Justia Energy, Oil & Gas Law Opinion Summaries

The Surface Mining Control and Reclamation Act, 30 U.S.C. 1201, imposes a fee to underwrite the costs of restoring lands damaged by mining. The fee is 28 cents per ton of coal produced by surface mining and the lesser of 12 cents per ton produced by underground mining, or 10 percent of the value of the coal at the mine. The reclamation fee for lignite coal is the lesser of eight cents per ton or two percent of the value of the coal at the mine. Lignite coal produces less than 8,300 British thermal units per pound, less energy than produced by bituminous, subbituminous, and anthracite coal. In the area of Wyodak’s strip mine near Gillette, Wyoming, coal transitions from subbituminous to lignite in the seams. The end product of the mine’s process is a mixture of subbituminous and lignite coal. Wyodak paid the higher reclamation fee for non-lignite coal. In 2005, Wyodak‘s consultant estimated that 12 percent of its coal was lignite and 88 percent was higher quality. The Office of Surface Mining denied a requested refund. The Claims Court first rejected claims not arising within six years of the filing date, then denied relief, holding that the fee is on coal as extracted. Because the BTU value of the blend was higher than 8300 BTUs per pound, Wyodak was not entitled to a refund for any lignite in the mix. The Federal Circuit reversed and remanded, noting that Wyodak had the burden of proving entitlement to and the amount of any refund. View "Wyodak Res. Dev. Corp. v. United States" on Justia Law

In connection with construction of a pipeline to ship natural gas from Wyoming to Eastern Ohio, Rockies Express and Minerals Management Service (MMS), within the Department of the Interior, entered into contracts containing Royalty-in-Kind (RIK) provisions. Under the RIK program, the government receives its royalty for mineral resources extracted under federal leases “in kind,” i.e., in natural gas, rather than in cash, 30 U.S.C. 192; 42 U.S.C. 15902(b). In exchange, the government makes monthly payments to ensure that a certain quantity of the mineral resources is made available for its purposes. The government then enters into processing and transportation contracts to sell the mineral royalties, often at a substantial profit over royalties received in cash. The Civilian Board of Contract Appeals determined that MMS had materially breached the contract, but that Rockies Express was only entitled to damages that had accrued before the Secretary of the Interior announced a decision to phase-out RIK contracts. The Federal Circuit affirmed that MMS materially breached the contract, but reversed the decision to limit damages. Rockies Express is entitled to compensatory damages to put it in as good a position as that in which it would have been put by full performance of the contract. View "Rockies Express Pipeline, LLC v. Salazar" on Justia Law

In 2003, after more than a decade of litigation, the IRS assessed penalties under now-repealed I.R.C. 6621(c), which penalizes “substantial” underpayments of tax “attributable to tax motivated transactions” against the 19 partners of the Dillon Oil Technology Partnership in tax years 1983 and 1984. The partners paid the tax and penalties in 2004, and, in 2006, initiated a refund suit. The Court of Federal Claims dismissed for lack of subject matter jurisdiction under the Tax Equity and Fiscal Responsibility Act, 1 I.R.C.7422(h), which provides that individual partners may not bring tax challenges relating to subject matter “attributable to a partnership item.” Such claims must be brought in a partnership-level suit by the partnership representative or Tax Matters Partner. The Federal Circuit affirmed, calling the claim an impermissible collateral attack. View "Bush v. United States" on Justia Law

In 1983, the Nuclear Waste Policy Act established a plan for spent nuclear fuel (SNF) generated by nuclear power plants, 42 U.S.C. 10101–10270. The Act made utilities responsible for SNF storage until the U.S. Department of Energy (DOE) accepts the material. The Secretary of Energy entered into contracts with nuclear utilities to accept SNF in return for payment of fees. The Act provided that the Nuclear Regulatory Commission “shall not issue or renew a license” to any nuclear utility unless the utility has entered into a contract with DOE or DOE certifies ongoing negotiations. Nuclear utilities, including the owner of the Entergy nuclear power stations, entered into contracts and began making payments, which have continued. By 1994, DOE knew it would be unable to accept SNF by the Act’s January 31, 1998 deadline. In 1995, DOE issued a “Final Interpretation” that took the position that it did not have an unconditional obligation to begin performance on that date. Entergy sued, asserting that DOE’s partial breach caused it to incur additional costs for SNF storage. The claims court struck an unavoidable delay defense, based on a prior decision rejecting DOE’s argument that its failure was “unavoidable” under the contract. The Federal Circuit affirmed. View "Entergy Nuclear Fitzpatrick, LLC v. United States" on Justia Law

In 1996, CP sued the United States, claiming that CP owned minerals underlying Louisiana property (Groups A, B, and C mineral servitudes), and that between 1943 and 1978, the government imposed a drilling and operations moratorium while the surface was used for bombing and artillery practice. It alleged that starting in 1992, the government, claiming ownership, has granted oil and gas leases covering the property. The district court granted the government summary judgment with regard to Groups A and B because the prescription period was not suspended by the moratoriums. Concerning Group C, the court granted CP summary judgment, finding that servitude imprescriptible. The Fifth Circuit affirmed; certiorari was denied. In1998, CP filed another complaint in the Claims Court, alleging taking without just compensation, as an alternative to its district court action. In 2004, the Claims Court dismissed the Groups A and B claims and limited the C claim to post-1992 action. The court found that the government’s issuance of leases after 1997 constituted a compensable temporary taking, but subsequently dismissed, finding that the facts alleged in the district court complaint were nearly identical. The complaints were “for or in respect to” the same claim and 28 U.S.C. 1500 precluded jurisdiction. The Federal Circuit affirmed. View "Cent. Pines Land Co., LLC v. United States" on Justia Law

