Monthly Archives: April 2021

Environmental Enforcement Expected To Rise – What To Do

As predicted by many, the shift in administrations from Pres. Trump to Pres. Biden has led to many quick changes, including an increase in enforcement of environmental regulations. One of the first speeches of the new USEPA Administrator Michael Regan reaffirmed the agency’s “commitment to working collaboratively and cooperatively with the states to protect public health and the environment.” Therefore, facilities should expect to see increased federal and state enforcement of environmental laws. New York Attorney General Letitia James recently stated that the change in administration is allowing her office to shift its focus from litigation against the federal government to other priorities, such as greater environmental enforcement. James also said that the expected greater collaboration and coordination with the USEPA would allow more successful enforcement initiatives.

Increased enforcement at the federal level is expected in the new administration, too. The Justice Department’s Environment and Natural Resources Division is expected to be supportive of prosecutors going forward with environmental cases. Enforcement tools constrained by Trump administration policies are in the process of being changed.

In addition, the Biden Administration has signaled that it will aggressively address the issue of environmental justice, excess emissions, waste, or impacts potentially harming poorer or minority neighborhoods.

Therefore, to prepare for this new uptick in environmental enforcement, companies potentially impacted should:

• Review current environmental regulations to determine which currently are applicable and, if so, whether the facility is in compliance, has slipped to potentially be out of compliance, or whether the monitoring systems to definitively determine continual compliance status are no longer working or reliable

• Review existing environmental management systems to make sure they are functioning properly and set and actually achieving compliance

• Undergo one or several rigorous compliance audits by outside qualified experts to determine your compliance status or what should be done to better assess it

• If non-compliance is discovered, develop and execute a plan to promptly correct the violation and potentially voluntary self-disclosure to reduce the chance of criminal prosecution.

• Since it may have been a long time since the last inspection, develop procedures in case federal or state environmental officials perform a surprise inspection of your facility. What would your staff do? What procedures should they follow?

CCES has the experts to perform the technical assessments to determine your air pollution emission rates and estimate where it stands vis-à-vis applicable federal, state, and local air quality regulations. Your company should retain a qualified, experienced attorney to counsel on legal issues. CCES has the technical experts to work with legal staff and determine compliance and help return your facility to compliance. Contact us today at karell@CCESworld.com or at 914-584-6720.

New Presidential Executive Order on Supply Chains

Lack of US independence in the manufacturing of crucial items, such as personal protective equipment and battery components, has led many to be concerned with how we will respond to the next pandemic or move forward on clean energy. On February 24, President Biden issued an Executive Order focused on shoring up supply chains of critical items. The order will require a 100-day review of the supply chain of many products worked on by government contractors and the private sector. In addition, over the next year federal agencies will be required to develop and begin to implement additional actions to maximize domestic production of crucial items and/or ways to work with allies on a coordinated response to hasten supplies when needed.

For example, the Secretary of Energy, coordinating with other agencies, is required to submit a report identifying risks in the supply chain for items such as, large-scale (industrial and electric vehicle) batteries and policy recommendations to address these risks. Also required is a report on supply chains for the energy sector industrial base.

The US Senate confirmed in a bipartisan vote former Michigan governor Jennifer Granholm to serve as the 16th Secretary of Energy. In a Department of Energy blog post shortly after confirmation, Secretary Granholm outlined her priorities including solar, wind, electric cars, advanced batteries, energy efficient appliances, and a weatherized grid structure. Secretary Granholm is known as an electric vehicle enthusiast.

One of her first actions as Secretary is to jumpstart a $100 million funding opportunity for “transformative clean energy solutions” to identify cutting-edge clean energy technologies to address the climate crisis. Energy officials believe total research in clean energy sponsored by the agency will increase to the billions.

CCES has the experts to help your company be more energy efficient and productive. Contact us today at 914-584-6720 or at karell@CCESworld.com.

The Proposed Infrastructure Plan: Clean Energy

On March 31, 2021, President Biden released his $2 trillion infrastructure plan intended to aid the nation’s economic comeback from the COVID-19 pandemic by raising employment in jobs for necessary projects, such as energy efficiency, renewable energy growth, and grid modernization. This is also part of the government’s strategy to achieve a net-zero emissions power sector by 2035, and a net-zero economy by 2050.

In response to the recent power crisis in Texas, the proposed Infrastructure Plan would invest $100 billion to modernize the electric grid with at least 20 GW of high-voltage capacity power lines. The Plan also proposes creation of a Grid Deployment Authority at the Dept of Energy to manage this effort.

The proposed Infrastructure Plan also promotes the retrofitting of existing residential, commercial, and municipal buildings to be more energy efficient and electrified and a $27 billion Clean Energy and Sustainability Accelerator to mobilize private investment.

The Infrastructure Plan proposes creation of Energy Efficiency and Clean Electricity Standard (EECES) aimed at improving energy efficiency, promoting cleaner energy, and incentivizing efficient use of existing infrastructure and carbon-free energy from nuclear and hydropower. The Infrastructure Plan proposes to invest $174 billion in electric vehicle (EV) development, including building a network of 500,000 EV chargers by 2030, replacing 50,000 diesel transit vehicles, and electrifying at least 20% of the school bus fleet. The Plan also includes a 10-year extension of an expanded direct-pay investment tax credit and production tax credit for clean energy generation and storage.

