Justia Energy, Oil & Gas Law Opinion Summaries

The case involves Francis Kaess, who owns mineral interests in land in Pleasants County, West Virginia, subject to an oil and gas lease with BB Land, LLC. The lease, dated January 6, 1979, provides for in-kind royalties, meaning Kaess is entitled to a portion of the physical oil and gas produced. BB Land began production in 2018, but Kaess did not take his share in-kind. Instead, BB Land sold Kaess' share and paid him royalties after deducting postproduction costs.Kaess filed a lawsuit in the United States District Court for the Northern District of West Virginia, alleging improper deductions of postproduction costs from his royalties, among other claims. The district court denied BB Land's motion for summary judgment on the improper deductions claim, finding that the requirements for deducting postproduction costs set forth in Wellman v. Energy Resources, Inc. and Estate of Tawney v. Columbia Natural Resources, LLC apply to in-kind leases. BB Land then moved to certify a question to the Supreme Court of Appeals of West Virginia.The Supreme Court of Appeals of West Virginia reviewed the case and answered two certified questions. First, the court held that there is an implied duty to market the minerals in oil and gas leases containing an in-kind royalty provision. If the lessor does not take physical possession of their share, the lessee must either deliver the lessor's share to a third-party purchaser near the wellhead, buy the lessor's share, or market and sell the lessor's share along with their own.Second, the court held that the requirements for deducting postproduction costs from royalties, as established in Wellman and Estate of Tawney, apply to leases with in-kind royalty provisions. Therefore, if the lessee markets and sells the lessor's share, the lessee must tender the lessor's percentage share of the gross proceeds, free from any deductions for postproduction expenses, received at the first point of sale to an unaffiliated third-party purchaser in an arm's length transaction. View "Francis Kaess v. BB Land, LLC" on Justia Law

The case involves a class action lawsuit brought by Jacklin Romeo, Susan S. Rine, and Debra Snyder Miller against Antero Resources Corporation. The plaintiffs, who own oil and gas interests in Harrison County, West Virginia, allege that Antero breached the terms of their leases by failing to pay the full one-eighth royalty specified in the leases. They argue that Antero improperly deducted postproduction costs from the gross sale proceeds of the gas, contrary to West Virginia Supreme Court precedents in Wellman v. Energy Resources, Inc. and Estate of Tawney v. Columbia Natural Resources, L.L.C.The United States District Court for the Northern District of West Virginia, which is handling the case, certified two questions to the Supreme Court of Appeals of West Virginia. The first question asked whether the requirements of Wellman and Estate of Tawney extend only to the "first available market" as opposed to the "point of sale" when the duty to market is implicated. The second question asked whether the marketable product rule extends beyond gas to require a lessee to pay royalties on natural gas liquids (NGLs) and, if so, whether the lessors share in the cost of processing, manufacturing, and transporting the NGLs to sale.The Supreme Court of Appeals of West Virginia answered the first question in the negative, holding that the requirements of Wellman and Estate of Tawney extend to the point of sale, not just to the first available market. The court reaffirmed that the lessee must bear all costs incurred in exploring for, producing, marketing, and transporting the product to the point of sale unless the lease provides otherwise.For the second question, the court held that the marketable product rule extends beyond gas to require a lessee to pay royalties on NGLs. However, the court also held that absent express language in the lease to the contrary, the lessors do not share in the cost of processing, manufacturing, and transporting residue gas and NGLs to the point of sale. View "Jacklin Romeo, Susan S. Rine, and Debra Snyder Miller v. Antero Resources Corporation" on Justia Law

