Green Industries Initiative

Kristina Tridico is a partner at Ice Miller LLP.  Her primary areas of concentration are corporate transactions, environmental and sustainability law.  Kristina is chair of Ice Miller's Green Industries Initiative.

EPA published its final biomass permitting deferral today (EPA released the final rule informally July 1 (128 DEN A-13, 7/5/11) exempting new and modified facilities that burn wood waste and some landfills from the need to obtain greenhouse gas emissions permits for three years.  BNA reports EPA is taking this action as part of the process of granting the Petition for Reconsideration filed by the National Alliance of Forest Owners (NAFO) on August 3, 2010, related to the PSD and Title V Greenhouse Gas Tailoring Rule as the agency conducts further studies of greenhouse gas emissions from biomass such as wood, various crop residues, and grass. The final rule, which amends 40 C.F.R. Parts 51, 52, 70, and 71, exempts those facilities from the requirement to obtain prevention of significant deterioration permits and Title V operating permits for their greenhouse gas emissions.

Beth Bechdol and I participated in Farm Journal's Top Producer Summer Seminar in Moline, Ill on June 7-8, 2011. The audience of 130 was mostly commercial, full-time farmers from across the country (mostly from the Midwest).

I led a breakout session on agricultural legal "pitfalls" and focused primarily on critical environmental regulatory issues for agriculture. I also spent time describing more positive opportunities for producers with on-farm alternative energy projects, including wind, solar, biomass and others. The PowerPoint presentation from the session is available below for reference.  The discussion on enhanced regulatory scrutiny of the agriculture industry was timely, as news sources reported today that Nebraska Senator Mike Johanns, speaking on the floor of the U.S. Senate, has questioned the sincerity of the Environmental Protection Agency over a campaign the Senator is calling EPA's "Charm Offensive." According to Johanns, as reported by Hoosier Ag Today, "the problem is what the EPA is selling publicly to farmers and ranchers just doesn't match up with reality. They say one thing on the road while the regulatory train just continues to barrel forward in Washington."

The overall themes of the conference sessions centered on how farmers should plan for the future - whether it be in business management, risk management, commodity marketing, access to credit and financing, regulatory compliance, or estate and succession planning. It was clear from our conversations with producers that estate planning and corporate and tax restructuring are front of mind and can be seen as overwhelming efforts. This is something we hear frequently from our clients as well. For more details please visit the firm's farm restructuring and estate planning services web site.

We look forward to being a part of future Farm Journal events and conferences. After 135 years of providing quality information to farmers, they clearly know and appreciate the issues most critical to success in farming.

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On Oct. 6, 2010, the Federal Trade Commission (FTC) published a notice soliciting public comment on proposed revisions to its "Guides for the Use of Environmental Marketing Claims" (commonly known as "Green Guides" or "Guides").  Companies may be affected by the FTC's proposed revisions if they advertise the "environmental attributes" of a product, package or service.

The FTC will consider and accept comments until Dec. 10, 2010, on the proposed changes, which include:

1. A caution to avoid claims of general environmental benefits.
2. A new section devoted to certifications and seals of approval.
3. Additional guidance for claims that a product is "degradable," "compostable" or "free of" a particular substance.
4. New guidance regarding the use of "renewable materials" and "renewable energy."
5. A new section regarding "carbon offset" claims.

If you would like to discuss the FTC's request for stakeholder input or any of the potential changes to the FTC's Green Guides, please contact Susan Charles or Kristina Tridico.  
       
Read the entire article that includes a summary of the proposed changes and a link to the text of the FTC's proposed revisions.

Blog written by Jacob Cox.

Opposition continues to grow against the U.S. Environment Protection Agency's (EPA) recent finding that greenhouse gases "endanger" public safety and welfare due to their effect on global warming.  Climate change issues are already a common source of controversy, but the EPA's finding has drawn attention due to the potentially wide-reaching effect of regulations proposed by the EPA:  More than six million facilities whose emissions are currently unregulated, including hospitals, restaurants, hotels and even small farms, could potentially be subject to new permitting requirements.

