation, job stimulation, and environmental benefits. To receive the credit, projects must be certified by the Treasury Secretary in consultation with the Energy Secretary. Credits will be awarded through an application process. Treasury must announce requirements for the application by August 16, 2009. Applicants have 3 years from the date of the award to place the project in service. The types of property that may qualify include: •

fuel cells, microturbines, or an energy storage system for use with electric or hybridelectric motor vehicles; and

•

new qualified plug-in electric drive motor vehicles, including electric motors, generators, and power control units.

B. Alternative Fuel Vehicle Refueling Credit. ARRA provides a temporary expansion of the Alternative Fuel Vehicle Refueling Property Credit from 30% to 50% of the cost of qualifying property. In addition, the dollar caps have been increased from $30,000 to $50,000 ($200,000 for hydrogen fueling property). C. New Plug-In Vehicle Tax Credit. ARRA substantially revises the existing plug-in vehicle credit for 2009, and again for vehicles purchased beginning in 2010. The base line tax credit equals $2,500 for the purchase of a plug-in electric or hybrid vehicle (“PHEV”) with a battery capacity of at least 4 hours, but may be increased up to $5,000 depending on the battery capacity of the PHEV. Certain plug-in electric vehicles are allowed a tax credit of 10% of the cost, up to $2,500 with a battery capacity of at least 4 hours. The tax credit will be phased out once sales of PHEVs reach 200,000. D. Electric Vehicle Conversion Credit. ARRA expands the alternative motor vehicle credit to provide a tax credit for the purchase of electric vehicle conversion kits. Electric vehicle conversion kits qualify for tax credits of 10% of the cost (does not exceed $40,000.) II. Federal Loan Guarantees. ARRA amends the Energy Policy Act of 2005 (“EPAct”) to provide $6 billion in federal loan guarantees to cover up to 80% of the costs for wind energy projects and facilities that manufacture related components. These projects will not be required to meet the “innovative technology” or other requirements of section 1703 of EPAct. Eligible projects must commence construction by September 30, STOEL RIVES LLP © 2009

Ch. 13 – Pg. 1

2011. Projects must also pay wages that are in line with the wages paid locally for similar work. The program is administered by the Department of Energy (“DOE”). The $6 billion appropriated for the program is expected to support as much as $60 billion in loans. III.

Federal Grant Programs.

A. Manufacturing Grant. ARRA provides $2 billion in grants for the manufacture of advanced batteries and components. State and local governments will be awarded $156 million in grants under the Clean Diesel Funding Assistance Program. B. AVTM Loan Program. The Energy Independence and Security Act of 2007 (“EISA”) created the ATVM Loan Program, a direct loan program responsible for the management of Advanced Technology Vehicle Manufacturing Loans. Under the EISA, the Department of Energy may provide direct loans totaling up to $25 billion to automobile manufacturers and component suppliers to pay the cost of re-equipping, expanding, or establishing a manufacturing facility in the United States to produce qualifying advanced technology vehicles; or qualifying components; and, engineering integration performed in the United States of qualifying vehicles and qualifying components. Applications for the loans will be processed as they are submitted. C. R & D Demonstration Projects. The DOE’s Office of Energy Efficiency and Renewable Energy (“EERE”) has announced that it anticipates allocating $2.5 billion to support its applied research, development and deployment activities. Those funds can be used for renewable energy projects including alternative vehicle projects. EERE also has an additional $400 million for adding electric technologies to vehicles. D. Advanced Research Projects Agency – Energy. ARRA also provides the Advanced Research Projects Agency - Energy (“ARPA-E”) with $400 million for to support innovative energy research which could include marine and hydrokinetic projects. The first funding opportunity (“FOA”) announced under ARPA-E is for a total of $150 million; individual awards of between $500,000 and $20 million are available to fund transformation energy research and development projects. This FOA is aimed at projects that have a well-formed R&D plan that can make a significant contribution towards enhancing the economic and energy security of the United States by reducing imported energy, reducing energy-related gases, including GHG, and improving energy efficiency. IV. Funding Opportunities. Currently the DOE has two Funding Opportunity Announcements (“FOAs”) related to advanced electric and hybrid vehicles. The first FOA provides up to $378 million. Recipients will be awarded between 20% and 50% of their project costs: •

Up to $100 million is for advanced vehicle electrification.

