[00:00:45] Speaker 01:
Okay, RP-1 fuel cell, the United States.

[00:00:51] Speaker 01:
Mr. Weiner?

[00:00:53] Speaker 02:
Weiner, Your Honor.

[00:00:54] Speaker 01:
Mr. Weiner.

[00:01:00] Speaker 01:
Please proceed.

[00:01:01] Speaker 02:
Good morning and may it please the Court, Andy Weiner for the United States Department of Treasury.

[00:01:07] Speaker 02:
This case is about payments in lieu of tax credits under Section 1603 of the American

[00:01:12] Speaker 02:
Recovery and Reinvestment Act of 2009.

[00:01:15] Speaker 01:
On page 32 of your opening brief, you argue that the definition of fuel cell power plant in IRC-48C1C does not include Apoly's gas conditioning equipment because it was not necessary for the operation of fuel cells using natural gas.

[00:01:37] Speaker 02:
Correct, Your Honor.

[00:01:38] Speaker 01:
Would it have been legal for appellees to operate without the gas conditioning equipment?

[00:01:45] Speaker 02:
I'm sorry.

[00:01:47] Speaker 02:
I heard some rustling.

[00:01:48] Speaker 02:
I didn't hear your question.

[00:01:50] Speaker 02:
I apologize.

[00:01:50] Speaker 01:
Would it have been legal for them to operate without that gas conditioning equipment?

[00:01:56] Speaker 02:
Yes, Your Honor.

[00:01:57] Speaker 02:
It would have been.

[00:01:59] Speaker 02:
In fact, they and so the situation here is they

[00:02:03] Speaker 02:
They bought a standard fuel cell package that was designed to run on natural gas.

[00:02:09] Speaker 02:
The gas conditioning equipment had played no role in the operation of the fuel cell power plants on natural gas, nor was it required to by law.

[00:02:19] Speaker 02:
The gas conditioning equipment

[00:02:21] Speaker 02:
provided additional functionality for those fuel cell power plants.

[00:02:24] Speaker 03:
I'm sorry, some of the language here may be kind of important, but it can't be true that the gas conditioning equipment played no role in the operation of the fuel cell.

[00:02:34] Speaker 03:
It did if the fuel was coming out of the waste.

[00:02:39] Speaker 02:
And I was about to say, the gas conditioning equipment was necessary to operate the fuel cell.

[00:02:46] Speaker 02:
on biogas, but Judge Wallach's question, I believe, was with respect to natural gas.

[00:02:52] Speaker 02:
No, it wasn't.

[00:02:54] Speaker 02:
And so as a practice... It certainly was not about natural gas.

[00:02:57] Speaker 02:
Okay, I apologize then.

[00:02:58] Speaker 02:
I misunderstood.

[00:02:59] Speaker 03:
I mean, your whole position comes down, I think,

[00:03:02] Speaker 03:
to the proposition that because fuel cells can operate on natural gas, maybe even, and I want to ask you about the record question, maybe even many, many, many of them do operate on natural gas.

[00:03:15] Speaker 03:
Therefore, the only equipment that is covered by, I guess, section 48 is that which is necessary to operate a particular fuel cell if it were operating on natural gas.

[00:03:30] Speaker 03:
choices about operating it on other fuels are really not to be considered in determining whether the particular fuel cell is what the base for the 30% compensation is.

[00:03:51] Speaker 03:
This is all your position.

[00:03:52] Speaker 03:
Intended use of the particular fuel cell is irrelevant because fuel cells in general, I think is your point,

[00:04:00] Speaker 03:
operate on natural gas?

[00:04:02] Speaker 02:
It's not our position that fuel cells in general operate on natural gas.

[00:04:06] Speaker 02:
Our position is that the fuel cells that are at issue here, that were acquired, the standard package that they purchased, it's a turnkey fuel cell that is capable of operating on natural gas out of the box.

[00:04:22] Speaker 02:
And so there you've met the terms of a statute.

[00:04:25] Speaker 02:
You have an integrated system

[00:04:29] Speaker 02:
necessary to convert a fuel into electricity using electrochemical means.

[00:04:35] Speaker 02:
That's the language of the statute.

[00:04:38] Speaker 02:
And so here, what taxpayers are asking for in their claim here for an additional $1.5 million is they customize their fuel cell to be able to operate on other fuels, biogas.

[00:04:52] Speaker 02:
And we're saying that that customization is not provided for under the credit.

[00:04:58] Speaker 03:
Does either the record say or do you know as background fact what the general market for fuel cells is, are a lot of them used

[00:05:11] Speaker 03:
only for natural gas or is the only real market for fuel cells for this kind of thing where natural gas is used either as a starter or a backup but in general people don't use fuel cells unless they're going to use something other than natural gas.

[00:05:27] Speaker 03:
Do we know anything about that?

