Holland & Knight - Energy and Natural Resources Quarterly Newsletter - Spring 2021

ENERGY AND NATURAL RESOURCES QUARTERLY NEWSLETTER SPRING 2021 TABLE OF CONTENTS About This Issue.......................................................................................................................................................................2.

Clean Tech Quarterly Update....................................................................................................................................................2 CLEAN Future Proposal Offers Details on House Democrats’ Vision for Climate Legislation......................................................3 Biden Order Aims to Strengthen Domestic Supply Chains in Key Sectors.................................................................................3 Issues and Risks Affecting Energy, Forestry and Agro-Industrial Projects in Colombia...............................................................4 Colombia Moves Forward with Fracking Pilot Projectsfor Unconventional Reservoirs................................................................4 The Wave Against Fracking in Colombia...................................................................................................................................5 Law and the Precautionary Principle: Wild Card for Courts in Latin America?............................................................................5 Realizing a Hydrogen Economy: Hydrogen Production from Excess Renewables.....................................................................6 Colombia Has High Potential for Renewable Energy.................................................................................................................7 Colombian Congress Considers Renewable Energy Bill............................................................................................................7 Did a New York Federal Court Just Burst a Private Equity Bubble?...........................................................................................8 About Our Energy and Natural Resources Industry Sector Group.............................................................................................8

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About This Issue Holland & Knight invites you to read the Spring 2021 issue of our Energy and Natural Resources Quarterly Newsletter, in which our authors discuss important hot topics and developments in energy, natural resources and the environment. This newsletter provides a look around the corner, highlighting top issues and emerging opportunities for the private sector.

Recognizing this newsletter is arriving in your inbox during uncertain times, we also wanted to let you know that Holland & Knight continues to track developments on the emerging situation surrounding the coronavirus (COVID-19) and the impacts the crisis may have on the Energy and Natural Resources industry. Analysis on what the developments may mean for business can be found on our COVID-19 Response Team page.

This edition covers, among other relevant topics, a number of recent U.S. political developments that may continue to be important market drivers throughout 2020. We encourage you to reach out to our authors with thoughts or questions on these topics.

FEDERAL POLICY AND REGULATION

Clean Tech Quarterly Update

By Taite R. McDonald, Beth A. Viola, Sydney Lauren Bopp and Hannah M. Coulter This edition of Holland & Knight’s Clean Tech Quarterly Update highlights the biggest clean tech updates and government-related developments from the past few months, and summarizes what these changes may mean for clean technology and investors in the coming quarter and year.

Building on last year’s congressional accomplishments, clean energy initiatives and legislation are advancing and expanding significantly with unprecedented momentum, direction and clout with the opening of the Biden-Harris Administration and 117th Congress. Indeed, COVID-19 rescue and relief will likely continue as the primary focus of the administration and Congress over the course of 2021. Nevertheless, Democrats, including President Joe Biden, hold that COVID-19 recovery in itself is a unique opportunity to meld climate action with a focus on economic revitalization and are expected to leverage funding to deploy clean technology in order to drive emissions to net zero in the coming decades.

Against the backdrop of the evolving political climate and the implications for energy innovation, drivers include increasing corporate net zero carbon commitments, national security concerns, a need for technology and innovation, market participation, education and competition from foreign governments, all of which are only increasing during the Biden Administration.

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FEDERAL POLICY AND REGULATION

CLEAN Future Proposal Offers Details on House Democrats’ Vision for Climate Legislation

By Beth A. Viola, Isabel C. Lane and Devin Barrett Senior Democrats from the U.S. House Committee on Energy and Commerce introduced on March 2, 2021, their comprehensive climate bill, the Climate Leadership and Environmental Action for our Nation’s (CLEAN) Future Act. The legislation, which was announced and initially circulated as a discussion draft in January 2020, sets an economy-wide goal of reaching net-zero national greenhouse gas (GHG) emissions by 2050. Many House Democrats view this proposal as the basis for climate-oriented infrastructure legislation that Democrats in Congress are eager to pass in 2021.