•

Up to $75 million is for transportation sector electrification.

•

Up to $10 million is for advanced electric drive vehicle education.

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•

Up to $175 million is for projects that are a combination of advanced vehicle electrification and transportation sector electrification.

The second FOA provides for $2 billion hybrid and electric vehicle batteries: •

$1.2 billion is to build or increase the production capacity of cell and battery pack manufacturing facilities.

•

$275 million is to build or increase the production capacity of advanced battery supplier manufacturing facilities.

•

$25 million is to build or increase the production capacity of advanced lithium ion battery recycling facilities.

•

$35 million is to build or increase the production capacity of electric drive component manufacturing facilities.

•

$15 million is to build or increase the production capacity of electric drive subcomponent manufacturing facilities.

•

The remaining $450 million could be used to fund facilities that combine the production of the items above, or could be saved for another round of FOAs.

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Chapter Fourteen SHOW ME THE MONEY! —Clean Coal Industry— The American Recovery and Reinvestment Act of 2009 (“ARRA”), a $787 billion economic stimulus package, contains numerous tax provisions related to wind and other renewable energy projects and presents significant new opportunities for developers of, and investors in, clean coal projects and technologies. I.

Tax Incentives.

A. Extension of Bonus Depreciation through 2009. ARRA extends first-year bonus depreciation for qualifying equipment placed in service in 2009, allowing the project owner to recover the costs of capital expenditures faster than the regular depreciation schedule. Under the bonus depreciation rule, an owner of qualifying property can write-off 50% of the adjusted basis of the assets placed in service in 2009. The remaining 50% of the adjusted basis of the property is depreciated over the regular tax depreciation schedule applicable to the property. B. Advanced Energy Facilities Investment Credit. The ARRA creates a new 30% tax credit for investment in property used in a “qualified advanced energy manufacturing project,” i.e., a project which establishes, re-equips or expands a manufacturing facility that produces products used in the production of energy from advanced energy sources including advanced fossil energy and coal gasification. The total amount of credits available under the program is $2.3 billion. Projects will be selected based upon a reasonable expectation of commercial viability, innovation, job stimulation, and environmental benefits. To receive the credit, projects must be certified by the Treasury Secretary in consultation with the Energy Secretary. Credits will be awarded through an application process. Treasury must announce requirements for the application by August 16, 2009. Applicants have 3 years from the date of the award to place the project in service. C. Clean Renewable Energy Bonds. Under the Clean Renewable Energy Bonds (“CREBs”) program, facilities that generate steam from refined coal production facilities can take advantage of projectspecific bonds issued by state, local or tribal governments and electricity cooperatives. ARRA increases the existing CREBs limitation, authorizing an additional $1.6 billion of new bonds. Existing rules on how funds should be allocated under the CREBs program remain unchanged. II.

Federal Grant Programs.

A. R & D Demonstration Projects. ARRA provides the Department of Energy with $3.4 billion for research and development of advanced fossil energy technologies. As of this date, the Department of Energy has not announced how it intends to distribute these funds, but it is anticipated that a portion will be used to fund projects under the Clean coal Power Initiative Program, focusing on projects that capture and sequester GHGs.

