Justia Energy, Oil & Gas Law Opinion Summaries

Articles Posted in US Court of Appeals for the District of Columbia Circuit
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The Federal Energy Regulatory Commission approved the merger of two electrical grid operators, Louisville Gas & Electric Company and Kentucky Utilities Company. To protect customers from the merger’s potential anticompetitive effects, the Commission required the combined company (collectively, “Louisville Utilities”) to join a then-new regional electrical grid organization, the Midwest Independent Transmission System Operator, Inc. (“MISO”).   Louisville Utilities asked the Commission to end its depancaking responsibilities under Schedule 402. Most of the customers protected by Schedule 402 objected. The Commission largely approved the request on the ground that sufficient competition in electricity sales existed to provide Louisville Utilities customers alternative competitive sources for electricity even without depancaking. At the same time, the Commission took steps to protect customers that had reasonably relied on depancaking under Schedule 402 in their contracting and investing decisions. A group of customers previously protected by Schedule 402 (collectively, “Municipal Customers”) and Louisville Utilities both petitioned for a review of the Commission’s orders.   The DC Circuit vacated the Commission’s decision to end depancaking under Schedule 402. While the Commission adequately supported its conclusion that customers would continue to enjoy a competitive market without depancaking, it was arbitrary for the agency to completely ignore the significant effect that duplicative charges would have on customer rates. The court also concluded that the Commission’s decisions protecting reliance interests were reasonable, with two exceptions. As a result, the court granted the petitions for review in part and vacated and remanded the challenged orders in part. View "Kentucky Municipal Energy Agency v. FERC" on Justia Law

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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

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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

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Electricity grids are natural monopolies. To prevent utilities such as grid operators from abusing their market power, Congress has given the Federal Energy Regulatory Commission the responsibility to ensure that rates and rules under its jurisdiction are “just and reasonable[.]” 16 U.S.C. Section  824d(a).   The Public Service Corporation of Colorado is a grid owner and subsidiary of petitioner Xcel Energy Services, Inc. (collectively, “PS Colorado”).  PS Colorado filed an application with the Commission to change how it processes power plant requests to interconnect—that is, to plug in—to its grid. The Commission denied PS Colorado’s request. It held that the proposal risked unduly preferring the company’s own power plants over would-be entrants to its grid.   The DC Circuit denied the petitions for review. The court held that the Commission reasonably explained its rejection of PS Colorado’s proposal. There was nothing arbitrary or capricious about its decision to bar a vertically integrated grid operator from adopting a rule that could favor its own generators and so cement its dominant market position. The Commission’s holding is consonant with decades of agency policy reflected in orders upheld by the Supreme Court and our court. The Commission also reasonably applied a different rule to a vertically integrated grid operator than it did to independent grid operators because vertically integrated operators have distinct competitive incentives. View "Xcel Energy Services Inc. v FERC" on Justia Law

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Petitioner, Cherokee, owns a qualifying cogeneration facility in South Carolina. Intervenor, Duke Energy Carolinas, LLC, is a public utility that sells wholesale and retail electric services to customers in North Carolina and South Carolina. Petitioner sells the entirety of its generated capacity and energy to Duke “under a Power Sales Agreement (PPA) pursuant to PURPA.”This case arose because Petitioner sought compensation for the reactive service it provides to Duke’s transmission system. Petitioner filed a proposed rate schedule for its reactive service with FERC pursuant to section 205 of the Federal Power Act. 16 U.S.C. Section 824d.   Duke intervened and claimed that FERC lacked jurisdiction over Petitioner’s section 205 filing. Duke contended that Petitioner’s facility is a qualifying facility selling energy or capacity to Duke pursuant to South Carolina’s implementation of PURPA. Petitioner contended that FERC’s dismissal of its section 205 rate filing is arbitrary and capricious.   The DC Circuit denied the petition for review. The court explained that while it clearly has jurisdiction over the petitions, it lacks authority to consider Petitioner’s arguments because they were not adequately presented in its petition for rehearing. The court wrote that FERC did not devise a new rationale out of the blue, instead, Petitioner made the “energy or capacity” argument in its original Answer to Duke’s motion to dismiss, but then dropped it in its petition for rehearing. Thus, Petitioner did not meet its obligation to show that its filing avoided the cogeneration regulation’s exemption from FERC jurisdiction. As such, the court concluded it does not have authority to consider the Petitioner’s arguments. View "Cherokee County Cogeneration Partners, LLC v. FERC" on Justia Law

