The Laws of Energy

While energy law and regulation is an established practice, new areas of growth are emerging in both traditional and renewable energy sectors. Legal counsel should pay attention to growth trajectories, particularly within the regulatory framework.

Revenue-Raising Proposals on Traditional Energy

President Obama’s Stimulus Bill (American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5) provides several revenue-raising proposals, including new or increased taxes targeted at the oil and gas sector, as well as energy-related spending proposals. While the administration justifies these proposals on the grounds of climate change, many of the proposals appear to be at cross purposes with the goal of U.S. energy independence. Congress passed a 2010 Budget Resolution on April 29, 2009 (Senate Concurrent Resolution 13). The administration issued its “Greenbook” of Budget tax proposals (entitled “General Explanations of the Administration’s Fiscal year 2010 Revenue Proposals”) on May 11, 2009. The Greenbook offers further details on the energy revenue-raising proposals, in addition to other tax proposals, and adds one new revenue-raising proposal in the energy area.

Cap-and-Trade

The Budget proposes a 100% full action "cap-and-trade" system, commencing in 2012. The goal of this system is to reduce greenhouse gas (GHG) emissions 14% over 2005 levels by 2020, and 83% by 2050. The "cap-and-trade" proposal has generated controvery. Business constituents, including oil and gas companies have lobbied Congress to enable auctioning, thereby saving costs by getting sellable permits for free. Environmental groups argue that such a system conflicts with the purpose of reducing greenhouse gases, in effect, allowing companies to continue polluting.

ARRA Funds Awarded

The U.S. Department of Energy (DOE) has announced allocations of more than $54 million in funding from the American Recovery and Reinvestment Act to support energy efficiency and renewable energy projects in Nevada, Rhode Island, Vermont, and Wisconsin. Under DOE's State Energy Program, states and territories have proposed statewide plans that prioritize energy savings, create or retain jobs, increase the use of renewable energy, and reduce greenhouse gas emissions.


New York State Developments

New York state enacted, in 2007, a number of recent laws to control carbon emissions. There is also a new Article 13 of N.Y. Energy Law, the State Green Building Construction Act, in 2008. This new Act is composed of four sections, including N.Y. Energy L. § 13-107, "Agency green building construction requirements." They also passed a law to establish a "Green Residential Building Grant Program," which directs NYSERDA to grant moneys subject to LEET. Finally, the legislature also enacted three closely-related laws to expand "Net metering" of alternative energy generating systems.

Sen. Parker stated that he has been "aiming for a long time" to work on energy and environmental issues. Among the issues he wants to address are "enrgy generation and transmission ... public transportation ... [and] Renewable energy...."

Assemblyman Cahill notes equally "abitious goals for renewable power and energy conservation," especially by funding the State Energy Plan, "mass transit", repowering "Old hydro facilities" and modernizing the states "electric grid." New York State Energy Research and Development Authority (NYSERDA) president Francis Murray, Jr. echoes "the most ambitious clean-energy program in the nation."

For more information on the legal issues surrounding state and national energy regulation, contact Sheheryar Sardar, Esq. at (631) 838-0178 or sardar@sardarlawfirm.com

Investor Visas

For many individuals, getting a visa comes down to one simple factor: circumstances. However, there is an opportunity for individuals to mold their circumstances through investor visas, called "E2 visas."

Investment Requirements

Foreign investors who invest a “substantial amount of capital” in a US business, and who will develop and direct the business may apply for the E2 investor visa, if their country of citizenship has the required treaty (Pakistan has this treaty) with the US. Foreign companies whose owners are nationals of a treaty country may potentially petition their employees for the E2 investor visa.

The investor must demonstrate that he or she has control of the enterprise by showing ownership of at least 50 percent of the business and possessing operational control through a managerial position or other means. The investor must have already invested in the US business or is actively in the process of investing in the business.

The investment must be substantial. The law does not specify a minimum dollar amount to qualify. Instead, “substantial investment” is defined as sufficient funds to ensure the investor’s financial commitment to the successful operation of the enterprise and large enough to support the likelihood that the investor will successfully direct and develop the business. The investment enterprise must be more than a marginal business solely for earning the investor’s living.