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David L. Benson

Experience David Benson is a member of the firm practicing in the Corporate, Securities and Finance practice group and a member of the Renewable Energy group. He leads the firm’s Biofuels Initiative and Biomass Initiative. He represents clients in public and private transactions, including debt and equity financings, merger and acquisition transactions, joint ventures and other strategic alliances. David also has experience in structuring and advising on international transactions, primarily in Europe, Asia and the Middle East. He represents alternative energy and clean technology clients in biofuels, biomass, wind, solar, geothermal, ocean energy and other energy related areas. His clients are also engaged in fuel cell and other storage technologies, smart grid and energy efficiency and other technologies focused on alternative energy markets. He represents clients in the development, structuring, financing and acquisition of facilities producing ethanol, cellulosic ethanol, biodiesel and other advanced biofuels, including

Member 206-386-7584 Direct 206-386-7500 Fax [email protected]

those producing or using a variety of feedstocks such as algae, jatropha, MSW, woody waste and other sustainable, non-food feedstocks. David has extensive experience with advising clients in the development, financing and acquisition of wind and biomass (including biosolids, MSW, biogas, waste-to-heat and landfill gas facilities). In addition to advising on the financing and acquisition of alternative fuel and energy projects, David has represented clients in negotiating turbine supply contracts, development agreements, operation and maintenance agreements and related development agreements. He also represents a number of other technology companies, including internet-based and software companies, in structuring operations, financings and acquisitions, and advising to successfully commercialize technology. David has experience representing food and beverage companies, including wholesale and retail distributors, and advises his clients on their operations and significant corporate transactions. He was a law clerk to the Honorable Richard Suhrheinrich, U.S. Court of Appeals, Sixth Circuit (1992). Representative Work •

Advised biofuels company based in Ontario, Canada on private placement and filing of S-1 registration statement in US.

•

Advised publicly-held company on acquisition of three separate wind energy projects in Texas.

•

Advised company developing commercial scale production of algae for biofuels in private placement.

Education Georgetown University Law Center, LL.M. international and comparative law, 1993, with distinction Michigan State University College of Law, J.D., 1992, summa cum laude MSU Law Review Arizona State University, B.S. finance, 1989 Admissions Washington Michigan Languages German (Conversational)

 

David L. Benson

•

Advised international financial services company on structuring joint venture in Dubai.

•

Advised publicly-held energy producer on the acquisition of a wind energy developer and on all projects under development throughout North America.

•

Advised client on investment in series of companies owning and operating a winery and vineyard property.

•

Advised client on acquisition of all outstanding shares of brewing company from parent brewery in the United Kingdom.

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Advised social networking Internet company on various rounds of financing and start-up matters.

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Advised energy technology company on commercialization of new turbine technology and private placement of convertible notes.

•

Advised biodiesel company on structuring and acquisition of facility and EPC contract; advised company in redemption of interests held by minority equity holder.

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Advised wholesale/retail distributor of specialty bakery products with regard to securities compliance and corporate governance matters.

•

Advised energy developer on structure and negotiation of geothermal power plant in Nevada.

•

Advised minority equity holder in taking control of fishing company and its crab fishing rights under the NMFS.

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Advised software company with respect to development, acquisition and protection of IP rights.

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Advised manufacturer of specialty brushes on recapitalization of preferred stock holder.

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Advised biomass fuel producer on structuring and financing of biomass projects, including offtake contracts for feedstock and sale of feedstock to biomass plant.

•

Represented power producer in renegotiating and extending the terms of two wind power projects in California and negotiating options to acquire another wind power project and hydro-storage project.

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Advised wind energy developer on sale of 90% interest in wind energy projects located in Montana.

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Advising a provider of electro-optical materials for optical telecommunications and data networks and its publicly traded parent in the subsidiary’s private placement of $24 million of equity securities.

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Advising a provider of software tools for wireless communications on general corporate matters and the private placement of approximately $10 million of equity securities.

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Advising the largest wholesale life insurance broker in the United States in the sale of all of its domestic operations through a combination of asset sale, share sale and merger transactions.

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Advised Taco Bell franchisee management in buyout of all equity holders and the refinancing of all debt.

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Advising a provider of life insurance products in the restructuring of its international operations, including the formation and operation of its offshore and Hong Kong based subsidiaries.