The Infrastructure Plan proposes both a $10 billion investment in public land and water conservation, community resilience, and environmental justice through a new Civilian Climate Corps and a $5 billion investment in remediation and redevelopment of Brownfield and Superfund sites in disadvantaged communities.

The Infrastructure Plan rebuilds research in climate areas that was decimated under the previous administration, setting aside $35 billion for research and development of new, beneficial technologies, such as energy storage, carbon capture and storage, hydrogen, EVs, floating offshore wind, and biofuel products.

One of the criticisms of the Plan is what will happen to the industries that will be harmed or ruined by the switch to clean energy, such as coal and oil & gas. The Plan proposes to address this by training fossil-fuel industry workers to apply their skills for clean energy and for employment to plug oil and gas wells and clean abandoned mines.

As one sees in the news, the Infrastructure Plan faces political hurdles, as many feel it is too expensive for a government already high in deficit spending. Democrats believe that the economic benefits and savings to the private sector will lead to economic growth that would raise revenues and eventually would pay it back plus some. It is likely some compromise (cutting back) of some of the ambitious goals (clean energy and others) will occur before it is promulgated.

CCES has the experts to help your firm manage energy (yes, manage this important resource), assess your energy profile, and move toward cheaper, cleaner energy choices and energy efficiency to reduce your energy waste, save you significant costs, and improve productivity. With the likelihood of financial incentives from the federal and many state governments, even the initial investment to reduce your energy and carbon profile can be quite affordable. Contact us today at karell@CCESworld.com or at 914-584-6720.

IRC Section 179D Tax Incentive Is Permanent

As part of the Consolidated Appropriations Acts, 2021 signed into law on December 27, 2020, the energy efficient commercial buildings deduction (IRC Sec. 179D) is now made permanent.

What Is IRC Sec. 179D?

Internal Revenue Code (IRC) Sec. 179D is a tax incentive that provides building owners and eligible designers/builders the opportunity to claim a tax deduction of up to $1.80 per square foot for installing qualifying energy efficient systems and buildings. Tenants may be eligible if they make the construction expenditures. The tax deduction applies to both new construction and retrofits. Qualified buildings include:

• Commercial buildings, including warehouses and parking garages;
• Multifamily properties with four stories or more; and
• Government-owned buildings, such as public universities, libraries, etc.

To qualify, the energy efficient property must reduce the energy and power costs of a building located in the US by 50% or more in comparison to the minimum requirements of ASHRAE Standard 90.1 of the time. If the 50% target saving is not met, the provision allows partial deduction of $0.60 per square foot for each of the following components:

• Interior lighting systems meeting a 25% saving;
• Heating, cooling, ventilation, and hot water systems meeting a 15% saving; and
• Building envelope meeting a 10% saving.

The deduction cannot exceed the cost of the qualifying property. There are also alternative guidance for partially qualifying property of lighting systems.

If a deduction is allowed under IRC Sec. 179D with respect to the energy efficient property, the property’s basis will be reduced by the amount of allowed deductions.

Illustration of Potential Tax Saving from IRC Sec. 179D

Multiple energy projects covering lighting, HVAC, and building envelope costing $19,500,000 is completed for a commercial building with 600,000 square feet. Typically, the improvement is depreciated over 39 years and provides annual depreciation of $50,000. However, with the qualified IRC Sec. 179D deduction, additional depreciation can be taken in the year that the energy efficient projects are placed into service, resulting in significant benefit to the taxpayers:

600,000 sq ft x $1.80 benefit rate = $1,080,000

The basis of the energy efficient property will reduce by $1,080,000, and the remaining basis of $18,420,000 will be depreciated over 39 years.

How to Apply

One cannot just do an energy efficiency project and claim the deduction. In order to qualify under 179D, energy efficiency project(s) must receive proper certification by licensed engineers as meeting appropriate energy efficiency standards. The qualified individuals will certify perform field inspections in accordance with guidelines from the National Renewable Energy Laboratory (NREL) and calculate the energy and power cost savings with software approved by the US Dept of Energy.

Taxpaying building owners can take the IRC Sec 179D deduction in the current tax year if they receive the proper certification and/or allocation letter at tax filing time. The renewal of the rule allows a building owner to take the deduction retroactively for energy efficient projects completed in prior years. Such a situation will require eligible tax payers to amend their prior tax returns in order to take the deduction.

The $1.80 per square foot deduction will rise with inflation in future years. Therefore, this rule does not have to be reauthorized every year or two. It is permanent.

Non-Tax Paying Buildings

For energy efficient property installed on or in buildings owned by an entity that does not pay taxes, such as federal, state, or local governments or not-for-profits, the 179D deduction can be allocated to an external person primarily responsible for the project’s design, such as designers, architects, engineers, contractors, or energy consultants. The person needs to secure an appropriate allocation letter to transfer the benefit.

CCES has the technical experts to design, perform, and certify energy upgrades that would qualify for IRC Sec. 179D. CCES has successfully done such work in the past under the 179D deduction program. Contact us today at karell@CCESworld.com or at 914-584-6720.