February 28, 2025

The Site Report - Construction Law Industry Insights, Issue 2, February 2025

Hikmat Al-Chami, David Croft, Stephanie Eaton, Carrie Grundmann, Bryce Hunter, Steven Lee, Brienne Marco, Julian Neiser, Alexander Turner, Joseph Unger

Spilman Thomas & Battle, PLLC

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Issue 2, 2025

Welcome to our second 2025 issue of The Site Report! In this edition, we address tariff fears in the industry, the use of artificial intelligence in building design, an update on The Rural Historic Tax Credit Improvement Act, the ramping up of data centers and the corresponding energy demands, the latest on offshore wind energy along the East Coast, the status of Three Mile Island, and the latest concerning the Corporate Transparency Act.

Thank you for reading.

Tariff Fears Tied to Biggest Construction Cost Jump in 2 Years

“Contractors have rushed to buy materials before potential tariffs go into effect, pushing prices higher.”

Why this is important: Attention Contractors: Have you bid enough for your upcoming project? Or if your project is in progress, do you need or expect to need a change order to cover material price increases? And can you still obtain the materials upon which your project was designed, engineered and/or bid? These are all questions that many contractors are asking themselves, their construction and project managers, and their subcontractors. Moreover, these are also questions many owners are facing. After a year of relative stability for contractors, this article highlights three primary factors for the sharp increase in price signals for construction projects following the recent change in presidential administrations: (1) increased energy prices; (2) producer price hikes; and (3) demand surges and related material “hoarding” related to anticipated effects of U.S. tariffs. While the first two factors can be more predictable and even expected, there are many unknowns about the impacts that tariffs will have on the construction industry now and in the coming years. Some products may become difficult if not impossible to obtain from overseas markets affected by tariffs. This, in turn, could clog the supply chain for those products, and cause sharp price increases for existing supplies. According to the Associated Builders and Contractors, or ABC, construction costs are 40.5 percent higher than they were five years ago, with prices jumping 1.4 percent from December 2024 to January 2025. Therefore, construction teams and owners need to take time now to reassess project bids on upcoming projects, more realistic timeframes for material deliveries and potential for supply chain gridlock, the potential for alternative (and U.S.-sourced) building materials, and the need for price adjustments and change orders for ongoing projects. If any of these questions are impacting your construction project, our Construction Practice Group is here to help guide you through the quagmire of potential legal issues to keep your project on track. --- Stephanie U. Eaton

Building The Future: How AI Is Revolutionizing Construction

"Given all the above complexity, it’s little surprise that AI is already making an impact on improving the efficiency and effectiveness of construction projects.”

Why this is important: Artificial intelligence has broad applications in the lifecycle of a construction project. The utilization of AI in the construction process begins with the design and planning of the project. AI is being used to create building information modeling (BIM) tools that will optimize the design of building systems, including the placement and operation of building systems. AI also assists construction managers with improving scheduling, allocation of resources, and risk management. These tools can also be used to provide construction managers with the ability to identify potential delays before they negatively impact the project, and to adjust the project accordingly. AI can also be utilized on the job site to not only monitor the progress of the project, but to also identify health and safety risks and prevent on the job injuries. Finally, AI is being used in autonomous robots that install drywall, lay bricks, pour concrete, or move supplies and equipment around the jobsite This use of AI throughout the construction project’s lifecycle will increase efficiencies, prevent on the job injuries, and save time and money. --- Alexander L. Turner

The Rural Historic Tax Credit Improvement Act Will Expand Access To Smaller Projects

Last week, U.S. Senators Shelley Moore Capito, R-West Virginia, and Mark Warner, D-Virginia, introduced S. 631, which focuses on rural historic tax credit (HTC) use and also includes transferability for small projects (those with $5 million or less in qualified rehabilitation expenditures). The legislation will help make rural HTC projects more financially feasible and will result in a higher number of these projects being completed in rural areas and states. The highlights of the proposed legislation are:

Making HTC projects in rural areas eligible for an increased credit from the current 20 percent to 30 percent.
Including an additional increase in the credit to 40 percent for affordable housing creation.
Allowing the credit to be used in addition to the Low-Income Housing Tax Credit (LIHTC).
Allowing small rural projects to claim the credit in the first year of use.
Allowing transferability of the credit to a third party.
Eliminating basis adjustment to simplify credit transactions.

This initiative reflects ongoing efforts to support rural development through the preservation of historic buildings, recognizing their significance to local identity and potential to stimulate economic growth. The bill has the support of the tax credit community, and its companion legislation in the House of Representatives is being led by U.S. Rep. Mike Carey, R-Ohio. --- David R. Croft and Bryce J. Hunter

Energy Demand Rises with Growth of Data Centers

By Steven W. Lee

In recent years, significantly higher electricity demands have been forecasted with the growth of large-load data centers, driven primarily by the development of artificial intelligence. The projected growth of data centers has caused utilities and states to grapple with important questions for all electricity consumers: who bears the cost burden for the infrastructure and new generation necessary to support new large-load customers, and how will enough generation be built in time to support the rapid growth?

