Monday, September 24, 2018

Panel: Title V To Expedite Energy Projects

By on August 31, 2017

It will be easier for the Puerto Rico Electric Power Authority (Prepa) to push forward controversial projects such as natural gas pipelines despite opposition from environmentalists because of the expedited permitting process contained in Title V of the federal Promesa law.

The law includes the appointment of an interagency environmental committee to safeguard against the possibility of environmentalists derailing controversial projects they may deem “unsafe,” as occurred with the proposed Vía Verde project, a natural gas pipeline that would have crossed the island from north to south. Prepa also has not entirely dismissed the possibility of bringing back the Southern Gas Pipeline, as suggested by Texas-based firm Arctas, during hearings at the Puerto Rico Energy Commission.

Bill Cooper, the former staff director for the Energy & Mineral Resources Subcommittee of the U.S. House Committee on Natural Resources, which drafted Promesa, described the proposed interagency environmental committee as a “risk management feature” to avoid the derailing of projects by environmentalists.

“But I think, more importantly…if you can’t come to terms, you always can go to court. Once you are in court, you can drag it on for years and years and cost a lot of money. That is why we put a provision in Title V to state that if you go to court, it will be the federal district court in San Juan that will decide the issues, and you have to fast tract and expedite that hearing so you can get an ultimate conclusion. I think that is as important,” he said during a Title V forum at the recent convention of the Puerto Rico Chapter of the Associated General Contractors.

Also participating in the forum, hosted by Caribbean Business Executive Editor Philipe Schoene Roura, were Prepa restructuring & financial adviser Fernando Padilla and David Álvarez, a former director of the Public-Private Partnerships Authority.

The fate of Prepa is crucial for the business sector, which is continuing to seek affordable energy rates to jumpstart the economy. Although local contractors remain hopeful that Congress would approve measures that can help move the economy, Cooper dashed those hopes.

Empty promises

Cooper, who works for the law firm McConnell-Valdés, said focusing on the Congressional Economic Development Task Force for Puerto Rico, which was created under Promesa as a way for Puerto Rico to get out of its fiscal and economic crisis, was a “misplaced call.”

He said that whenever there is legislation containing provisions for a study or the creation of a task force, as was the case with Promesa, it is because there was no agreement on substitute provisions, strongly suggesting the panel’s creation was a public relations tactic to give the impression that Congress is moving on economic initiatives for the island.

“So the consolation [prize] is a task force,” he said.

The Task Force on Economic Development for Puerto Rico was created to come up with legislation or changes to federal laws that could be pushed through Congress to help jumpstart the local economy. The Task Force, headed by U.S. Sen. Orrin Hatch (R-Utah), came up with a report containing a list of suggestions, but so far, Congress has failed to act on most of the recommendations.

Resident Commissioner Jenniffer González told Caribbean Business she has introduced bills based on the Task Force’s recommendations, with Hatch’s knowledge. These include bills to help bring more funding to the health sector, bring the earned-income tax credit to the island and allow small businesses to obtain more loans.

She acknowledged, however, difficulties in pushing legislation through, given the fact that she is a nonvoting representative.

Regarding energy projects, the panelists said Prepa could still accelerate projects under Title V despite the utility being bankrupt.

Opportunities in place

“Prepa has a great opportunity under Title III with the Revitalization Coordinator and under the definition of critical projects. And it is going to be a great tool for Prepa to help accelerate permitting in the local field…to start incorporating these projects and attracting capital and investment,” Padilla said.

However, Cooper said the Revitalization Coordinator, the person in charge of moving forward critical infrastructure projects under Promesa’s Title V, still does not have a final say on energy projects. “He has a fair amount of say, but the statute requires a critical project report, and that has to be signed off by the oversight board and has to go out for public comment. It is on a fairly short timeline, so the infrastructure coordinator doesn’t have the plenary power to do it all without any checks and balances,” Cooper said.

Aside from pushing critical energy projects through Promesa, the local government has the alternative of promoting energy projects through public-private partnerships (P3s).

Padilla said the government plans to launch a $6 billion infrastructure investment as part of the local P3 initiatives, with half of that on energy with generation capacity and the maintenance of operations to stabilize the utility. Recently, Prepa temporarily closed the Palo Seco powerplant to overhaul its deteriorating infrastructure.

During the energy forum, panelists admitted Prepa’s bankruptcy process is not a “show stopper” for investors. “You want to make sure you have an organized process that takes care of the finances of the entity. From the projects and investors’ standpoint, the greatest negative impact is time. Is it going to take one year to understand when we are going to start working on projects? Does it take 18 months? Does it take two years? Or is it a six-month period?” Álvarez said.

Panelists also wondered if investments in large projects like the Aguirre Offshore GasPort are out of the question in this current environment. “Yes, even Aguirre. We do feel the [lack of] appetite of investors,” Padilla said, noting that “uncertainty is a challenge.”

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