Business Aviation Law Blog

Electric Aircrafts May Soon be the Standard in the Business Aviation Industry

Van Hilderbrand — Wed, 16 May 2012 15:53:16 -0500

Volta Volare, a Portland, Oregon based aeronautics company will begin testing a four-person electric aircraft prototype called the GT4 later this year.

As reported by the company, here are a few interesting aspects of the GT4:

The GT4 runs off a hybrid powertrain similar to that of the Chevrolet Volt and is equipped with both a 900-pound lithium-polymer battery system and a secondary supercharged 1.5 liter gasoline engine that will recharge the battery when the battery approaches 25% full.

The GT4 is able to takeoff and travel up to 300 miles on battery power alone. The aircraft carries enough aviation gasoline to extend the flight another 1,000 miles, if required.

The GT4 utilizes a canard, or short cross-wing near the nose of the aircraft, and a rear four-blade carbon-composite propeller to “push” the aircraft through the air.

Electric-powered flight is made possible by the tremendous technological advances in the electric vehicle industry. Batteries have become lighter while at the same time able to generate the additional horsepower needed for takeoff and flight. Further, hybrid technologies have cured one of the greatest criticisms of electric powered flight – that the failure of power during flight is too risky.

The benefits of electric aircraft travel are obvious. The cost of completing a roundtrip journey on battery power would be a fraction of the cost to complete the same journey on aviation gasoline, especially if jet fuel prices remain at record highs. Aircraft emissions and noise pollution will also be reduced significantly. Some industry experts also envision a time when daily commutes will be made by electric flights, thus cutting gasoline-powered vehicle emissions.

The next logical step once these personal electric-powered aircrafts are regularly flying and the technology has further matured is for the aircrafts to become larger. They could soon reach a capacity of 10 to 20 seats for use in the business and corporate sector, and then move to commercial size. Before this happens, however, there are some regulatory hurdles. Currently, Federal Aviation Administration (“FAA”) regulations for light sport aircraft preclude electric-powered aircraft. However, it was announced last month at the CAFE Electric Aircraft Symposium that the FAA had completed its regulatory study and is moving towards rulemaking. The rulemaking process may take several years to compete and implement, thus, although no longer science fiction, you may have to wait a little longer to take your first electric-powered flight.

For more information on the electric aircraft industry, visit the CAFE Foundation’s blog.

Panel Provides Unique Perspectives on EU-ETS's Affect on the Commercial and Non-Commercial Aviation Industry

Van Hilderbrand — Tue, 17 Apr 2012 14:31:19 -0500

Last Thursday at the 11^th Annual Aviation Summit in Washington, DC, a highly informative expert panel was convened to discuss the ever-so-controversial European Union Emissions Trading Scheme (“EU-ETS”). The panel members were:

Nancy Young, Vice President, Environmental Affairs, Airlines for America;

The Honorable Julie Oettinger, Assistant Administrator for Policy, International Affairs and Environment, Federal Aviation Administration;

Felix Leinemann, Transport Counselor, Energy, Environment and Nuclear Matters, Delegation of the European Union to the United States; and

Edward M. Bolen, President and Chief Executive Officer, National Business Aviation Association.

The panel was moderated by Stephen D. Eule, Vice President for Climate and Technology, U.S. Chamber of Commerce’s Institute for 21st Century Energy, and was preceded by a keynote address from Ambassador Duane Woerth, representative to the Council of the International Civil Aviation Organization (“ICAO”). To better understand the conflict regarding the ETS, Ambassador Woerth explained that the United States and the European Union have had different focuses post-9/11. While the U.S. has been focused on security in the aviation industry, the EU has been more focused on climate and environmental issues, such as reducing emissions and noise pollution.

Although the panel members were at odds on most issues, they did find some common ground. All were of the opinion that most aviation industry leaders agree that emissions should be curbed to reduce their effects on climate. Opinions diverge, however, on the most appropriate vehicle to achieve this goal.

Mr. Leinemann, the sole representative from the EU, delivered its point of view. From the EU’s perspective, the ETS is a “stepping-stone” to a global approach that already has garnered agreement from the EU’s 30 member states, all of which are willing to integrate their individual trading schemes. It is true that the EU prefers a global solution; however, because the EU views the ETS as a building block, it will not back down from its position that the ETS must move forward.

Non-EU countries, however, do not see this controversy as one about aircraft greenhouse gas (“GHG”) emissions; rather, they see the dispute as one about national sovereignty and violation of international law. These countries view the ETS as an unilateral tax placed on them by the EU.

In contrast to the EU’s views, the U.S. Federal Aviation Administration (“FAA”) views the ETS as an impediment to progress, and finds it difficult to reconcile the EU’s support of a global solution and its steadfast position not to repeal the ETS. In defense, Mr. Leinemann drew an analogy to the legislative inter-workings of the U.S. Congress and asked the Summit participants to imagine the difficulty in repealing legislation that enjoyed almost unanimous support in both the European Parliament and the Council of the European Union.

Non-EU countries have other concerns, as well. One concern involves the money that will be collected for the carbon emissions credits. According to Mr. Leinemann, the money will be used for emissions mitigation projects, particularly in developing countries. Ms. Young stated that the money paid to the EU could be used for such projects, but it is not mandatory. In fact, the United Kingdom has publicly stated that it would not “earmark” the funds. Another suggested likely scenario would be that non-EU airlines would have to buy carbon credits on the open market. EU businesses could use the money for energy-efficiency projects, all funded on the “backs” of non-EU airlines.