The new proposal includes several updates compared to the discussion draft circulated in 2020. Most notably, the proposal sets an interim national goal for the United States to achieve 50 percent GHG emissions reductions by 2030, driving nearterm action on emissions reductions, particularly in sectors where technologies for decarbonization are more developed. Like the proposal before it, though, implementation of the economy-wide target is decentralized, with federal agencies and the states tasked with developing individual strategies and plans to reach the top-line goals. This iteration also includes a greater focus on worker and community transition, environmental justice and waste reduction.

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FEDERAL POLICY AND REGULATION

Biden Order Aims to Strengthen Domestic Supply Chains in Key Sectors

By Taite R. McDonald, Kevin L. Turner, Eric S. Crusius, Andrew K. McAllister, Sydney Lauren Bopp and Hannah M. Coulter President Joe Biden has signed an Executive Order (EO) on America’s Supply Chains, mandating a 100-day review of the global supply chains used by key industries in an effort to avoid the shortages in medical equipment, semiconductors and other goods seen as critical during the COVID-19 pandemic.

The order, issued on Feb. 24, 2021, is intended to boost manufacturing by strengthening U.S. supply chains. During the past year, the fragility of vital supply chains has been illuminated and exacerbated by the pandemic and increased demand from evolving market forces and government actions. The EO seeks to end the country’s reliance on imports of crucial goods, which the administration stresses is a potential national security and economic risk, and to strengthen ties with allies.

With the EO, the president launched an immediate review to address vulnerabilities of supply chains of four key products: large-capacity batteries, pharmaceuticals, critical minerals and semiconductors. The review will seek to determine whether U.S. firms in these sectors are too reliant on foreign suppliers, particularly those in China, as well as other vulnerabilities, such as extreme weather and environmental factors.

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ENVIRONMENTAL

Issues and Risks Affecting Energy, Forestry and Agro-Industrial Projects in Colombia Project Developers Must Perform Proper Real Estate and Environmental Due Diligence

By Esteban García-Jimeno Colombia is one of the Latin American countries with the greatest growth potential in its agricultural and forestry sector, given its climatic and topographic conditions as well as its land availability for planting of several types of crops (e.g., pineapple, avocado, cacao, African palm, teak, etc.). In recent years, especially since the signing of the peace agreements with illegal armed groups, the government has encouraged investments to develop the country’s agricultural and forestry sector, including the regulation of special areas with high agricultural or forestry potential (e.g., Zones of Interest for Rural, Economic and Social Development or Zidres, its acronym in Spanish). In addition, the government has offered tax benefits and exemptions for new projects, among others. However, its development has been affected by social and legal aspects, such as the effects of the post-conflict and the lack of clarity in the allocation of property rights over land.

Something similar happens with respect to energy projects and the exploration and exploitation of natural resources, which have had increased relevance in recent years as a fundamental sector for the economic development of the country. However, such types of projects have also been affected by the lack of clarity on real estate rights as well as the social and political impacts that the activity generates in the configuration of land uses.

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OIL AND GAS

Colombia Moves Forward with Fracking Pilot Projects for Unconventional Reservoirs

By Claro Manuel Cotes The Colombian National Hydrocarbons Agency (ANH) on Sept. 11, 2020, issued Agreement 006 of 2020, which adopts the regulations for the selection of contractors and special contractual conditions for the development of research pilot projects (PPII) that use the fracking technique for the exploration and production of unconventional reservoirs.

Said Agreement was issued under a political scenario of multiple social and environmental pressures to ban development of unconventional reservoirs through fracking. Bills to ban fracking for the development of hydrocarbons situated in unconventional reservoirs in Colombia have already been filed. However, the issuance of current Agreement reveals the government’s support to assess and evaluate real difficulties for their development in an effort to adopt an informed decision to that extent.