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The Federal Energy Regulatory Commission (“FERC” or “Commission”) required Midcontinent Independent System Operator, Inc.’s (“MISO”) to institute reforms to its interregional planning process and directed MISO to propose a cost allocation method for its share of certain interregional project costs. Since that time, MISO has twice submitted proposals for such cost allocation. Both times, FERC rejected the proposals, finding that they were not just and reasonable as required by the Federal Power Act (the “Act”), because they were inconsistent with the cost causation principle. After the second rejection, FERC, on its own initiative, established a cost allocation method for certain MISO-PJM projects.   Petitioners challenged FERC’s rejection of MISO’s second proposal and FERC’s corresponding implementation of a cost allocation method. The DC Circuit denied the petitions and affirmed FERC’s orders in all respects. The court explained that according to MISO’s own representations to FERC in its filings, the Second Interregional Filing was “designed to work seamlessly with the revisions proposed in the [Second Regional Filing]” and relied on definitions and provisions in the Second Regional Filing As such, it was appropriate and well within FERC’s discretion to reject MISO’s Second Interregional Filing based on its rejection of the Second Regional Filing, as it would obviously suffer from the same critical flaw.   Further, as FERC noted, it made clear that its Third Regional Order was only addressing regional projects, not interregional ones. Thus, because MISO’s SPP Metric would identify regional benefits, disregarding such known benefits in cost allocation is inconsistent with the cost causation principle. Accordingly, FERC reasonably rejected MISO’s Second Interregional Filing. View "Entergy Arkansas, LLC v. FERC" on Justia Law

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The Federal Energy Regulatory Commission (“FERC”) granted NEXUS Gas Transmission, LLC (“Nexus”) a certificate of public convenience and necessity to construct and operate a natural gas pipeline from Ohio to Michigan. After FERC granted Nexus the certificate, the City of Oberlin (“City”) petitioned for review claiming, among other things, that FERC did not adequately justify its reliance on agreements to transport gas ultimately bound for export to Canada as evidence of need for the pipeline.   The DC Circuit denied the petition, explaining that the FERC’s explanation on remand from was reasonable and because its decision comported with the Natural Gas Act and the Takings Clause. The court wrote FERC’s justification for considering the agreements to transport gas bound for export is well reasoned and comports with both the Natural Gas Act and the Takings Clause. FERC’s alternative explanation that it would have granted Nexus a certificate even without considering the export agreements also passes muster. View "City of Oberlin, Ohio v. FERC" on Justia Law

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The City of Salisbury, North Carolina relies on the Yankin River for its drinking water. The City constructed a pump station on the Yankin River, which the City believed was threatened by a plan proposed by the operator of a nearby hydroelectric damn and approved by FERC. The City challenged the plan and FERC's approval.The D.C. Circuit dismissed the City's petition, finding that the proposed rule was within the license granted to the dam operator and was not arbitrary. The operator of the dam was required to implement a flood protection plan, including 1.) physical modifications to the facilities such as a protective dike for the pump station, 2.) improved access to the pump station with the road consistent with the City of Salisbury’s design or 3.) other feasible options for achieving the same benefits. The proposed plan meets the requirement of the flood protection plan. Additionally, the court determined that FERC's approval of the plan was not arbitrary. View "City of Salisbury, North Carolina v. FERC" on Justia Law

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LSP, an independent electric transmission developer, bids on proposals to build transmission projects throughout the U.S. LSP sought judicial review of a Federal Energy Regulatory Commission (FERC) decision under 16 U.S.C. 824e concerning ISO New England’s compliance with Commission Order 1000, which required “the removal from Commission-jurisdictional tariffs and agreements” of rights of first refusal to construct transmission facilities and directed incumbent transmission providers to engage in competitive selection of developers. FERC recognized an exception if the time needed to solicit and conduct competitive bidding would delay the project and thereby threaten system “reliability.” FERC found “insufficient evidence” that ISO was incorrectly implementing Order 1000.The D.C. Circuit denied LSP’s petition for judicial review, first holding that FERC’s ruling bears all the indicia of a substantive decision produced after a contested proceeding involving ISO and numerous intervenors and is subject to judicial review. The court found nothing irrational in FERC’s response to LSP’s general criticism of ISO’s use of more conservative assumptions regarding its system capacity and future management in determining when to apply the exception. Although the number of reliability projects exempted from competitive bidding exceeded those open to competition, the appropriate balance between competitive procurement and quick redress of reliability needs is a policy judgment for FERC. View "LSP Transmission Holdings II, LLC v. Federal Energy Regulatory Commission" on Justia Law

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Petitioners sought review of the Commission's decision to authorize a new natural gas pipeline and compressor station in Agawam, Massachusetts. One of the petitioners, Berkshire, has failed to establish standing to challenge the Commission's decision. The other petitioner, Food & Water Watch, has raised challenges related to the Commission's compliance with the National Environmental Policy Act.The DC Circuit mainly rejected Food & Water Watch's claims, but agreed with its contention that the Commission's environmental assessment failed to account for the reasonably foreseeable indirect effects of the project—specifically, the greenhouse-gas emissions attributable to burning the gas to be carried in the pipeline. Accordingly, the court granted Food & Water Watch's petition for review on that basis and remanded for preparation of a conforming environmental assessment. View "Food & Water Watch v. Federal Energy Regulatory Commission" on Justia Law