When asked what it would take to satisfy the EU, Mr. Leinemann offered that the EU would like to see visible and irreversible progress from ICAO that includes all major emitting countries and sets GHG emission reduction targets that go further than the current ETS. However, non-EU countries take issue with the fact that the EU has not provided any guarantees that it would adopt such a global solution, even if one is worked out by ICAO members.

Mr. Bolen delivered the perspective of the non-commercial aviation industry. In the EU, small emitters are eligible for waivers of ETS requirements; however, there are no such waivers for corporate/business aircrafts. Neither is the non-commercial aviation industry eligible to receive the carbon credits that would be free to other ETS participants. According to Mr. Bolen, business aircrafts would be required to buy credits for each and every flight, thus placing a severe financial strain on the industry. Further, the administrative burden to comply is high. The non-commercial aviation industry does not have the same resources as the commercial industry to track emissions and achieve compliance.

As noted in earlier posts, ICAO is currently working on a global solution; however, no mandatory deadline has been established. One option for a quicker resolution is for the U.S. to file a challenge against the EU under Article 84 of the Chicago Convention for resolution of the dispute according to the ICAO Rules for the Settlement of Differences. According to Ms. Young and Ms. Oettinger, this challenge would effectively turn this into a judicial dispute requiring resolution by ICAO’s permanent Council. Such a situation is not without precedent. In 2000, the U.S. used a similar challenge to protest EU regulations to reduce noise pollution that effectively prevented U.S. aircrafts using “hush kits” to fly in Europe. The EU ultimately repealed this legislation two years later. A “roundtable” on pursuing this option was held on March 28, 2012 before the House aviation subcommittee. According to Ms. Oettinger, at this time, the FAA has not decided whether to bring such a challenge.

Even if ICAO crafts an acceptable global solution that is adopted at the next governing conference in September 2013, and, importantly, the EU finds the solution acceptable and repeals the ETS, the U.S. aviation industry still must bear the administrative burden and cost of tracking, collecting and submitting emissions data for the years 2012 and 2013. Thus, questions would remain regarding who will pay for these administrative costs; and does this make an Article 84 challenge the next logical step?

As this issue progresses, please check back to this blog for future posts.

China's Corporate Aircraft Industry Takes Off

Van Hilderbrand — Mon, 16 Apr 2012 08:30:49 -0500

Spurred by China’s continuous economic growth and desire to maintain the country’s strong presence in the international marketplace, China announced that the general aviation sector is now an economic growth pillar of the country’s 12^th Five-Year Plan (2011-2015). As a result, China has eased regulations restricting corporate aircraft ownership by private individuals and companies, and relaxed regulations to permit corporate aircraft to fly in low-altitude airspace. The corporate aircraft industry responded by courting thousands of China’s newly minted millionaires and billionaires. In fact, last week a Chinese Luxury Consumer White Paper suggested that there are 63,500 ultra-high net worth individuals in China.

Corporate conglomerates like General Electric Co.(through its subsidiary GE Capital Corporate Aircraft Finance) and Honeywell International Inc.(through its Aerospace Division) are seizing the opportunity to provide capital, financing and manufacturing expertise -- having recognized the importance of this market and the opportunities to meet today’s and tomorrow’s demands. For instance, industry insiders expect last year’s registration of 132 private aircraft on China’s mainland to grow and surpass 1,000 in ten years.

This, of course, begs a few questions. Who will provide these aircraft? Who will pilot them? Who will provide maintenance? Who will update existing airport infrastructure? To answer some of these very questions, over 150 Chinese and international industry leaders met last week in Shanghai at the Asian Business Aviation Conference. At the conference, 30 corporate aircraft were on display, along with exhibits demonstrating companies’ products and services in the corporate aircraft industry.

Industry experts agree that opportunities in China exist today. Those already in the corporate aviation industry space should look to capitalize on this economic opportunity and bring their unique products and services to a growing China market.

Special thanks to Sullivan & Worcester’s Reggie McKoy, Legal Research and Business Development and Marketing Intern, for assistance in preparing this post.

White House Completes Review of Effluent Limitation Guidelines Governing Discharges From Airport Deicing Operations

Van Hilderbrand — Fri, 13 Apr 2012 16:07:08 -0500

Recently the White House Office of Management and Budget (“OMB”) completed its review of the Environmental Protection Agency’s (“EPA”) Effluent Limitation Guidelines governing discharges from airport deicing operations. The guidelines, which will be implemented under the National Pollutant Discharge Elimination System (“NPDES”), require airports within the scope of the rules to collect spent deicing/anti-icing fluid and treat the associated wastewater. According to EPA’s website, the Agency projects the Final Rule to be published in the Federal Register in May 2012.

The Federal Aviation Administration (“FAA”) requires airlines to remove frozen precipitation from an aircraft and airfield pavement to protect the safety of the passengers and cargo. Airlines use anti-icing/deicing (“ADF”) because it is economical and effective. According to EPA, during typical wet weather conditions, it can take an estimated 150-1,000 gallons of ADF to deice smaller corporate or business size aircrafts and 1,000-4,000 gallons to deice a large commercial aircraft. The concerns raised by environmentalists and residents living close to airports are that chemicals within ADF discharges may affect nearby surface and ground water quality, including reductions in dissolved oxygen, fish kills and contamination of drinking water sources. After more than a decade of research, EPA agreed.

The proposed Effluent Limitation Guidelines require airlines to use the best available technology to control direct discharges of toxic and non-conventional pollutants. Factors considered in assessing the best available technology include the cost of achieving effluent reductions, the age of the equipment and facilities involved, the process employed and potential energy impacts.