Driven by a concern for the effect of such new administrative and economic burdens on small businesses, Virginia and two other states filed suit in federal court against the EPA in late February 2010, in an attempt to force it to reexamine its "endangerment" finding.  Since that time, more than a dozen other states, including Indiana, Kentucky and Nebraska, have filed motions to join the Virginia lawsuit in opposition to the EPA's finding.  Outside the courtroom, numerous members of Congress have also begun to seek support for an amendment to the Clean Air Act that would specifically prevent the EPA from regulating greenhouse gas emissions. 

Despite these criticisms, the EPA has refused to compromise its position, and has indicated that it believes its "endangerment" finding will withstand even such direct legal attacks.  Further, the EPA is not without its supporters in this fight – a similar number of states have already expressed their agreement with the EPA's finding, and have even requested the right to intervene in lawsuits filed against the EPA in support of the EPA's position. 

I guess my upcoming presentation on Climate Change Disclosures for the University of Kentucky College of Law Securities Law Conference this Friday, February 5, 2010, is more timely than I could have anticipated. While not opining on the science of climate change, the Securities and Exchange Commission (SEC) issued interpretive guidance (guidance) Tuesday, February 2, 2010, on existing SEC disclosure requirements as they apply to business or legal developments relating to the issue of climate change.  Proxy activism, investors interest on the impact of climate change on their investments, and the recent regulatory and legislative developments prompted the SEC to recognize that, for some companies, these developments could have a "significant effect on operating and financial decisions, including those involving capital expenditures to reduce emissions and, for companies subject to 'cap and trade' laws, expenses relating to purchasing allowances where reduction targets cannot be met."  The SEC noted that even companies that may not be directly affected by these developments could be indirectly affected as prices change for goods and services. Given this diverse and shifting regulatory landscape, what's a reporting company to do?  The intent of the guidance is to provide the reporting roadmap. The guidance does not change the landscape and notes specifically that a number of SEC rules and regulations may be the source of disclosure obligations for registrants under the federal securities laws.  However, the guidance identifies topics that are some of the ways climate change may trigger disclosures required by those rules and regulations:

• Impact of legislation and regulation - Developments in federal and state legislation and regulation regarding climate change, and provisions which relate to greenhouse gas emissions, may trigger disclosure of material estimated capital expenditures and specific risks registrants face as a result of the changes. The guidance advises registrants to "consider specific risks they face as a result of climate change legislation and avoid generic risk factor disclosure that could apply to any company."
   
• International Accords - Consider and disclose, when material, the impact on a registrant's business of treaties and international accords relating to climate change.
   
• Indirect consequences of regulation or business trends - Think increased or decreased demands for goods, services, products and energy sources depending on their greenhouse gas emissions. The guidance directs a registrant to assess its business and its sensitivity to public opinion.  A registrant may have to consider whether the public's perception of any publicly available data, relating to its greenhouse gas emissions, could expose it to potential adverse consequences on its business operation or financial condition resulting from reputational damage.
   
• Physical impacts of climate change - How do the physical impacts of climate change, (such as effects on the severity of weather [floods, hurricanes] or sea levels, arability of farmland or water availability or quality) affect a registrant's operations and results?  Registrations whose businesses may be vulnerable to severe weather or climate related events should consider disclosing material risks of, or consequences from, such events in their publicly filed disclosure documents.

See http://www.sec.gov/rules/interp/2010/33-9106.pdf for the text of the guidance.