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OIL AND GAS

The Wave Against Fracking in Colombia

By Margarita Solorza Beginning in 2018, there have been several attempts in the Congress of Colombia to prohibit or discourage regulations that favor the exploration and exploitation of unconventional reservoirs in the country. To date there have been at least three such bills, including one that seeks to qualify fracking as a felony in the Criminal Code.

These yet-to-pass attempts show a growing animadversion in Congress against the possibility of development activities in unconventional reservoirs in Colombia.

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ENVIRONMENTAL

Law and the Precautionary Principle: Wild Card for Courts in Latin America?

By Jose V. Zapata COVID-19, as other pandemics right out of Pandora’s Box, has required ensuring that even the smallest crevice allows room for hope. Among the principles that have gained particular attention in Latin America by multiple courts in the region, has been the “precautionary principle.”

The principle, originating in international environmental law (particular reference being made to Article 15 of the 1992 Rio Declaration on Environment and Development), has been brought down to the daily life of citizens as a rule through which the review of projects bearing environmental, health or social impact, are to be validated within the context of developmental needs. Similarly, the principle has been used more often than not to assess whether nonrenewable energy projects are in fact allowed to proceed. More recently, the principle has been flagged vis-à-vis the safety of the many vaccines rapidly developed by science to address the COVID-19 pandemic.

In reviewing the referred principle, courts in Latin America have placed particular emphasis on the need to understand scientific certainty on a case-by-case basis. However, there appears to be a growing redefinition of the rules initially delimited by the courts themselves, which have resulted in the principle being used more broadly and intuitively to simply argue that it allows for any project, new venture, activity or undertaking to be suspended when the negative effects of such an activity are unclear or when they cannot be scientifically validated. This new position creates particular difficulties, precisely in scenarios such as with the use and application of rapidly developed vaccines to address COVID-19.

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RENEWABLE ENERGY

Realizing a Hydrogen Economy: Hydrogen Production from Excess Renewables

By Mark C. Kalpin, Seth R. Belzley, Taite R. McDonald and Saqib Z. Hossain Propelled by the global tailwinds of net zero and decarbonization initiatives, green hydrogen has captured the attention of political and market actors alike. The upside for this nascent industry is massive – a versatile clean energy carrier that could decarbonize fossil fuel reliant industries, disrupt the energy industry and help turn the tide in the battle against climate change.

Recognizing this potential, a number of countries have already set ambitious targets to advance their green hydrogen strategies. Among the first countries to have done so was Japan, which issued a “Basic Hydrogen Strategy” in 2017 that introduced Japan’s vision of becoming a “world-leading hydrogen-based society.” Japan then proceeded to complete a 10 megawatt (MW) green hydrogen plant in March 2020, which at the time was considered the largest in the world. By the start of 2021, Canada became host to the world’s largest green hydrogen plant, with its 20 MW nameplate capacity. Along the way the European Union established a green hydrogen installation target of 40 gigawatt (GW) by 2030, while Chile announced a 25 GW target by 2030 in its effort to become the “cheapest producer of green hydrogen on Earth.” Other countries in this rapidly growing list include China, South Korea, Australia, Saudi Arabia and Portugal.

A key driver behind the pursuit of a hydrogen economy is the abundance of sectors that stand to benefit from the decarbonization applications of green hydrogen.

Read full article For additional articles in the Realizing a Hydrogen Economy series, please visit Holland & Knight’s Energy and Natural Resources Blog.

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RENEWABLE ENERGY

Colombia Has High Potential for Renewable Energy

By Inés Elvira Vesga According to the World Economic Forum’s Energy Transition Index 2020, Colombia has made the greatest progress in the renewable energy area in Latin America and the Caribbean. In addition, Colombia has received two important international recognitions because of its commitment to energy transition. First, the United Nations (UN) chose Colombia as one of the seven countries to lead the global dialogue on energy transition at the High-Level Dialogue on Energy, which will be held at the UN General Assembly in September 2021. Second, Colombia was designated as a principal member of the Council of the General Assembly of the International Renewable Energy Agency (IRENA), representing Latin America.

