|
Server : Apache/2.4.62 System : FreeBSD fbsdweb2.web.rcn.net 14.1-RELEASE FreeBSD 14.1-RELEASE releng/14.1-n267679-10e31f0946d8 GENERIC amd64 User : www ( 80) PHP Version : 8.3.8 Disable Function : NONE Directory : /domains/enrgy/feldman/ |
Upload File : |
<html>
<head>
<title>Carbon Wildcatting</title>
</head>
<body style="font-family: Arial" vlink="#808080">
<div align="center"><center>
<table border="0" cellpadding="8" cellspacing="0" width="98%" bgcolor="#000000">
<tr>
<td width="100%" valign="middle"><a name="top"></a>
<img src="../images/pmamagsm.gif" alt="PMA Online Magazine" border="0" align="right" width="229" height="100"></td>
</tr>
</table>
</center></div><center>
<table border="0" cellpadding="8" width="98%">
<tr>
<td width="25%" valign="top" align="center">
<!--webbot bot="Include" U-Include="wv_sidebar.htm" TAG="BODY" startspan -->
<table border="0" cellpadding="8" width="98%" id="table1">
<tr>
<td width="25%" valign="top" align="center"><map name="FPMap0_I1">
<area href="http://www.powermarketers.com/adrates.html" shape="rect" coords="14, 297, 97, 322">
<area href="http://www.powermarketers.com/pmajobs.htm" shape="rect" coords="11, 230, 95, 257">
<area href="http://www.powermarketers.com/main.htm" target="_parent" shape="rect" coords="12, 163, 96, 189">
<area href="http://www.powermarketers.com/power2.htm" target="_blank" shape="rect" coords="12, 95, 96, 121">
<area href="../pmamag.htm" shape="rect" coords="11, 29, 96, 54"></map>
<img rectangle="(12,163) (96,189) http://www.powermarketers.com/main.htm##_parent" rectangle="(12,95) (96,121) http://www.powermarketers.com/power2.htm##_blank" rectangle="(11,29) (96,54) ../pmamag.htm" src="../images/magmenu.gif" alt="PMA OnLine Magazine Menu" border="0" align="center" usemap="#FPMap0_I1" width="110" height="350"><p>
<a href="../searchpma.htm">
<img src="../images/archives.gif" alt="Archives Search" border="0" align="center" WIDTH="70" HEIGHT="40"></a></p>
<p align="left"><font face="Arial"><strong><small>About The Author:<br>
<br>
</small></strong><span lang="X-NONE" style="color: black"><font size="2">
ROGER FELDMAN, Co-Chair of Andrews Kurth LLP Climate Change and Carbon
Markets Group has practiced law related to the finance of environmental and
energy projects and companies for 40 years. In particular, he has analyzed
and executed a wide variety and substantial value of project financings. He
chairs the American Bar Association’s Committee on Carbon Trading and
Finance, serves on the Board of the American Council for Renewable Energy,
and has been a senior official in the Federal Energy Administration. He is
a graduate of Brown University, Yale Law School and Harvard Business School.</font></span></font></p>
<p class="BodyText05DS" align="left" style="text-align:left"> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p> </p>
<p><a href="#top">
<img src="../images/b-t-top.gif" alt="Back To Top" border="0" WIDTH="71" HEIGHT="35"></a></td>
</tr>
</table>
<!--webbot bot="Include" i-checksum="19883" endspan --></td>
<td width="75%" valign="top">
<img src="../images/feldman.gif" alt="Washington Viewpoint by Roger Feldman" border="0" width="375" height="75"><p><b><u><br>
May 2006</u></b></p>
<p align="center"><font size="6"><b>Carbon Wildcatting</b></font></p>
<p><strong>by Roger Feldman -- Bingham, Dana L.L.P.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine
Magazine: 2</em>006/10/27)<br>
</font><span style="font-size: 10.0pt; font-family: Palatino; color: black">
</span></p>
<font FACE="Times New Roman" SIZE="1"><i></i></font>
<font SIZE="3">
</font>
<i></i>
<p ALIGN="JUSTIFY">Where will the new energy merchants come from? Can they
learn anything from prior merchant history?</p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p ALIGN="JUSTIFY">There have always been two very different types of
drivers of entrepreneurial planning in the merchant energy space: Long run
strategic embrace of "big picture" trends and concepts, and "right now"
exploration of governmental incentives and trading arbitrage opportunities.
Each approach began with a reasonable idea; extended into creative merchant
status and then more or less expired of excesses. Pontification on return to
basics followed. So it has been in the "big picture" cases of the
diversified multi-functional utility; the deregulated functionalized utility
("genco, transco, disco"), of late blessed "right now," the "virtual" (if
not virtuous) utility. So it has been for "right now" models like PURPA
machines; tax driven renewable deals, and hot trading floors exploiting fuel
and market price discrepancies. </p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p ALIGN="JUSTIFY">The most successful merchant strategies in the past
actually took advantage of these ideas in their prime. There is now another
chance to do so and revisit the relevance of some of these "big picture" and
"right now" strategies in the context of carbon-related developments.</p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p ALIGN="JUSTIFY">In terms of "big picture" long-term trends, we are at a
new juncture of course, in the entrepreneurial energy marketplace. Floor
prices for fuel seem to have bolted upward for the foreseeable future.
Consumer tolerance for the true prices and therefore operation of
deregulated markets seems to be a thing of the past. The barriers to
consolidation across energy service territory and international lines are
significantly reduced. The push for the utilization of non-imported fuels
that are price-competitive is "pumped up" with the passing of every day.