The U.S. Department of Agriculture (USDA) made two announcements in recent days from Copenhagen, Denmark as the United States and delegates from 191 other countries meet at the United Nations Climate Summit. Secretary of Agriculture Tom Vilsack released a USDA report outlining the agency's calculated impact of climate change on U.S. ecosystems. "The Effects of Climate Change on U.S. Ecosystems" report concludes that climate change affects U.S. agriculture, land resources, water resources and biodiversity and describes in some detail more specific projected impacts on grain and oilseed crops, horticultural crops, and livestock, among others. Vilsack referenced carbon offset markets as a means to help the country become energy independent, to reduce greenhouse gas emissions and to create income generating opportunities for rural America. USDA's analysis of the climate change legislation passed by the U.S. House of Representatives shows it provides a net gain for farmers and ranchers, with revenue from a carbon offset market offsetting increased farm expenses.

A complete copy of the report is available at the following link: http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB?contentidonly=true&contentid=2009/12/0611.xml.

Over the last several months, many of the leading agriculture commodity organizations have challenged this specific analysis by USDA, arguing the costs to farmers and ranchers far outweigh the calculated revenue from carbon markets. Today, though, USDA announced a unique partnership with U.S. dairy producers who have agreed to accelerate their adoption of waste to energy technology projects. The Memorandum of Understanding, signed by Dairy Management Inc.'s Innovation Center for U.S. Dairy and USDA, committed the industry to reach a 25 percent reduction in greenhouse gas emissions by 2020. The partners will increase the number of anaerobic digesters (which convert manure into electricity) supported by USDA programs and also encourage research and development of new technologies.

Just days before the United Nations Climate Change Conference in Copenhagen, Denmark, the U.S. Patent and Trademark Office (USPTO) initiated the Green Technology Pilot Program on December 8, 2009 to expedite the examination of "green technology" patent applications. By offering the program, the USPTO hopes to accelerate the development and deployment of green technologies, help create green jobs, and promote U.S. competitiveness in the clean technology sector. In the press release announcing the Pilot Program, the Under Secretary of Commerce for Intellectual Property and Director of the USPTO, David Kappos explained "Every day an important green tech innovation is hindered from coming to market is another day we harm our planet and another day lost in creating green businesses and green jobs."

According to its own statistics, the USPTO takes on average 30 months to issue an initial office action for green technology patent applications and approximately 40 months to make a final determination on the patentability of such applications. In the normal process, applications are taken up for examination based on their filing date. Recognizing that over a three and half year wait is too long in the green technology sector, the Pilot Program provides a mechanism for green technology patent applications to be advanced, out of turn, to examination without having to pay any additional fees or provide any additional examination support documentation. The USPTO estimates that this Pilot Program will reduce the examination time of these applications on average by one year.

The Pilot Program broadly defines the term "green technologies" as technologies that pertain to environmental quality, energy conservation, development of renewable energy resources, or greenhouse gas emission reduction. Despite this broad definition, the USPTO currently requires that a patent application be classified in one of 79 specific U.S. patent classifications outlined in the Pilot Program to be eligible.

The Pilot Program only applies to non-provisional utility applications filed prior to December 8, 2009 that have yet to be examined. Applications that are either filed after December 8, 2009 or already being examined are not eligible for the Pilot Program. The Pilot Program is set to expire on December 8, 2010 and the USPTO only guarantees that it will accept the first 3,000 petitions to make an application special under the Pilot Program. Thereafter, the USPTO will evaluate whether the Pilot Program should be extended based on the USPTO's workload and available resources. Thus, time is of the essence for those wanting to take advantage of the Pilot Program.

While there are limitations on the number and type of claims that can be included in the application and a requirement that an applicant waive its right to object to a restriction requirement, the Pilot Program does provide an inexpensive mechanism to expedite the examination of a green tech patent application. Such an expedited examination can prove beneficial to those looking to enforce their patent rights as quickly as possible and/or those looking for funding options.

The Official Notice of the Pilot Program can be found at 74 Fed. Reg. 64666 (Dec. 8, 2009) (See http://www.uspto.gov/patents/law/notices/74fr64666.pdf ) and the USPTO Press Release for the Pilot program can be found at www.uspto.gov/news/pr/2009/09_33.jsp.

