Justia Energy, Oil & Gas Law Opinion Summaries

Articles Posted in Government Contracts
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The State of North Dakota, ex rel. the North Dakota Board of University and School Lands, and the Office of the Commissioner of University and School Lands, a/k/a the North Dakota Department of Trust Lands appealed a judgment dismissing its claim against Newfield Exploration Company relating to the underpayment of gas royalties. The North Dakota Supreme Court found that the district court concluded the State did not establish a legal obligation owed by Newfield. However, the State pled N.D.C.C. § 47-16-39.1 in its counterclaim, which the court recognized at trial. Because the State satisfied both the pleading and the proof requirements of N.D.C.C. § 47-16-39.1, the Supreme Court held the district court erred in concluding the State did not prove Newfield owed it a legal obligation to pay additional royalties. Rather, as the well operator, Newfield owed the State an obligation under N.D.C.C. § 47-16-39.1 to pay royalties according to the State’s leases. The court failed to recognize Newfield’s legal obligations as a well operator under N.D.C.C. § 47-16-39.1. The Supreme Court concluded the district court erred in dismissing the State's counterclaim; therefore, judgment was reversed and the matter remanded for findings related to the State's damages and Newfield's affirmative defenses. View "Newfield Exploration Company, et al. v. North Dakota, et al." on Justia Law

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The First Circuit affirmed the judgment of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) Title III court allowing certain expenses incurred by the Puerto Rico Electric Power Authority (PREPA) under a contract entered into with LUMA Energy, LLC and LUMA Energy ServCo, LLC (collectively, LUMA) as entitled to administrative expense priority pursuant to section 503(b)(1)(A) of the Bankruptcy Code, holding that there was no error.In 2017, the Financial Oversight and Management Board for Puerto Rico (FOMB) filed for bankruptcy on behalf of PREPA. In 2020, PREPA entered into a contract with LUMA, a private consortium, to transfer the operations and management of PREPA to LUMA. At issue was whether the Title III court erred in allowing expenses incurred by PREPA under the contract as entitled to administrative expense priority. The First Circuit affirmed, holding (1) section 503(b)(1)(A) applies in Title III cases; (2) the Title III court did not abuse its discretion in applying the requirements of section 503(b)(1)(A); and (3) the Title III court correctly held that 48 U.S.C. 2126(e) prevents it from reviewing challenges to FOMB's certification decision. View "Union de Trabajadores de la Industria Eléctrica y Riego v. Puerto Rico Electric Power Authority" on Justia Law

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The First Circuit affirmed the judgment of the PROMESA Title III court granting the motion of the Financial Oversight and Management Board to assume certain long-term power supply contracts on behalf of the Puerto Rico Electric Power Authority (PREPA) under 11 U.S.C. 365 and 48 U.S.C. 2161, holding that there was no clear error.On appeal, Appellants - PREPA's primary labor union, an energy company that had other contracts with PREPA, and multiple environmental groups - argued that the Board abused the assumption procedure set forth in section 365 to avoid the competitive bidding process ordinarily required for long-term power supply contracts under Commonwealth law. The First Circuit affirmed, holding (1) the Board's motion to assume was ripe for resolution by the Title III court and remained so on appeal; and (2) the Title III court properly granted the Board's motion to assume the renegotiated contracts under the customary standards of section 365(a). View "Campamento Contra Las Cenizas v. Puerto Rico Electric Power Authority" on Justia Law