The use of best available technology and the amount of ADF required to be captured depends on the number of annual departures and the gallons of ADF used. According to the guidelines, an airport using more than 460,000 gallons of ADF annually, with more than 1,000 annual commercial jet departures and more than 10,000 departures of all aircraft must use best available technology to capture 60 percent of used ADF. Airports using less than 460,000 gallons of ADF annually must use best available technology to capture 20 percent of used ADF, meet the effluent limit for chemical oxygen and certify use of non-urea based pavement deicers or meet the effluent limit for ammonia. Additionally, airports with more than 1,000 annual jet departures and fewer than 10,000 annual departures must certify use of non-urea based pavement deicers or meet the effluent limit for ammonia.

This begs the question, who’s paying the bill for the purchase and maintenance of the best available technology; airports, airlines or customers? EPA’s proposed guidelines state that historically, most or all airport costs are eventually paid by airlines and passed through to airline customers. However, due to severe financial distress experienced by the airlines after 9/11 and the recent economic recession, cost pass through percentages by airports are significantly lower than a decade ago when the rate was 100 percent. For large airline operations and airports, the effect of the regulation won’t disrupt their bottom line; by contrast, for many small operators and airports, the cost of this regulation may be more than they can bear.

Some airports have decided to reduce or eliminate their use of ADF altogether. For example, according to a WINGS Magazine article, New York’s John F. Kennedy Airport and New Jersey’s Newark International Airport invested in an Infrared Deicer technology designed and built by Radiant Aviation Services, Inc. The airports employing this new technology as an alternative to ADF, have found it to be reliable and cost-effective.

For airports with deicing operations, requirements for capture and mitigation of ADF will soon become a reality as EPA works toward finalizing and implementing its Effluent Limitation Guidelines. Airports meeting the criteria outlined in the proposed guidelines should begin preparing to meet these standards. As this issue progresses, please check back to this blog for future posts.

Special thanks to Sullivan & Worcester’s Legal Research and Business Development Intern, Reginald McKoy II, for assistance in preparing this post.

Recent Statements Highlight Difficulty in Achieving a Global Compromise on Aviation Emissions Regulation

Van Hilderbrand — Mon, 26 Mar 2012 10:54:36 -0500

Since taking effect on January 1, 2012, the European Union Emissions Trading Scheme (“EU-ETS”) has continued to be a hot button issue among the international aviation community. As such, much of the recent content of this blog has been devoted to covering this unfolding issue, including the following posts:

Global aviation emissions negotiations are ongoing at the International Civil Aviation Organization (“ICAO”), however, each side of the question has taken a hard-line position which could make a compromise difficult or even unrealistic. Late last month, representatives from more than 20 non-EU countries, including the Russian Federation, the United States, India, China, and Japan met in Moscow, Russia in an informal “coalition of the unwilling” to protest their inclusion in the EU-ETS and to discuss measures to counteract its effects. The meeting resulted in a signed declaration that each country would consider a variety of actions including strongly urging the ICAO to adopt a multilateral approach toward international civil aviation emissions, barring their country’s aircraft operators from complying with the EU-ETS, and/or imposing levies/charges on EU aircraft operators. The joint declaration can be found here, as communicated by the Russian Federation. Continued discussions are planned for this summer in Saudi Arabia. Although most believe that the rhetoric of the Moscow joint declaration was “less aggressive” than previous draft statements, it may be enough to create momentum toward a global solution to this problem.

This month, a joint announcement was released by Airbus and eight other EU aviation companies stating that the current situation is “intolerable” and that threatened retaliation will have serious negative effects on the EU aviation industry. Airbus, Air Berlin, Air France, British Airways, Iberia, Lufthansa, MTU Aero Engines, Safran, and Virgin Atlantic all called for a global compromise facilitated through the ICAO. Shortly after its release, Connie Hedegaard, the EU’s Climate Action Commissioner, applauded the statement as creating more pressure for global action to regulate aviation emissions. The Office of the EU’s Climate Action Commissioner has preferred a global consensus approach, but has publicly and steadfastly held its position to move forward with the ETS despite the dissidence from non-EU countries.

Among the aviation industry, the greatest concern is a resulting international trade war. China, for example, has reportedly told its airline operators to not cooperate in the EU-ETS and has suspended $12 billion worth of aircraft orders with Airbus, placing thousands of jobs at jeopardy. Reports indicate that India is contemplating a similar stance. As demonstrated by the Moscow joint declaration, this could just be the tip of the proverbial iceberg as other countries are considering similar countermeasures and further retaliatory restrictions on EU aircraft operators. The EU aviation industry is worried, and with good reason, that other important markets will follow in China’s footsteps.

The ICAO has established a dedicated working group, consisting of five member states and the International Air Transport Association (“IATA”), to study the issue and propose a global framework for international aviation emissions by the end of 2012, so that it can be adopted at the next IATA governing conference in September 2013. The ICAO may create any type of international regulation system, however, a compromise may come from one of two clauses in the 2008 law (2008/101/EC) that allow for the ETS to be easily modified. First, flights into the EU could be exempt from the ETS if emissions-reducing measures are in place in the country of departure. Second, if equivalent measures to the ETS are put in place in the country of origin, then airline operators may be exempted. However, as indicated by the recent difficulty in approving a successor to the Kyoto Protocol, a global environmental agreement on aviation emissions will be difficult to reach among the ICAO’s 190-plus members.

As this issue progresses, please check back to this blog for future posts.

Special thanks to Sullivan & Worcester’s Michael Karp, Business Development and Marketing Intern, for assistance in preparing this post.