Professional Honors and Activities •

Named a Top Lawyer in Washington in 2008 by Washington CEO and Avvo

•

Named one of Washington’s “Rising Stars” by Washington Law & Politics

•

Board member, Washington Clean Technology Alliance

 

David L. Benson

•

Past-Chair, Privately Held Companies Subcommittee, Committee on Corporate Counsel of the American Bar Association

•

Past-Board member and vice president of sponsorships, Association for Corporate Growth, Seattle Chapter

•

Screening and Coaching Committee, Angel Investor Forum, Zino Society

•

Member, Business Law Section, Washington State Bar Association

•

Member, Business Law Section, American Bar Association

Presentations •

Presenter, Novel Approaches to Financing the Clean Energy Technology Revolution, National Renewable Energy Laboratory Annual Growth Financing Conference, Denver, 2007

•

Panelist, Critique business plans at , National Renewable Energy Laboratory Annual Growth Financing Conference, Denver, 2007

•

Presenter, “Capital Stress Points in Renewable Energy Projects,” FRA Renewable Summit, Phoenix, 2007

•

Presenter, “Corporate Compliance Issues in the U.S., Asia and Latin America,” R.E. Lee International Underwriting and Reinsurance Forum, 2002

•

Presenter, “Securities Law Issues in Mergers and Acquisitions,” University of Washington Continuing Legal Education Program, November 2000

•

Presenter, “Choice of Business Entity,” Garage.com Boot Camp follow-up seminar, May 2000

Publications •

“Financing Your Biofuels Project,” coauthor, The Law of Biofuels, Stoel Rives LLP, Second Edition, 2008

•

“Next-Generation Biofuels,” coauthor, The Law of Biofuels, Stoel Rives LLP, Second Edition, 2008

•

Coeditor, The In-House Counsel’s Essential Tool Kit, American Bar Association, 2007

•

Contributor, M&A Process: A Practical Guide for the Business Lawyer, American Bar Association, 2005

Civic Activities •

Board member, Washington Clean Technology Alliance

•

Member, Board of Trustees, Seattle Repertory Theatre

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Chair, member and past chair, Board of Directors, King County Boys and Girls Clubs, Southwest Branch

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Former member, Board of Directors, King County Boys and Girls Club

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Former partner and member, Environmental Grant Committee, Social Venture Partners

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Past member, Executive Committee and Board of Directors, Kent County Literacy Council

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Past member, Development Council, St. Mary’s Health Services

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Past member, Finance Committee and Investment Committee, St. Cecelia Music Society

 

Dina M. Dubson

Experience Dina Dubson is an associate in the Energy and Telecommunications group, where she concentrates her practice on wind, geothermal, solar, tidal and ocean power, together with other forms of renewable energy. Dina has experience in drafting and reviewing power purchase agreements (“PPAs”) for renewable energy developers, assisting buyers and sellers of environmental attributes, including renewable energy certificates (“RECs”), verified emission reductions (“VERs”), and carbon offsets, drafting and reviewing leases for the development of energy projects; assisting renewable energy developers with transmission and interconnection issues, and assisting with the financing and permitting of renewable energy projects. Prior to joining Stoel Rives, Dina was a research assistant, University of Oregon, 2006-2008; summer associate, Stoel Rives LLP, 2006, 2007; community

Associate 503-294-9675 Direct 503-220-2480 Fax [email protected]

relations, PR Racing, Inc., 2004-2005; research assistant, Global Development and Environment Institute, 2003-2004; publicist, Tufts Institute of the Environment, 2001-2003; and intern, Intradeco, Inc., 2002.

Education University of Oregon School of Law, J.D., 2008

Representative Work

Certificate in Ocean and Coastal Law

•

Regularly assists in review and negotiation of retail energy contracts for a client with facilities nationwide

Distinguished Service Award, Journal of Environmental Law and Litigation, 2008

•

Represented wind energy developer in PPA negotiation

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Represented Fortune 500 company with respect to purchase of VERs from renewable energy project in Southeast Asia

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Assisted wind energy developer in review of development services agreement

•

Drafted geothermal lease involving project developer and private landowner in Oregon

Professional Honors and Activities •

Women of Wind Energy

•

Oregon State Bar Public Utility Law Section

•

Multnomah County Bar Association

Presentations •

“Renewable Portfolio Standards in Oregon and Washington,” Stoel Rives LLP, Portland, July 2007