[00:05:28] Speaker 02:
I believe that in the record there is testimony that most fuel cells operate on natural gas or other

[00:05:39] Speaker 02:
gases that would not require the heavy conditioning that biogas does, like propane or methane.

[00:05:46] Speaker 02:
But basically, my understanding, again, this is entirely from the record, is that fuel cells require effectively the same, it uses the same energy that you get in combustion, except it's an electrochemical process.

[00:06:01] Speaker 02:
So it can run on anything that can combust, in theory.

[00:06:05] Speaker 01:
Where in the statute does it mention

[00:06:08] Speaker 01:
standard package or natural gas or basic operations?

[00:06:13] Speaker 02:
Well, it does not mention anywhere in the statute.

[00:06:17] Speaker 02:
But what it does mention is it defines the integrated system by the conversion of a fuel into electricity.

[00:06:27] Speaker 02:
And so therefore, when they bought, in this particular case, the standard package, which was capable of converting natural gas into electricity,

[00:06:35] Speaker 02:
You've met the terms of a statute.

[00:06:37] Speaker 02:
That's how Congress delineated the credit in this case, and that's what they're entitled to.

[00:06:42] Speaker 02:
If they want to customize based on their particular intent to use to run on biogas, or I can think of a million different variations where they have to customize the particular unit, that is not provided for by Congress.

[00:06:58] Speaker 01:
They use natural gas as a startup, and you make that as one of your points.

[00:07:05] Speaker 01:
What percentage of their operations were on natural gas?

[00:07:08] Speaker 02:
It varied based on the particular unit.

[00:07:10] Speaker 02:
For RP1, the evidence is that for the first 10 months time frame, they operated on about 69% biogas, 31% natural gas.

[00:07:22] Speaker 02:
For SJ1, they operated on, I believe, 91% biogas and 9% natural gas.

[00:07:29] Speaker 02:
The natural gas is used not only when the gas conditioning equipment might be down, but there's also testimony in the record that sometimes biogas doesn't have the necessary BTUs.

[00:07:42] Speaker 02:
There's not enough energy in the biogas.

[00:07:44] Speaker 02:
I mean, we're talking about sewage here.

[00:07:47] Speaker 02:
So there are variations, I imagine, in the type of sewage being run through the waste treatment plants.

[00:07:53] Speaker 02:
There's not enough energy sometimes to harness, so you have to plant.

[00:07:58] Speaker 02:
There are contracts that say that they needed to operate on at least 75% in order to qualify for some state credits, but at least with respect to one of the facilities, they didn't do that so far as the time period for which we have evidence.

[00:08:18] Speaker 01:
You contend that the fuel cell equipment and the gas conditioning equipment are separate systems because they're provided by separate suppliers.

[00:08:28] Speaker 01:
Does the statute distinguish?

[00:08:31] Speaker 02:
If I may, Your Honor, we weren't saying that they're separate systems just because they're provided by separate suppliers.

[00:08:38] Speaker 02:
What we're saying is that is evidence of the fact that the fact that they purchased a fuel cell power plant that was capable of operating without seeking another supplier to provide gas conditioning is evidence of the fact that

[00:08:54] Speaker 02:
The credit applies to the fuel cell power plant and not the gas conditioning equipment.

[00:08:59] Speaker 02:
The fact that they started up on natural gas, and we're converting a fuel into electricity, months in RP1's case, several months before they ever ran it on biogas, is evidence that... Can I ask?

[00:09:17] Speaker 03:
The desulfurizers do not play a role when, is this right, when they're operating on the biogas that's going through the gas conditioning and then the gas conditioner is sending it directly into the fuel cell?

[00:09:32] Speaker 02:
It's not perfectly clear from the record, Your Honor, but I believe that to be true, yes.

[00:09:36] Speaker 03:
So suppose they had gone to, is it UTC, is that the purveyor, and maybe there are other... No, they are UTC.

[00:09:43] Speaker 02:
The purveyor would be fuel cell energy, I believe.

[00:09:46] Speaker 03:
Okay, fuel cell energy and maybe there, I hope that there are other sellers of this and somebody said, you know, we have two standard packages.

[00:09:54] Speaker 03:
You can buy this without the de-sulfurizer.

[00:09:57] Speaker 03:
If they had bought the fuel cell without the de-sulfurizer and then bought gas conditioning equipment, would they get to include the gas conditioning equipment in the base to which you apply the 30%?

[00:10:11] Speaker 02:
I think that would be a question that, I mean, there's a 60-day review period when you get these applications for payment.

[00:10:20] Speaker 02:
And it goes to NREEL, a scientific lab, and they look to various factors.

[00:10:25] Speaker 02:
They look to the science of the equipment that's being claimed for payment.

[00:10:29] Speaker 02:
They also look to the contracts.

[00:10:32] Speaker 02:
For example, if they said, well, we're trying to maximize our credit here, so don't give us the de-sulfurizers now.

