Justia Energy, Oil & Gas Law Opinion Summaries

Articles Posted in Constitutional Law
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Alaska Venture Capital Group, LLC (AVCG) owned interests in oil and gas leases on state lands. AVCG sought the State’s approval to create overriding royalty interests on the leases. The Alaska Department of Natural Resources, Division of Oil and Gas denied AVCG’s requests, explaining that the proposed royalty burdens jeopardized the State’s interest in sustained oil and gas development. AVCG appealed. Five years later the DNR Commissioner affirmed. The superior court then affirmed the Commissioner’s decisions. AVCG appealed to the Alaska Supreme Court, arguing primarily that the decisions improperly adopted a new regulation that did not undergo the rulemaking procedures of Alaska’s Administrative Procedure Act (APA). AVCG maintained that DNR’s reliance on specific factors - in particular, the fact that the proposed ORRIs would create a total royalty burden of over 20% on the leases - amounted to adopting a regulation. AVCG also argued that the decisions lacked a reasonable basis in fact and law and that, for some of its leases, no agency approval was required at all. The Supreme Court rejected these arguments, and rejected AVCG's constitutional claim: that delay and an "ad hoc" decision-making process violated its procedural due process rights. View "AVCG, LLC v. Alaska Department of Natural Resources" on Justia Law

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Minnesota sued a litany of fossil fuel producers1 (together, the Energy Companies) in state court for common law fraud and violations of Minnesota’s consumer protection statutes. In doing so, it joined the growing list of states and municipalities trying to hold fossil fuel producers responsible for alleged misrepresentations about the effects fossil fuels have had on the environment. The Energy Companies removed to federal court. The district court granted Minnesota’s motion to remand, and the Energy Companies appealed.   The Eighth Circuit affirmed. The court held that Congress has not acted to displace the state-law claims, and federal common law does not supply a substitute cause of action, the state-law claims are not completely preempted. The court reasoned that because the “necessarily raised” element is not satisfied, the Grable exception to the well-pleaded complaint rule does not apply to Minnesota’s claims. Further, the court wrote that the connection between the Energy Companies’ marketing activities and their OCS operations is even more attenuated. Thus, neither requirement is met, there is no federal jurisdiction under Section 1349. View "State of Minnesota v. American Petroleum Institute" on Justia Law

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These original proceedings involve efforts by the Public Utilities Commission (PUC or the Commission) to discover whether the political activities of Southern California Gas Company (SCG) are funded by SCG’s shareholders, which is permissible, or ratepayers, which is not. The Commission propounded several discovery requests (called “Data Requests”) on SCG, and when SCG failed fully to comply, moved to compel further responses that ultimately resulted in an order to comply or face substantial penalties. SCG seeks a writ of mandate directing the Commission to rescind its order on the ground that the discovery requests infringe on SCG’s First Amendment rights.   The Second Appellate District granted the petition and held that SCG has shown that disclosure of the requested information will impact its First Amendment rights, and the Commission failed to show that its interest in determining whether SCG’s political efforts are impermissibly funded outweighs that impact. The court reasoned that because SCG demonstrated that a threat to its constitutional rights exists, the burden shifted to the Commission to demonstrate that the data requests serve and are narrowly tailored to a compelling governmental interest. However, the PAO’s discovery inquiries into all sources of funding for SCG’s lobbying activities go beyond ratepayer expenditures. Insofar as the requests seek information about shareholder expenditures, they exceed the PAO’s mandate to obtain the lowest possible costs for ratepayers and its authority to compel disclosure of information necessary for that task. The requests, therefore, are not carefully tailored to avoid unnecessary interference with SCG’s protected activities. View "So. Cal. Gas Co. v. P.U.C." on Justia Law