Pratt & Whitney's Innovation Aids Hawaiian Airlines in Earning Carbon Credits

Van Hilderbrand — Mon, 19 Mar 2012 15:10:17 -0500

Hawaiian Airlines has become the first airline to earn aviation-based carbon credits in part by utilizing Pratt & Whitney’s innovative EcoPower engine-washing system. EcoPower reduces fuel burn by using atomized water to wash engines in a closed-loop system that both filters and reuses water. According to the Hawaiian Airlines press release, the reduction of emissions by 22,000 metric tons “has had the equivalent effect of taking 700 cars off the road annually. In addition, since launching the program in 2005, Hawaiian’s commitment to the engine-washing system has saved the company more than 2.5 million gallons of fuel, along with an estimated 26,000 gallons of water that would have been used with traditional washing methods.” For more information on the technology, also check out Pratt & Whitney’s press release.

U.S. District Judge Dismisses Environmental Group's Legal Suit to Force EPA to Regulate Aircraft Engine Emissions

Van Hilderbrand — Fri, 16 Mar 2012 09:56:19 -0500

As previously posted, in June 2010, the Center for Biological Diversity (“CBD”) filed suit in the U.S. District Court for the District of Columbia (Ctr. for Biological Diversity et al. v. EPA et al., No. 1:10-cv-00985), alleging that the Environmental Protection Agency (“EPA”) unnecessarily “dragged its feet” and delayed making a determination that aircraft engine emissions significantly contribute to air pollution and climate change.

Disagreeing with CBD’s position, on Wednesday, March 14, 2012, U.S. District Judge Frederick J. Scullin, Jr. declined to force EPA to study such emissions, stating that the agency properly focused on larger and more major pollution sources first and could not consolidate its processes for automobile and aircraft emissions findings into a single study because they were different sources. The ruling does require EPA to review CBD’s administrative petitions and respond within 90 days of the judge’s order, however, the ruling does not compel EPA to make an endangerment finding within 90 days of the order. As you may recall from our earlier post, on July 5, 2011, the court also dismissed CBD’s efforts to push for similar marine vessel and non-road vehicle engine emissions regulation.

EPA does plan to release findings on aircraft emissions in the future, but said it has focused its limited resources on a bigger piece of the air pollutant pie. As this issue progresses, please check back to this blog for future posts.

Environmental Advocacy Group Sues EPA to Regulate Emissions from Aviation Gasoline

Van Hilderbrand — Wed, 14 Mar 2012 14:25:04 -0500

As we mentioned in our October 19, 2011 post, “EPA Sets Its Regulatory Cross Hairs on Leaded Aviation Fuel,” an environmental advocacy group, Friends of the Earth, filed a 2006 petition asking EPA to find that lead emissions from the use of aviation gasoline (“Avgas”) in the general aviation sector endangers public health, and to regulate such emissions under the Clean Air Act. In May 2011, the group submitted a Notice of Intent to sue the EPA. Last week, Friends of the Earth filed a lawsuit to challenge EPA’s failure to respond to the 180-day petition and for failure to regulate lead emissions from Avgas.

Friends of the Earth point to two facts that it says mandates immediate corrective action by EPA through regulation of Avgas: (1) according to EPA estimates, sixteen million people reside and three million children attend school in close proximity to the 22,000 airports where leaded Avgas may be used; and (2) there is no safe threshold for lead exposure.

As posted earlier, it is well-known that lead is highly toxic and may cause adverse health effects, thus, it was phased out of automobile gasoline many years ago. A recent study from Duke University concluded that children living within 1,000 meters of an airport where Avgas is used show a higher blood lead level than other children. EPA has commissioned air quality monitors be installed at 15 airports to gather information on lead pollution and the Federal Aviation Administration has assembled a task force to orchestrate a move away from Avgas use. However, it appears that these actions were not good enough for Friends of the Earth. According to the group, this lawsuit asks EPA “to move more quickly and definitively in establishing regulations.”

Air pollution remains a top priority at EPA. It is likely that we will see regulation of air emissions, such as lead emissions, in the near future. As this issue progresses, please check back to this blog for future posts.

FAA Outlines the Environmental Risks to the Aviation Industry

Van Hilderbrand — Tue, 13 Mar 2012 14:13:06 -0500

The United States Federal Aviation Administration (“FAA”) recently released its Aerospace Forecast for Fiscal Years 2012-2032. In the Forecast, FAA identified several risks to the aviation industry, including aviation’s impact on the environment and the uncertainty surrounding the European Union’s Emissions Trading Scheme (“EU ETS”).

Aviation sector operations are expected to grow to meet expanding national economic and mobility needs. With this growth comes increased noise pollution, air quality, and water quality concerns, especially around new construction and expansion of existing airports. Global carbon emissions from the fleet are also expected to rise, unless mitigated by new cleaner aircraft technologies, renewable fuels, operational improvements, and market based measures. If the aviation industry does not address these issues and make significant progress, tighter restrictions via environmental standards and operating limitations will be imposed, thus potentially depressing industry growth.

The report also notes that the effects of market based measures, such as the EU ETS, are unpredictable. Implementation of the EU ETS has the potential to increase costs for U.S. airlines, which in turn, could reduce the funds available for investments in new emissions reduction technology. However, the reverse could also be true. In the face of increased operating costs, U.S. airlines could hasten the development of more fuel efficient technologies. Most likely, U.S. airlines will face a short-term increase in operating costs that will soon be reduced through the adoption of cleaner technologies and fuels. Such an outcome would only be hastened by the uncertainty and recent increase in oil prices.

