Justia Energy, Oil & Gas Law Opinion Summaries

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

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

Electric Reliability Council of Texas, Inc. (“ERCOT”) determines market-clearing prices unless otherwise directed by the Public Utility Commission of Texas (“PUCT”). ERCOT is the sole buyer and seller of all energy in Texas. According to the operative complaint, during winter storm Uri ERCOT and the PUCT allegedly “intervened in the market for wholesale electricity by setting prices [that were] orders of magnitude higher than what market forces would ordinarily produce.”   Just Energy, a retail energy provider, purports that after the storm, ERCOT “floored” it with invoices totaling approximately $335 million. Just Energy commenced bankruptcy proceedings in Canada and filed this Chapter 15 case in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. Just Energy challenges its invoice obligations. At the hearing on ERCOT’s motion to dismiss, the bankruptcy court stated that it would strike various language like, “subject to reduction only after a finding by the Court concerning a legally appropriate energy price per megawatt hour as proven by expert testimony, if appropriate, but in no event greater than the price per megawatt hour in effect after market forces took effect.” By striking this and similar language sprinkled throughout the complaint, the court concluded that “this change solves the abstention problem.”    The Fifth Circuit disagreed and vacated the bankruptcy court’s order and remanded with instructions to determine the appropriate trajectory of this case after abstention. The court explained that abstention under Burford6\ is proper because: (1) the doctrine applies in the bankruptcy context; and (2) four of the five Burford factors counsel in favor of abstention. View "Electric Reliability v. Just Energy" on Justia Law

PJM Interconnection, LLC (“PJM”)  authorized a series of upgrades to facilities owned by the Public Service Electric and Gas Company (“PSE&G”). PSE&G’s Bergen and Linden switching stations; a second involved repairs to and around PSE&G’s Sewaren substation. Together, these two projects cost around $1.3 billion. Initially, PJM assigned most of the projects’ costs to entities that reroute electricity from northern New Jersey into the New York market. Thereafter, the New York-based entities gave up their rights to withdraw electricity from New Jersey, and PJM reassigned their costs to PSE&G. The Federal Energy Regulatory Commission (“FERC” or “the Commission”) approved both rounds of cost allocations. The petitions for review in these two cases are about whether these cost allocations were “just and reasonable” under the Federal Power Act, and whether FERC’s orders were “arbitrary [and] capricious” in violation of the Administrative Procedure Act (“APA”).   The DC Circuit denied the petitions for review in New Jersey Board v. FERC, and granted in part and denied in part the petitions in ConEd v. FERC. In denying the New York entities’ applications for rehearing of both the First and Second Linden Complaint Orders, the court explained that FERC failed to adequately distinguish its decision in Artificial Island from its treatment of the Bergen and Sewaren projects. Further, FERC upheld the de minimis threshold in its orders denying rehearing of the First and Second Linden Complaint Orders and the ConEd Complaint Order. The court, therefore, vacated FERC’s denial of Linden’s two complaints. The court also vacated its denial of ConEd’s complaint and remanded for further proceedings solely on the de minimis issue. View "New Jersey Board of Public Utilities v. FERC" on Justia Law

The Federal Energy Regulatory Commission is responsible for ensuring that interstate electricity rates are “just and reasonable.” Midcontinent Independent System Operator, Inc. (“MISO”) administers the electric grid on behalf of the companies that own transmission lines. Those transmission owners invested money to build their transmission lines, and MISO must charge customers electricity transmission rates that provide those companies an appropriate return on their investment. That return-on-equity component of the transmission rates, which we’ll just call the Return, is at issue in this case. In this case, a group of customers thought MISO provided transmission owners a too-generous Return. They asked FERC to reduce that aspect of MISO’s rates. FERC did. In the process, it completely overhauled its approach to setting an appropriate Return. Both the customers and transmission owners challenged several aspects of the FERC proceedings as unlawful or arbitrary and capricious.   The DC Circuit agreed with the customers that FERC’s development of the new Return methodology was arbitrary and capricious, thus the court vacated its rate-determination orders and remanded for further proceedings. Because the other challenged aspects of FERC’s orders flow from FERC’s rate determination, the court did not reach them. The court explained that FERC Failed to offer a reasoned explanation for its decision to reintroduce the risk-premium model after initially, and forcefully, rejecting it. Because FERC adopted that significant portion of its model in an arbitrary and capricious fashion, the new Return produced by that model cannot stand. View "MISO Transmission Owners v. FERC" on Justia Law

The Wabash Valley Power Association is an Indiana-based cooperative established to generate and transmit electricity. This case centers on a provision newly added to the 2020 contracts. Section 22 of these contracts purport to subject any changes to the Formulary Rate Tariff to the Mobile-Sierra presumption of justness and reasonableness. After Wabash submitted the new contracts to FERC, Tipmont Rural Electric Membership Cooperative, one of the two-member utilities that did not sign, filed a protest arguing that the Mobile-Sierra presumption should not apply to changes to the Formulary Rate Tariff. The Commission agreed. After FERC failed to act on an application for rehearing within 30 days, Wabash filed a petition for review.   The DC Circuit denied the petitions for review finding that the Commission reasonably rejected Wabash’s new contracts. The court wrote that  FERC reasonably determined that the 2020 contracts do not set a contractually negotiated rate. Under the Mobile Sierra doctrine, the key question is whether rates are set bilaterally or unilaterally. Here, the governing contracts give the Wabash board broad discretion to raise rates unilaterally: The board may approve rates that it believes are necessary to cover Wabash’s expenses and to maintain a reasonable profit margin, which is what any utility filing a unilateral tariff rate may seek to do. View "Wabash Valley Power Association, Inc. v. FERC" on Justia Law

