Noting the growing global demand for new sources of energy, Congress tailored the Energy Policy Act of 1992 (EPAct) to make U.S. public utility holding companies more competitive abroad. First, it eased the Securities and Exchange Commission review of U.S. investment in foreign energy facilities. Second, it sought to expand U.S. participation in foreign energy-related projects to include U.S. technology as well as investment dollars. In that regard, Congress structured EPAct to offer financial assistance for "design, construction, testing, and operation" of projects in foreign countries that use renewable, environmental, and clean-coal technologies manufactured in the United States. These environmental energy technology programs are intended to foster a new industry and help it compete globally.

Public utility holding companies can take advantage of the new rules under EPAct through intrasystem arrangements between associate companies. One associate company invests in a foreign exempt wholesale generator (EWG) or a foreign utility company (FUCO); the other manufactures environmental energy technology. The technology associate then transfers (that is, exports) the technology to the foreign EWG or FUCO. Although the intrasystem arrangement raises a number of regulatory wrinkles, the trouble of ironing them out might be well worth the effort for holding company associate companies.

Intrasystem arrangements offer a number of benefits. First, the EWG or FUCO may be eligible for financial assistance from the U.S. government because it uses environmental energy technology manufactured in the United States. Second, the technology associate may find the EWG or FUCO a good market for continued sales and related services. Third, using environmental energy technology may render the investment facility more risk averse to the environmental consequences of its energy production.

The governments of most of the Latin American and Caribbean countries have given priority to addressing environmental issues in their energy-related laws and regulations. As one commentator points out: "Countries with weak environmental laws or enforcement programs will be strengthening them. The environmental laws of other countries will offer many traps for U.S. companies doing business overseas. [U.S. companies] should not be reacting to developments, but should try to anticipate what will happen and formulate sensible courses of action."1

U.S. companies would be wise also to build environmental controls into their projects at the start to mitigate the environmental consequences of energy production-that is, resource depletion. Resources are depleted when used as inputs to energy production and as receptacles for the waste generated in that process. For example, at current consumption rates, the estimated technically recoverable U.S. natural gas resource base (an input to energy) will be depleted in approximately 65 years.2 Similarly, sulphur dioxide (SO2) emissions (waste produced by coal-fired generation) degrade air quality.

Environmental energy technology also answers the need to mitigate transboundary pollutants. SCECorp recently pulled out of the Carbon II project, a $1.8-billion coal-fired electric generating plant under construction in Mexico, in part because the plant was not expected to meet the Environmental Protection Agency's new source performance standards for SO2 and particulates. In this instance, clean-coal energy technology offers a potential solution.

Debate among international lenders centers on whether to increase conservation's prominence in energy sector development or to focus on developing a competitive market for electricity. The transboundary pollution issue reportedly caused The World Bank to defer its involvement in financing Mexico's Carbon II. An environmentally sound project would likely attract both conservationists (interested in natural resource stewardship) as well as promoters of competition (interested in efficient natural resource management). Any prudent investor is interested in risk avoidance and secure markets.

EWGs or FUCOs that use environmental energy technology may reduce the risk of environmental consequences of energy production as well as keep pace with rapidly developing environmental regulation around the world. They may also serve as a secure market for the continued export of environmental energy technology and related services by the technology associate. By investing abroad, the holding company enters the global power market. By diversifying in an environmental energy-technology associate company, the holding company can also enter the global market for environmental energy technology. And if the technology is exported to an associate company's EWG or FUCO, that EWG or FUCO may be eligible for financial assistance under environmental energy technology transfer programs.B. Victoria Brennan is an associate with the Washington, DC, law firm of Goldberg, Fieldman and Letham, P.C. She holds a BA in international studies from the University of Washington/Peking University (China), and a JD from Georgetown University Law Center/Wuhan University Environmental Law Institute (China). The views expressed in this article are not necessarily those of the law firm.FOOTNOTES

1 J.A. Schlickman, "Barriers to International Business Becoming 'Greener,'" Corporate Legal Times at 19 (July 1992).2 D.F. Santa and P.J. Beneke, "Federal Natural Gas Policy and the Energy Policy Act of 1992," 14 Energy Law Journal 1, 4 (1993).CALLOUTS

"Developing advanced technology and fully exploiting its commercial capabilities in products, processes, and services is essential to ensuring that U.S. businesses can survive in an increasingly competitive world market."

C.L. Van Orman, "The National Energy Strategy-An Illusive Quest for Energy Security," 13 Energy Law Journal 251, 261 (1992). SIDEBAR

China's Open Door

The state-owned China National Technical Import and Export Corp. recently entered into its sixth agreement to purchase an emission-control coal boiler from the environmental control technology company, A. Ahlstrom Corp. The purchase reportedly brings the value of that U.S. company's boiler deliveries in the People's Republic of China to about $145 million since 1992.

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