The plaintiff, a company that constructs and operates fuel cells, sought municipal property tax exemptions for its fuel cell modules and related equipment installed on the Pfizer campus. The property primarily provided electricity and converted waste heat into thermal energy. The plaintiff applied for tax exemptions under Connecticut General Statutes § 12-81 (57), which exempts class I renewable energy sources from taxation. The defendant, the town of Groton, denied the applications, classifying the property as a cogeneration system under § 12-81 (63), which allows but does not require municipalities to exempt such systems from taxation.The Superior Court granted partial summary judgment to the plaintiff, ruling that the property was exempt from taxation for the years 2017 through 2019 under § 12-81 (57). The court found that the property, which included fuel cells with a heat recovery steam generator (HRSG), fell within the definition of a class I renewable energy source. For the 2016 tax year, the court held a trial and determined that the property was not completely manufactured by October 1, 2016, and thus was exempt under § 12-81 (50) as "goods in the process of manufacture." The court also ruled that the plaintiff was not required to file a personal property declaration for the exempt property, and the penalties imposed by the defendant for failing to file such a declaration were improper.The Connecticut Supreme Court upheld the trial court's rulings. It agreed that the property was exempt from taxation under § 12-81 (57) for the years 2017 through 2019, as the statute specifically exempts class I renewable energy sources, including fuel cells. The court also affirmed that the property was exempt for the 2016 tax year under § 12-81 (50) as it was still in the process of manufacture. Finally, the court held that the plaintiff was not required to file a personal property declaration for the exempt property, and the penalties for failing to do so were not permitted. View "FuelCell Energy, Inc. v. Groton" on Justia Law

NextEra Energy Resources, LLC and NextEra Energy Seabrook, LLC (collectively, "Seabrook") own a nuclear power plant in Seabrook, New Hampshire. Avangrid, Inc. and NECEC Transmission LLC (collectively, "Avangrid") sought to connect their New England Clean Energy Connect (NECEC) project to the regional transmission grid. The connection required Seabrook to upgrade its circuit breaker to handle the increased power flow. Seabrook and Avangrid agreed on the necessity of the upgrade and that Avangrid would cover the direct costs, but they disagreed on whether Seabrook should be compensated for indirect costs and whether Seabrook was obligated to upgrade the breaker without full compensation.The Federal Energy Regulatory Commission (FERC) ruled that Seabrook must upgrade the circuit breaker under the Large Generator Interconnection Agreement (LGIA) and that Avangrid was not required to reimburse Seabrook for indirect costs such as legal expenses and lost profits. Seabrook petitioned for review, arguing that FERC lacked statutory authority to require the upgrade and that the LGIA did not obligate them to upgrade the breaker without full compensation.The United States Court of Appeals for the District of Columbia Circuit reviewed the case. The court held that FERC had statutory authority to require the upgrade because it directly affected the transmission of electricity in interstate commerce. The court also found that FERC correctly interpreted the LGIA to require Seabrook to maintain an adequate circuit breaker in light of changing grid conditions, including the interconnection of new generators like Avangrid. Additionally, the court upheld FERC's decision to deny compensation for indirect costs, reasoning that the tariff did not clearly and specifically cover such costs and that FERC's precedent generally did not allow for recovery of opportunity costs during interconnection outages.The court denied Seabrook's petitions for review, affirming FERC's orders. View "NextEra Energy Resources, LLC v. FERC" on Justia Law

Columbia Gas of Ohio, Inc. applied to the Ohio Power Siting Board for approval to construct a 3.7-mile natural-gas-distribution pipeline in Maumee, Ohio. The application was submitted under an accelerated review process for pipelines less than five miles long. Yorktown Management, L.L.C., which owns property adjacent to the proposed pipeline route, raised concerns about the safety and environmental impact of the pipeline, particularly its proximity to their commercial office building.The Ohio Power Siting Board approved Columbia's application under the accelerated review process, finding that the project met the necessary criteria. Yorktown filed a motion to intervene and later a motion to suspend the review, arguing that the board had not adequately addressed their safety concerns. The board denied Yorktown's motion to suspend and subsequently denied their application for rehearing, leading Yorktown to appeal the decision.The Supreme Court of Ohio reviewed the case and affirmed the board's decision. The court found that Columbia's application did not require a 50-foot-wide permanent easement along the entire pipeline route, as Yorktown claimed. The court also determined that Yorktown had waived its right to challenge the board's rejection of testimony from a different pipeline project. Additionally, the court held that the board did not err in refusing to suspend its review of the accelerated application, as Yorktown failed to demonstrate good cause for suspension. The court concluded that the board did not improperly defer to Columbia and had appropriately conditioned the approval on compliance with relevant safety regulations. View "In re Letter of Notification Application of Columbia Gas of Ohio, Inc. for the Ford Street Pipeline Project" on Justia Law