United States Navy Procures Historic Amount of Aviation Biofuel

Michael Karp — Wed, 11 Jan 2012 12:08:44 -0500

The United States Navy recently purchased 450,000 gallons of algae and animal oil fat based biofuel from Louisiana based Dynamic Fuels, LLC, which is the single largest order of biofuel by the federal government in history. The biofuel is a drop-in fuel, meaning that no modifications to existing engines are necessary, and will be combined with marine diesel or aviation gas to be used in the newly formed “Green Strike Group.” The fuel combination has already been tested in the F/A – 18 fighter jet, as well as the V-22 Osprey and other sea vessels. Critics point out that the $12 million price-tag is too steep during a time which the military is already facing deep budget cuts, however, the Navy has always led the nation in transforming energy use and further, is responding to executive orders and instituted goals to invest in and to attain 50% of its fuel from renewable sources. The 450,000 gallons is only a fraction of the 1.26 billion gallons of fuel the Navy uses each year, but according to the USDA new release, the purchase “accelerates the development and demonstration of a homegrown fuel source that can reduce America’s, and our military’s, dependence on foreign oil.” The Navy’s procurement of the biofuel will enable it to test the cost and energy effectiveness on a large scale platform, which in turn could have a direct impact on the airline industry in the future.

Controversial Ruling on EU-ETS Causes U.S. Great Consternation

Michael Karp — Thu, 22 Dec 2011 18:38:15 -0500

As part of our continuing coverage, yesterday the European Union Court of Justice held that the European Union has the right to “permit a commercial activity, in this instance air transport, to be carried out in its territory only on condition that operators comply with the criteria that have been established by the EU.” (Air Transport Association of America v. Secretary of State for Energy and Climate Change) This judgment in effect forces international operators to comply with the European Union Emissions Trading Scheme (“EU-ETS”) provisions to cut carbon emissions on flights to the EU. The EU-ETS takes effect on January 1, 2012.

Whereas, the EU welcomed the ruling as a step forward in reducing emissions in the global aviation industry, representatives of U.S. and international carriers, as well as business operators, have criticized the ruling and the unilateral nature of the EU-ETS. According to National Business Aviation Association (“NBAA”) president and CEO Ed Bolen, “The court’s ruling goes against established policy and long-standing practice when it come to aviation regulations. It appears to set aside the principle, established in the Chicago Convention, that because aviation is a global industry, aviation policies should be developed and implemented on a global basis. Any new standards should be developed by the International Civil Aviation Organization (“ICAO”).” The International Air Transport Association and other international aviation industry representatives have also taken the position that airline emissions should be addressed through ICAO. ICAO itself issued a statement on behalf of 26 of its member states urging the EU not to include flights by non-EU operators in the EU-ETS.

Another important aspect to this development is the response from the U.S. government itself. As noted in previous posts, the House of Representatives has already passed a bill which excludes U.S carriers from participating in the EU-ETS, and a similar bill has been presented to the Senate for approval. Further, in a December 16^th letter addressed to the EU, Secretary of State Hillary Clinton expressed the United States’ escalating disapproval of the EU-ETS, and asserted that the EU had become increasingly isolated on this issue. According to the letter, the United States is strongly opposed to U.S. operators being subjected to coverage under the EU-ETS. According to the letter, 42 other countries have registered similar objections.

According to the NBAA and the Airlines for America (formerly the Air Transport Association of America), members will continue to seek a global approach to environmental issues, but in the interim, airline operators will adhere to the EU-ETS requirements. As this issue progresses please check back to this blog for further posts.

Special thanks to Sullivan & Worcester’s Michael Karp, Business Development and Marketing Intern, for assistance in preparing this post.

UBS Report Could Spell the End of the EU-ETS

Van Hilderbrand — Fri, 16 Dec 2011 11:53:08 -0500

According to a recent article in The Australian, “Europe’s $287bn Carbon ‘waste’: UBS report,” Swiss banking giant UBS reported that the European Union’s Emissions Trading Scheme (“EU-ETS”) has cost the continent’s consumers $287 billion in exchange for a negligible impact on cutting carbon emissions, and as a result its carbon trading market is on the verge of collapse. The report claims that had the funds been part of a targeted approach to replace the European Union’s dirtiest power plants, emissions could have been reduced by 43 percent.

This report is yet another blow to the EU-ETS as worldwide opposition to the scheme grows, especially in the aviation industry. As reported in the article on the National Business Aviation Association website entitled, “Report: EU-ETS Will Be Costly, Have Minimal Emissions Impact,” the International Civil Aviation Organization (“ICAO”) has adopted a white paper from 26 nations including the U.S. and Canada urging the EU to omit its air operators from complying with the EU-ETS. Further, as posted earlier on this blog, the U.S. has made moves to legislatively prevent U.S. airlines from participating in the EU-ETS. Actions like these could cripple the EU-ETS and signal the end of the scheme as a whole.

The bank’s findings add even more uncertainty to the overall ability to implement an international carbon trading market. The report came at a time when the U.S. announced it would forgo its own cap-and-trade system, Canada became the first country to withdraw from the Kyoto Protocol, and the Durban, South Africa Climate Talks ended with a non-binding agreement that will not be implemented until 2020. As this issue progresses please check back to this blog for further posts.

Special thanks to Sullivan and Worcester’s Michael Karp, Business Development and Marketing intern, for preparing this post.