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In 1942-1943, the government contracted with the Oil Companies to rapidly expand aviation gas (avgas) production facilities and sell vast quantities of avgas to the government with an artificially low profit margin. The government assumed certain risks, agreeing to reimburse “any new or additional taxes, fees, or charges” which the Companies “may be required by any municipal, state, or federal law ... to collect or pay by reason of the production, manufacture, sale or delivery of the [avgas].” The increased production led to increased amounts of acid waste that overwhelmed existing reprocessing facilities. The Companies contracted to dispose of the acid waste at the McColl site in Fullerton, California.In 1991, the United States and California sued under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. 9601, seeking to require the Companies to pay cleanup costs. The Ninth Circuit held that the government was 100% liable for the cost of cleaning up the benzol waste (about 5.5% of the waste) at the McColl site. The Companies have borne nearly all of the clean-up costs incurred since 1994; they submitted a contract termination claim, seeking reimbursement. The Claims Court ultimately found the government liable for all cleanup costs at the McColl site and awarded the Companies $99,509,847.32 for costs incurred through November 2015. The government paid. Remediation at McColl remains ongoing. The Companies sought damages incurred after November 2015. The Federal Circuit affirmed that the government is liable for those costs plus interest, rejecting arguments that res judicata bars the claims and that the Claims Court did not have jurisdiction under the Contract Settlement Act of 1944. View "Shell Oil Co. v. United States" on Justia Law

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The plaintiffs each own a wind farm that was put into service in 2012. Each applied for a federal cash grant based on specified energy project costs, under section 1603 of the American Recovery and Reinvestment Tax Act of 2009. The Treasury Department awarded each company less than requested, rejecting as unjustified the full amounts of certain development fees included in the submitted cost bases. Each company sued. The government counterclaimed, alleging that it had actually overpaid the companies.The Claims Court and Federal Circuit ruled in favor of the government. Section 1603 provides for government reimbursement to qualified applicants of a portion of the “expense” of putting certain energy-generating property into service as measured by the “basis” of such property; “basis” is defined as “the cost of such property,” 26 U.S.C. 1012(a). To support its claim, each company was required to prove that the dollar amounts of the development fees claimed reliably measured the actual development costs for the windfarms. Findings that the amounts stated in the development agreements did not reliably indicate the development costs were sufficiently supported by the absence in the agreements of any meaningful description of the development services to be provided and the fact that all, or nearly all, of the development services had been completed by the time the agreements were executed. View "California Ridge Wind Energy, LLC v. United States" on Justia Law

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BP built and maintained the Atlantis Platform, a semi-submersible floating oil production facility located in the Gulf of Mexico. Plaintiff Keith Abbott, employed by BP in the Atlantis administrative offices, filed suit under the False Claims Act (FCA), 31 U.S.C. 3730(b)(2), claiming that BP falsely certified compliance with various regulatory requirements. While DOI was investigating Atlantis, Abbott amended his complaint to add Food & Water Watch as a plaintiff and included additional claims for violations of the Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. 1331 et seq. On appeal, plaintiffs challenged the district court's grant of summary judgment for BP on all claims. In this case, plaintiffs' FCA claims centered on whether engineers approved the various stages of construction of Atlantis. The court explained that these facts failed to create an issue of fact as to materiality given the particular circumstances in plaintiffs' case. In light of Universal Health Servs., Inc. v. United States ex rel. Escobar, when the DOI decided to allow Atlantis to continue drilling after a substantial investigation into plaintiffs' allegations, that decision represented "strong evidence" that the requirements in those regulations were not material. In regard to plaintiffs' OCSLA claims, the court concluded that plaintiffs lack standing because they failed to plead individualized injuries. Accordingly, the court affirmed the judgment. View "Abbott v. BP Exploration & Production" on Justia Law

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The power companies allege that they were overcharged for electricity during several months in 2000–2001 and sought to recover the overcharges from the federal government based on sales by the federal Western Area Power Administration (WAPA) and Bonneville Power Administration (BPA). The California Power Exchange (Cal-PX) and the California Independent System Operator (Cal-ISO) were responsible for acquiring and distributing electricity between producers and consumers in California and setting prices for the electricity. The power companies argued that a contract existed between all consumers of electricity (including themselves) and all producers of electricity (including the government agencies) in California. The government argued that the contracts were only between the middleman entities—Cal-PX and Cal-ISO—and the consumers and producers individually. The Claims Court dismissed for lack of standing. The Federal Circuit affirmed. The companies lack privity of contract or any other relationship with the government that would confer standing. Under the Tucker Act, the Claims Court has jurisdiction over contract cases in which the government is a party, 28 U.S.C. 1491(a)(1); normally a contract between the plaintiff and the government is required to establish standing. The court noted that the companies may have claims against the parties with whom they are in contractual privity, the electricity exchanges. View "Pacific Gas & Elec. Co. v. United States" on Justia Law

