Three Weeks after President Obama's Re-Election: Insights into Executive Branch Energy Funding, Federal Policy, and White House Initiatives

by Wilson Sonsini Goodrich & Rosati
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Despite uncertainty heading into the 2012 election, the incumbent president secured a second term and the congressional landscape remains largely the same. For energy and clean tech, this means an almost seamless continuation of the efforts already underway across the agencies. Moreover, this may mean an expansion of policy and programs in the not-so-distant future, as a shift in the political climate for some facets of the energy and clean tech industry already has begun to occur. This update provides a high-level overview of what has occurred thus far and the impact these developments will have on well-established energy programs in the upcoming fiscal year, as well as insight into what President Obama's re-election may mean for a more overarching energy policy and White House energy-related initiatives.

Department of Defense

As discussed in our pre-election WSGR Alert, the Department of Defense's (DoD's) commitment to commercial-scale, on-base energy development—3 gigawatts of renewable energy deployed across Army, Navy, and Air Force facilities by 2025—will remain largely intact. These initiatives are currently well established in their respective branches, and with a clear path forward to achieving its renewable energy targets, the DoD is unlikely to modify or expand them.

Furthermore, these initiatives are likely to be expanded indirectly through the DoD's support for the funding of associated technologies that further the energy security goals of facility energy managers, such as microgrid applications, storage solutions, and energy management systems. Improving the energy security of facilities will remain a key national priority for the Obama administration.

The services currently have myriad existing programs in place and are developing other programs that can serve as vehicles to deploy these energy-security-focused technologies, but funding remains hard to identify. Accordingly, the support of the administration likely will play a critical role in encouraging proactive base and program managers to allocate their resources to energy-security-related initiatives.

The funding of the DoD's Defense Production Act (DPA) drop-in biofuels program through the Fiscal Year 2013 National Defense Authorization Act (NDAA) also is looking promising, despite recent press to the contrary. The FY 2013 NDAA may provide up to $70 million of additional funding to support the DPA biofuels program, which originally was funded with money appropriated to DPA in the FY 2012 NDAA.

Department of Energy

Funding for the Department of Energy (DOE) Office of Energy Efficiency and Renewable Energy (EERE) programs likely will remain stable for FY 2013. While programs within DOE, such as EERE's SunShot initiative, Advanced Research Projects Agency - Energy (ARPA-E), and EERE biomass-related programs, have become integral parts of the administration's research and development funding over the last four years, several additional programs have the potential for expanded activity in the upcoming term.

Funds also remain available through the Advanced Technology Vehicle Manufacturing (ATVM) Loan Guarantee Program. With the president's re-election, these funds have increased potential to be awarded for the financing of viable technologies developed by well-established companies on the trails blazed by electric and natural gas-fueled vehicle, vehicle light-weighting, and advanced fuel technology companies in the past four years.

In addition, the Office of Fossil Energy may see an expanded role as compromises between the parties and the chambers of Congress drive the push for an updated comprehensive energy policy under the Energy Independence and Security Act of 2007 (EISA). The potential to utilize the existing fossil program and funding for research, development, and deployment presents an underutilized path of advancement for natural gas and other fossil-related innovative technology companies.

The Small Business Innovation Research (SBIR) program, which is utilized across the DoD, DOE, U.S. Department of Agriculture (USDA), and other agencies, recently updated its funding policy in the latest DOE release. Rather than companies applying for a Phase I award of up to $150,000 and then applying again upon successful completion for a Phase II award of up to $1,000,000, some SBIR programs have instituted a "fast-track" for companies to apply and be approved for both Phase I and Phase II funding, as long as milestones are met throughout the company's research timeline. As initially fast-tracked companies find this funding path more beneficial than traditional SBIR programs, companies likely will be in a position to encourage the spread of the fast-track program throughout the rest of the DOE SBIR programs.

In the wake of the election, it's been widely speculated that a change in DOE senior leadership may occur. Such a change is not likely to negatively impact opportunities for energy and clean tech companies; instead, it may further broaden the scope of available opportunities.

Department of Agriculture

The USDA faces a turning point for many of its funding programs in the new term. With a still-incomplete 2012 Farm Bill likely to draw attention early in the next congressional session, biofuels, chemicals, and associated bioproducts provisions are likely to be included and retain some mandatory funding status due to the Senate's 55-Democratic-seat majority. The inclusion of a bipartisan energy title in the 2012 Farm Bill remains uncertain due to the House of Representatives' pre-election position; however, the appetite for the inclusion of such a provision is much more promising in the wake of the election. To further the inclusion of an energy title, Wilson Sonsini Goodrich & Rosati encourages companies to engage with entities such as the Ag Energy Coalition, which has been successfully impacting these discussions over the past year.

In addition, the Business & Industry Loan Guarantee Program will remain funded and there is a possibility of re-opening the 9003 Loan Guarantee program in the coming months if projects that previously received commitments do not close.

Energy Policy and White House Energy Initiatives

Amid negotiations on the upcoming "fiscal cliff" during the lame-duck session, many still are expecting traction on tax credits. In particular, many are expecting the wind production tax credit and the cellulosic biofuel producer tax credit to be included in a tax extenders package. Comprehensive tax reform legislation will be discussed and framed during the 2013 calendar.

Comprehensive energy legislation remains unlikely in the 113th Congress. However, Senators Ron Wyden (D-OR) and Lisa Murkowski (R-AK), the prospective chairman and ranking member of the Senate Energy and Natural Resources Committee, respectively, have a strong working relationship and track record promoting research and development of new technologies, energy efficiency applications, and grid modernization.

In addition, the White House is likely to release a road map of energy-related initiatives shortly after the first of the year. Industry should be prepared to engage with the White House and executive branch once the new strategy becomes public.

Conclusion

The Obama administration faces a balancing act in 2013 between building upon existing programs and trying new models of funding and financing to address concerns from the past four years. Developing new research, development, and commercial-scale funding for energy and clean tech programs that can garner bipartisan support in a still-divided Congress will be a challenge that requires input from a variety of sectors and sources. Companies should be proactive about engaging with officials in federal agencies and lawmakers on Capitol Hill. A common refrain from agency and legislative staff is that more private input and education on the state of technology and the industry allows them to craft funding opportunities and policy that more accurately addresses market needs and garners bipartisan support.

For more information or assistance in exploring programs such as those referenced here, please contact Taite McDonald (tmcdonald@wsgr.com) or Chris Groobey (cgroobey@wsgr.com).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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