Best Bets: Clean Tech

By Tom McNichol
     
It's not clear exactly how recession-proof clean technology will be in a steep economic downturn. But whatever venture deals do get done, it's a pretty safe bet that California-based law firms will get more than their share of the business. In fact, according to a recent study by Dow Jones VentureSource, more than half of all clean-tech venture capital in the United States last year went to California companies. That adds up to a cool $1.3 billion. As a result, many law firms are betting the bank on practice groups devoted to this area.
      When Morrison & Foerster launched its Clean Tech practice group in the fall of 2006, it had about 25 attorneys. Now there are more than 100, and the firm adds an average of one new clean-tech client a week. For example, in February MoFo negotiated a deal in which AltraBioFuels, a Los Angelesbased manufacturer and developer of renewable biofuels, sold its cellulosic technology to EdenIQ in a cash and stock deal. MoFo also recently helped Suntech Power Holdings, a large China-based solar power company, negotiate a $678 million silicon-purchase agreement.
      Another firm that's jumped into this area in a big way is Sheppard Mullin Richter & Hampton. It has committed 50 lawyers to the Global Climate Change practice group that it launched a year ago. Among its clients is a West Coast alternative-energy and renewable-fuels company that has a patented technology for converting landfill greenhouse gases and forest residue into pipeline-quality natural gas and clean, compressed natural gas. In April, Sheppard Mullin helped that company close a $25 million equity-investment deal with
      a large investment bank. Sheppard Mullin attorneys also recently assisted Brookfield Homes in obtaining permits for its residential project-Landmark at the Ridge, located in Brisbane, just south of San Francisco. The project adopts green standards to reduce greenhouse-gas emissions during and after construction, and the homes feature energy-efficient appliances and passive solar panels to heat water.
      Of course, the clean-tech boom isn't solely a California phenomenon, and undergirding all of this activity is widespread concern over global warming. According to a Bloomberg news survey, as of last winter 20 of the 100 highest-grossing law firms in the country have started practices advising companies on climate change. But California stands out, if only because it was here in 2006 that the Legislature passed AB 32, the Global Warming Solutions Act (Cal. Health & Safety Code §§ 3850038599), which launched the nation's first statewide program to cap the greenhouse-gas emissions of major industries.
      "Global climate change is clearly the issue of the day, and it's probably going to be the issue of the decade," says Rob Thornton, a partner at Nossaman Guthner Knox & Elliott who is one of ten lawyers now working on that firm's Climate Change Team. Much of that team's work is advising land developers and local governments on how to address climate-change issues in their environmental impact reports. It also provides litigation services to clients being sued over greenhouse-gas emissions. For example, Nossaman's Climate Change Team recently worked with the National Association of Home Builders to develop a new set of environmentally conscious building requirements, known collectively as the National Green Building Standard, which is due to be unveiled later this year.
      But for all of the thoughtful analysis that's gone into this area, much of what is driving the business right now is uncertainty. The California Global Warming Solutions Act sets
      general targets to reduce greenhouse gases. Detailed guidelines have yet to be worked out, and companies with large carbon footprints want a seat at the table as those decisions are made.
      Meyers Nave Riback Silver & Wilson reported a "significant uptick" in its climate changerelated business last spring, particularly with respect to clients looking for advice on how to make sure their environmental impact reports properly address the greenhouse-gas issue. But Meyers Nave attorney Tim Cremin cautions, "I don't necessarily think this area is recession-proof. Already, you're seeing state and local governments grappling with how to balance environmental issues and budget constraints. The growth potential is there, but it's going to be subject to the usual economic pressures."
      The legal work on green housing and real estate development has already softened, mainly because the housing market has fallen into a deep slump. And over the longer haul, a severe recession could very well pit the green movement's ideals against more immediate concerns. Thus, while global warming may be with us for a very long time, for law firms and their clients there may very well be some bumps in the road ahead.
     
      Tom McNichol is a contributing writer for California Lawyer.
     

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