1 DoD Renewable Energy: Focus on Army RFP August 6, 2012 Robert E. Tritt ©2012 McKenna Long & Aldridge LLP

2 Context In Which RFP Arises Underlying Legal Authorities Status of RFP Essential Terms of RFP Regulations Imposed by RFP ©2012 McKenna Long & Aldridge LLP

3 Context In Which RFP ArisesContext In Which RFP Arises Underlying Legal Authorities Status of RFP Essential Terms of RFP Regulations Imposed by RFP ©2012 McKenna Long & Aldridge LLP

4 EPACT 2005 Renewable Mandate for Electric Energy 3% % %2013 and beyond DoD must produce or procure not less than 25% of the electric energy it consumes by 2025 [10 USC § 2911(e)] White House Announcement – 1 GW each Air Force by 2016 Navy/Marines by 2020 Army by 2025 DoD Requirements ©2012 McKenna Long & Aldridge LLP

2011 ADC ANNUAL CONFERENCE| PAGE 5 5 Renewable Energy Goal DoD Progress Towards 10 USC 2911(e) DoD produced or procured 9.6 TBTU of renewable energy in DoD needs to increase this amount to 17 TBTU to meet the 2025 goal. FY 2011 DoD Reported 8.5%

6 How to Procure 1 GW At Nellis Air Force Base size (14.2 MW) need 70 projects 1GW= $4 billion in investment, more or less Inherent complexity requires specialized knowledge and centralized administration, at least of larger projects Look for a mix of publicly bid projects, with negotiated agreements with utilities and municipalities Expect most deals to be centrally approved but still some opportunities for small projects at base level ©2012 McKenna Long & Aldridge LLP

7 Source of Money Limited Milcon Money Private sector designs, builds, owns, finances, and operates projects DoD buys energy from private sector under long-term contracts DoD leverages off private sector’s capital and tax benefits DoD uses appropriated utilities money to make payments ©2012 McKenna Long & Aldridge LLP

8 Context In Which RFP Arises Underlying Legal AuthoritiesUnderlying Legal Authorities Status of RFP Essential Terms of RFP Regulations Imposed by RFP ©2012 McKenna Long & Aldridge LLP

9 Authority Needed Long-term Real Estate Authority Always needed if facility built on base Long-term Power Purchase Authority Not needed if DoD not buying power ©2012 McKenna Long & Aldridge LLP

10 Enhanced Use Leasing (10 USC § 2667) Underutilized Assets Up to 50 years In-kind consideration But Also – Easements 10 USC § 2668 (Fort Bliss – El Paso Desalination Plant) 40 USC § 1314 (Air Force Academy – Photovoltaic Project) 43 USC § USC § 2688 Real Estate Authority ©2012 McKenna Long & Aldridge LLP

11 FAR year, renewable at government option Western Area Power Authority At least 20 year authority Western states Energy Savings Performance Contracts (42 USC § 8287) 25 years But revenues only from savings Power Purchase Authority ©2012 McKenna Long & Aldridge LLP

12 Utilities Privatization (10 USC § 2688) Up to 50 years Cost effective requirement Utility Energy Service Contract 10 years Only local utility 10 USC § 2922(a) (formerly 10 USC § 2394) 30 years Sec Def approval, now delegated to Deputy Under Secretary of Defense Power Purchase Authority (cont’d) ©2012 McKenna Long & Aldridge LLP

13 Secretary of military departments may enter into contracts for up to 30 years Under 10 USC § 2917 (geothermal); AND Operation of energy production facilities on real property under the Secretary’s jurisdiction…and the purchase of energy produced from such facilities But requires approval of Secretary of Defense (now delegated) CONJUNCTIVE VS. DISJUNCTIVE 10 USC § 2922(a) ©2012 McKenna Long & Aldridge LLP

14 Context In Which RFP Arises Underlying Legal Authorities Status of RFPStatus of RFP Essential Terms of RFP Regulations Imposed by RFP ©2012 McKenna Long & Aldridge LLP

15 Status of RFP USACE issued draft RFP February 24, 2012 More than 800 comments/questions Army/AF Air Force Day June 13, 2012 July 26, 2012 – notice posted – expecting release in two weeks Release Date … ©2012 McKenna Long & Aldridge LLP

16 Role of MATOC One vehicle (relying on 10 USC 2922(a)) to purchase power Not exclusive vehicle (not used for any of four announced Army projects) Can be used by other services/departments ©2012 McKenna Long & Aldridge LLP

17 Context In Which RFP Arises Underlying Legal Authorities Status of RFP Essential Terms of RFPEssential Terms of RFP Regulations Imposed by RFP ©2012 McKenna Long & Aldridge LLP

18 What Will RFP Look Like? 92 pages, $7 billion in energy purchases over 10 years Relies on 10 USC § 2922(a) Calls for the award of multiple IDIQ contracts – to all qualified parties, but see experience requirements Selects companies in one or more of 4 categories (wind, solar, biomass, and geothermal) Leaves open (for now) procurement of full needs of base or multiple bases in one award Enables purchase of power, not related issues like microgrids which may be better accomplished under better authority/vehicles ©2012 McKenna Long & Aldridge LLP

19 Context In Which RFP Arises Underlying Legal Authorities Status of RFP Essential Terms of RFP Regulations Imposed by RFPRegulations Imposed by RFP ©2012 McKenna Long & Aldridge LLP

20 But What Are These 150 Plus Regulations? Not all equally applicable, burdensome or relevant But don’t assume joint venture or special purpose entity will avoid them Minimum Wage Requirements Davis-Bacon Act Contract Work Hours and Safety Standard Act Service Contract Act Equal Employment Opportunity Requirements ©2012 McKenna Long & Aldridge LLP

21 But What Are These 150 Plus Regulations? Other Notable Compliance Obligations A.Permission to sell power to other customers and most favored customer pricing B.Contractor code of business ethics and conduct C.Small business subcontracting requirements D.Price reduction for defective certified cost or pricing data E.Employment Eligibility Verification (E-Verify) F.Restrictions on certain foreign purchases ©2012 McKenna Long & Aldridge LLP

22 Absent But Interesting Buy American Provisions Rule (became final 5/21/2012) that photovoltaic devices must comply with Buy American. DFAR Applies to an energy savings performance contract, a utility service contract or a private housing contract awarded by DoD DoD deemed to own if reserved for exclusive use of DoD for full economic life Must be manufactured or assembled in U.S. – but substantial transformation exceptions Purchases from 21 countries meet requirements; plus Korea ©2012 McKenna Long & Aldridge LLP

23 Context In Which RFP Arises Underlying Legal Authorities Status of RFP Essential Terms of RFP Regulations Imposed by RFP Summary ©2012 McKenna Long & Aldridge LLP

24 Robert E. Tritt Albany, Atlanta, Brussels, Denver, Los Angeles, New York, Orange County, San Diego, San Francisco, Washington DC ©2012 McKenna Long & Aldridge LLP