GE calls on US commission to block Mitsubishi turbine imports

With the US overtaking Germany last year as the world's largest producer of wind power, the market for wind turbines in the US is clearly significant and with lucrative rewards at stake, technology developers and manufacturers often turn to their intellectual property rights as a means of preventing rivals from taking advantage of new markets.

The US market for wind turbines is currently dominated by General Electric and by Vestas and Mitsubishi is trying to increase its presence in the lucrative US market. In an ongoing case, GE has complained to the US International Trade Commission that turbines manufactured by Mitsubishi heavy industries infringe three of GE's patents. GE is seeking a ruling to prevent Mitsubishi importing infringing turbines into the United States.

GE is the proprietor of three patents which relate to variable speed turbines. These turbines can adjust to provide a consistent power supply to the electrical grid without damage to the turbines. GE alleges that the turbines sold by Mitsubishi infringe GE's patents and therefore that Mitsubishi's import of turbines should be blocked. An initial ruling is set to be issued by the ITC on 7 August. The initial ruling will be issued by one judge (Carl Charneski) and, once the initial ruling has been issued, the full US ITC then has until 7 December to complete its investigation and either modify, accept or reject the initial ruling. Any order to block imports could, however, ultimately be overturned by the US trade representative Ron Kirk for policy reasons.

Intellectual property rights can be a powerful tool in the armoury of technology companies. It is worth bearing in mind that patents prevent the import of technology into territories where patent protection is in place, as well as preventing manufacture. Developers who depend on manufacturers to supply turbines will doubtless have clear delivery obligations on suppliers which would assist in a situation where a supplier was prevented from importing infringing technology, but developers should also ensure that supply agreements contain clauses relating to patent infringement. An indemnity covering claims for intellectual property infringement is important if developers purchase equipment and are then exposed to risk by importing that technology into a country where a rival manufacturer holds a blocking patent.

For further information, please contact Joanna Boag-Thomson.

10 June 2009

Smart Metering – A way forward at last?

Smart Metering – A way forward at last?

On 11 May 2009 the Department for Energy and Climate Change published a further consultation on Smart Metering for electricity and gas. The consultation document sets out proposals for the domestic and small to medium sized business premises. The consultation document focuses on two issues; the level of functionality which the new meters will require to have, and the arrangements for rolling out and managing the new technology.

DECC's Proposals

DECC have indicated that their preferred arrangement is the centralised model. Their view is that this delivers the "highest net overall benefit", retaining flexibility for energy companies and allowing for a faster roll out, whilst ensuring interoperability by utilising a central communications centre for data management.

A centralised model will allow for central management of gas and electricity settlement, reconciliation and supply information through a national provider, although this could entail significant costs in remodelling systems as well as changes to the regulatory model. Another key issue is the management of data and how it will be accessed, protected and stored by the new central agency.

There may be data protection and privacy issues in relation to processing customer data. Data security will be another major factor and it is likely that the roll out will necessitate major IT and systems upgrades for suppliers. Significant changes may be required both to deal with the new arrangements once implemented and to ensure that existing metering arrangements remain in operation while the preparatory work takes place.

Other Issues

• Functionality – DECC have suggested that all domestic smart meters should be accompanied by real-time display units to encourage customers to manage their energy use and reduce consumption.
• Cost - Who will pay for the roll out? It is not yet clear whether the cost will be borne by the taxpayer or the energy companies. The Industry is keen for the cost to be centrally managed, particularly given the risk that customers may switch suppliers before the cost of the equipment has been recouped. Another factor is the ongoing Energy Supply Probe and the pressure on suppliers to ensure that pricing is cost reflective. For energy suppliers, there is the cost of replacing meters which have not reached the end of their economic life. DECC has indicated that it does not intend to establish a compensation fund and that the cost of removing existing meters will lie where they fall.
• Installation – Concerns have been raised about the perceived inefficiency of having a number of different energy suppliers installing smart meters in the same local area. A regional franchising model would avoid this inefficiency however it remains to be seen whether the energy companies, with or without the assistance of the UK Government, will co-operate during the installation period if the centralised model is chosen.

There are of course many other issues raised in the consultation which are not covered here. Please contact Claire Mooney for further information.

10 June 2009

Coal Bed Methane - So who regulates what?

Regulatory Bodies

• Department of Energy and Climate Change (DBERR): drilling licences
• Local Authorities/Councils: planning permission to drill wells and establish production facilities
• Scottish Environmental Protection Agency (SEPA) and the Environment Agency (EA): environmental regulation
• The Coal Authority (CA): permission to access the UK's coal reserves; and
• Heath & Safety Executive: operational safety.

Department of Energy and Climate Change (DECC)

The 1994 Coal Industry Act clarified that the ownership of methane does not rest with the CA. As a petroleum product, the Crown owns the methane associated with coal and the rights to the gas are regulated by DECC under the Petroleum Act 1998 (PA98).

Licence exploitation is conducted by means of onshore Petroleum Licences. Onshore production licences are called Petroleum Exploration and Development Licences (PEDLs) and are generally issued in “rounds”. All onshore hydrocarbon fields will require a licence for development, production, venting and flaring of gas and abandonment. More information on this process and the location of existing licences can be accessed on the DECC web site at www.og.berr.gov.uk.

The focus of DECC, once a development has been authorised, will be to ensure that the Development Plan is being followed or modified appropriately as the understanding of the field develops. The operator will be required to prepare regular Field Reports which will alert DECC to proposed deviations from, or alterations of, the agreed Management Plan within the Field Development Plan. This is intended to reduce the need for more formal re-submissions of Development Plans.