Adelphia Gateway, LLC, applied to the Federal Energy Regulatory Commission (Commission)_  for a certificate of public convenience and necessity to acquire an existing pipeline system. It also sought authorization to construct two short lateral pipeline segments extending from the existing pipeline infrastructure it would acquire. Adelphia also sought approval to construct facilities necessary to operate the pipeline. Together, these acquisitions and improvements would comprise the Adelphia Gateway Project (“the Project”).   In their joint brief, Petitioners challenge: (1) the Commission’s finding of market need for the Project under the Natural Gas Act; (2) the sufficiency of the Commission’s environmental review under the National Environmental Policy Act (“NEPA”); and (3) the constitutionality of the Commission’s purported preemption of state and local authorities’ ability to protect public health.   The Court is persuaded that the Commission did not act arbitrarily and capriciously. The court explained that as in Birckhead v. FERC, 925 F.3d 510 (D.C. Cir. 2019), Petitioners here “have identified no record evidence that would help the Commission predict the number and location of any additional wells that would be drilled as a result of production demand created by the Project.” Further, Petitioner did not argue before the Commission that section 1502.21(c) required the use of the Social Cost of Carbon tool. Their rehearing request referred to the regulation once in a footnote, and only in the context of the version of the argument petitioners then relied on and that passing reference was not enough to “alert the Commission” to the position Petitioners now take. View "Delaware Riverkeeper Network v. FERC" on Justia Law

Until 1997, Illinois residents could only purchase power from a public utility, with rates regulated by the ICC. The Electric Service Customer Choice and Rate Relief Law allows residents to buy electricity from their local public utility, another utility, or an Alternative Retail Electric Supplier (ARES). The ICC was not given rate-making authority over ARESs, but was given oversight responsibilities. The Law did not explicitly provide a mechanism for recovering damages from an ARES related to rates. Zahn purchased electricity from NAPG, after receiving an offer of a “New Customer Rate” of $.0499 per kilowatt hour in her first month, followed by a “market-based variable rate.” Zahn never received NAPG’s “New Customer Rate.” NAPG charged her $.0599 per kilowatt hour for the first two months, followed by a rate higher than Zahn’s local public utility charged. Zahn filed a class-action complaint, claiming violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, breach of contract, and unjust enrichment. The court dismissed for lack of subject-matter jurisdiction, or for failure to state a claim. After the Illinois Supreme Court answered a certified question, stating that the ICC does not have exclusive jurisdiction to hear Zahn’s claims, the Seventh Circuit reversed. The district court had jurisdiction and Zahn alleged facts that, if true, could constitute a breach of contract or a deceptive business practice. View "Zahn v. North American Power & Gas, LLC" on Justia Law

Plaintiff-appellee Randy Howard sought to bring a class action suit against Ferrellgas Partners, LP in federal district court for allegedly overcharging him and other customers. Ferrellgas moved to force plaintiff to pursue his individual claim alone, in arbitration, arguing that arbitration was the procedure the parties had agreed to. The district court was unable to conclude that the parties agreed to arbitrate. Rather than proceed to trial as the Federal Arbitation Act required, the district court entered an order denying arbitration outright. The Tenth Circuit concluded that denial was error: "When it's apparent from a quick look at the case that no material disputes of fact exist, it may be permissible and efficient for a district court to decide the arbitration question as a matter of law through motions practice and viewing the facts in the light most favorable to the party opposing arbitration. . . . Parties should not have to endure years of waiting and exhaust legions of photocopiers in discovery and motions practice merely to learn where their dispute will be heard. The Act requires courts process the venue question quickly so the parties can get on with the merits of their dispute in the right forum. It calls for a summary trial — not death by discovery." View "Howard v. Ferrellgas Partners, et al" on Justia Law

Plaintiff, on behalf of an asserted class, brought this action in state court against MFA, Casey's General Stores, and Quicktrip Corporation (the operators) under the Missouri Merchandising Practices Act, Mo. Rev. Stat. 407.020, alleging that defendants misrepresented the grade of gas pumped at their stations. Casey's General Stores removed the case to the federal district court asserting that plaintiff's claim was completely preempted by the Petroleum Practices Act (PMPA), 15 U.S.C. 2801 et seq., or alternatively, that there was diversity jurisdiction under the Class Action Fairness Act (CAFA), 28 U.S.C. 1711 et seq. The court concluded that the absence of a federal cause of action in Subchapter II meant that plaintiff's claim was not completely preempted and that there was no federal jurisdiction over that claim. Since the question of whether there was jurisdiction under CAFA would benefit from full development and adversarial briefing, the court remanded those issues in order for the district court to consider whether there was federal jurisdiction over this case under CAFA. Accordingly, the court reversed the ruling that plaintiff's state claim was completely preempted and remanded for further proceedings. View "Johnson v. MFA Petroleum Co., et al" on Justia Law