Justia Energy, Oil & Gas Law Opinion Summaries

The Supreme Court of New Mexico affirmed the decision of the New Mexico Public Regulation Commission (PRC) to deny Southwestern Public Service Company’s (SPS) application for a financial incentive under the Renewable Energy Act (REA). SPS had proposed to retire renewable energy certificates (RECs) earlier than required to exceed the Renewable Portfolio Standard (RPS), and in return, requested a rate rider that would allow it to charge customers one dollar for each REC retired over the twenty percent standard. The PRC denied the application, finding that SPS’s proposal did not meet the REA’s requirement to “produce or acquire renewable energy” to qualify for an incentive. The court agreed with the PRC’s interpretation of the REA, stating that the act of retiring RECs alone does nothing to further the statute’s objectives. The court also rejected SPS’s challenges to the PRC’s amendments to Rule 572, which governs the award of incentives under the REA. The court found that the amendments did not exceed the scope of the REA, were not arbitrary or capricious, and were not otherwise unreasonable or unlawful. View "S.W. Pub. Serv. Co. v. N.M. Pub. Regul. Comm'n" on Justia Law

Citizens for Fair Rates and the Environment and New Energy Economy, Inc., two organizations that represented energy consumers (collectively, "New Energy"), intervened in the administrative proceedings before the New Mexico Public Regulation Commission. New Energy raised several issues for the New Mexico Supreme Court's review, most of which attacked the Energy Transition Act ("ETA") on constitutional grounds. In addition to these constitutional challenges, New Energy also raised a single claim of error in the findings of the Commission relating to the requirement that Public Service Company of New Mexico’s ("PNM") submit a “memorandum . . . from a securities firm” in support of its application for a financing order. The Supreme Court declined to reach two of New Energy’s issues because they were not properly before the Court and were not essential to the disposition of this appeal. The Court further declined to address New Energy’s arguments regarding an invasion of judicial powers under Section 62-18-8(B) and Section 62-18- 22. With respect to the issues it deemed properly presented, the Court rejected New Energy’s constitutional challenges to the ETA, and concluded the Commission’s final order was based on a reasonable construction of Section 62-18- 4(B)(5) and was supported by substantial evidence. View "Citizens for Fair Rates et al. v. NMPRC" on Justia Law

New Energy Economy (NEE) appealed a New Mexico Public Regulation Commission (Commission or PRC) order approving Public Service Company of New Mexico’s (PNM) renewable energy procurement plan (Plan) for the year 2018. In its application, PNM sought to demonstrate its compliance with Renewable Energy Act requirements and obtain the Commission’s approval of renewable energy procurements, among other items. NEE challenged the Commission’s approval of PNM’s 2018 Plan by arguing that PNM’s proposed procurement of solar energy generating facilities relied on an unfair request for proposal (RFP) process. NEE contended PNM designed its RFP to limit the universe of potential bidders and select its predetermined, preferred type of renewable energy bid. After review, the New Mexico Supreme Court concluded NEE did not meet its burden of proving that the Commission’s approval of the solar energy procurement was unreasonable or unlawful because evidence in the record supported the Commission’s determination that the challenged provisions of the RFP were reasonable under the facts and circumstances of this case. The Court, therefore, affirmed the Commission's final order approving PNM's 2018 Plan. View "N.M. Indus. Energy Comm'n v. N.M. Pub. Regulation Comm'n" on Justia Law

New Energy Economy, Inc. (NEE) appealed a final order issued by the New Mexico Public Regulation Commission (PRC). NEE contended the PRC violated New Mexico law by approving a contested stipulation granting the Public Service Company of New Mexico (PNM) certificates of public convenience and necessity (CCNs) to acquire new generation resources and by filing a notice proposing to dismiss the protests to PNM’s 2014 integrated resource plan (IRP). The New Mexico Supreme Court determined NEE’s arguments were predicated on a mistaken understanding of the law, and NEE asked the Court to accept factual assertions that were rejected in earlier proceedings. The Court affirmed the PRC’s final order. View "New Energy Econ. v. N.M. Pub. Regulation Comm'n" on Justia Law