Colombia has a privileged location for renewable energy. According to official records from the Mining and Energy Planning Unit (Unidad de Planeación Minero Energética or UPME), there is an average solar radiation of 4.2 kilowatt hours per square meter (KW/h per m2) per day in Colombia. For reference, countries with high solar energy potential have an average of 3.7 KW/h per m2 per day. There is also great potential in wind energy and biomass. The energy matrix currently has 68.3 percent from hydroelectric sources, 30.7 percent from thermal sources and 0.98 percent from nonrenewable sources.

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RENEWABLE ENERGY

Colombian Congress Considers Renewable Energy Bill

By Daniel Andres Vargas In line with the global concern to implement clean energies and help strengthen national policies to minimize the environmental impacts of several activities that contribute to climate change, the Colombian Congress is studying a bill focused on energy transition and strengthening the electric and fuel gas public utility services.

The objectives proposed by the bill – No. 365 of 2020 of the Senate of the Republic – are for the country to implement “measures to strengthen the energy transition and to allow the reduction of emissions from fossil fuels, diversifying the Colombian energy matrix, implementing renewable energy, and improving the energy efficiency in order to protect the fundamental rights of life and health of the Colombian people.” Among these measures is the strengthening of the use of nonconventional energy sources, storage systems and the efficient use of energy, especially those of a renewable nature.

This can be accomplished by integrating the measures into the electricity market for the provision of public utilities and public lighting services and other energy uses as a basic mechanism for sustainable economic development.

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LITIGATION AND DISPUTE RESOLUTION

Did a New York Federal Court Just Burst a Private Equity Bubble?

By Seth R. Belzley and Keith N. Sambur Recently, a U.S. District Court for the Southern District of New York issued a significant ruling in In re Nine West LBO Securities Litigation, Case No. 20-2941 (S.D.N.Y. Dec. 4, 2020) (Rakoff, J.), which could shift the risk of a failed leveraged buyout (LBO) to a selling corporation’s directors. In Nine West, the court refused to dismiss a suit which alleged that the directors of a selling corporation face personal liability based on claims of breach of fiduciary duty to the seller corporation, as well as aiding and abetting a breach by the buyer’s board for leaving the target company insolvent as a result of the transactions contemplated in the sale. While the private equity industry often has to defend against claims involving failed LBOs, the Nine West ruling represents a significant shift by introducing the specter that a target’s board could be on the hook for the failures or lack of success by the buyer’s board even many years after a transaction has closed. While the facts of Nine West, may be particularly egregious, the case more generally presents a fundamental expansion of the liability typically understood for directors and officers of a selling corporation and individuals in those positions, as well as advisors, should carefully consider its warnings.

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About Our Energy and Natural Resources Industry Sector Group The energy and natural resources industries will play a significant role in shaping the future of the global economy, and they must continue their innovative efforts in timely and responsible ways. In order to keep up with competitors and meet their many challenges, companies in the field need to stay ahead of the curve and be prepared for new issues and challenges.

Holland & Knight’s Energy and Natural Resources Industry Sector Group consists of more than 100 experienced attorneys and professionals who work on all facets of transactional, regulatory, legislative and litigation matters related to energy and natural resources. In addition to our work with regulatory bodies such as the Federal Energy Regulatory Commission (FERC), we interface with the White House and key agencies such as the U.S. Environmental Protection Agency (EPA), Department of Energy, Department of Agriculture, Department of Defense and Department of the Interior. We understand the importance of tailoring regulatory strategies to meet the unique needs of a particular client and of accommodating existing and anticipated state and national regulation, technology and infrastructure.

Newsletter Editors Beth A. Viola Washington, D.C. +1.202.457.7030 beth.viola@hklaw.com

Taite R. McDonald Washington, D.C. +1.202.469.5200 taite.mcdonald@hklaw.com 8

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