[00:10:38] Speaker 02:
But we're going to need to be able to run on natural gas in the future.

[00:10:41] Speaker 02:
So we're going to pay for the sulfurizer separately.

[00:10:44] Speaker 03:
The simple fact here is that there are two fuels that are sometimes being used in the Ontario version a fair bit in the San Jose version, not that much.

[00:10:55] Speaker 03:
And your position is you get to choose one of them and say, as long as you can operate on that one, the cost for that operation is all you're going to get.

[00:11:07] Speaker 03:
and the other one we're not going to give that similar privilege status to.

[00:11:12] Speaker 03:
So why, somewhere near the heart of this is a question, why privilege natural gas as the choice of fuel as opposed to the other one?

[00:11:23] Speaker 02:
I would respectfully disagree with this idea that we're choosing just between two different gases and we're choosing the one that's most advantageous.

[00:11:31] Speaker 02:
I think the evidence in the record and

[00:11:36] Speaker 02:
And I think the evidence of the record supports the fact that effectively what they're doing is stacking technologies.

[00:11:43] Speaker 02:
So they've bought a fuel cell power plant that's capable of running on natural gas.

[00:11:47] Speaker 02:
And now they need to buy another piece of equipment that costs two or three million dollars, depending upon the facility, that was able to clean the biogas to get it to the fuel specifications that natural gas already has.

[00:12:01] Speaker 02:
The desulfurizers are

[00:12:03] Speaker 02:
used as a fail-safe mechanism.

[00:12:04] Speaker 02:
They're not necessary for all cleaning.

[00:12:08] Speaker 02:
What they are is that the evidence and the record supports that natural gas sometimes has spikes in sulfur.

[00:12:14] Speaker 02:
The amount that a public utility cleans natural gas is not necessarily to the specifications of a fuel cell power plant.

[00:12:22] Speaker 02:
And so you have to have the desulphurizers there, because there are some variations in the quality.

[00:12:27] Speaker 03:
Does all the natural gas run through the desulphurizers, or do you know something about the

[00:12:32] Speaker 03:
the, you know, how much undesirable stuff, how much sulfur, I guess, is in the natural, the particular natural gas, and you can say, route that one through the desulfurizer, and the other one just hook right up to the fuel.

[00:12:45] Speaker 02:
I believe, again, it's not entirely clear from the record as to the channels, the piping, but I believe that the record supports that all of the natural gas was run through the desulfurizers, but the sulfurizers didn't have to clean most of it.

[00:13:00] Speaker 02:
It was there as a failsafe mechanism.

[00:13:02] Speaker 02:
When there's a spike in sulfur, the desulfurizers then purify that sulfur out of it.

[00:13:07] Speaker 02:
But most natural gas has a low enough or maybe a non-existent sulfur content to be able to meet the specifications that the fuel cells require, the fuel specifications.

[00:13:17] Speaker 02:
And so therefore, it is not like the gas conditioning equipment where if you run biogas into the fuel cells, within a day you'd have

[00:13:28] Speaker 02:
you'd have, you would have poisoned your fuel cell power plant.

[00:13:33] Speaker 02:
It is, that is not, so the sulfurizers, I think, they do clean the natural gas, but they clean it based on variations in the fuel quality of the pipeline natural gas that's running in, as opposed to a, you know, taking a filthy biogas product and having to effectively condition it significantly

[00:13:57] Speaker 02:
Um, or you're necessarily going to poison yourself.

[00:14:00] Speaker 03:
Can I ask, well, you don't make any argument for any kind of deference here.

[00:14:06] Speaker 03:
Um, and I'm, can you offer me any intuition about why?

[00:14:11] Speaker 03:
Um, this is not the clearest statutory language I've ever read.

[00:14:18] Speaker 03:
Um, that's the kind of situation, it's a good starting point for what the government, I mean, practically all the time says.

[00:14:27] Speaker 03:
given me some kind of deference under any label.

[00:14:30] Speaker 03:
And yet you don't know people about that.

[00:14:34] Speaker 02:
Let me put it two ways.

[00:14:36] Speaker 02:
One is that we think that the statute is... Suppose I disagree with you about the first point.

[00:14:44] Speaker 02:
We did not argue our deference below.

[00:14:48] Speaker 03:
Our?

[00:14:48] Speaker 03:
We're talking about a statute.

[00:14:50] Speaker 02:
Oh, I'm sorry.

[00:14:53] Speaker 03:
Chevron or any variety?

[00:14:56] Speaker 02:
Well, again, because Chevron would be, we're not suggesting that there are regulations that dispose of this.

[00:15:08] Speaker 02:
This is a review process that we've made a determination based on the statute directly.

[00:15:14] Speaker 02:
And so I'm not exactly sure.

[00:15:18] Speaker 02:
Our case does not rely on

[00:15:21] Speaker 02:
administrative authority that was resolved.