Coalition Lobbies Senate on Passage of EU-ETS Prohibition Bill

Van Hilderbrand — Thu, 15 Dec 2011 12:14:21 -0500

As a follow-up to our October 26, 2011 post entitled, “House Passes European Union Emissions Trading Scheme Prohibition Act,” the National Business Aviation Association (“NBAA”) along with 14 other organizations representing the aviation sector formed a coalition to lobby the Senate on the passage of Senate Bill S.1956. The Senate bill is similar to that of House bill H.R. 2594, which passed convincingly in the House and prohibits U.S. airlines from complying with the European Union Emissions Trading Scheme (“EU-ETS”). The coalition claims that U.S. operators would lose billions of dollars if the EU-ETS prohibition is not passed, which in turn would fill the coffers of the European governments.

The projected date of implementation of the EU-ETS is January 1, 2012. For more details regarding the Coalition please see the NBAA website.

Special thanks to Michael Karp, Business Development and Marketing Intern, for assistance in preparing this post.

Announcement of SEC Investigation into Disclosure of Perks Involving Use of Aircraft by Executive

Harry Ekblom — Tue, 15 Nov 2011 14:25:12 -0500

A recent article in The Wall Street Journal, “SEC Probes Nabors’s Executive Perks, Jets,” reported that Nabors Industries Ltd. had disclosed an informal Securities and Exchange Commission investigation related to perquisites and personal benefits received by the officers and directors of Nabors, including their use of non-commercial aircraft. It is possible that a June 2011 article in The Wall Street Journal, (“Corporate Jet Set: Leisure vs. Business”), piqued the SEC’s interest in Nabors’ executive compensation reporting practices. The June article reported that Nabors had not disclosed the cost of aircraft perks provided to its CEO in 2009 and 2010 – although FAA records indicated that during 2009 and 2010 the most visited destinations after Houston (where Nabors is based) were New York, Palm Beach and Martha’s Vineyard. The article reported that Nabors’ CEO owned houses in all three places, and estimated that the costs of the flights to or from Palm Beach or Martha’s Vineyard alone would have cost around $704,000. A Nabors spokesman was quoted as saying that the company had offices in both Palm Beach and Martha’s Vineyard, at the CEO’s homes, and that the CEO “worked out of those locations a lot.”

The recent article serves as a reminder that the SEC has some firm views regarding the disclosure of what it considers “perquisites and other personal benefits.” Given that journalists and other interested parties recently have been provided with increased access to information on company aircraft movements through the curtailment of the BARR program (discussed below), this may be a good time for reporting companies to take another look at their reporting procedures regarding the personal use of aircraft by their executives.

Nabors is a ’34 Act reporting company, and is subject to SEC executive compensation disclosure requirements. Under Item 402 of Regulation S-K, reporting companies must disclose compensation paid to certain executive officers and directors in the nature of “perquisites and other personal benefits,” unless the aggregate amount of such compensation is less than $10,000. If perquisites or personal benefits are required to be reported for a particular executive officer or director, then each perquisite or personal benefit that exceeds the greater of $25,000 or 10% of the total amount of perquisites or personal benefits must be quantified for that individual and disclosed in a footnote to the compensation table required under Item 402. Item 402 requires perquisites and other personal benefits to be valued on the basis of the aggregate incremental cost to the registrant. Examples of aggregate incremental cost could include the cost of fuel, additional crew expenses, landing fees and other charges attributable to flights conducted for the personal benefit of an executive officer or director. Aggregate incremental cost would generally not include the acquisition cost of an aircraft.

So what makes an item a “perquisite”? In the release that accompanied its most recent revision to Item 402 in 2006, the SEC identified two factors in determining when an item is a perquisite. First, an item is not a perquisite “if it is integrally and directly related to the performance of the executive’s duties.” The SEC provided, as an example of this type of item, a Blackberry or laptop computer, if the company believes it is an integral part of the executive’s duties to be accessible by email to the executive’s colleagues and clients. Otherwise, an item is a perquisite “if it confers a direct or indirect benefit that has a personal aspect, without regard to whether it may be provided for some business reason or for the convenience of the company, unless it is generally available on a non-discriminatory basis to all employees.” A company policy that requires an executive to use company aircraft for personal travel for security purposes or the provision of a helicopter service for an executive to commute to work from home may be of benefit to the company, but, in the view of the SEC, is not integrally and directly related to the performance of the executive’s duties and confers a direct or indirect benefit that has a personal aspect. In the SEC’s view, unless that benefit is generally available on a non-discriminatory basis to all employees, it is a perquisite and, if over the $10,000 threshold, must be disclosed.

It is unclear how the Nabors’ investigation will turn out.

What is clear is that the SEC takes a broad view of what constitutes a perquisite, and is likely to regard most kinds of personal use of company aircraft as a perquisite, and subject to disclosure.

It is also clear that the use of company aircraft has recently become easier to track than ever before – thus making the personal use of company aircraft potentially more visible than ever before. Aircraft movements are generally made available on a near real-time basis via the FAA’s Aircraft Situation Display to Industry (ASDI) data feed to subscribers – which include for-profit flight tracking services. Until recently, aircraft owners and operators could request that aircraft identification information be blocked from the ASDI feed via the Block Aircraft Registration Request (BARR) program, which was administered by the National Business Aircraft Association (NBAA) on behalf of the FAA. The BARR program, which did not require any special showing for blocking requests, proved extremely popular with owners and operators of corporate aircraft. Effective August 2, 2011, however, the FAA curtailed the BARR program such that only a request justified by a “Certified Security Concern” would be honored, and it took over the management of the program from the NBAA. Efforts are underway to reverse the FAA’s curtailment of the BARR program, and it is not yet clear how the FAA’s administration of the curtailed program will work in practice. In any event it seems likely that, in the short run at least, the FAA’s action will lead in the direction of more disclosure, not less.

