2010 Energy Legislative Update
By: DANIEL A. YARANO, KATIE L. COLE & MELISSA J. RAHN
Minnesota community wind C-BED bill brings clarity to wind project qualification; provides market incentive to local turbine vendors and lenders.
On May 17, 2010, Minnesota Governor Tim Pawlenty signed legislation that clarifies how a renewable energy project qualifies as C-BED: community-based energy development.
C-BED was originally enacted in 2005 to allow Minnesota communities, landowners, residents, workers, and their families to benefit from Minnesota’s abundant wind resource and the state economic benefit it creates, including jobs.
The 2010 legislative changes support the original public policy objective in a changing wind energy marketplace. It reduces ambiguity, clarifies how C-BED benefits are calculated, increases competition to keep C-BED power priced attractively, attracts green energy jobs to our state, and provides for accountability.
The new legislation includes the following changes:
- Redefines “qualifying owners” as “qualifying beneficiaries” and expands the group to explicitly capture other Minnesota business entities previously included in C-BED under the undefined term “other local entities.” The legislation captures the Minnesota Public Utilities Commission’s interpretation of “other local entities” to include Minnesota businesses that provide valuable services, equipment and components to C-BED projects.
- The legislation adds the concept of “qualifying revenues” to give OES guidance as to what revenues derived from a power contract count towards the 51% qualification requirement.
- Projects may include the cost of value-added manufacturing of wind turbines and its components as revenues counted toward achieving C-BED qualification. This may have the additional benefit of attracting turbine manufacturing facilities statewide and allow for more flexibility in structuring C-BED projects.
- Requires a net present value analysis when calculating the 51% threshold requirement.
- Requires C-BED developers to seek recertification of C-BED eligibility once financing is secured and before construction begins.
- In order to ensure a seamless transition to the new statutory language, the bill provides for a grace period to grandfather in those projects that have been already obtained C-BED qualification.
The amended C-BED statute creates a unique opportunity for turbine vendors to set up assembly operations in Minnesota, and for Minnesota lenders to lend to C-BED projects since developers will have significant incentive to purchase locally made wind turbines and finance their projects through local lenders. Finally, the amended statute allows developers to use alternative financing structures, including a royalty model.
To view the full content of the bill, 2010 c 358; SF3081 Prettner Solon/ HF3641 Welti, Read More.
Fredrikson & Byron Senior Government Relations Specialist Melissa Rahn led the lobbying effort at the Capitol on behalf of Geronimo Wind Energy, LLC. Fredrikson & Byron’s Energy Practice Group Chair Daniel Yarano, and Associate Christina Brusven provided legal support on the project. To learn more about how your project may benefit from the new C-BED legislation, please contact Daniel Yarano.
On May 13, 2010, the Governor signed a bill extending the 7-year limit on wind easement development periods until June 1, 2012 (Minn. Session Laws 2010, Ch. 333, Art. 1, Sec. 33).
In Minnesota, a wind easement, easement to install wind turbines on real property, option, or lease of wind rights entered into on or after May 26, 2007, will terminate seven years from the date the easement is created or lease is entered into, if a wind energy project to which the easement or lease applies does not begin commercial operation within the 7-year period (Minn. Stat. § 500.30, subd. 2). The statute was amended during the 2008 legislative session to remove the 7-year termination provision, but the amendment was not to be effective until June 1, 2010 (Minn. Session Laws 2008, Ch. 296, Art. 1, Sec. 25).
The Commissioner of Commerce, through the Minnesota Office of Energy Security, was directed to convene a work group to determine whether there was a factual basis for concerns that wind development might be hindered due to the statutory termination requirement, and to report its findings to the legislature along with any legislative recommendations regarding the issue. The issue has not yet been resolved, and the 2010 bill delays the effective date of the 2008 amendment for two additional years. It is anticipated that another amendment relating to the 7-year termination provision will be enacted prior to June 1, 2012. In the meantime, any wind easement or lease agreement entered into on or after May 26, 2007 until June 1, 2012 will be subject to the 7-year termination provision.
Minnesota transmission easements and wind easements may be owned by foreign entities
Minn. Stat. § 500.221 prohibits foreign ownership of agricultural land in Minnesota. In the past, foreign entities relied on international treaties to secure leasehold interest in Minnesota real property that was used to operate wind energy facilities. Minn. Session Laws 2010, Ch. 333, Art. 1, Sec. 26, which was signed by the Governor on May 13, 2010, amended the statute to explicitly exclude an “easement taken by an individual or entity for the installation and repair of transmission lines and for wind rights” from the prohibition on foreign ownership. This amendment makes it clear that foreign entities, regardless of treaty rights, may possess a leasehold interest in Minnesota real property to operate a wind facility.
To view the full content of the bill containing these new statutes, Read More.
For more information about how you may be affected by or benefit from the new easement statutes, please contact Katie Cole.