Counsel to Counsel - May 2008 - (Page 32)

HEIGHTENED MINE SAFETy ENFOrCEMENT In 2006, following several highly publicized mining accidents, Congress passed the first major mine safety legislation in 30 years, and the Mine Safety and Health Administration (MSHA) also greatly expanded its safety enforcement in violation numbers and assessments. Now mine operators face: • More than a doubling in the total fines assessed for safety violations, from $35 million in 2006 to $75 million in 2007. • A nearly fourfold increase in the maximum civil penalty, to $220,000 with the creation of a new “flagrant” violation. • New safety expenditure requirements for emergency communication systems, underground shelters and post-accident breathable air systems. • New “pattern of violation” evaluations, in which coal mines that exceed national violation averages can be placed on pattern status. While on a pattern, the mine must shut down any area in which MSHA finds a significant and substantial violation until the issue is corrected. In-house counsel for mining companies should understand this dramatically increased enforcement effort and work both to ensure compliance with the new inspection and safety requirements and to maintain proper records of all safety improvements and related training. Equally important, counsel should be prepared to litigate safety cases. MSHA rules allow companies to request a 10-day conference after a citation or order is issued, and to request a hearing before an administrative law judge within 30 days of the assessment. Violations can be, and are, overturned. Given the severe consequences of “pattern of violation” enforcement, contesting violations should be strongly considered. TIME TO rECONSIDEr CHP? Until energy deregulation in the late 1990s, many companies in energy-intensive industries generated their facilities’ power and heat using their own combined heat and power (CHP) system. Now industries are re-examining CHP as an efficient way to obtain energy at lower, more stable pricing that also provides a measure of independence from local utilities. Several potentially lucrative incentives are available now. For example, CHP projects may generate carbon credits to mitigate other carbon emissions. The carbon credits then may be traded on the Chicago Climate Exchange (CCX). Trading on the CCX has recently been more than $4.00 per ton of mitigated carbon. Consider too Section 45 of the Internal Revenue Code of 1986. It creates tax credits (currently 1.5 cents per kilowatt hour, as adjusted annually) for CHP projects chosen from a comprehensive list of qualifying renewable fuels. For instance, paper producers may generate Section 45 credits by using wood waste and lignin. Complex requirements must be satisfied in order to qualify for these credits. Additionally, biomass-fueled CHP may generate renewable energy certificates (RECs) to satisfy so-called “renewable portfolio standards” in certain states. The values of RECs from biomass-fueled CHP vary from state to state but in some cases exceed $50 per megawatt hour. Finally, other incentive programs, such as so-called “white tags” or efficiency credits, exist or are under development in many jurisdictions. With energy prices at historically high levels, now may be the right time to reconsider how CHP may cut energy costs, generate tax credits and maybe even produce some income for your company by exporting excess energy to the grid. GrEEN ENErGy DuE DILIGENCE Many companies find attractive the purchase or generation of energy from “green” alternative sources, particularly wind and solar power. In their enthusiasm to pursue energy independence and positive public relations, companies should not neglect the role corporate counsel play in structuring green energy arrangements. Investment in green energy production or purchase, like investment in any new facility or process, is a significant capital expenditure, and corporate counsel should give careful consideration to all contracts and agreements involved, just as they would for any major capital expenditure. That includes due diligence on what is being purchased and from whom, life-cycle costs (particularly with a quickly evolving technical product), what regulatory issues are involved and what financial concerns (including asset depreciation) should be addressed. For example, a company building its own solar power installation at a large factory must have expert advice on power transmission interconnection issues, terms for purchase or sale of surplus power, and both the requirements of and subsidies from federal and state governments. The purchase of green energy from a solar or wind power developer requires full due diligence on the developer’s record, resources, operating permits and proposed technology (i.e., not all solar panels are created equal). Such arrangements require detailed documentation of all relevant partnership, purchasing, real estate, environmental, maintenance and investor rights issues, reflecting the fact that energy contracts are highly specialized and have unique elements. The potential benefits of green energy come only from a substantial long-term investment, and companies making that investment without adequate investigation may find that litigation is their only recourse if expectations are not met. Mark E. Heath Member and MSHA Practice Group Chair mheath@spilmanlaw.com Peer Review Rated Cecil E. Martin III Partner and Co-Head, Energy Industry Team cmartin@mcguirewoods.com Thomas M. Berliner Partner, Energy Law and Chair, Renewable Energy and Sustainability Practice Group tmberliner@duanemorris.com Peer Review Rated Mark J. La Fratta Partner and Co-Head, Energy Industry Team mlafratta@mcguirewoods.com Peer Review Rated Spilman Thomas & Battle, PLLC Duane Morris LLP McGuirewoods LLP 32 LexisNexis® Martindale-Hubbell®

Table of Contents Feed for the Digital Edition of Counsel to Counsel - May 2008

Counsel to Counsel - May 2008 Contents Harassment Policies NEC Corporation of America and Duane Morris LLP Lost or Stolen Data: Minimizing Fallout On-Boarding the Board Drafting Fair, Efficient and Enforceable Arbitration Agreements Responding to Counterfeit Products Crafting an English-Only Workplace Policy Distressed Debt: New Players, Global Sophistication Make Restructuring More Complex IP Confidential: Plan Ahead, Act Fast to Protect Your Trade Secrets Adverse Changes: Think Ahead in a Strained M&A Market Optimizing Web 2.0 Technology: Expanding Your Professional Network Union Pacific Railroad Company and Patton Boggs LLP Warming Warning: Develop Your Climate Change Strategy Now Risk Sharing: Expect New Obstacles and Expenses in Syndicated Loans E-Discovery in Action Diversification at the Gate Energy

Counsel to Counsel - May 2008

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