Coal Authority (CA)

Whilst DECC is the licensing body for methane, the consent of the CA (usually the owner of the coal or coal mines) is required before any works take place that intersect coal and/or coal mine workings (whether abandoned or not) vested in the CA.

The CA grants Access Agreements to enter its property for coal methane exploitation and the process for applying for such an agreement can be found at:
http://www.coal.gov.uk/media//44430/GuidanceNotesforCBM2000.pdf.

Basically, the CA can grant three types of Coal Methane Access Agreement, namely:

1. an Abandoned Mine Methane Access Agreement relating to exploitation of methane from abandoned coal-mine workings at a single site within a petroleum Licence Area; or
2. a Coal Bed Methane Access Agreement relating to exploitation of methane from unworked coal seams at a single site within a Petroleum Licence Area; or
3. a Coal Bed Methane Access Agreement relating to the whole or major part of a Petroleum Licence Area. This type of "blanket" Access Agreement covers the overall area with subsequent Supplemental Agreements granted for each borehole site within this overall area.

The CA has a specific duty in the exercise and performance of its powers and duties with respect to its land and other property to have regard to the desirability of the exploitation, so far as that is economically viable, of coal bed methane in Great Britain (Coal Industry Act 1994, Section 3(5)). The CA is therefore concerned to ensure that the situation with regard to methane is widely appreciated and understood, in particular its potential with regard to the energy needs of the nation.

Environmental Management

Environmental management of the onshore hydrocarbon industry does not come within the jurisdiction of DECC, with the exception of certain pipelines. Rather the relevant, EC legislation is given effect in the UK through Acts of Parliament and their statutory instruments and implemented by:

• DEFRA;
• Environment Agency in England and Wales;
• Scottish Environment Protection Agency (SEPA);
• Local authorities; and
• DECC (pipelines only).

Examples of some key planning and environmental legislation having implications for the onshore hydrocarbon industry, and as such in turn potentially applicable to a CBM project, are outlined below.

• Legislation: Pipelines Act 1962 and Pipe-line Works (Environmental Impact Assessment) Regulations 2000; Main Requirements: Requires that in respect of pipelines over 16 km in length that an Environmental Statement is prepared as part of the approval process. Regulator: DECC.
• Legislation: Gas Act 1986 and Public Gas Transporter Pipe-line Works (Environmental Impact Assessment) Regulations 1999 Main Requirements: Requires that certain pipeline developments to prepare an Environmental Statement as part of the approval process. Regulator: DECC. 
• Legislation: Town and Country Planning Act 1990 (England and Wales); Town and Country Planning (Scotland) Act 1997;Planning and Compensation Act 1991;and Environment Act 1995. Main Requirements: Planning permission is required for all onshore hydrocarbon developments. Regulator: Local authorities / county councils.
• Legislation: EC Directive (85/337/EEC): Assessment of the effects of certain public and private projects on the environment; and Town & Country Planning (Environmental Impact Assessment) (England and Wales) Regulations 1999, Environmental Impact Assessment (Scotland) Regulations 1999. Main Requirements: Requires that an Environmental Statement be prepared in respect of certain developments as part of the planning approval process. Regulator: Local authorities.
• Legislation: EC Directive (92/43/EEC); Conservation of natural habitats and of wild fauna and flora; and Conservation (Natural Habitats) Regulations 1994.; Main Requirements: Requires developments to take account of Special Areas of Conservation in the relevant environmental impact assessment. Regulator: Local authorities
• Legislation: EC Directive (96/82/EC): Control of major accident hazards; and a) Planning (Control of Major Accident Hazards) Regulations 1999 [2000 in Scotland]b) Control of Major Accident Hazards (COMAH) Regulations 1999. Main requirements: A licence is required for storage of listed hazardous substances.Requires operators to implement certain management practices and report to the competent authorities. Regulators: Local authorities and Environment Agency / SEPA.
• Legislation: Control of Pollution Act 1974, Part III, Environmental Protection Act 1990, Part III and Environment Act 1995, Part V. Main requirements: Requires local authorities to take action where noise limits are exceeded. Regulator: Local authorities.
• Legislation: EC Directive (80/68/EEC) Groundwater and Groundwater Regulations 1998. Main Requirements: Discharges of listed substances which could pollute groundwater require to be authorised through the issue of a licence. Regulator: Environment Agency / SEPA.
• Legislation: EC Regulation (259/93) (Supervision and control of shipments of waste within, into and out of the European Community) and Transfrontier Shipment of Waste Regulations 1994. Main Requirements: A licence is required for transfrontier movement and disposal of hazardous waste. Regulators: DEFRA / Environment Agency / SEPA.
• Legislation: EC Regulation (3093/94): Substances that deplete the ozone layer; and Environmental Protection (Controls on Substances that Deplete the Ozone Layer) Regulations 1996. Main Requirements: A licence is required for the production, supply, use, trading and emission of certain "controlled substances" that deplete the ozone layer. Regulator: DEFRA.
• Legislation: Environmental Protection Act 1990, Part I, Environmental Protection (Prescribed Processes and Substances) Regulations 1991 and Pollution Prevention and Control Act 1999 and Pollution Prevention and Control Regulations 2000. Main Requirements: Certain potentially polluting processes require to be licensed by the authorities. Industries must demonstrate environmental management through Best Available Technology Not Entailing Excessive Cost (BATNEEC) for IPC and Best Available Techniques (BAT) for IPPC. Regulator: Environment Agency / SEPA/ local authorities.

Please contact Hazel Vallance for further information.

10 June 2009