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The Kentucky Public Service Commission's “fuel adjustment” regulation allows utilities to adjust the rates they charge customers to account for fluctuating fuel costs. Unreasonable charges are disallowed. The Commission considers the price the utility paid for raw materials, like coal. Kentucky utilities are encouraged to buy cheaper coal. Kentucky coal producers, however, pay a severance tax. Compared to states with no severance tax, Kentucky coal is expensive. The Kentucky House of Representatives encouraged the Commission to consider all costs, including fossil fuel-related economic impacts within Kentucky, when analyzing coal purchases under the regulation. The Commission issued a new regulation under which it would artificially discount a utility’s fuel costs by the amount of the severance tax paid to any jurisdiction.Foresight, an Illinois coal producer, challenged the regulation under the Commerce Clause. The district court denied a preliminary injunction. While an appeal was pending, the Commission rescinded the regulation. A subsequent statute required the Commission to evaluate the reasonableness of fuel costs based on the cost of the fuel less any severance tax imposed by any jurisdiction. Foresight sued; the district court again denied the preliminary injunction. The Sixth Circuit remanded. Foresight is likely to be able to show that the law discriminates against interstate commerce. The Commission proffered no explanation for the statute except that it is designed to nullify the competitive disadvantages created by Kentucky’s severance tax. Illinois coal is worse off as a matter of basic economics and Supreme Court precedent; the law is purposefully discriminatory. View "Foresight Coal Sales, LLC. v. Chandler" on Justia Law

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Plaintiffs Citizens for Constitutional Integrity and Southwest Advocates, Inc. appealed the rejection of their challenges to the constitutionality of the Congressional Review Act (CRA), and Senate Rule XXII, the so-called Cloture Rule, which required the votes of three-fifths of the Senate to halt debate. The Stream Protection Rule, 81 Fed. Reg. 93,066 (Dec. 20, 2016), heightened the requirements for regulatory approval of mining-permit applications. The Rule was promulgated by the Department of the Interior’s Office of Surface Mining Reclamation and Enforcement (the Office) in the waning days of the Obama Administration. Within a month of the Stream Protection Rule taking effect on January 19, 2017, both Houses of Congress had passed a joint resolution disapproving the Rule pursuant to the CRA, and President Trump had signed the joint resolution into law. According to Plaintiffs, the repeal of the Rule enabled the approval of a 950.55-acre expansion of the King II Coal Mine (the Mine), located in La Plata County, Colorado, and owned by GCC Energy. Plaintiffs filed suit in the United States District Court for the District of Colorado against the federal government and several high-ranking Department of the Interior officials in their official capacities (collectively, Defendants) seeking: (1) a declaration that the CRA and the Cloture Rule were unconstitutional and that the Stream Protection Rule was therefore valid and enforceable; (2) vacation of the approval of the King II Mine permit modification and an injunction against expanded mining activities authorized by the modification; and (3) attorney fees. The Tenth Circuit Court of Appeals rejected plaintiffs' challenges to the CRA and held that they lacked standing to challenge the Cloture Rule. View "Citizens for Constitutional, et al. v. United States, et al." on Justia Law

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The original proceedings involve efforts by the Public Utilities Commission (PUC or the Commission) to discover whether the political activities of Southern California Gas Company (SCG) are funded by SCG’s shareholders, which is permissible, or ratepayers, which is not. The Commission propounded several discovery requests (called “Data Requests”) on SCG, and when SCG failed fully to comply, moved to compel further responses that ultimately resulted in an order to comply or face substantial penalties. SCG seeks a writ of mandate directing the Commission to rescind its order on the ground that the discovery requests infringe on SCG’s First Amendment rights.   The Second Appellate District granted the petition. The court held that SCG has shown that disclosure of the requested information will impact its First Amendment rights, and the Commission failed to show that its interest in determining whether SCG’s political efforts are impermissibly funded outweighs that impact. The court explained that the Commission argues that sometimes SCG misclassifies expenditures, and has at times moved expenditures from ratepayer to shareholder accounts. But this just shows that a less invasive discovery process is working, and the PAO can confirm that no funds have been misclassified to ratepayer accounts by reviewing above-the-line accounts. Further, because the court will vacate Resolution ALJ-391 insofar as it compels disclosure of shareholder expenditures, no basis for sanctions exists. View "So. Cal. Gas Co. v. P.U.C." on Justia Law