In June 2016, an explosion damaged a gas processing plant in Moss Point, owned by Enterprise Gas Processing LLC. Enterprise alleged that the explosion was caused by Hetsco Inc.'s negligent repair of a heat exchanger. Hetsco argued that a Proposal for Services between it and the plant's prior owner, BP, entitled it to summary judgment. The circuit court agreed, granting summary judgment in favor of Hetsco.The Jackson County Circuit Court found that BP's employee, Hayes, had apparent authority to bind BP to the Proposal for Services, which included a forum-selection clause and a two-year statute of limitations. The court concluded that the Proposal for Services was a valid and enforceable contract, and thus, Enterprise's claims were barred by the forum-selection clause and the statute of limitations.The Supreme Court of Mississippi reviewed the case and found that genuine issues of material fact remained regarding Hayes's apparent authority to bind BP to the Proposal for Services. The court noted that the evidence did not conclusively show that Hayes had the authority to agree to the legal terms of the Proposal for Services. Additionally, the court found that there were factual disputes about whether BP ratified the Proposal for Services and whether Enterprise could be bound by it as BP's successor.The Supreme Court of Mississippi reversed the circuit court's grant of summary judgment and remanded the case for further proceedings. The court held that the contractually shortened two-year statute of limitations in the Proposal for Services was unenforceable under Mississippi law. The court did not address the enforceability of the forum-selection clause, leaving that issue for the circuit court to consider on remand. View "ACE American Insurance Company v. Hetsco, Inc." on Justia Law

Liberty Petroleum Corporation appealed a judgment affirming North Dakota Industrial Commission (NDIC) orders approving a plan of unitization for the Haystack Butte (Bakken Pool) Unit (HBU) in McKenzie County, North Dakota. Burlington Resources Oil & Gas Co. LP petitioned NDIC for unitized management of the HBU, which would allow drilling without regard to spacing unit boundaries. Liberty, holding federal oil and gas leases and working interests in the HBU, objected to the plan, particularly Article 11.8, which provided for the payment of pre-unitization risk penalty balances from unit production proceeds. Liberty argued this would unfairly take revenue from wells it participated in to satisfy penalties on non-consent wells.The District Court of McKenzie County affirmed NDIC's orders, finding that the plan of unitization was in the public interest, protective of correlative rights, and necessary to increase oil and gas recovery and prevent waste. NDIC concluded that production from the unit area would be distributed to each tract within the unit area, regardless of where it was produced, and rejected Liberty's objections to Article 11.8.The North Dakota Supreme Court reviewed the case and upheld the lower court's decision. The Court found that NDIC did not exceed its authority, misapply the law, or authorize an unconstitutional taking. It held that NDIC's approval of Article 11.8 was consistent with the unitization statutes, which allow for the recovery of risk penalties from unit production. The Court also concluded that NDIC's findings were supported by substantial and credible evidence, including expert testimony from Burlington. The judgment was affirmed, and NDIC's orders were upheld. View "Liberty Petroleum Corp. v. NDIC" on Justia Law