The business must a real and operating enterprise. If the applicant is not the principal investor, he or she must be employed in an executive or supervisory capacity, or possess skills that are highly specialized and essential to the operations of the commercial enterprise. Ordinary skilled or unskilled workers do not qualify.

Non-Immigrant Intent Requirement

The E2 investor visa has a nonimmigrant intent requirement. Nonimmigrant intent means the applicant must intend to depart the United States when the E2 status terminates. However, holders of E2 visas may renew their visas indefinitely as long as they continue to own and operate their E2 enterprise or work for a qualifying E2 business in the case of an employee.

Application Process

If the investor or employee is inside the US, he or she may apply directly to the US Citizenship and Immigration Services (USCIS, formerly INS) for a change of status, extension of stay, or change of employment without leaving the country.

The E2 category does not require a petition for employment, if the investor is outside of the US. This means the investor or employee may apply for the E2 visa on his or her own behalf directly to a US Embassy or Consulate abroad. The E2 visa may be issued for up to 5-year validity period and may be renewed indefinitely, as long as the applicant continues to satisfy the visa requirements. The actual length of the visa depends on the treaty between the US and the applicant's country and the consular officer's discretion.

You should understand that a change of status is not a visa. Once the person leaves the United States, he or she must apply for an E2 visa at a US consular office before returning to the United States. Only a consular office may issue a visa. The USCIS cannot issue a visa

Email us at sardar@sardarlawfirm.com for more information.

Pakistan & Private Equity

The Sardar Law Firm recently analyzed a prospective alternative energy joint venture between a North American company and a public-private partner in Pakistan on behalf of a consultancy. The firm analyzed the creation and sustainability of a JV; financing through private equity structures; foreign exchange hedging; and agro-energy economic factors relevant to the project in Pakistan.

The current fiscal crisis has least affected private equity funding, which bears positively on international project financing in emerging markets. Emerging markets private equity will continue to present attractive investment opportunities this year. Recent EM-PE funds will likely outperform equally developed market funds because of a lower reliance on debt-to-finance transactions despite general economic decline. Still, the average risk premium for EM-PE has risen to 7.2% from 6.7% in 2008. Over three quarters of investors (78%) currently invested in EM-PE plan to commit additional EM managers and/or geographies over the next 5 years. Further, nearly two-thirds of investors (62%) with current exposure to EM-PE expect the dollar value of their new commitments to remain steady or rise in 2009 relative to their actual commitments in 2008. Merely 26% of investors who intend to reduce commitments are doing so to refocus on developed markets. Of the investors who do not have exposure to EM-PE, over 35% expect to commit to private equity investing within the next 12-to-24 months.

With the private equity market relatively healthy for current and new investment, Pakistan and other emerging economies have seen an increase in project financing. Any prospective investor or project developer however, should seek legal counsel when navigating the complex international regulatory terrain covering equity, financing, government approval, and project implementation.

Debt Collection: What Consumers Need to Know

With layoffs on the rise, it is a wonder that credit card companies are sending more and more pre-approved credit card applications out in order to garner more customers. These credit cards are often available with high interest rates or other variable terms and conditions. Consumers use the credits cards in hard times because - frankly - they often lack a choice due to difficult financial situations.


However, the problems start when individuals fall behind on credit card payments or when the creditor's records mistakenly show that they have fallen behind, and start phone calls from debt collectors start coming in. Consumers are often overwhelmed by these calls and have no idea what to do.

The Federal Trade Commission (FTC) enforces the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive debt collection practices. The FDCPA covers personal, family, and household debts, including money owed on a personal credit card account, an auto loan, a medical bill, and/or mortgage.

Under the FDCPA, a debt collector is someone who regularly collects debts owed to others. This includes collection agencies, lawyers who collect debts on a regular basis, and companies that buy delinquent debts and then try to collect them. Here are some actions that debt collectors may NOT engage in the following practices, as outlined by the FTC:

(1) Harassment. Debt collectors may not harass, oppress, or abuse individuals or any third parties they contact.

(2) False statements. Debt collectors may not lie when they are trying to collect a debt.