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A real estate development company PEM Entities LLC (PEM), asserts a North Carolina county violated the Federal Constitution and state law by imposing new rules for getting water and sewage services. The district court dismissed the complaint, concluding the company lacked standing to bring its takings and due process claims, its equal protection claim was too insubstantial to raise a federal question, and the court should not exercise jurisdiction over the state law claims once the federal claims were dismissed.   The Fourth Circuit affirmed. The court explained that without a constitutionally protected property interest, PEM’s takings and due process claims fail as a matter of law. Accordingly, the court affirmed the district court’s dismissal of PEM’s takings and due process claims because they fail to state a claim on which relief can be granted. Further, the court concluded the district court was right to dismiss PEM’s equal protection claim but should have done so for failure to state a claim rather than lack of jurisdiction. Thu, having concluded the district court correctly dismissed all of PEM’s federal claims, the court saw no abuse of discretion in the district court’s decision not to exercise supplemental jurisdiction over the state law claims. View "PEM Entities LLC v. County of Franklin" on Justia Law

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The City of Industry sued Cordoba Corporation, among others, after uncovering allegedly fraudulent billings for a solar energy development. Cordoba filed a cross-complaint, but the trial court granted the City’s special motion to strike it as a strategic lawsuit against public participation (Code Civ. Proc., Section 425.16), or anti-SLAPP motion.   The Second Appellate District affirmed the order. The court explained that Cordoba does not deny filing a lawsuit is protected activity. Instead, it argues its three causes of action arise not from the City’s petitioning activity, but from the City’s noncompliance with its contractual obligations. The court wrote that this is a distinction without a difference. Further, the court explained that the court properly struck Cordoba’s breach of contract claim because the conduct Cordoba attacked was protected petitioning activity. Moreover, the court held that Cordoba cannot satisfy its burden because each of its three causes of action fails to state a valid claim. View "Cordoba Corp. v. City of Industry" on Justia Law

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Texas recently enacted such a ban on new entrants in a market with a more direct connection to interstate commerce than the drilling of oil wells: the building of transmission lines that are part of multistate electricity grids. The operator of one such multistate grid awarded Plaintiff NextEra Energy Capital Holdings, Inc. the right to build new transmission lines in an area of east Texas that is part of an interstate grid. But before NextEra obtained the necessary construction certificate from the Public Utilities Commission of Texas, the state enacted the law, SB 1938, that bars new entrants from building transmission lines. NextEra challenges the new law on dormant Commerce Clause grounds. It also argues that the law violates the Contracts Clause by upsetting its contractual expectation that it would be allowed to build the new lines   The Fifth Circuit concluded that the dormant Commerce Clause claims should proceed past the pleading stage. But the Contracts Clause claim fails as a matter of law under the modern, narrow reading of that provision. The court explained that limiting competition based on the existence or extent of a business’s local foothold is the protectionism that the Commerce Clause guards against. Thus, the court reversed the Rule 12(b)(6) dismissal of the claim that the very terms of SB 1938 discriminate against interstate commerce. Further, the court held that SB 1938 did not interfere with an existing contractual right of NextEra. NextEra did not have a concrete, vested right that the law could impair. It thus fails at the threshold question for proving a modern Contracts Clause violation. View "NextEra, et al v. D'Andrea, et al" on Justia Law

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On interlocutory appeal in this case involving the New England Clean Energy Connect project (Project), the Supreme Judicial Court held that retroactive application of legislation enacted by voters (the Initiative) to the Project, as required by section 6 of the Initiative, was unconstitutional.On November 2, 2021, fifty-nine percent of Maine voters approved a ballot question through a public referendum that would result in legislation effectively precluding the Project, which is designed to transmit power generated in Quebec through Maine and into Massachusetts. Plaintiff filed a complaint for declaratory relief alleging that retroactive application of the Initiative to the Project was unconstitutional. The trial court reported the case to the Supreme Judicial Court. The Supreme Judicial Court held that section 6 of the Initiative, as applied retroactively to the certificate of public convenience and necessity (CPCN) issued for the Project, would infringe on Plaintiff's constitutionally-protected vested rights if Plaintiff can demonstrate that it engaged in substantial construction of the Project in good-faith reliance on the authority granted by the CPCN before Maine voters approved the initiated bill by public referendum. View "NECEC Transmission LLC v. Bureau of Parks & Lands" on Justia Law