Aviation Industry Considers the Use of More Biofuels to Cut Emissions and Reduce Costs

Van Hilderbrand — Tue, 08 Nov 2011 10:40:40 -0500

As reported in earlier posts, non-European Union airlines may soon be subject to the EU Emissions Trading System (“ETS”). As airlines face pressure to reduce carbon emissions and to cut their $200 billion annual fuel bill, many are weighing the advantages of using more aviation biofuels, in addition to employing improved fuel efficient designs and materials. Yesterday, United Airlines made the first domestic commercial flight from Houston, Texas to Chicago, Illinois powered by a biofuel blend from San-Francisco based Solazyme, Inc., which is 60 percent traditional jet fuel and 40 percent algae-based biofuel. In addition, on Wednesday, Alaska Airlines plans to begin 75 regular passenger flights from Seattle, Washington to Portland, Oregon and to Washington, D.C. fueled by a 20 percent biofuel blend made from used cooking oil. (Chicago Tribune)

Last month, another airline announced its plans to fly its passengers on a waste gas-based fuel by 2014, thus cutting its carbon footprint in half. Virgin Atlantic Airways plans to be the first airline to use waste gas from industrial steel production to move well beyond its initial pledge of a 30 percent carbon reduction per passenger by 2020. Virgin is a pioneer in this area, flying a Boeing 747 from London to Amsterdam in 2008 on a mixture of babassu oil and coconut oil and stands to be a leader moving forward. (Environmental Leader)

Biofuels, however, are not without critics, as biofuels often are produced from first-generation edible crops or from plants that consume arable land that would have otherwise been used for edible crops. To solve this dilemma, the aviation industry is turning to other plant sources that grow in arid conditions as well as municipal organic waste to convert into aviation fuel.

Commercial airlines are certainly moving toward taking advantage of biofuels. It is only a matter of time before business and corporate aircrafts follow. As this issue progresses please check back to this blog for future posts.

House Passes European Union Emissions Trading Scheme Prohibition Act

Van Hilderbrand — Wed, 26 Oct 2011 13:55:59 -0500

By a consent vote last Thursday, October 20, 2011 and after less than an hour of debate, the United States House of Representatives approved H.R. 2594, the “European Union Emissions Trading Scheme Prohibition Act.” If this bill is passed by the Senate and signed by President Obama, it would force the Department of Transportation to bar U.S. airline operators from complying with the European Union’s Emissions Trading Scheme. As previously posted, the carbon trading scheme has drawn criticism from many countries that question its compliance with international laws and agreements.

For more details, please see the articles at LAW360 or Bloomberg Business Week. The text of H.R 2594 can be found at the Library of Congress. As this issue progresses, please check back to this blog for future posts.

EPA Sets Its Regulatory Cross Hairs on Leaded Aviation Fuel

Van Hilderbrand — Wed, 19 Oct 2011 13:13:54 -0500

Avgas (aviation gasoline), the last type of leaded fuel available on the U.S. market, has recently drawn the scrutiny of EPA. Although it makes up only a tenth of 1 percent of the liquid fuel sold in the U.S., it is the life blood of smaller piston-engine aircrafts. In the 1970’s and 1980’s, EPA used its authority under the Clean Air Act to push for the removal of lead from automobile gasoline and today this move is considered one of the greatest environmental achievements of all time. However, Avgas and racing fuel were spared EPA regulation mainly because of their relative small impact and limited use. Racing fuel switched to a customized blend of high-octane gasoline in 2008 and it appears that EPA has now taken notice of Avgas.

Later this year, air quality monitors will be installed at 15 airports to gather data on lead pollution and to aid EPA in making a determination on whether Avgas is exposing people to dangerous amounts of lead. EPA’s move comes as a result of a lawsuit from the environmental group Friends of the Earth. Scientific studies have shown that aircraft emissions contributed to lead in children’s blood, particularly those living close to airports.

The Federal Aviation Administration has assembled the Unleaded Avgas Transition Aviation Rulemaking Committee to plan for the potential transition away from Avgas, but the same problem that has kept Avgas around in the first place has yet to be solved. The problem being that no suitable replacement exists. Lead helps protect engines, a unique quality not easily replicated. Engines that burn Avgas can’t handle the ethanol added to regular gasoline and premium gasoline is less powerful than the 100 octane Avgas. The industry has been testing alternatives for quite some time, but none have worked. However, the industry has not been under any pressure thus far to achieve results.

Any Avgas ban would most directly affect aircraft operated in Alaska, which uses roughly one-third of the Avgas consumed in the U.S., and in other remote areas that use piston-engine planes to deliver food, medicine, and other supplies to remote towns. An Avgas ban would essentially regulate these aircraft out of existence. To address this, the National Business Aviation Association and others have formed acoalition of stakeholders that is seeking an approach that focuses on concerns about safety, cost, availability and ease of Avgas production.

If you consider that Avgas is only a small piece of the overall emissions pie, it is clear from this move to begin a monitoring program as well as other recent moves by EPA that air pollution is a top priority. It is likely we will see more emissions regulation in the near future. As this issue progresses, please check back to this blog for future posts.