Shell imported petroleum products, 1993-1994, upon which custom duties, taxes, and other fees were paid. During the same period, Shell exported drawback-eligible substitute finished petroleum derivatives. In 1995-1996, substitution drawback claims were filed with the U.S. Customs and Border Protection on Shell’s behalf. Generally, Customs provides a drawback of 99% of any duty, tax, or fee imposed under federal law upon entry or importation if the merchandise (or a commercially interchangeable substitute) is subsequently exported or destroyed under Customs supervision and not used within the U.S. before exportation or destruction, 19 U.S.C. 1313(j),(p). Drawback claims must be filed within three years of exportation. During the time of Shell’s imports, drawback eligibility of Harbor Maintenance Tax and Environmental Tax payments, which Shell now seeks, were heavily disputed. Shell was found not to have included an express request for HMT and ET in the “net claim” figure. In 1997, after the three-year period for the filing of drawback claims had expired Shell filed protests with Customs, seeking drawback as to HMT and ET payments. Customs denied Shell’s protests. The Court of International Trade found the claims time-barred. The Federal Circuit affirmed, holding that 1999 and 2004 statutory amendments did not change Shell’s position. View "Shell Oil Co. v. United States" on Justia Law

Kansas power companies suffered damages due to the government’s partial breach of the Standard Contract for Disposal of Spent Nuclear Fuel And/Or High-Level Radioactive Waste, authorized by the Nuclear Waste Policy Act of 1982, 42 U.S.C. 10101–10270. The Court of Federal Claims conducted a nine-day trial and awarded $10,632,454.83. The Federal Circuit affirmed in part. In determining the amount of damages, thel court correctly did not award damages for cost of capital and for the costs associated with researching alternative storage options for spent nuclear fuel and high level radioactive waste. The court also appropriately reduced the companies’ damages by the value of the benefit they received as a result of their mitigation activities. However, the court erred by not accepting the companies’ reasonable method for calculating overhead costs. View "KS Gas & Elec. Co. v. United States" on Justia Law

A subsidiary of Marathon hired Preston as a relief pumper in Marathon’s coal bed methane well operation. After beginning work, Preston signed an Employee Agreement containing the assignment at issue. Later, Preston worked with Marathon Engineer Smith on a baffle system to improve machinery used to extract methane gas from water-saturated coal in a coal bed methane gas well. Marathon installed the system on wells. After Preston’s employment ended, both Marathon and Preston pursued patents. The district court declared that Preston is the sole inventor of one patent and that Smith was misjoined as an inventor; ordered the PTO to issue a new certificate reflecting Preston as the sole inventor; declared Marathon the owner of other patents pursuant to the employment agreement and that Preston breached the agreement for failing to assign his rights. The court entered summary judgment in favor of Marathon on its shop right claim, finding that, even if Marathon did not own the patents, it had a shop right to practice the inventions. The Federal Circuit affirmed that Preston assigned his rights in two inventions to Marathon pursuant to his employment agreement. Because that assignment was automatic, there was no breach of that agreement. View "Preston v. Marathon Oil Co." on Justia Law

In 1983, the Nuclear Waste Policy Act, 42 U.S.C. 10101-10270, authorized the Department of Energy to contract with nuclear facilities for disposal of spent nuclear fuel and high level radioactive waste. The Standard Contract provided that rights and duties may be assignable with transfer of SNF title. Plaintiff entered into the Standard Contract in 1983 and sold its operation and SNF to ENVY in 2002, including assignment of the Standard Contract, except one payment obligation. Plaintiff transferred claims related to DOE defaults. As a result of DOE’s breach, ENVY built on-site dry-storage facilities. The Claims Court consolidated ENVY’s suit with plaintiff’s suit. The government admitted breach; the Claims Court awarded ENVY $34,895,467 (undisputed damages) and certain disputed damages. The Federal Circuit affirmed in part. Plaintiff validly assigned pre-existing claims; while partial assignment of rights and duties under the contract was not valid, the government waived objection. The assignment encompassed claims against the government. Legal and lobbying fees to secure Vermont approval for mitigation were foreseeable, but other expenses were not recoverable. ENVY failed to prove costs of disposing of contaminated material discovered due to the breach and its characterization of spent fuel moved to dry storage. ENVY is not entitled to recover cost of capital for funding mitigation, or Resource Code 19 payroll loader overhead costs, but may recover capital suspense loader overhead costs,.View "VT Yankee Nuclear Power Corp. v. United States" on Justia Law

Power companies sought damages for the cost of storing spent nuclear fuel and high-level radioactive waste beyond when the government promised by contract to begin storing that waste in a permanent repository. In 2004, the claims court held a seven-week trial on damages. The Federal Circuit accepted its findings on foreseeability, reasonable certainty and the use of the substantial causal factor standard for causation purposes, and the determination that an award of Nuclear Waste Fund fees should be denied as premature, but remanded for application of the 1987 annual capacity report rate to damages claimed by the parties. On remand, the claims court accepted the fuel exchange model presented by plaintiffs’ expert and concluded that plaintiffs would not have built dry storage; two of the companies would not have reracked their storage pools under the 1987 ACR rate. The court found that, using fuel exchanges, plaintiffs would have emptied their wet storage facilities in the non-breach world within the first 10 years of DOE’s performance. The Federal Circuit reversed with respect to denial of claims for wet storage pool costs and NRC fees, which were within the mandate on remand, but otherwise affirmed. View "Yankee Atomic Elec. Co. v. United States" on Justia Law