Click here to read the entire article.

US Port Welcomes First Coastal Virginia Offshore Substation and Dominion Energy Says Virginia Beach Wind Farm's Cost is Up

“The first of three offshore substations for the Coastal Virginia Offshore Wind (CVOW) project has arrived at the Portsmouth Marine Terminal in the US.”

“The utility now plans to spend $10.7 billion on the Coastal Virginia Offshore Wind project, up from $9.8 billion in 2021.”

Why this is important: Work is progressing on Dominion Energy Virginia’s offshore wind project known as the Coastal Virginia Offshore Wind (CVOW), which is located off the coast of Virginia. In December 2024, the first of three offshore wind substations were delivered to the Portsmouth Marine Terminal in eastern Virginia. The project is currently approximately 50 percent completed, is proceeding on time, and construction is expected to be completed by the end of 2026. When complete, CVOW is expected to provide 2.6 GW of clean, carbon-free energy, enough to power approximately 660,000 homes.

Of particular note, we recently learned through a Dominion press release as mentioned in the NPR article that the projected total costs of CVOW have increased from the $9.8 billion as estimated in 2021 to $10.7 billion (a nearly 10 percent increase) due primarily to higher network upgrade costs as assigned by PJM, the regional electric grid operator. Fortunately, due to a stipulation negotiated by groups representing customer interests, including Walmart, the Virginia Attorney General, Appalachian Voices, and Sierra Club, the full extent of these cost increases will not be borne by customers. Instead, these cost overruns – up to $11.3 billion – are shared 50/50 between customers and Dominion. Additional customer protections kick in if the costs of CVOW exceed $11.3 billion. For project costs between $11.3 billion and $13.7 billion, Dominion would bear the full responsibility for those cost increases.

While Dominion does not currently anticipate any issues with bringing CVOW online since it is a fully permitted project, the Trump administration has issued directives that (1) pause any further permitting and leasing of offshore wind projects; and (2) require federal officials to study whether existing leases should be amended or terminated. Dominion also has two additional leases under development, thus, it remains to be seen whether these leases will be impacted by the Trump administration. There is also a lawsuit by environmental groups against CVOW due to the potential impact on marine life. --- Carrie H. Grundmann

Three Mile Island Restart Plans Move Forward Despite Community Concerns

“The group ‘No TMI Restart’ plans to urge commissioners not to cooperate with Constellation Energy's evacuation plan to prevent the plant's restart.”

Why this is important: The proposed restart of Three Mile Island's (TMI) Unit 1 reactor is moving ahead on schedule, with Constellation Energy making significant progress in hiring and facility preparations. The project represents a complex intersection of Big Tech's growing energy needs, the push for carbon-free power, and lingering public anxiety over nuclear safety at the site of America's worst commercial nuclear accident.

Constellation Energy reports they have already hired 200 of the roughly 600 full-time employees who will work at the newly renamed Crane Clean Energy Center. Dave Marcheskie, community relations manager, notes many employees are returning to the facility after being transferred elsewhere. "They had jobs at other sites, but they wanted to move back to the area... and grow their family here," he said.

The project has faced opposition from local activists like Gene Stilp, director of "No TMI Restart," who argues that the project prioritizes corporate interests over community safety. His group has urged commissioners not to cooperate with Constellation Energy's evacuation plan. A key point of contention: the power generated won't serve local communities but instead will be transmitted to Microsoft facilities in Virginia through a 20-year power purchase agreement.

Multiple regulatory approvals must still be secured from agencies including the U.S. Nuclear Regulatory Commission, along with completion of environmental impact assessments, state and local permits, and license renewal through 2054, before the reactor can resume operations. A filing with the NRC indicates Constellation plans to target a re-opening by the end of the second quarter in 2027.

The restart effort will create thousands of construction jobs during the facility preparation process. The company plans significant upgrades to the plant's turbine, generator, main power transformer, and cooling and control systems.

This development comes against the backdrop of TMI's troubled history. In 1979, Unit 2 suffered a partial meltdown that fundamentally changed nuclear industry safety protocols and public perception. While Unit 2 remains permanently shuttered, supporters point to Unit 1's separate design and Constellation's "proven track record of safety and performance and excellence" as evidence of its viability as a power generation option. --- Hikmat N. Al-Chami

Court Lifts Injunction on Corporate Transparency Act – Most Companies Must File by March 21, 2025

By Brienne T. Marco and Joseph C. Unger

After months of litigation, the Corporate Transparency Act is once again effective, and most companies subject to the CTA are required to file Beneficial Ownership Information reports with the U.S. Treasury’s Financial Crimes Enforcement Network on or before March 21, 2025.

Click here to read the entire article.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.