[00:15:24] Speaker 03:
No, but you're an administrator, you're an agency, you got an application, you read the statute and it has these various terms and it says kind of what's necessary to run this thing on a fuel and you say, well, we actually think at least for these, these particular Ontario and San Jose units, maybe even more generally, we think that that means, should mean what's necessary to run it on kind of the, you know,

[00:15:50] Speaker 03:
quasi-universal or at least here necessary default fuel natural gas and no more, why do you not say the statute allows that even if it doesn't require that?

[00:16:09] Speaker 03:
The statute, I'm sorry, the statute, we're saying that... Allows you to say they bought the natural gas standard equipment

[00:16:16] Speaker 03:
So in that circumstance, they get only the cost of the natural gas equipment, the desulphurizer, and the rest is what you would call customizing.

[00:16:27] Speaker 03:
Maybe in another case, if they had done the other hypothetical, namely forget the desulphurizer, we're going to shut the thing down unless we have biofuel to operate on.

[00:16:40] Speaker 03:
It might be different.

[00:16:41] Speaker 03:
The statute is just not compellingly clear about

[00:16:47] Speaker 03:
what to do, and this is why we have agencies.

[00:16:50] Speaker 02:
Well, Your Honor, I think on top of the fact that we do think that the language of the statute is pretty clear as to how we've applied it here.

[00:16:57] Speaker 02:
We also pointed the court's attention to the doctrine.

[00:17:00] Speaker 02:
You have to construe the language of fuel cell power plants narrowly.

[00:17:04] Speaker 02:
And I think that's a pretty well-established principle, and I think it's perfectly applicable in this case, that the idea that Congress creates deductions and credits

[00:17:16] Speaker 02:
And by virtue of the fact that they are matters of legislative grace, Congress is not required to give anybody a credit for anything.

[00:17:23] Speaker 03:
And that principle has, I mean, I agree that has some force.

[00:17:26] Speaker 03:
On the other hand, what is it the earlier history?

[00:17:29] Speaker 03:
Is it a section 48 has at least some case law that says, well, maybe these investment tax credits are not quite so charally interpreted?

[00:17:40] Speaker 02:
Yes, your honor, with respect to a completely different statute.

[00:17:43] Speaker 03:
Isn't it an earlier version of this?

[00:17:46] Speaker 02:
It's the same statutory number, but if you look at what section, if you look at 48, section 46 today, prior to 1990, there was a statutory scheme.

[00:18:00] Speaker 02:
Section 38 provided an investment and a tax.

[00:18:03] Speaker 01:
I'm going to have to wrap up.

[00:18:04] Speaker 02:
I apologize, Your Honor.

[00:18:06] Speaker 02:
To make it short,

[00:18:09] Speaker 02:
It is, you're right, the same code section as a completely different statute.

[00:18:13] Speaker 02:
And the investment tax credit went way beyond green energy.

[00:18:20] Speaker 02:
It talked about investments in manufacturing and investments in transportation.

[00:18:25] Speaker 02:
It was an infrastructure.

[00:18:26] Speaker 02:
It was just to create, to spur investments in general.

[00:18:33] Speaker 02:
And this is a completely different statutory scheme.

[00:18:35] Speaker 02:
I'll reserve the rest of my time.

[00:18:36] Speaker 02:
I apologize for the noise.

[00:18:37] Speaker 01:
You don't have any right?

[00:18:38] Speaker 01:
I'm trying to reserve counsel.

[00:18:40] Speaker 01:
I'm going to give you two because we ate it up all year.

[00:18:43] Speaker 01:
Thank you.

[00:18:46] Speaker 00:
May it please the court, Tim Jacobs for the plaintiffs who are the appellees.

[00:18:50] Speaker 00:
And if it pleases your honors, I'd like to address some of the questions that were asked, because I think they're very important.

[00:18:58] Speaker 00:
I think the first question from Judge Wallach was, can you operate

[00:19:03] Speaker 00:
this these power plants legally without the gas-conditioned equipment.

[00:19:08] Speaker 00:
The answer to that is no.

[00:19:09] Speaker 01:
First of all... Yeah, and I misspoke because I read from his quote that did say natural gas, and I have to apologize to you, Mr. Weiner, but you're addressing what I meant.

[00:19:20] Speaker 00:
This anaerobic digester gas, these wastewater plants, if they don't use the anaerobic digester gas for a fuel source, they have to flare it.