Enduro Operating, LLC and Echo Production, Inc. were two of several parties to a joint operating agreement (JOA). Under the JOA, Echo, as a party wishing to undertake a new drilling project, had to provide notice of the proposed project to the other parties to the JOA, who then had thirty days to decide whether to opt in or out of the project. By opting in, a party agreed to share in the cost and risk of the project. If a party opted out of the project (as Enduro did in this case), then the party was deemed “non-consenting,” and exempt from any of the cost or risk associated with the new project, but could not share in any of the profits from the new project until the consenting parties recovered four-hundred percent of the labor and equipment costs invested in the new project. The question before us is what activities are adequate as a matter of law to 6 satisfy the contractual requirement that a consenting party actually commence the 7 drilling operation. The Court of Appeals concluded that the language in Johnson v. Yates Petroleum Corp., 981 P.2d 288, indicating that “any” preparatory activities would be sufficient was too permissive. The Court of Appeals was persuaded that Echo’s lack of on-site activity at the proposed well site, other than surveying and staking, and lack of a permit to commence drilling was evidence as a matter of law that Echo had not actually commenced drilling operations. The Court of Appeals reversed the district court’s grant of summary judgment in favor of Echo and remanded for an entry of summary judgment in favor of Enduro. The New Mexico Supreme Court reversed, holding that the failure to obtain an approved drilling permit within the relevant commencement period was not dispositive; “[a] party may prove that it has actually commenced drilling operations with evidence that it committed resources, whether on-site or off-site, that demonstrate its present good-faith intent to diligently carry on drilling activities until completion. “ View "Enduro Operating LLC v. Echo Prod., Inc." on Justia Law

In this opinion the New Mexico Supreme Court addressed two orders issued by the New Mexico Public Regulation Commission (PRC) that affected the revenues of local telephone networks including rural telephone companies that made up the New Mexico Exchange Carrier Group. The first was an annual order that had to be issued by the PRC on or before October 1 each year that adopted a Surcharge Rate for the succeeding year. On September 17, 2014, the PRC issued the Surcharge Rate Order, which adopted a 3% Surcharge Rate for calendar year 2015. The second was a Rule Order that amended the 2005 rules which set forth the procedures for administering and implementing the Fund. The Rule Order was issued on November 26, 2014; the rule changes became effective on January 1, 2015. After review of both orders, the Supreme Court reversed, persuaded that the both Orders were arbitrary, not supported by substantial evidence, and clear violations of its own rules. The Court reversed the PRC and remanded for further proceedings. View "N.M. Exch. Carrier Grp. v. N.M. Pub. Regulation Comm'n" on Justia Law

Environmental contamination from Shell Western Exploration and Production, Inc. and Shell Oil Company's operations was discovered in Hobbs. Residents near the area brought a toxic tort action against Shell for personal injury damages, alleging the contaminants cause their autoimmune disorders. Plaintiffs challenged the district court's exclusion of the scientific evidence and expert testimony they offered in support of their theory, and they challenged the grant of partial summary judgment in favor of Shell. After review, the Supreme Court concluded the district court applied an incorrect standard of admissibility in its evidentiary rulings, and that plaintiffs' causation evidence should have been admitted. Because summary judgment to Shell's culpability for autoimmune disorders was granted because of this improper exclusion, the Supreme Court reversed and remanded for further proceedings. View "Acosta v. Shell W. Expl. & Prod., Inc." on Justia Law