If you have questions about the Green Technology Pilot Program, you can contact Alex Forman or Bill Lyon, members of Ice Miller's Intellectual Property Group.

Saying "[w]ith respect to climate pollution, we will act," and that "[t]he Clean Air Act does in fact allow us to do so" Administrator Jackson today announced that greenhouse gases threaten the public health and welfare of the American people.
 
Administrator Jackson indicated at the press briefing that the agency's intention with regards to the finding was to "release the science and reduce the questions." Stressing that "we'll continue to work under the Clean Air Act" Administrator Jackson also stated that the agency is "compelled" to address climate change pollution.
 
She fielded questions on the legislative timeline and agenda and stressed that EPA's and the legislative initiatives are independent.  Administrator Jackson did emphasize that the agency would move forward with work that the EPA had planned, and that there is no reason to delay.  A common question at the briefing was what EPA's timeline is on additional rules for stationery sources and additional rulemaking for reductions in light of the greenhouse gas reporting rule. Administrator Jackson said that there was no timeline for the next rules on emissions, including next steps on the tailoring rule, and stated that "I have no additional information on timelines." 
 
So why issue this rule now, and not concurrent with the transportation rule?  She stressed again that this is a unique situation and responded that this finding itself was the subject of a U.S. Supreme Court Case and that they wanted to project the image that the "EPA is on the job and is about doing the job."  She said that they intend to "keep the ball moving."
 
The overall message from the press conference was, "with respect to climate pollution, we will act."

To view a full transcript of Administrator Jackson's remarks, click here.

The following post was authored by Paul Jones.

The American Recovery and Reinvestment Act (Act) established a new 30 percent investment tax credit for clean technology and advanced energy manufacturers.  On August 13, 2009, the U.S. Treasury Department and the U.S. Department of Energy (DOE) announced that the application period for companies to apply for $2.3 billion in tax credits opens on August 14, 2009.  Applicants must file the preliminary application by September 16, 2009, followed by final applications by October 16, 2009.

According to the announcement, the Internal Revenue Service (IRS) will certify or reject applications by January 15, 2010, and notify the certified projects with the approved amount of their tax credit.  Award recipients can expect to receive acceptance agreements from the IRS by April 16, 2010.

So, what types of businesses might be eligible for this credit?  Essentially, manufacturers of clean technology (including wind turbine gears, carbon sequestration property, solar panels, energy storage systems, etc.).

Read the entire alert regarding the tax credit for advanced energy manufacturers.

Incentives are on the rise for businesses to provide "green" products and services.  Many consumers are willing to pay a premium for products that are environmentally friendly, and businesses have taken notice.  Buzzwords such as "organic," "recyclable" and "hybrid" are used to distinguish a product from its competitors.  Even the government has increased its focus on encouraging companies to provide environmentally friendly products and services by offering a wide array of tax incentives available to companies and consumers.  It is not surprising that many companies have responded to these incentives by embarking on green marketing campaigns.

However, companies engaged in green marketing are not only increasing their profits, but also their risk.  Lawsuits and class actions accusing companies of "greenwashing" - marketing the environmental friendliness of a company's product in a false or misleading way - have sprung up across the nation.  These lawsuits have been filed against companies in a variety of industries and trades, including construction companies, retailers, automakers, candy makers and manufacturers of cleaning supplies.

In addition to these consumer actions, the Federal Trade Commission (FTC) has also increased its scrutiny of green marketing.  In June 2009, the FTC filed suit against Kmart, Tender Corporation and Dyna-E International for making false and unsubstantiated claims that their products were biodegradable.  The FTC alleged that these claims did not conform with environmental marketing guidelines contained in the "Green Guides," a set of regulations used by the FTC to determine whether a company's environmental marketing constitutes consumer fraud.  A revised version of these guides will be released later this year and will address the changes and growth in green marketing over the past ten years.