[00:19:28] Speaker 00:
And that's, you can see, there's places you drive around here at some of these

[00:19:32] Speaker 00:
we sort of treatment plants they flare that gas so what these facilities do is actually utilize that gas but they have to clean it before it goes in the fuel cells now the testimony before the court court including plaintiff's expert and also the government's expert was that if you used uh... this uh... anaerobic digestive gas because it's so dirty in this fuel cell that uh... it would destroy the fuel cells within a couple hours

[00:19:58] Speaker 00:
and by the way a natural gas has to be cleaned as well as we have to do so for us is that the government contends that uh... i think one of the questions from judge toronto was you know do you need to do so for us is are they offline anytime the testimony before the court in the findings before the court of the point of the the court of federal claims made was that uh... the disulphurizers every gas that goes through a fuel cell because it's so sensitive has to be clean gas conditioning equipment in every case is balance of plant

[00:20:27] Speaker 00:
you have to have it and i believe the government actually in the reply briefly been indicated that is a standard piece of equipment for cleaning gas any fuel cell park standard piece of equipment it's a standard piece of equipment is balanced plan for purpose of the statute and obviously it's integrated as you need uh... the other question i think that was raised was and i think that is is that true for fuel cell installations there's one exception

[00:20:55] Speaker 00:
If you can build a fuel cell power plant in any laboratory and you get pure hydrogen, you may be able to run it through the fuel cells without damaging them.

[00:21:04] Speaker 00:
That's the one exception.

[00:21:05] Speaker 03:
I'm sorry, I didn't ask my question precisely enough.

[00:21:09] Speaker 03:
Are there fuel cells in operation out there that don't have desulphurizers?

[00:21:15] Speaker 03:
I don't think it's contested that at least this seller of fuel cells offers the de-sulfurizer as part of the standard package.

[00:21:27] Speaker 03:
Is it true that that's universal?

[00:21:29] Speaker 00:
There are only a couple fuel cell providers.

[00:21:31] Speaker 00:
And by the way, there are only two cases that really have this issue.

[00:21:35] Speaker 00:
That's how limited the universe is here.

[00:21:37] Speaker 00:
But I think there are a couple manufacturers.

[00:21:40] Speaker 00:
One is fuel cell energy, which was

[00:21:42] Speaker 00:
involved in this case, they typically put the desulfurizer with their package of equipment.

[00:21:49] Speaker 00:
There's another company called UTS, and there are a couple companies that have gone out of business.

[00:21:53] Speaker 00:
I'm not aware of what those particular groups provide, but I think a lot of it goes back to what is your contract?

[00:21:59] Speaker 00:
I mean, these are suppliers.

[00:22:00] Speaker 00:
If you don't have to buy the desulfurizer, you're not going to do it.

[00:22:04] Speaker 00:
But what is typical is, is you will start up these facilities with natural gas because it's more efficient to use that, and it's more reliable

[00:22:12] Speaker 00:
for the startup period, which is very important.

[00:22:14] Speaker 00:
And that's what we saw here.

[00:22:15] Speaker 00:
I mean, the government's citing some statistics about the startup period where they used a little bit more natural gas than biogas for a certain period of time.

[00:22:25] Speaker 00:
Well, that's typical of any power plant.

[00:22:27] Speaker 00:
You're going to do that.

[00:22:30] Speaker 00:
The other question I think was asked was the numbers.

[00:22:32] Speaker 00:
What numbers are we looking at here?

[00:22:33] Speaker 00:
And there was testimony about that.

[00:22:34] Speaker 00:
And actually, the court made findings.

[00:22:35] Speaker 00:
And I want to raise that for the court.

[00:22:37] Speaker 00:
It's on JA49.

[00:22:39] Speaker 01:
I want to back up.

[00:22:41] Speaker 01:
to your initial point.

[00:22:44] Speaker 01:
You indicated, I think correctly, from the record, that you have to have desulphurizers.

[00:22:53] Speaker 01:
Somewhere in line, whether you get it in your initial package or you go out and buy it, can you run a plant without desulphurizers and not destroy your fuel cells?

[00:23:04] Speaker 00:
You have to have it.

[00:23:06] Speaker 00:
The testimony, and I grew up in Western Pennsylvania and a lot of natural gas pieces, you put the smell in it, it's the sulfur, they actually add that so that you know it's leaking.

[00:23:18] Speaker 00:
That has to be cleaned out.

[00:23:19] Speaker 00:
That's why it's called the sulfurizers.

[00:23:21] Speaker 00:
If that goes through that fuel cell, it would destroy it.

[00:23:23] Speaker 00:
So it doesn't matter whether it's natural gas or whether it's digester gas.

[00:23:27] Speaker 00:
It has to be clean.

[00:23:29] Speaker 00:
It has to be in every instance, if you're going to operate a fuel cell, you have to have that equipment.

[00:23:35] Speaker 00:
And, you know, in most cases where you're going to use, let's just say the CNOS 8 plant was 100 percent.

[00:23:43] Speaker 03:
The more true that is, the more it seems to me to help the government.

[00:23:49] Speaker 03:
That is that fuel cells, let's assume you take that to an extreme.

[00:23:54] Speaker 03:
Every fuel cell sold and installed has de-sulfurizers.

[00:23:58] Speaker 03:
Now, the rest is optional.