(3) Debt collectors are prohibited from saying:

• you will be arrested if you don’t pay your debt;
• they’ll seize, garnish, attach, or sell your property or wages unless they are permitted by law to take the action and intend to do so; or
• legal action will be taken against you, if doing so would be illegal or if they don’t intend to take the action.

Often, debt collectors utilize these tactics because consumers are not represented by a lawyer. Further, many violations committed by debt collectors are technical violations that may not be readily apparent. However, it is imperative for individuals to know their rights, and know that they contact a lawyer for further advice.

Islamic Finance & Investment: The Next Wave

With the legal market saturated with lawyers in every conceivable practice area, from corporate to litigation, there are few opportunities to distinguish one's own practice. Islamic finance however, is gaining ground as a mainstream vehicle for individual and institutional investments, mergers, property development and acquisitions. Islamic finance refers to principles of funding and investment based on the Shari'ah, a corpus of rules derived from The Qur'an, Islam's holy text. Islamic finance is known as Fiqh al-Muamalat (Islamic rules on transactions). The basic principle of Islamic banking is the sharing of profit and loss and the prohibition of riba (usury). Common Islamic concepts are profit sharing (Mudharabah), safekeeping (Wadiah), joint venture (Musharakah), cost plus (Murabahah), and leading (Ijarah). In sum, Shari'ah compliance typically relates to the prohibition on interest as security in the future event of financial delay or default.

To circumvent the use of interest, Shari'ah-compliant transactions have found innovative ways to finance. For example, in an Islamic mortgage transaction, instead of loaning the buyer money to purchase the real estate, a bank may purchase the real estate from the seller, and re-sell it to the buyer at a profit, while allowing the buyer to pay the bank in installments. In this context, there are no additional penalties for late payment and therefore, no use of interest arises. In order to protect itself against default, the bank asks for strict collateral. The real estate is registered to the name of the buyer from the start of the transaction, called Murabahah.

Another innovative approach applied to real estate loans is called Musharaka al-Mutanaqisa, which enables banks to institute a floating rate in the form of rental. The bank and borrower forms a partnership entity, both providing capital at an agreed percentage to purchase the property. The partnership entity then rents out the property to the borrower and charges rent. The bank and the borrower will then share the proceed from this rent based on the current equity share of the partnership. Concurrently, the borrower in the partnership entity also buys the bank's share on the property at agreed installments until the full equity is transferred to the borrower and the partnership ceases to exist. If default occurs, both the bank and the borrower receive the proceeds from an auction based on the current equity. This method allows for floating rates according to current market rate such as the BLR (base lending rate).

There are a variety of emerging, more complex financial arrangements that call for the application of Islamic legal principles. As Western and Islamic institutions grow in their financial ventures, U.S. lawyers should keep apprised of its developments and potential income opportunities.

Severance Pressure: Not Everyone has to Accept the Terms

With lay offs being heard around the world, employees are being faced with tough choices: take the usually attractive severance package or to walk away and leave options open against their former employers. These choices are hardly novel, however, the situations in which they arise are novel because of the economy. Companies are putting intense pressure on their former employees to sign severance agreements.

A couple of days ago we received a call from an employee because her employer had given her one day to sign the severance agreement or face immediate termination and no severance. However, the agreement itself stated that she had 21 days to review it and advised that she retain a lawyer to review it. We stepped in right away and the situation was resolved.

With the economy being volatile and employers feeling the need to clear out employees, these tactics are not unheard of. But, individuals need to think about what to do if they are faced with such a situation.

Remember:

- If the agreement gives you a deadline, your employer must abide by that deadline. They cannot force you to make a decision before that deadline occurs. It is a written promise and they must uphold it.

- Review the entire agreement. Find an employment or contract lawyer that can help you understand the terms of the agreement, discuss other options, and advise you accordingly.

- Sign the agreement once you have understood the terms and are ready to move forward with your course of action.

- DO NOT feel pressured. Severance agreements are an OPTION, not a requirement.

- It is a contract. Remember, it can be negotiated withe your employer. You may be able to ask for more money or extended benefits.