Although green marketing is a potentially invaluable tool, companies should ensure that they understand and minimize the risks that are associated with its use.  For further information regarding green marketing and ways to manage its risk, please contact Michael McNally or Jacob Cox in Ice Miller LLP's Competitive Business Practices Litigation Practice Group and members of the Firm's Green Industries Initiative.

Blog was written by Paul Jones, partner in the Tax Practice Group and member of the Firm's Green Industries Initiative.

Nearly five months after the enactment of the American Recovery and Reinvestment Act, the U.S. Department of the Treasury and the U.S. Department of Energy (DOE) today announced a multi-billion dollar program for the development of renewable energy projects.  The Act extended and modified tax credits for renewable energy projects in a manner intended to make such projects more financially feasible during the current economic downturn.  The Act authorized the Treasury to make direct payments to companies that create and place in service renewable energy facilities beginning January 1, 2009.

Under the new program, businesses may elect to forgo renewable energy tax credits in return for an immediate reimbursement of a portion of qualified expenses.  The cash in lieu of credit program is intended to provide immediate stimulus in local economies, and guidance is now available for businesses to elect direct payments in lieu of tax credits in support of renewable energy facilities.  According to their press release, the Treasury and DOE estimate that the cash in lieu of credit program will support 5,000 bio-mass, solar, wind, and other types of renewable energy production facilities.  While applications are not yet being accepted, businesses interested in applying for the new program should start preparing now to seek the cash grants.

Businesses considering the election of cash in lieu of credits should carefully consider not only the requirements of the program, but also the tax consequences of the election as it may impact the overall economics of the project.

Indiana Department of Environmental Management, DieselWise Indiana  - Application Deadline is May 15, 2009

The DieselWise program is grant availability for projects designed to significantly reduce diesel emissions across Indiana.  The total estimated funding for this competitive grant opportunity is in excess of $2,000,000.  DieselWise Indiana anticipates awarding cooperative agreements from this announcement ranging from $25,000 to $250,000, subject to availability of funds and the quality of proposals received.  Additional funds may be available in the near future.  Project proposals submitted under this grant announcement may be awarded for funding from these additional funds.  Preference will be given to applicants that are willing to provide a financial match and/or in-kind match, provide actual historic idling hours pre-installation and post installation of idle reduction technologies, along with a commitment to maximize the use of any installed diesel emission reduction technology.  Information can be found at http://www.in.gov/idem.5255.htm

USEPA Small Business Innovation Research Program - Solicitation closes May 20, 2009

The U.S. Environmental Protection Agency’s (EPA) Small Business Innovation Research Program supports small businesses in developing new environmental technologies.  The EPA anticipates the total funding that will be available for Phase I projects issued under this announcement will be $1.8 million. A total of $70,000 is available in funding for each EPA Phase I award. Recipients of Phase I awards will be eligible to compete for a much larger (up to $295,000) two-year Phase II award. Companies with fewer than 500 employees are eligible.  Solicitation closes May 20.

SBIR Phase I green building materials and systems research topics are:

• Building Materials and Site Management
• Energy and Indoor Environmental Quality
• Water Use and Management

HUD Brownfields Economic Development Initiative Funds - Application Deadline June 16, 2009
 
The Department of Housing and Urban Development (HUD) published a notice of availability of $20 million in Brownfields Economic Development Initiative (BEDI) funds (74 FR 20494) on May 4.  David Kaminsky, who works on development grants in HUD's Office of Economic Development, said the funds will be awarded competitively, and individual grants are capped at $2 million. BEDI grant funds are targeted for use in redeveloping brownfield sites as part of larger urban economic development projects, according to HUD. Brownfields are underutilized, abandoned or vacant sites where expansion or redevelopment may be burdened by confirmed or suspected environmental contamination, according to HUD. Kaminsky said BEDI grants must be used in conjunction with a new guaranteed loan under Section 108 of the Housing and Community Development Act. Section 108 is the loan guarantee provision of the Community Block Grant Program administered by HUD. The application deadline is June 16. The funds are coming from fiscal year 2008 and fiscal year 2009 appropriations, according to HUD. See http://www.hud.gov/offices/cpd/economicdevelopment/programs/bedi/funding09/index.cfm.