This case stemmed from a dispute over the proper calculation of royalty payments on state oil and gas leases. Over the years, the Legislature has enacted several versions of the statutory oil and gas lease, and Lessees have entered into “hundreds” of oil and gas leases with the State. Specifically, the New Mexico Legislature enacted statutory oil and gas leases in 1919, 1925, 1927, 1929, 1931, 1945, 1947 and 1984. This appeal concerned the royalty clauses contained in the 1931 and the 1947 statutory lease forms. Both the 1931 lease and 1947 lease specified that the payment of royalty was to be calculated as a percentage of the “net proceeds” resulting from the sale of gas. During 2005 and 2006 Commissioner audited ConocoPhillips Company and Burlington Resources Oil & Gas Company’s royalty payments. Following the Audit, Commissioner notified Lessees that they had been underpaying their royalty obligations and issued them assessments for the underpayment. The Commissioner claimed that pursuant to the terms of the statutory lease forms Lessees could not deduct the post-production costs necessary to prepare the gas for the commercial market when calculating their royalty payments. Commissioner claimed that the improper deductions for post-production costs resulted in ConocoPhillips underpaying royalties by approximately $18.9 million and Burlington underpaying by approximately $5.6 million. In response to Commissioner’s audit and assessments, Lessees filed a complaint in the district court seeking a declaration that Commissioner’s assessment of additional royalty constituted a deprivation of due process, an unconstitutional impairment of contract, and breach of contract. In addition, Lessees claimed that Commissioner had exceeded his constitutional and statutory powers by issuing the assessments and had effectively usurped legislative power by seeking royalty payments under calculation methods not approved by the Legislature. In response, Commissioner alleged a host of counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of the implied covenant to market. This appeal pertained to three orders granting summary judgment on behalf of Lessees and a fourth order denying Commissioner’s motion for reconsideration of the district court’s previous dismissal of his counterclaim for breach of the implied covenant to market. In the first order, the district court granted Lessees’ motion for summary judgment. Upon review of the several orders and claims before the Supreme Court on appeal, the Court affirmed the trial court's grant of summary judgment. View "ConocoPhillips Co. v. Lyons" on Justia Law

The property at the center of this dispute was located in San Juan County with productive oil and gas wells thereon. While ownership of the land was the ultimate question the parties sought to resolve in the underlying lawsuit, the issue on appeal was narrower: whether, as a matter of law, a joint tenancy in realty may be terminated and converted into a tenancy in common by a mutual course of conduct between the owners that demonstrates their intent to hold the property as tenants in common. Upon review of the matter, the Supreme Court held that such a course of conduct may effectively terminate a joint tenancy. Accordingly, the Court reversed the Court of Appeals and remanded the case to the district court for further proceedings. View "Edwin Smith, LLC v. Synergy Operating, LLC" on Justia Law

The Supreme Court addressed the question of what level of participation in an administrative rule-making proceeding gives a participant the right to defend that new rule in an appellate court during a subsequent appeal. Each of the four petitions for writs of superintending control stemmed from an appeal of a decision made by one of two administrative agencies, the New Mexico Environmental Improvement Board (EIB) or the New Mexico Water Quality Control Commission (WQCC). Those petitions arose from appeals of administrative rule makings: one appeal challenging rules adopted by EIB and the other challenging rules adopted by WQCC. The Court of Appeals denied appellee status to all four Petitioners, and the Petitioners requested that the Supreme Court issue writs of superintending control to overturn those rulings. The Court consolidated the four petitions and, after hearing oral arguments, issued the writs requested by three of the Petitioners while rejecting the fourth: "[b]eyond the party initiating the proceeding, [the Court] need only decide in this case whether participants who have presented technical testimony are 'parties' to an appeal as contemplated under [New Mexico] rules. [The Court concluded] that they are." [Petitioners] were not just participants who happened to be recognized as parties by EIB and WQCC. Rather, each participated in the rule-making proceedings in a legally significant manner. Each was required to file advance notice of participation, naming their witnesses and the witnesses' qualifications, and each was required to satisfy other prerequisites to their testimony. In addition, Petitioners contributed the kind of evidence that directly informed the inquiries made by EIB and WQCC in making their final decisions. Thus, the Court concluded that the requirements imposed upon Petitioners afforded them a right to defend their positions as parties on appeal. View "New Energy Economy Inc. v. Vanzi" on Justia Law