Inclusion of Non-European Union Aviation Sector in Emissions Trading System Does Not Violate International Law

Van Hilderbrand — Wed, 12 Oct 2011 13:39:22 -0500

As noted in earlier posts, beginning January 1, 2012, the European Union ("EU") plans to include the aviation sector as the second largest industry in its carbon Emissions Trading System ("ETS"). The plan requires all airlines, including airlines operated out of non-EU countries, to use emissions allowances for flights to or from European airports. The international community has spoken out against this measure, with more than 20 countries, including the United States, China, India, Japan, and Russia, signing a declaration vowing to challenge the EU's plan. The Air Transport Association of America, American Airlines, Continental Airlines, and United Airlines took further steps, filing an action in the High Court of Justice of England and Wales arguing that inclusion in the ETS would place them under U.K. authority. Air Transport Ass'n of America v. Secretary of State for Energy and Climate Change, EU Court of Justice, No. C-366/10. The High Court referred the case to the EU Court of Justice for an interpretation of EU law.

On Thursday, October 6, 2011, Advocate General Juliane Kokott wrote an advisory opinion on behalf of the EU Court of Justice finding that the EU's inclusion of the entire airline sector does not infringe on the sovereignty of other states or international agreements, including the U.S.-EU Open Skies Agreement, the Kyoto Protocol, or the Chicago Convention on International Aviation. Although the opinion is non-binding, the advocate general's opinion normally predicts the final judgment of the case, which is expected in early 2012. For more details, please see the BNA Daily Reporter article or LAW360 article. As this issue progresses, please check back to this blog for future posts.

Positive Cooperation on the Horizon Regarding Wind Turbine Radar Concerns

Van Hilderbrand — Tue, 06 Sep 2011 12:55:07 -0500

As mentioned in our July 1, 2011 post entitled “Wind Turbines Effect on Radar Systems and Aviation Security,” the wind energy and aviation security sectors continue to struggle towards common ground, but signs of government agency cooperation with both developers and one another reveal that change is in the works.

The Federal Aviation Administration certainly has its eye on aviation safety and security concerns, as wind turbines may impact radar dependant air traffic and often fall within FAA jurisdiction over construction projects proximate to an airfield or over 200 feet tall. To help ease concerns, FAA has even mandated contribution to radar development efforts as a condition for siting approval. Similar worries have been voiced by the National Oceanic and Atmospheric Administration pointing out that wind turbines often disrupt registration of weather events, such as areas of high precipitation, causing potentially dangerous forecasting and weather tracking obscurities.

Wind energy industry developers understand the agencies’ concerns. To put the technological issue with wind turbine interference in perspective, the technical director with Raytheon explains that “a wind turbine can look like a 747 on final approach” and they “don’t want to have the software eliminate a real 747,” which is a difficult hurdle to surmount. As a result, this issue will remain contentious for both the commercial and business aircraft industries until these concerns are addressed.

United States defense and military agencies maintain that wherever there is a threat and concern caused by radar interference, this concern trumps the push to erect wind energy farms. The Department of Defense has been accused of “foot-dragging” after missing two deadlines pertaining to the impact of wind farming on military operations, and has been criticized regarding the last minute blockage of a Caithness Energy project in Shepherds Flat, Oregon after the company had the project vetted by the Air Force years earlier. Although this project is now on track to becoming the world’s largest wind energy farm, the skein of bureaucracy has been a subject of criticism. In response, the Department of Defense has changed course and begun to develop a timely, transparent review process through the DOD Energy Siting Clearinghouse, a “one-stop shop” within the DOD for developers and other government agencies.

A current and unique case to watch is that of prospective offshore wind farms on Virginia’s Outer Continental Shelf. Recently, the Virginia Offshore Wind Coalition was pleased to receive results from a Department of Defense assessment identifying 18 of 25 proposed optimum wind harnessing tracts as “compatible with military needs and rules so long as certain [unspecified] guidelines are met.” These wind corridors were of particular importance to the Department of Defense due to both the Norfolk Naval Station, the world’s largest naval base, and a NASA launch facility being in the vicinity. With multiple bids on the table from both turbine farm and energy transmission developers, many are hopeful that the lengthy review process might be nearing its end.

As this issue progresses please check back to this blog for future posts.

Special thanks to Sullivan and Worcester’s Alex Kellenberg, environmental intern, for preparing this post.

Chinese Acquisition of United States Aircraft Manufacturer Facing Possible Department of State Scrutiny

Van Hilderbrand — Wed, 10 Aug 2011 08:38:02 -0500

On June 28, 2011, the Minnesota based small aircraft manufacturer, Cirrus, was acquired for a reported $210 million by China’s state-run Chinese Aviation Industry General Aircraft (“CAIGA”). This acquisition has raised questions concerning jurisdiction and China’s ability to gain access to potential U.S. military technology. CAIGA currently manufactures a stealth jet fighter and has come under scrutiny for previously bidding on U.S. defense contracts. Thus, a request for jurisdiction review to the Department of State was initiated just after CAIGA’s purchase of Cirrus.

Cirrus has a line of four-seat turbo prop planes, along with technology for a small jet prototype, the Vision SF50. Cirrus uses Williams International’s FJ33-4A-19 engines on the SF50. It is this engine technology that has come under scrutiny. The FJ33 uses a Full Authority Digital Engine Control (“FADEC”), which the Department of State may classify as a military item. If it does, Cirrus could lose access to its prototype due to its acquisition by a foreign-owned company. Until the decision is made, the SF50 remains with Williams International.

The Department of State’s jurisdiction review could take up to six months. A similar review last November denied a Chinese acquisition of a U.S. technology start-up worth $2 million, just one of a handful of Chinese acquisitions that were not approved. As this case progresses, please check back to this blog for future posts.