[00:24:00] Speaker 03:
Why is that not a justification for the government to give privilege status to that which is necessary to run the fuel cell?

[00:24:09] Speaker 03:
Because you always have to have de-sulfurizers.

[00:24:13] Speaker 00:
Well, I think, again, we have to look at the facts.

[00:24:16] Speaker 00:
The facts here are, in like San Jose, the contracts for requirements are 100%.

[00:24:21] Speaker 00:
You have to operate that facility on 100% biogas.

[00:24:25] Speaker 00:
There is no so-called standard package.

[00:24:28] Speaker 00:
when that this was one of the questions was asked what what are the numbers in the testimony before the court and this is actually on j forty nine or page forty eight judge warns opinion uh... the numbers in california where most of these plants are fifty percent operate roughly fifty percent operate on biogas so these are this is not you know just a couple facilities so if you go to the still so energy literature so the other fifty percent run just a natural gas yes so it's i mean it's fifty percent

[00:24:57] Speaker 00:
The facilities operate on biogas, and 50% operate on natural gas in California and the United States at least.

[00:25:06] Speaker 00:
That's where most of these facilities are.

[00:25:08] Speaker 00:
So you have a situation where if you're operating on biogas, you have to have the gas condition quote.

[00:25:13] Speaker 00:
But go back to, let's take this back to the statute.

[00:25:16] Speaker 00:
What does the statute say?

[00:25:17] Speaker 00:
Well, first of all, the statute says A fuel.

[00:25:20] Speaker 00:
It doesn't say natural gas.

[00:25:21] Speaker 00:
It doesn't talk about standard package.

[00:25:23] Speaker 00:
A fuel is the

[00:25:25] Speaker 00:
Court of Federal Claims found detailed findings about what that means.

[00:25:29] Speaker 00:
Looked at the Department of Energy.

[00:25:30] Speaker 00:
Looked at the Energy and Information Association as to what that means.

[00:25:33] Speaker 00:
Well, it's a broadly defined term.

[00:25:35] Speaker 00:
It means afuel.

[00:25:37] Speaker 00:
It includes natural gas.

[00:25:38] Speaker 00:
It includes anaerobic digester gas.

[00:25:40] Speaker 00:
It includes anything that a fuel cell can operate on.

[00:25:46] Speaker 00:
And what we're saying is that many fuel cells operate on biogas.

[00:25:51] Speaker 00:
And if you operate on biogas, you have to have the gas condition equipment.

[00:25:54] Speaker 00:
uh... but i would get a legislative history which actually both parties site the legislative history for the enactment for the school so parkland uh... uh... incentive says it expresses a preference by congress because this is a real wooded energy statute by the way for a non-conventional fuel well a non-conventional fuels biogas uh... of course natural gas is a conventional fuel so congress in its legislative history expressed a preference for a non-conventional fuel

[00:26:24] Speaker 00:
and it makes total sense when you're looking at section forty eight which is an investment tax credit which incentivizes renewable energy that you would be that congress it makes sense that congress would have made the statute brought enough to include the real energy which it did uh... another point uh... the government is saying that the statute has been repealed well i think it was the last question was asked well the reality is is the in the height of the investment tax credit which a general application that was repealed in nineteen ninety that's

[00:26:54] Speaker 00:
That's true.

[00:26:55] Speaker 00:
But the ITC, the Investment Tax Credit for Energy property, which is in Section 48, that's been around since the Energy Tax Act of 1978.

[00:27:03] Speaker 00:
And it's gone, you know, it's changed certain iterations.

[00:27:07] Speaker 00:
But that same statute, for example, solar, has been in there for the whole time period.

[00:27:13] Speaker 00:
At one point it was 10%, now it's 30%.

[00:27:15] Speaker 00:
So the government keeps saying there are different statutes.

[00:27:18] Speaker 00:
The reality is they're the same exact statute over the course of time.

[00:27:22] Speaker 00:
And what you have with Section 1603,

[00:27:25] Speaker 00:
That provision was, you know, policy reasons one way or another, whether it's good or bad, but Congress enacted Section 1603 to provide a grant in lieu of the investment tax credit.

[00:27:38] Speaker 00:
It did that because all of the investments had dried up.

[00:27:42] Speaker 00:
It included fuel cell power plants in there, and it housed the entirety of Section 1603 in the investment tax credit structure.

[00:27:50] Speaker 00:
Indeed, the legislative history says it was designed to mimic the operation of the investment tax credit.

[00:27:55] Speaker 03:
So the court here... Let me see.

[00:27:57] Speaker 03:
So let's assume that the whole country is like California and 50% of the fuel cells operate only on natural gas and the other 50% operate on some combination of natural gas and the biofuel.

[00:28:18] Speaker 03:
The first 50% get the 30% applied to

[00:28:25] Speaker 03:
The fuel cell plus the de-sulfurizer.

[00:28:27] Speaker 03:
The second set get more.