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Under the 1887 General Allotment Act and the 1934 Indian Reorganization Act, the U.S. is the trustee of Indian allotment land. A 1996 class action, filed on behalf of 300,000 Native Americans, alleged that the government had mismanaged their Individual Indian Money accounts by failing to account for billions of dollars from leases for oil extractions and logging. The litigation’s 2011 settlement provided for “historical accounting claims,” tied to that mismanagement, and “land administration claims” for individuals that held, on September 30, 2009, an ownership interest in land held in trust or restricted status, claiming breach of trust and fiduciary mismanagement of land, oil, natural gas, mineral, timber, grazing, water and other resources. Members of the land administration class who failed to opt out were deemed to have waived any claims within the scope of the settlement. The Claims Resolution Act of 2010 ratified the settlement and funded it with $3.4 billion, The court provided notice, including of the opt-out right. Challenges to the opt-out and notice provisions were rejected. Indian allotees with interests in the North Dakota Fort Berthold Reservation, located on the Bakken Oil Shale (contiguous deposits of oil and natural gas), cannot lease their oil-and-gas interests unless the Secretary approves the lease as “in the best interest of the Indian owners,” 122 Stat. 620 (1998). In 2013, allotees sued, alleging that, in 2006-2009, a company obtained Fort Berthold allotment leases at below-market rates, then resold them for a profit of $900 million. The Federal Circuit affirmed summary judgment for the government, holding that the allotees had forfeited their claims by failing to opt out of the earlier settlement. View "Two Shields v. United States" on Justia Law

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The Nuclear Waste Policy Act of 1982 authorized the Department of Energy (DOE) to contract with power utilities for a planned national nuclear waste disposal system, 42 U.S.C. 10222. Utilities were to pay into a Nuclear Waste Fund; the government was to dispose of their spent nuclear fuel beginning by January 31, 1998.. Under the Standard Contract, utilities must provide “preparation, packaging, required inspections, and loading activities necessary for the transportation … to the DOE facility.” DOE is responsible for “arrang[ing] for, and provid[ing], a cask(s) and all necessary transportation … to the DOE facility.” In 1983, System Fuels entered Standard Contracts concerning the Grand Gulf and Arkansas Nuclear One power stations. The government has yet to begin accepting spent nuclear fuel. System Fuels obtained damages for costs incurred through August 31, 2005 (Grand) and June 30, 2006 (Arkansas), including costs to construct Independent Spent Fuel Storage Installations (ISFSIs) and later successfully sought damages for continued breach. The Claims Court denied costs incurred to load spent fuel into storage casks at the ISFSIs by first loading it into canisters, then loading those canisters into dry fuel storage casks and welding the casks closed. The Federal Circuit reversed, noting that under the Standard Contracts, DOE cannot accept any of the canistered fuel as is, so System Fuels will incur costs to unload the casks and canisters and to reload fuel into transportation casks if and when DOE performs. View "System Fuels, Inc. v. United States" on Justia Law

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Trona is a sodium carbonate compound that is processed into soda ash or baking soda. Because oil and gas development posed a risk to the extraction of trona and trona worker safety, the Bureau of Land Management (BLM), which manages the leasing of federal public land for mineral development, indefinitely suspended all oil and gas leases in the mechanically mineable trona area (MMTA) of Wyoming. The area includes 26 pre-existing oil and gas leases owned by Barlow. Barlow filed suit, alleging that the BLM’s suspension of oil and gas leases constituted a taking of Barlow’s interests without just compensation and constituted a breach of both the express provisions of the leases and their implied covenants of good faith and fair dealing. The Federal Circuit affirmed the Claims Court’s dismissal of the contract claims on the merits and of the takings claim as unripe. BLM has not repudiated the contracts and Barlow did not establish that seeking a permit to drill would be futile. View "Barlow & Haun, Inc. v. United States" on Justia Law