•

“The ‘Law’ of Wave Energy–Who's in Charge?,” Public Interest Environmental Law Conference, Eugene, Oregon, Mar. 2007

Chapin Clark Award for Editorial Excellence, Journal of Environmental Law and Litigation, 2007 Ann Louise Litin Memorial Award, 2007 Wayne Morse Fellow, 2005-2008 Tufts University, B.A., 2004, cum laude Dean’s list, Pi Sigma Alpha Admissions Oregon Languages Spanish French (proficient)

 

Dina M. Dubson

Publications •

Regular contributor to the Stoel Rives Renewable Energy & Climate Policy Law Blog and Energy Law Alerts

•

“Carbon Offsets Fast Becoming an Essential Tool for Business,” coauthor, Portland Business Journal, July 2007

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“Ocean Renewable Energy Conference,” coauthor, Oregon Insider, Sept. 1, 2006

Civic Activities •

Member, City Club of Portland

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Member, New Leaders Council

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Member, Oregon Area Jewish Committee

 

Debra H. Frimerman

Experience Debra Frimerman practices in the Corporate group. Debra assists both public and private renewable energy clients in a variety of areas. Her work includes mergers and acquisitions, business entity structuring, exempt and registered securities offerings, and ongoing general corporate governance and securities compliance. Debra dedicates a significant portion of her practice to emerging green and renewable technologies. She also has experience working with clients in agribusiness, finance manufacturing, medical devices, and insurance industries. Prior to joining Stoel Rives LLP, Debra was an attorney at Lindquist & Vennum PLLP. Representative Work Capital Raising •

Founders, seed and primary equity offerings ranging from $1 million - $100 million to provide funding for renewable energy projects.

•

Preferred stock offerings by cooperative associations to provide financing to build biofuels production facilities.

Associate 612-373-8819 Direct 612-373-8881 Fax [email protected] Education University of Minnesota Law School, J.D., 2005, magna cum laude Editor, Journal of Law & Inequality

•

Counsel clients on possible capital structures and best practices to raise necessary project funds.

University of California, Santa Barbara, B.A., economics, 2002

•

Agent’s counsel in registered securities offering of approximately $5 million.

Admissions Minnesota

Mergers, Acquisitions and Exit Strategies •

Merger of two ethanol companies, which created one of the nation’s largest publicly traded ethanol production companies, with complimentary grain, agronomy, feed, fuel, and ethanol marketing and distribution operations.

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Sale of 60% interest in ethanol production facility for $100 million.

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Asset sale to private equity fund by closely-held business providing owner exit strategy and ongoing fee-based consulting arrangement.

•

Merger of two public companies by tender offer of over $100 million. Ongoing Corporate Advice

•

Negotiate engineering, procurement and construction (EPC) agreements for wind development projects.

 

Debra H. Frimerman

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Offtake and supply agreements.

•

Licensing agreements between biomass technology providers and projects for cutting-edge technologies.

Professional Honors and Activities •

Member, American Bar Association

•

Member, Minnesota State Bar Association

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Member, Hennepin County Bar Association

Publications •

Coauthor, “Renewable Energy: Trends in Finance and Business Structures,” The Law of Cooperatives, Business, Structure and Legal Issues, Stoel Rives LLP, 2007

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Author, “Minnesota Adopts 2002 Uniform Securities Act,” Hearsay, September 2007

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Coauthor, “Design, Engineering, Constructions,” The Law of Ocean and Tidal Energy, A Guide to Business and Legal Issues, Stoel Rives LLP, 2007

Civic Activities •

Board member, Purusha Project

 

Janet F. Jacobs

Experience Janet Jacobs practices in the Corporate, Securities and Finance practice group and the Renewable Energy practice group. Janet represents clients in corporate governance matters; mergers and acquisitions; and corporate, securities and financing transactions, with an emphasis on the development, structuring, financing and acquisition of biofuels, solar and wind projects. She also advises her clients on their business operations and significant corporate transactions. Janet has been an associate at Alschuler, Grossman & Pines, Century City, California; associate at Valensi, Rose & Magaram, Century City; associate, Forsyte Kerman, London, England. Representative Work •

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Represented a global trading company headquartered in Tokyo in the acquisition of a solar energy solutions provider and the largest privatelyheld wholesale distributor of solar energy systems in the U.S. Represented an international bank in its acquisition of a California confectionery manufacturer; represented bank in its $60 million dollar acquisition of a heating equipment manufacturer with multi-state operations.