Gasoline consumers alleged that various oil producers colluded with the U.S. government, including then-President Trump, to negotiate with Russia and Saudi Arabia to cut oil production, limit future oil exploration, and end a price war on oil. Plaintiffs claimed this agreement fixed gas prices in violation of Sherman Act § 1, suppressed competition in violation of Sherman Act § 2, and involved anticompetitive mergers in violation of Clayton Act § 7.The United States District Court for the Northern District of California dismissed the case, finding it lacked subject-matter jurisdiction under the political question and act of state doctrines. The court also found that Plaintiffs failed to adequately plead an antitrust conspiracy. Additionally, the court dismissed Defendant Energy Transfer for lack of personal jurisdiction and denied Plaintiffs leave to amend their complaint, as well as requests for additional discovery and oral argument.The United States Court of Appeals for the Ninth Circuit affirmed the district court’s dismissal. The court held that the political question doctrine barred judicial review of the President’s foreign policy decisions, as these decisions are committed to the political branches of government. The court also found no judicially manageable standards to resolve the claims under antitrust laws. Additionally, the act of state doctrine barred the claims because they involved evaluating the petroleum policies of foreign nations. The court further held that Plaintiffs failed to state a plausible antitrust conspiracy claim regarding Defendants’ private conduct. Finally, the court found no abuse of discretion in the district court’s procedural rulings. View "D'Augusta v. American Petroleum Institute" on Justia Law

The case involves a proposed electric substation in East Boston by NSTAR Electric Company, doing business as Eversource Energy. The Energy Facilities Siting Board (the board) granted a certificate of environmental impact and public interest to Eversource for the substation. The petitioners, Conservation Law Foundation and GreenRoots, Inc., challenged this decision, arguing that Eversource failed to show "undue delay" by two city agencies, and that the board did not properly consider environmental justice principles, among other issues.Previously, Eversource's petition to build the substation was approved by the board in 2017, with a project change approved in 2018. The petitioners intervened in the proceedings, and the board issued a decision in November 2022, granting the certificate. The petitioners then filed for judicial review in the Supreme Judicial Court for the county of Suffolk.The Supreme Judicial Court of Massachusetts reviewed the case and upheld the board's decision. The court found that the board's determination of "undue delay" by the city agencies was supported by substantial evidence. The court also concluded that the board properly considered environmental justice principles, including the equitable distribution of energy benefits and burdens. Additionally, the court found that the board's decision to issue the equivalent of a G. L. c. 91 tidelands license was lawful and supported by substantial evidence. The court affirmed the board's findings on the need for the substation, its compatibility with environmental protection, public health, and safety, and its alignment with the public interest. The decision of the board was affirmed. View "Conservation Law Foundation v. Energy Facilities Siting Board" on Justia Law

The case involves a dispute over fees related to contracts between independent solar generators (the plaintiffs) and National Grid USA Services Co., Inc. and its affiliate Niagara Mohawk Power Corporation (the defendants). The plaintiffs are required to pay costs for interconnecting their solar energy projects to the defendants' electric distribution grid, which includes a "tax gross-up adder" to offset the defendants' federal income tax liability. The plaintiffs sought a declaratory judgment that these interconnection payments are not taxable income and also sought to recover the allegedly unlawful tax-related fees through state-law claims for damages.The United States District Court for the Northern District of New York dismissed the case, finding that it lacked subject-matter jurisdiction. The court concluded that the plaintiffs' request for a declaratory judgment was barred by the Declaratory Judgment Act because the federal tax issue would only arise as a defense to a state-law breach of contract claim. The court also found that the plaintiffs' state-law claims did not raise a substantial federal question, as the federal tax issue was not significant to the federal system as a whole.The United States Court of Appeals for the Second Circuit affirmed the district court's judgment. The appellate court agreed that the plaintiffs' request for declaratory relief did not meet the threshold requirement for federal subject-matter jurisdiction, as the federal tax issue would only arise as a defense in a hypothetical state-law breach of contract claim. The court also found that the federal issue in the plaintiffs' state-law claims was not substantial, as it was fact-bound and situation-specific, and did not have broader significance for the federal government. Therefore, the district court's dismissal for lack of subject-matter jurisdiction was upheld. View "Sunvestment Energy Group NY 64 LLC v. National Grid USA Services Co., Inc." on Justia Law