[00:28:29] Speaker 03:
Why does that make sense?

[00:28:32] Speaker 00:
They don't get more.

[00:28:33] Speaker 03:
You're getting paid for the de-sulfurizer.

[00:28:35] Speaker 03:
So you want to get paid for the de-sulfurizer, 30%, plus 30% of the gas condition equipment, right?

[00:28:43] Speaker 00:
Isn't that more?

[00:28:44] Speaker 00:
Well, there are situations where a lot of folks get more for the particular layout of the plant.

[00:28:50] Speaker 03:
Don't tell me, yeah, that's just fine.

[00:28:53] Speaker 03:
Is the premise correct?

[00:28:55] Speaker 00:
Well, they actually get the additional, you know, the funds for putting in that necessary equipment.

[00:29:01] Speaker 00:
That's right.

[00:29:02] Speaker 03:
Okay.

[00:29:03] Speaker 00:
But I'm not sure that that's relevant, disrespectfully, because the statute says you get the credit.

[00:29:11] Speaker 00:
I mean, the statute is not limited to natural gas.

[00:29:14] Speaker 00:
It's not limited to a standard package.

[00:29:15] Speaker 00:
It says a fuel, and it includes specifically balance of plant components.

[00:29:20] Speaker 00:
The reality is there is a cap on credit and we're well below that cap.

[00:29:24] Speaker 00:
Congress put a cap in there so that you're running the problem where somebody was building a big plant.

[00:29:29] Speaker 00:
And you're only getting 30%.

[00:29:30] Speaker 00:
I mean, somebody's not going to build something in order to put in, you know, invest funds.

[00:29:37] Speaker 03:
Just so I understand, and I think you are just defending the proposition that when you customize by adding a second piece of fuel equipment,

[00:29:49] Speaker 03:
to a plant that could in fact operate forget about california's laws could in fact operate the way fifty percent of california's fuel cells do operate just on natural gas you get to be paid not only for the de-sulfurizer which everybody does but in addition for the gas conditioning equipment that's what the statute says that's what i think the statute says absolutely and and i and i disagree that it's customization because when you build a power plant

[00:30:18] Speaker 00:
you build it according to the ground up.

[00:30:22] Speaker 00:
Why did they build these plants at the wastewater treatment plant?

[00:30:26] Speaker 00:
They built these plants at the wastewater treatment plant to operate in the free biogas, not to purchase natural gas.

[00:30:32] Speaker 00:
These plants would never have been built if they were going to operate on natural gas.

[00:30:36] Speaker 00:
And that was clear from the testimony and the findings of the Court of Federal Plants.

[00:30:42] Speaker 00:
So I don't agree that it's customization at all.

[00:30:45] Speaker 00:
I think this is just how you build a power plant.

[00:30:47] Speaker 00:
There are power plants all over the country that have various configurations.

[00:30:53] Speaker 00:
In fact, I will tell you this, the government's lead reviewer testified that the government will allow the cost of roads to be reimbursed under the statute.

[00:31:07] Speaker 00:
Now, roads have very little to do with the fuel cell power plant in terms of generating actual power.

[00:31:15] Speaker 00:
But they are nevertheless integrated and necessary in particular circumstances.

[00:31:20] Speaker 00:
Now, the government's not going to call that customization because they allow the reimbursement for those roads.

[00:31:27] Speaker 00:
And that's typical of what I've seen in what the Treasury's done.

[00:31:32] Speaker 00:
The reason they don't like the gas conditioning equipment here is because they view this as different than some of the other fuel cells that they've seen.

[00:31:41] Speaker 00:
But it's a limited pull.

[00:31:43] Speaker 00:
and uh... the reality is is that uh... as i mentioned there there at least fifty percent of bio gas plants in california operating on uh... on bio gas and if the if congress is expressing a preference under a renewable energy statute for a non-conventional fuel which i guess is why would you take out gas conditioning equipment reward natural gas which is fossil fuel and and and uh... uh...

[00:32:11] Speaker 00:
you know force force these folks to have an un-economical plan.

[00:32:14] Speaker 03:
I'm sorry, what is there in 48 C 1 big C that expresses any preference for one fuel over another that goes into this preferred kind of power plant?

[00:32:32] Speaker 00:
The statute itself refers to a fuel, but the legislative history which is cited in our

[00:32:36] Speaker 00:
in our briefing papers and a response brief.

[00:32:39] Speaker 03:
This gives a preference for fuel cell power plants as opposed to non-fuel cell power plants and it doesn't matter what fuel is put into it.

[00:32:50] Speaker 00:
That's correct.

[00:32:54] Speaker 00:
This is a broader statute.

[00:32:56] Speaker 00:
The use of a broader term doesn't mean it's restricted.

[00:33:01] Speaker 00:
The term a fuel is a broad term.