And, without direct reference to these developments, the public has moved
into acute awareness of a somewhat nebulous but nevertheless emotionally
heartfelt, desire to end "global warming" particularly through reduction of
the amount of CO2 in the air, by reduction of carbon sources, both
stationary and mobile. This is not your grandfather’s Kyoto, to paraphrase
an old "gas guzzler" ad. The confluence of these trends is a challenge to
nimble (read: merchant entrepreneur) inactivity, whether based in large or
small entities.</p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p ALIGN="JUSTIFY">Their attention is turning from every direction to what
may seem an unlikely beacon: carbon. With the consciousness growing that
there ultimately will be meaningful US governmental action trailing in the
wake of state initiatives, more merchants are checking the angles than ever
before. Utilities are, for the most part, simply doffing their caps to the
issue by setting emission target caps off in the middle distance; planning
ahead with announcements of major new efficient coal plants, built right in
the heart of the crowded Atlantic Coast; or issuing solemn "sustainability"
reports. But some larger players as well as smaller innovators are doing
more.</p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p ALIGN="JUSTIFY">First, and most visibly, they are becoming advocates of
the regional programs for carbon emissions control and trading and for
sustainability through efficiency programs. They are suggesting that the
renewables’ initiative in support of REC’s trading might be expanded and
oriented toward the larger goal of rewarding those technologies which foster
carbon displacement and sustainability.</p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p ALIGN="JUSTIFY">Second, entrepreneurs are seeking to foster greater
awareness — already quite clear in Europe — of the high return interplay
between energy efficiency measures and carbon savings. The US ESCO "shared
savings" market seems to be contracting; the world market for reduced
reliance on all fossil fuels seems to be growing. Efficiency Technology
improvements and recycling sectors are beginning to find their rationale on
the CO2 front. Even the greenest of new fuels, ethanol, now has its
proponents of technology producing carbon savings improvements in its
manufacturing process.</p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p ALIGN="JUSTIFY">Third, the electricity renewables sector has begun to
emphasize better policy recognition and measurement of its
carbon-displacement value. This is particularly true, as it relates to calls
for improved recognition of the carbon air quality offset contribution which
renewables can make. The appeal of methane gas projects, for example, never
has been greater from that standpoint.</p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p ALIGN="JUSTIFY">Fourth, funds and developers who not so long ago once
pursued "distressed power assets" now seek out old coal plant sites which
present the possibility of IGCC and possibly even CTL. Optionally, value has
been added by the hunt for carbon displacement opportunities.</p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p ALIGN="JUSTIFY">Fifth, the pursuit of eligible carbon reducing projects
for CDM and JI projects has become far more than a hypothetical cottage
industry. Substantial commodity trading entities have become involved in the
field, and pools of capital which once pursued merchant combined cycle
plants now have refocused their sights as well.</p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p ALIGN="JUSTIFY">Sixth, the forces impelling overseas investment in
carbon-displacement energy investments are picking up capital investment
reinforcement as the possibilities for trading come into clearer focus.
There has been a significant decline in emerging market country power
investments over the past few years. The new emphasis on expedition of CDM
measurement has begun to somewhat reverse the trend. Many types of projects
now have an additional attractiveness, which their economics might not by
themselves have provided in the past.</p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p ALIGN="JUSTIFY">And finally, apart from the legally-created value of
carbon-reduction technologies as a result of emerging trading regimens there
has been the emerging value driven by impetus toward technology for using
CO2 outputs from power, gasification and even prototype hydrogen production
from petroleum coke fueled facilities to support enhanced oil recovery.
Direct CO2 utilization now has been conjoined with radio frequency
technology in proposed oil shale extraction technologies as well. In effect,
the pursuit of black gold is leading the way to the pursuit of black-derived
gold.</p>
<font FACE="Palatino" SIZE="2">
<p ALIGN="JUSTIFY"></p>
</font>
<p>So perhaps the prior "big picture" models for merchant energy can be
applied again in the pursuit of "right now" projects related to exploitation
of potential sustainability enhancing projects. Carbon wildcatting may be
the key to new types of energy entrepreneurs. And perhaps the players to do
so are the real successors to the merchants (by whomever owned) of prior
years. Public policy makers should be as alert to be helpful to them as they
were, for awhile, to merchant power development.</p>
<!--webbot bot="Include" U-Include="wv_bottom.htm" TAG="BODY" startspan -->
<hr color="#FFFF00">
<p class="MsoBodyText" align="left" style="margin-bottom:0in;margin-bottom:.0001pt;
text-align:left"><font face="Arial" size="2">
<span lang="X-NONE" style="color: black">ROGER FELDMAN, Co-Chair of Andrews
Kurth LLP Climate Change and Carbon Markets Group has practiced law related
to the finance of environmental and energy projects and companies for 40
years. In particular, he has analyzed and executed a wide variety and
substantial value of project financings. He chairs the American Bar
Association’s Committee on Carbon Trading and Finance, serves on the Board
of the American Council for Renewable Energy, and has been a senior official
in the Federal Energy Administration. He is a graduate of Brown University,
Yale Law School and Harvard Business School.</span></font></p>
<!--webbot bot="Include" i-checksum="63395" endspan --></td>
</tr>
<tr>
<td width="25%" valign="top" align="center"> </td>
<td width="75%" valign="top">
<p align="center"><a href="#top">
<img src="../images/b-t-top.gif" alt="Back To Top" border="0" width="71" height="35"></a></td>
</tr>
</table>
</center>
<p align="center"> </p>
</body>
</html>