Associate 206-386-7582 Direct 206-386-7500 Fax [email protected] Education University of Washington School of Law, J.D., 2003, with honors London School of Economics and Political Science, London, England, LLB, 1976, magna cum laude

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Represented a national bank in a $25 million dollar loan to a fishing company for the acquisition and development of fishing facilities in Alaska; represents bank in commercial loan transactions.

Admissions Washington

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Represented a $3 billion revenue grocery wholesale cooperative on the acquisition of substantially all of the assets of a grocery wholesale cooperative.

U.S. District Court for the Central District of California

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Represented biodiesel company on structuring and acquisition of facility; represented company in redemption of interests held by minority equity holder; represents company on joint venture with technology company.

Languages French

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Represented two U.S. subsidiary companies in public offerings of UK parent companies on the AIM Market of the London Stock Exchange.

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Represented The Cobalt Group, Inc. in its 2007 and 2008 acquisitions of two on-line businesses.

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Represented wind energy company on the development of a new wind project in Washington and the negotiation of an EPC Agreement, a Balance of Plant Agreement and related documents.

California

England and Wales

 

Janet F. Jacobs

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Represents life insurance broker in its international operations in Hong Kong, Singapore and other jurisdictions in Asia and Latin America; advising client in structuring operations in the Middle East.

Professional Honors and Activities •

Member, Washington State Bar Association

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Member, King County Bar Association

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Member, California State Bar Association

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Member, Law Society of England and Wales

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Smith-Doheny Legal Ethics Writing Award (Notre Dame Law School)

Presentations •

Moderator, “Utilities’ Perspectives in Utility Scale Solar,” Utility Scale Solar Finance and Investment Summit, 2008

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Presenter, “Buying and Selling a Business in These Trying Times: The Ancillary Documents” Sterling Educational Services, 2008

Publications •

“Show Me the Money – A Guide to Sources of Stimulus Funds,” coauthor, Stoel Rives LLP, 2009

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“Business Law Practice,” Chapter XIII, chief author, Washington Lawyers’ Practice Manual, 2008

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“Tax and Financial Incentives for Green Building,” coauthor, Los Angeles Lawyer, January 2008

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“Tax And Government Incentives Promoting Sustainable Development In Oregon,” coauthor, 2008

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“Tax And Government Incentives Promoting Sustainable Development In Washington,” coauthor, 2008

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“Solar Project: Securing Your Place in the Sun,” coauthor, Lex Helius: The Law Of Solar Energy, Stoel Rives LLP, 2008

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“Next Generation Biofuels,” coauthor, The Law of Biofuels, Stoel Rives LLP, 2008

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“When Bad Projects Happen to Good People,” coauthor, The Law of Biofuels, Stoel Rives LLP, 2008

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“SEC Announces Proposal to Update Executive Compensation Disclosure,” coauthor, Stoel Rives LLP Client Alert, January 2006

 

Gregory F. Jenner

Experience Gregory Jenner is a member of the firm practicing in the Tax group. Greg has broad experience in virtually all Federal tax matters, with particular focus on planning and implementing complex tax-related transactions, partnerships and joint ventures, and mergers and acquisitions. He has worked extensively on energy-and insurance-related tax issues, and has successfully represented taxpayers in Federal and state tax controversies, in both audit and litigation. Greg has been active for many years in the Federal tax policy process, working closely with senior policy makers in Congress, the Treasury Department, and the Internal Revenue Service. Prior to joining Stoel Rives, Greg was an attorney and consultant in Washington, DC. He served as Executive Vice President, Taxes and Retirement Security, for the American Council of Life Insurers until 2007. Previously, he served as the