President Obama set out his priorities regarding his vision of a clean energy future. In a press release prior to meetings with "clean energy entrepreneurs and leaders of the research community" the president stated that it was time to make investments in cutting-edge research that will establish the foundation for America's future economic prosperity. The press release included the follwoing:

FACT SHEET: INVESTING IN OUR CLEAN ENERGY FUTURE

Today, President Obama will meet with clean energy entrepreneurs and leaders of the research community to discuss his strategy for building a clean energy economy and creating the industries and jobs of the future.

The American Recovery and Reinvestment Act (ARRA) and his FY10 budget dramatically increase investment in cutting-edge research, the development and deployment of clean energy technologies, and incentives for private sector research and development (R&D).  These investments will establish the foundation for America’s future economic prosperity, reduce our dependence on foreign oil, and help combat climate change.

The ARRA includes $39 billion in energy investments at the Department of Energy and $20 billion in tax incentives for clean energy, including:

• The creation of an advanced research agency for energy, modeled after the Defense Advanced Research Projects Agency which developed the Internet.
• Support for Energy Frontier Research Centers, which could lead to breakthroughs in energy storage, super-efficient engines, and solar cells as cheap as paint.
• Supporting U.S. manufacturing of advanced batteries needed for plug-in hybrids, renewable energy backup, and other applications.
• $1.2 billon for research infrastructure for the Department of Energy’s national labs, which is being announced by Secretary of Energy Steven Chu today at Brookhaven National Laboratory. 

The  president’s 10-year budget also proposes almost $75 billion to make the Research and Experimentation Tax Credit permanent, stimulating private-sector investment in R&D and keeping the U.S. economy at the cutting-edge of 21st century technologies:

• Studies have shown that every dollar of tax benefit stimulates as much as an additional dollar of private R&D spending in the short term and two dollars in the long term.  Every one dollar of R&D adds two dollars of benefit to our economy and society as a whole.
• Two-thirds of benefits of the credit are attributable to salaries of U.S. workers performing U.S.-based research, and the credit stimulates R&D spending by more than 11,000 small, medium and large firms.
• The credit has been extended 13 times with some extensions lasting just six months, and has also been allowed to lapse for almost a year - undermining its effectiveness because companies can't count on it. 

Several of the technologies in the program today will be on display, highlighting the importance of R&D investment in building a clean energy economy, including:

• Orion Energy "Apollo Light Pipe:" The Apollo Light Pipe collects and focuses sunlight, bringing natural light indoors without consuming electricity and replacing traditional lighting for large portions of the day.  Coca-Cola and Sysco have installed this system, saving enough energy to power over 500 homes for a year.
• Solyndra Solar Panel: Solyndra is the first recipient of the DOE Loan Guarantee recovery program, announced last week.  Their solar panel is a unique cylindrical design that maximizes direct sunlight and absorption. 

The program will highlight success stories from R&D investments in the lab to job creation. Paul Holland, the vice chairman of the board and lead investor for Serious Materials, will introduce the president and share the story of Serious Materials, the leading energy-saving building materials company in the U.S.

• Serious Materials has four plants in California, Colorado, Pennsylvania, and plans to reopen the old Republic Windows plant in Chicago this Spring.
• Earlier this month, Serious Materials re-opened a previously shuttered plant in Pennsylvania, and is hiring back over 100 union workers in the next couple of months.
• Serious Materials’ products exceed current Energy Star standards by up to 400 percent and can reduce heating and cooling energy costs by up to 50 percent.  Five percent of U.S. energy use is lapsed through inefficient window glass.