[00:33:04] Speaker 00:
congress did not limit it to a specific fuel which meant that they wanted to incentivize fuel so hard really stinky filthy fuel well it is but uh... is it this just a great use of of something otherwise that would be wasted i mean it these these wastewater treatment plants become self-sufficient uh... uh... you know pretty much self-sufficient on this on this uh... fuel

[00:33:27] Speaker 00:
and why would we waste it and just put it up in the air why would congress not want to incentivize that made question why treasury and in the national renewable energy laboratory which actually really reviews these why they would not want to incentivize this type of the plant i know department of energy uh... has encouraged folks such as as our taxpayer here uh... to build these plants and bill on sir that way sort of treatment plants because of the abundance of this energy source uh... i see my time running

[00:33:57] Speaker 00:
I did want to make some points that we stand by our brief.

[00:34:00] Speaker 00:
I'll give you one minute.

[00:34:01] Speaker 01:
I'll give you two minutes because you're closing council.

[00:34:06] Speaker 00:
I stand by for a brief on both the Trice facility issue and the fuel cell power plant.

[00:34:11] Speaker 00:
But I want to make a point about the fuel cell power plant.

[00:34:12] Speaker 00:
One is the statute talks about an integrated system.

[00:34:15] Speaker 00:
The government makes that a critical point.

[00:34:19] Speaker 00:
And it cites cases, including this court's decision in a Y in refinery.

[00:34:23] Speaker 00:
When you look at that opinion and they say it's timing versus scope, the reality is that

[00:34:28] Speaker 00:
That opinion did focus on intended use and design and purpose.

[00:34:31] Speaker 00:
In fact, that was the seminal case on placed in service and timing issues.

[00:34:35] Speaker 00:
So I think this court has already made that, has looked at that issue.

[00:34:40] Speaker 00:
And when you determine what is integrated or an integrated system, an integrated unit of property, it includes consideration of the design and what the specifically assigned function of the plan is.

[00:34:51] Speaker 00:
And moreover, the court in that case, actually the court of claims decision there, actually

[00:34:57] Speaker 00:
uh... the origin of the intended use case is actually the i t c rex intersection forty eight if you read the court of of claims uh... trial division opinion which this court embraced in line with on

[00:35:23] Speaker 02:
With my two minutes, I'm going to just address a few points regarding fuel cell power plants.

[00:35:28] Speaker 02:
And I guess I will have to leave the statutory thicket of trash facilities to the court unless it has any specific questions.

[00:35:35] Speaker 02:
But I just wanted to mention our trash facility argument that while the processes at the plant, including the inputs into the anaerobic digesters,

[00:35:47] Speaker 02:
are, while that is taking place, that is a treatment process, as definition under the Clean Water Act and the regulations, and therefore that is not solid waste, which would be sludge from a waste treatment plant.

[00:36:02] Speaker 02:
But returning to the points that were made regarding fuel cell power plants, I think the important point is that the statute, I think everybody agrees that the statute clearly doesn't preference one fuel over another in terms of a fuel

[00:36:17] Speaker 02:
that's converted into electricity.

[00:36:22] Speaker 03:
The problem is what inference to draw from it.

[00:36:25] Speaker 03:
It says, and to summarize here, what's necessary to use a fuel?

[00:36:30] Speaker 03:
So whatever fuel they're using, what's necessary to use that?

[00:36:32] Speaker 03:
That's covered.

[00:36:34] Speaker 02:
Again, Your Honor, I think the idea is that once you get to clearly natural gas as a fuel, and we don't dispute the biogas as a fuel, but once you've gotten to the point where you've met the conditions of the statute,

[00:36:46] Speaker 02:
natural gas and you haven't actually gone out to the marketplace and bought your gas conditioning equipment, you don't get that customization.

[00:36:52] Speaker 02:
And the legislative history, I don't think supports the other side here.

[00:36:55] Speaker 02:
The legislative history shows that Congress intended to encourage investments in these types of systems.

[00:37:01] Speaker 02:
Fuel cell power plants.

[00:37:03] Speaker 02:
It said that fuel cell power plants are good because they process, they produce electricity without combustion.

[00:37:08] Speaker 02:
Great.

[00:37:09] Speaker 02:
They said it also has potential uses for

[00:37:13] Speaker 02:
for using non-traditional fuels.

[00:37:15] Speaker 02:
However, so do other types, more traditional types of power generation systems allow for the use of biogas as well.

[00:37:28] Speaker 02:
And in fact, at these plants, they were using non-traditional fuel sources.

[00:37:32] Speaker 02:
The fact of the matter is that Congress, oh, let me just finish this one sentence, Your Honor.

[00:37:38] Speaker 02:
Congress provided a credit for a fuel cell power plant.

[00:37:43] Speaker 02:
And that's what they got.

[00:37:44] Speaker 02:
And they don't get the gas conditioning equipment.

[00:37:47] Speaker 01:
Thank you, counsel.