Member 612-373-8857 Direct 612-373-8881 Fax [email protected]

Acting Assistant Secretary of the Treasury for Tax Policy from February 2004, to December 2004, and was nominated by President George W. Bush to be Assistant Secretary. Prior to his elevation to Acting Assistant Secretary, Greg served as Deputy Assistant Secretary for Tax Policy, beginning in 2002. As the Acting Assistant Secretary, Greg directed the Treasury’s Office of Tax Policy, which is responsible for providing the Administration with policy analysis, advice and recommendations relating to all aspects of domestic and international issues of Federal taxation, including all legislative proposals, regulatory guidance, and tax treaties. The Office of Tax Policy is also responsible for providing the official estimates of all Federal Government receipts for the President's budget, fiscal policy decisions, and Treasury cash management decisions. Prior to his appointment as Deputy Assistant Secretary, Greg was a partner in the Washington, D.C. office of Venable, Baetjer, Howard & Civiletti, LLP, specializing in tax policy issues before Congress, the Treasury Department and the Internal Revenue Service. Greg previously served in the Treasury Department as Special Assistant to the Assistant Secretary (Tax Policy) from 1989 through 1992. He also served as Tax Counsel for the U.S. Senate Committee on Finance from 1985 through 1989, where he helped write the Tax Reform Act of 1986.

Education New York University School of Law J.D., 1979, cum laude Law Review Note and Comment Editor; Order of the Coif Portland State University B.S., 1975, with highest honors Admissions District of Columbia U.S. Tax Court Languages Basic French

 

Gregory F. Jenner

Professional Honors and Activities •

Fellow, American College at Tax Counsel

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Martindale Hubbell AV – rated

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Member, American Bar Association (Taxation Section: former Vice Chair for Communications; Council Director; and former Chair of the Corporate Tax Shelter Task Force and Government Relations Committee)

Presentations Greg has been a frequent speaker on current and continuing legal education topics, including numerous appearances on CNN, C-Span, NBC Nightly News, CNBC and Fox News.

 

John S. Laney

Experience

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John Laney is an associate in the Corporate practice group. Prior to law school John was a senior account executive with HSBC, Consumer Lending. John was an extern for the Honorable John C. Coughenour, U.S. District Court for the Western District of Washington (2007); law clerk at Forsberg & Umlauf, P.S. (2007); and a legal extern at the King County Prosecuting Attorney’s Office (Summer 2006). Professional Honors and Activities •

Member, Filipino Lawyers of Washington

Civic Activities •

Member, Knights of Columbus

Associate 206-386-7559 Direct 206-386-7550 Fax [email protected] Education Seattle University School of Law, J.D., 2008, magna cum laude Associate editor, Law Review Dean’s list Stokes Lawrence Diversity Scholar King County Bar Foundation Scholar Moot Court competitor Student member, William L. Dwyer Inn of Court Admissions Washington (pending) Languages Tagalog (conversational)

Stoel Rives Supports Renewable Energy Stoel Rives purchases Renewable Energy Credits known as RECs or “green tags” to offset 100 percent of its firmwide electricity usage. The emissions that are avoided through this green power purchase is roughly equivalent to the annual greenhouse emissions from 1,208 passenger vehicles or 748,617 gallons of gasoline. We purchase our RECs from firm clients 3Degrees and Bonneville Environmental Foundation. With our green power purchase commitment, we are one of the first law firms nationwide to qualify as a member of the U.S. EPA Green Power Partnership’s Leadership Club and the ABA-EPA Law Office Climate Challenge programs.

Show M e t h e M o n e y The Law of the Stimulus Package

Show Me the Money: The Law of the Stimulus Package will be updated periodically, but to stay informed of developments in the industry before the next edition, please sign up for our alerts at www.stoel.com/subscribe . You can also visit our Renewable + Law blog at www.lawofrenewableenergy.com .

Stoel Rives is a leading business law firm with focused experience in the areas of energy and environmental law and nearly 400 attorneys in eight states.

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