2. Base Renewable Projects Legal & Regulatory Hurdles
February 16, 2011
Bob Tritt
McKenna Long & Aldridge LLP

3. Legal/Regulatory Issues
Real Estate Authority
Power Purchase Authority
CBO Scoring
OMB Scoring
State Utilities Laws

4. Real Estate Authority 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 § 961
10 USC § 2688

5. Power Purchase Authority
FAR
10 year, renewable at government option
Western Area Power Authority (DOE)
At least 20 year authority
Western states
Energy Savings Performance Contracts (42 USC § 8287)
25 years
But revenues only from savings

6. Power Purchase Authority (cont.)
Utilities Privatization (10 USC § 2688)
50 years
Cost effective requirement
Utility Energy Service Contract
25 years
Only local utility
10 USC § 2922(a) (formerly 10 USC § 2394)
30 years
Requires Sec Def approval

7. CONJUNCTIVE VS. DISJUNCTIVE
10 USC § 2922(a)
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
CONJUNCTIVE VS. DISJUNCTIVE

8. CONJUNCTIVE VS. DISJUNCTIVE
1 House Report 10 USC § 2922(a)
(1) geothermal
(2) provision and operation by others of energy production facilities on government or private land and purchase of energy from such facilities;AND
purchase of refuse derived fuel or fuel derived from biomass
CONJUNCTIVE VS. DISJUNCTIVE
1 (H.R. Rpt at § 30)

9. Purchases of Private Sector On Base Generation
FAR
§ 2922(A)
WAPA
Special Circumstances
Army
Army Position: Applies to All Renewables
Fort Carson
2MW Solar
__________
17 years w/one 3 year option
Fort Detrick
Electric Energy not sold
Fort Irwin
Sold off base to grid
Navy
Navy Position:
Applies to All Renewables
Navy Southwest
40 MW Solar
30 years
Air Force
Nellis AFB
14.2 MW Solar
Davis Monthan AFB
14.5 MW solar
Edwards AFB
3.5 MW solar
Indefinite Term with 1 year Termination
AF Position:
Only Applies to Geothermal

10. CBO Scoring Impact on budget from legislation
Only arises if change in law
Recent legislative effort
S Sen Carper (D – Del)
DOD action needed

11. OMB Scoring Purchase of Asset vs. Use of Assets
Financial Accounting Board Standards
(OMB Circular A-11, Appendix A & B)

12. OMB Scoring (cont.) If Capital lease
present value of all [lease] payments
If Operating lease
one year [lease] payments, plus termination liability

13. Definition of an “Operating Lease”
pv lease payments don’t exceed 90% of asset Fair Market Value, and
lease term is not greater than 75% of the economic life of the asset, and
no bargain-price purchase option, and
ownership of asset remains with lessor and is not transferred to the government, and
asset is a general purpose asset, not built for special purpose of the government, and
private sector market for the asset

14. State Utility Laws State laws often restrict who can make retail sales
Is it retail? (WAPA)
Do state laws apply?
Federal law (40 USC § 591) says must buy electricity in accordance with state law
But West River Electric Association v. Black Hills Power (918 F.2d 713, 8th Cir. 1990) (if exclusive enclave, still not subject to state law)
ESPC and 10 USC § 2922(a) excepted from statute
Exceptions for distributed generation
Sale through public utility