Hunton & Williams Tax Team Secures Section 1603 Victory for Clients

A team led by Hunton & Williams LLP partner Timothy L. Jacobs secured a victory for operators of two California fuel cell power plants in the US Court of Federal Claims, which ruled Tuesday, March 31, that the facilities are eligible for federal Section 1603 grants for certain renewable energy projects.Under Section 1603 of the American Recovery and Reinvestment Act of 2009, the federal government provides grants for designated alternative energy projects that were placed in service or had begun construction between 2009 and 2011. RP1 Fuel Cell LLC and UTS SJ-1 LLC, subsidiaries of UTS BioEnergy, LLC, claimed the government wrongly declined to award more than $1.5 million in grants to RP1 and SJ-1, erroneously arguing that its gas-conditioning equipment failed to qualify for reimbursement under Section 1603.

The primary issue before the court was whether gas conditioning equipment installed by the plaintiffs to condition and remove contaminants from wastewater treatment sludge digester gas that was then used to generate electricity in fuel cells was included within the statutory definition of “qualified fuel cell property” under federal law.

In her ruling, Judge Marian Blank Horn sided with the plaintiffs, who argued that the gas conditioning equipment is necessary for the operation of the fuel cell systems, and without the equipment, the power plant would not be able to function. Judge Horn also held that the equipment alternatively would qualify for the grant as part of a “trash facility” that uses municipal solid waste to generate electricity.

The plaintiffs also were represented by partner David S. Lowman Jr. and associate Hilary B. Lefko.