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LeClairRyan Attorney: Common Challenges Drive Closer Cooperation Between U.S. and European Energy Sectors

06/20/2019

Energy conference highlights benefits of transatlantic coordination on financing, policy and the formation of new cooperative utilities, says national law firm’s Roy M. Palk.

Growth opportunities are taking shape thanks to closer cooperation between the U.S. and European energy sectors, said LeClairRyan attorney Roy M. Palk during the annual conference of the Associated European Energy Consultants (AEEC), June 11-12, in Washington.

“Both sides of the Atlantic are working together on energy as never before,” said Palk, Senior Energy Industry Advisor for LeClairRyan and former CEO of the East Kentucky Power Cooperative. “For example, new financing initiatives stand to bring more solar and wind projects and infrastructure to continental Europe; new pipelines and terminals promise to bolster American exports of liquified natural gas (LNG); and the formation of U.S.-style power co-ops in Europe could ramp up the modernization and expansion of the grid in several countries, benefitting millions of people.”

Palk was a co-coordinator of the annual conference (“Transatlantic Gas and Power Markets: Challenges, Opportunities and New Frontiers”) along with LeClairRyan Member James P. Guy, II, head of the national law firm’s Energy Industry Team. Both are based in the firm’s Glen Allen, Va. office.

An entire day of expert presentations and panel discussions focused on cooperative financing for European utilities. Since 1969, Palk explained, U.S. co-ops have enjoyed access to capital via their own bank, the Cooperative Finance Corp. (CFC), which now has about $26 billion on its books.

“The CFC was created after power co-ops saw a 30 percent reduction in federal funds during the Nixon administration,” Palk said. “By creating their own bank, they were able to continue financing the construction and repair of electric co-op grids. Their common need led them to join their balance sheets together. For Europe, the questions today include whether, in similar fashion, there’s enough common need to propel a continent-wide financing effort akin to the CFC.”

Other questions, Palk noted, revolve around whether current banking regulations in Europe will allow for the creation of a CFC-like bank. “Would a common enabling act allow co-ops in individual European countries to borrow in this way?” he said. “Studies are underway to answer these and other questions. Even though it may not be possible to exactly replicate the CFC model in Europe, it could certainly be used as a template should this effort move forward.”

The three-day conference also dealt at length with geopolitics, Palk noted. “Russia’s Nord Stream 2 pipeline, which was designed to transport Russian gas to Germany by going underneath the Baltic Sea, is generating quite a lot of discussion today,” he said. “Many Europeans are wary of anything that increases Europe’s dependence on Russian gas, as Nord Stream 2 surely would. These skeptics are eager to find ways to import more U.S. LNG, which is good news for our energy sector.”

One possible route to accomplishing that aim, Palk said, would be to build alternative pipelines and terminals in Northern Europe. “You could deliver U.S. gas to the terminals and then ship those resources across Europe via pipelines, but you’d have to overcome resistance to pipeline construction in Turkey and other countries,” the attorney explained.

Despite today’s more contentious global trade environment, collaboration on pipeline construction is theoretically possible, Palk added. “The tariffs and saber-rattling—so far at least—have not had a major impact on relationships in the energy business globally,” Palk said.

The five-year-old AEEC is an alliance between LeClairRyan and Berlin-based law firm Becker Büttner Held (BBH). Its mission is to serve transatlantic clients of both firms and foster industry education. Also participating in the conference were American and European utility CEOs, government officials, diplomats, financiers, academics and other experts.

AEEC members met to discuss topics such as wind projects in the Netherlands and the potential to work with the Brussels, Belgium-based International Cooperative Alliance to promote more collaboration among utility co-ops globally. Broadly speaking, Palk is optimistic about the potential for ever-closer transatlantic coordination on energy. “Simply put, energy issues are global issues today,” he said. “Countries are now more inclined to work together to find mutually beneficial solutions.”